Promising data from the UK, Europe and Asia supported stocks on Friday, and also soothed fears of an economic slowdown.
Among corporate updates, Rightmove and Pearson shares slipped despite robust annual results. AIM listing Active Energy’s stock surged on a positive patent update.
The pound was on the up, meanwhile, but still traded below the $1.20 mark.
The FTSE 100 index was up 16.75 points, 0.2%, at 7,960.79. The FTSE 250 was up 89.57 points, 0.5%, at 19,941.22, and the AIM All-Share was up 2.60 points, 0.3%, at 863.89.
The Cboe UK 100 was up 0.2% at 796.58, the Cboe UK 250 was up 0.5% at 17,486.31, while the Cboe Small Companies was flat at 14,188.21.
The UK’s private sector returned to growth in February for the first time in six months, survey results showed on Friday.
The latest S&P Global/CIPS UK composite purchasing managers’ index rose to 53.1 points in February from 48.5 points in January. The latest reading signalled the strongest increase in private sector activity since June 2022. It also ends a six-month period of decline.
S&P also noted that overall input cost inflation faded to its weakest level since April 2021.
The UK services PMI rose to 53.5 points in February, slightly above the flash score of 53.3 and well up from 48.7 in January. This marks the first time in six months that the services index posted above the 50.0 no-change mark and thus indicates that business activity has improved.
‘Spring fever gripped the services sector early last month as supply chain managers reported a big leap in activity and the first improvement for half a year,’ CIPS Chief Economist John Glen said.
‘Companies enjoyed renewed customer confidence with the highest level of new orders in nine months. Improvements in the global marketplace made the wheels of activity turn a little faster, and levels of export business rose for the third month in a row despite some ongoing supply chain disruptions.’
It will be a ‘tough year’ for UK households nonetheless, BRI Wealth Management analyst Tom Hopkins warned.
‘Today’s data from February’s survey pointed to an easing in inflationary pressures. It also points to stronger levels of optimism regarding growth prospects, thanks partly to the abating of political uncertainty. We would proceed with caution from here. Core Inflation is proving stubborn and consumer spending continues to be squeezed due to cost of living difficulties and higher borrowing costs. We think it’ll be a tough year for UK households,’ the analyst explained.
PMI results from the eurozone were similarly decent. The eurozone economy grew at its strongest pace since June, as private sector activity expanded for the second month in a row.
The seasonally adjusted S&P Global eurozone composite PMI rose to 52.0 points in February, from 50.3 in January. Market consensus, as cited by FXStreet, had expected a reading of 52.3, however.
The eurozone services PMI business activity index rose to 52.7 in February from 50.8 the previous month. This was the highest reading for eight months, signalling back-to-back monthly expansions in output across the service sector.
Growth in China’s service sector sped up sharply in February, according to final survey data on Friday, as business continued to rebound after the rollback of anti-Covid measures. In Japan, services business activity also picked up.
London-listed miners were performing well on the back of the positive data from China. Glencore and Rio Tinto were both up 3.3%, while Anglo American climbed 2.7%.
Elsewhere, data from Eurostat showed that factory gate inflation in the eurozone cooled by more than expected at the beginning of 2023.
Industrial producer prices fell by 2.8% in the eurozone in January, compared to a month-on-month increase of 1.1% in December. This was steeper than expected, with FXStreet-cited market consensus predicting a 0.3% drop.
Compared to the same month a year prior, eurozone industrial producer prices increased by 15%, slowing from a 25% annual rise seen in December. Market consensus had expected a lesser slowdown to 17.7%, according to FXStreet.
Still to come on Friday’s economic calendar, there is an S&P Global US services PMI reading at 1445 GMT, before ISM’s survey at 1500 GMT.
Ahead of the reading, the dollar was weaker.
The pound was quoted at $1.1987 at midday on Friday in London, up compared to $1.1949 at the equities close on Thursday. The euro stood at $1.0610, up marginally against $1.0606. Against the yen, the dollar was trading at JP¥136.18, down compared to JP¥136.75.
