European equities pushed higher on Friday, with Standard Chartered the best-performing London blue-chip, though the FTSE 100’s gains were unable to stave off a weekly loss for it.
At the end of the eighth Friday of 2024 so far, London’s large-cap benchmark has only mustered two weekly gains, suffering six losses.
The market euphoria following Nvidia’s well-received results suggested a weekly gain was possible this time. That was not meant to be, however. The outlook for next week could be tricky too, with inflation readings in the US and Europe on the horizon.
Blue-chips stocks enjoyed a stellar end to the week following strong earnings from chipmaker Nvidia.
The FTSE 100 index rose 21.79 points, 0.3%, at 7,706.28. It has lost 0.1% this week, however, and is down 0.4% since the turn of the year.
The FTSE 250 closed down 83.94 points, 0.4%, at 19,179.56, and the AIM All-Share closed down 2.19 points, 0.3%, at 747.77. For the week, the FTSE 250 fell 0.1%, while the AIM All-Share lost 1.5%.
The Cboe UK 100 ended up 0.3% at 772.03, the Cboe UK 250 ended down 0.6% at 16,577.40, and the Cboe Small Companies fell 0.5% to 14,407.57.
In European equities on Friday, the CAC 40 in Paris rose 0.7%, while the DAX 40 in Frankfurt ended up 0.3%.
After Nvidia’s earnings impressed this week, eyes will be on inflation readings in the next.
‘Next week, the focus will be on the US PCE inflation release, with other inflation reports also due in Europe and Japan. Otherwise, several economic activity indicators will be released for key economies, including PMI gauges in China,’ Deutsche Bank analysts commented.
The personal consumption expenditures gauge will be of interest, amid the tiny thread of hope that an interest rate cut by the Federal Reserve could be forthcoming at its May meeting.
According to the CME FedWatch Tool, there is a 20% chance it cuts rates in May. That was the most likely outcome around a month ago, however. The best bet, according to the tool, is for a June rate cut. There is a 65% chance that occurs.
Capital Economics analyst Paul Ashworth commented: ‘Based on comments from Fed officials this week, we now expect the Fed to wait until June to begin cutting interest rates. Our forecasts now assume 100bp of cuts this year and a further 100bp next year, with the fed funds rate at 4.25% to 4.50% at end-2024 and 3.25% to 3.50% at end-2025.’
Three Federal Reserve officials called for patience on interest rate cuts Thursday, with one of them suggesting they wanted to see ‘at least another couple more months of inflation data’ before deciding when to start lowering rates.
‘I still expect it will be appropriate sometime this year to begin easing monetary policy, but the start of policy easing and number of rate cuts will depend on the incoming data,’ Fed Governor Christopher Waller told a conference in Minneapolis on Thursday, in prepared remarks.
Also Thursday, Fed Vice Chair Philip Jefferson indicated that rate cuts were still on the table for 2024 – just not yet.
‘If the economy evolves broadly as expected, it will likely be appropriate to begin dialling back our policy restraint later this year,’ he told an event at the Peterson Institute of International Economics in Washington.
Jefferson’s colleague on the Fed board, Governor Lisa Cook, also addressed the timing of interest rate cuts during a speech on Thursday.
‘I am now weighing the possibility of easing policy too soon and letting inflation stay persistently high versus easing policy too late and causing unnecessary harm to the economy,’ she told a conference in Princeton, New Jersey.
Cook said she would like to have ‘greater confidence’ that inflation was closing in on the Fed’s long-run target of 2% before ‘beginning to cut the policy rate.’
The dollar rounded off the week higher.
The pound was quoted at $1.2667 late on Friday in London, down slightly from $1.2671 at the equities close on Thursday. The euro stood at $1.0818, down against $1.0848. Against the yen, the dollar was trading at JP¥150.44, up compared to JP¥150.23.
In New York, the Dow Jones Industrial Average was up 0.3% at the time of the closing bell in Europe, while the S&P 500 was 0.1% higher, as both averages hit another record high on Friday. The Nasdaq Composite was down 0.2%.
Nvidia was up 1.4%, extending gains.
XTB analyst Kathleen Brooks commented: ‘The record stock market rally for Nvidia stocks makes us shudder to think what would have happened if the chip maker had delivered weak earnings or weaker forecasts. However, while we doubt that Nvidia is going to continue adding $200 billion+ to its market cap in a single day, AI is a key theme for markets right now.’
In London, eyes were on Standard Chartered shares. The stock closed 4.9% higher.
The Asia-focused bank brought in operating income of $18.02 billion in 2023, a 10% increase from $16.32 billion a year before. Net interest income increased 2.4% to $7.77 billion from $7.59 billion, while non-NII jumped 17% to $10.25 billion from $8.73 billion. Pretax profit increased 19% to $5.09 billion from $4.29 billion.
StanChart proposed a final dividend of $0.21 per share, bringing the full-year total to $0.27 - a 50% increase from the prior year’s 18 cents payout. It also announced plans for a $1 billion share buyback to start ‘imminently’.
Insurer Beazley extended gains on Friday, adding 1.2%. The company had upped its outlook on Thursday and hinted at a possible $300 million capital return.
Elsewhere in London, Hornby jumped 33%.
The Margate, England-based model railway company said Frasers Group has upped its stake in the company, the Sports Direct owner’s latest target in its retail sector investment frenzy.
The company said that Frasers, the sporting goods retailer and owner of the House of Fraser department store chain, has acquired an additional 11.1 million shares in the company. This takes Frasers total holding in Hornby to 15.2 million shares, or 8.9% of the company.
On the decline, Saietta plunged 79%. The company, which makes drivetrain systems for use in electric vehicles, predicted that the date it can no longer ‘solvently trade’ is nearer than first thought.
‘Whilst the company’s cashflow model shows positive cash balances to the end of March, the company’s directors are becoming increasingly aware that certain contracted cash receipts may be withheld, therefore bringing forward the date, absent any further funding, on which the company can no longer solvently trade,’ it warned.
‘The board continues to believe in the quality of Saietta’s products and the compelling market opportunity and accordingly remains hopeful that a solvent solution for the company can be found. The company will continue to look at all financing and other strategic options available and has a number of discussions ongoing.
‘Should the company not have made material progress with its formal sale process or with any other financing initiatives by the end of next week, the company may need to commence planning for an administration.’
Back in New York, shares in Intuitive Machines skyrocketed 30% after the Houston-based firm’s Odysseus craft successfully landed on the moon.
‘Odysseus is alive and well. Flight controllers are communicating and commanding the vehicle to download science data. The lander has good telemetry and solar charging,’ the firm said on Friday.
Brent oil was quoted at $82.16 a barrel at the time of the London equities close on Friday, down from $82.84 late on Thursday. Gold was quoted at $2,033.76 an ounce, higher against $2,024.88 the day before.
A quiet economic calendar on Monday has new US home sales and the Dallas Fed manufacturing index at 1500 and 1530 GMT.
In the local corporate calendar, distribution firm Bunzl reports annual results.
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