Stocks in Europe were on the up on Friday afternoon, while the dollar struggled as investors bet that the Federal Reserve will soon call time on its hiking cycle.
US banking earnings were also in focus. Numbers from JPMorgan impressed. Earnings from Citi are still to come.
The FTSE 100 index was up 25.63 points, or 0.3% at 7,869.01. The FTSE 250 was up 212.33 points, or 1.1%, at 19,282.46, and the AIM All-Share was up 5.58 points, or 0.7%, at 830.38.
The Cboe UK 100 was up 0.3% at 787.24, the Cboe UK 250 was up 1.3% at 16,856.62, and the Cboe Small Companies was up 0.4% at 13,749.01.
The pound was quoted at $1.2515 at midday on Friday in London, virtually unchanged compared to $1.2519 at the close on Thursday. Sterling hit a 10-month high against the dollar earlier in the day, trading at $1.2546.
‘The weakness of the greenback follows the release of inflation figures on Wednesday that came up lower than expected, and the slowing down in producer prices revealed on Thursday, which was the steepest in three years,’ said Ricardo Evangelista, senior analyst at ActivTrades.
‘Against this background, investors still expect the Federal Reserve to increase rates in May, with a 25-basis points hike, but bets that it will be the last hike in the current cycle are now dominating market sentiment.
‘What hasn’t yet been fully priced-in is the possibility of the Fed starting to cut rates before this year. Should economic data continue to show a slowing of inflation, the probability of a rate cut in 2023 will increase, and so will the likelihood of further dollar weakness,’ Evangelista concluded.
The euro stood at $1.1059, slightly higher against $1.1053. Against the yen, the dollar was trading at JP¥132.46, largely unchanged compared to JP¥132.41.
In London, National Grid fell 0.5% after it said new UK tax measures for capital expenditure will weigh on earnings per share growth over the next few years.
The electricity infrastructure company said its annual performance was in line with its expectations and said it continues to expect underlying earnings per share growth in the middle of its 6% to 8% compound annual growth rate. However, it warned that from financial 2024 to 2026, the UK government’s introduction of ’full expensing’ tax relief for capital expenditure will impact underlying EPS.
It now expects underlying EPS growth between financial 2022 to 2026 to be at the ‘lower end’ of its 6% to 8% CAGR range.
In the FTSE 250, Dechra Pharmaceuticals surged 35%.
Late Thursday, the veterinary pharmaceutical company confirmed that it has entered into discussions with private equity firm EQT for a possible cash takeover offer.
Under the terms of the possible offer, Dechra shareholders would receive 4,070 pence per ordinary share in cash. The offer price is a 49% premium to Thursday’s closing price of 2,776p.
Dr Martens climbed 9.0% despite warning it will miss annual guidance slightly, thanks to weaker wholesale trade and costs from its LA distribution centre.
The bootmaker said that in the year to March 31, revenue was up 10%, with revenue in the fourth quarter up 6%. In January, it had guided for annual revenue growth of between 11% and 13%.
It also expects annual earnings before interest, tax, depreciation and amortisation of £245 million, below January’s guidance of between £250 million and £260 million.
Elsewhere in London, 888 Holdings jumped 19% despite swinging to an annual loss due to exceptional costs.
The Gibraltar-based online betting and gaming company said it swung to a pretax loss of £115.7 million in 2022, from a profit of £56.0 million. 888 said it was due to exceptional costs and adjusting items of £184.8 million.
‘[The costs] primarily related to amortisation of acquired intangibles, impairment of historic US goodwill and William Hill technology no longer under development, together with transaction fees for the acquisition of William Hill, and integration and restructuring costs post completion as we began to realise synergies,’ 888 explained.
Revenue, meanwhile, surged 74% to £1.24 billion from £712.3 million in 2021, primarily driven by the completion of William Hill acquisition.
Superdry plunged 17% as it withdrew its profit guidance, citing the cost of living crisis in the UK and poor weather.
The clothing retailer withdrew its existing guidance of ‘broadly breakeven’ adjusted pretax profit in financial 2023 ending April 30, compared to a profit of £21.9 million in financial 2022.
‘Retail sales in February and March, whilst showing significant year-on-year like-for-like growth, have not met our expectations. This can partly be attributed to factors outside the company’s control, including the cost-of-living crisis having a significant impact on spending and footfall, and poor weather resulting in less demand for our new spring-summer collection. These trends are consistent across both the UK and Europe. Wholesale performance continues to lag the rest of the group, although we are making progress in working with our partners to support their recovery,’ the company explained.
In European equities on Friday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.3%.
Stocks in New York were called lower, with all eyes on the big US banks as they kick off the first quarter earnings seasons. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.3%.
JPMorgan shares traded 3.9% higher in pre-market trade. It reported a first-quarter revenue beat but warned of ‘storm clouds’ gathering over the US economy.
It noted an ‘increased probability of a moderate recession due to tightening financial conditions’.
Revenue in the first quarter of 2023 surged 25% to $38.35 billion from $30.72 billion a year earlier. Revenue beat a CNN cited forecast of $36.1 billion.
Net income jumped 52% to $12.62 billion. Diluted earnings per share were 56% higher at $4.10.
Gold was quoted at $2,038.46 an ounce at midday in London on Friday, higher against $2,040.03 late Thursday. Brent oil was quoted at $86.37 a barrel, down from $87.01.
The oil market is heading for a significant shortfall of around 2 million barrels per day at the end of the year as a result of a production cut by major producers, the Organization of the Petroleum Exporting Countries said.
In its monthly report for April, OPEC noted the unexpected decision at the start of the month by OPEC+, which includes Russia alongside OPEC members, to reduce production from next month.
Russia is among the countries cutting production by extending to the end of the year a production cutback originally scheduled to expire at the end of June.
Still to come on Friday’s economic calendar, US retail sales data will be published at 1330 BST. Shortly after, US industrial production data will be released at 1415 BST.
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