In European equities on Friday, the CAC 40 in Paris was up 0.7%, and the DAX 40 in Frankfurt was up 1.0%.
In the FTSE 100, Pearson lost 2.5%.
The education publisher said sales rose by 12% to £3.84 billion for 2022 from £3.43 billion a year ago.
Sales were up 8% in Assessment & Qualifications and up 4% in Virtual Learning. In Higher Education, however, sales were down 4%, due to a decline in enrolments and a ‘loss of adoptions to non-mainstream publishers’, Pearson explained.
Pretax profit surged by 82% to £323 million from £177 million, as basic earnings per share grew to 32.8 pence from 23.5p a year ago.
‘These results are testament to the strong momentum that we’ve been building operationally and strategically over the past 24 months. For a second consecutive year, our financial performance was ahead of expectations, and we saw progress in our strategic initiatives, which are taking Pearson on a new, exciting journey,’ said Chief Executive Andy Bird.
The company declared a 14.9 pence final dividend, up 4.9% from 14.2p a year prior. This brings the annual dividend to 21.5p, also up 4.9% from 20.5p.
Looking ahead, Pearson said it is confident of achieving low- to mid-single digit underlying sales growth in 2023. It expects adjusted operating profit in line with current market expectations.
‘There are many moving parts to the business and not everything is doing well, which implies management has to study harder to find solutions to get the company firing on all cylinders,’ commented AJ Bell analyst Russ Mould.
‘The shares have had a great run, up 44% over the past 12 months, but there wasn’t enough in the latest results to sustain that momentum and so the stock slipped amid investors taking profits.’
Real estate portal Rightmove was down 1.8%.
It said pretax profit grew 6.9% in 2022 to £241.3 million from £225.6 million a year prior. Operating profit rose 6.7% to £241.3 million from £226.1 million, underperforming against company-compiled consensus of £242.2 million.
Revenue climbed 9.1% to £332.6 million from £304.9 million, beating company-compiled consensus of £330.8 million by 0.5%. It fell 5.5% shy of a revenue forecast of £352.0 million by UBS analysts, however.
The company will pay a final dividend of 5.2 pence per share for 2022, up 8.3% from 4.8p paid for 2021. This brings the total dividend to 8.5p, up 9.0% from 7.8p a year ago.
Outgoing Chief Executive Officer Peter Brooks-Johnson said: ‘The year’s changing housing market conditions demonstrated our customers’ resilience and ability to adapt and to continue to succeed. The softening from the Covid-induced frenetic market towards a more normal market earlier in the year was disrupted in the final few months by the unexpected rapid mortgage rate increases.’
Rightmove said 16.3 billion minutes were spent on its platform, down from 18.3 billion in 2022, as the UK housing market cooled off.
On AIM, Active Energy jumped 17%.
The London-based renewable energy business said it has won the trademark for the registration of CoalSwitch in Canada from the Canadian Patent & Trademark Office.
The CoalSwitch product is an energy pellet made from biomass. Active Energy said it has been shown to reduce carbon dioxide emissions by up to 99% compared to coal and up to 97% compared to natural gas.
In February, Active Energy said it had been awarded two trademarks for the registration of CoalSwitch in the US and UK.
Longboat Energy lost 22%, amid the loss of a licence.
The North Sea-focused exploration and production company said its PL939 licence, which contains the Egyptian Vulture oil discovery, is being relinquished as the reservoir quality is not good enough.
It said it seeks to reapply for the acreage in the forthcoming licence round, with awards due in January 2024.
Stocks in New York were called higher. The Dow Jones Industrial Average is called up 0.2%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.4%.
Brent oil was quoted at $84.25 a barrel at midday in London on Friday, down from $84.84 late Thursday. Gold was quoted at $1,847.32 an ounce, up against $1,837.58.
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