London shares were attempting to rebound early Friday, but the FTSE 100 still looked set to end a week of central bank announcements in the red.
The large-cap index was up 30.15 points, or 0.4%, at 7,075.13 early Friday, still down more than 3% for the week so far. The mid-cap FTSE 250 index was up 138.49 points, or 0.7%, at 18,865.97. The AIM All-Share index was up 3.99 points, or 0.5%, at 896.70.
The Cboe UK 100 index was down 0.1% at 702.48. The Cboe 250 was up 0.7% at 16,586.35, and the Cboe Small Companies down 0.3% at 13761.46.
In mainland Europe, the CAC 40 in Paris was up 0.1% while the DAX 40 in Frankfurt was up 0.2% early Friday.
Worries over the outlook for global growth have been raised by aggressive central bank action this week. The US Federal Reserve on Wednesday lifted interest rates by 75 basis points, the largest hike since 1994, while the Bank of England carried out its fifth consecutive rate hike and the Swiss National Bank surprised markets with a half-point interest rate increase.
In stark contrast on Friday was the Bank of Japan, which stuck to its long-held monetary easing policy.
But it said it would ‘pay due attention’ to foreign exchange markets, a rare comment that comes after the yen hit a 24-year low against the dollar.
In a statement following a two-day policy meeting, the BoJ kept in place its target rate of minus 0.1% - part of a decade-old action plan aimed at boosting the world's third-largest economy - bucking pressure to address the impact of a weaker yen.
Consumer price inflation is running at only 2.5% in Japan.
The dollar was quoted at JP¥134.57 early Friday in London, jumping from JP¥132.22 on Thursday. This week, the greenback hit its highest level against the yen since 1998, at JP¥135.60.
Sterling was quoted at $1.2293 early Friday, down from $1.2311 at the London equities close on Thursday. The euro traded at $1.0514 early Friday, firm against $1.0509 late Thursday.
In Tokyo on Friday, the Nikkei 225 index closed down 1.8%. The Shanghai Composite closed up 1.0%, while the Hang Seng index in Hong Kong was up 1.2%. The S&P/ASX 200 in Sydney dived 1.8%.
In London, oil majors BP and Shell weighed on the FTSE 100, down 2.3% and 2.0% respectively in early dealings. Brent oil was trading at $119.84 a barrel, up from $118.37 late Thursday but down from a high of $125.19 hit earlier in the week.
‘On the inflation front, higher oil prices are the primary driver of consumer price inflation worldwide...So with Fed and other central banks now focused on headline inflation, not ex-energy, it suggests they are on a mission to or risk even a domestic recession for on-target headline inflation,’ said Stephen Innes at SPI Asset Management.
‘While this does not mean oil will tank, it could mean that this year's sizzling 55% rally could run out of steam if higher energy prices continue to force the Fed and other central bankers' hands to hike rates into economically restrictive territory.’
Gold was quoted at $1,845.87 an ounce early Friday, higher than $1,841.77 on Thursday.
Glencore rose 1.4% after saying its Marketing segment's half-year earnings will top $3.2 billion, being the upper end of its long-term adjusted earnings before interest and tax annual guidance range of $2.2 billion to $3.2 billion.
‘Our Marketing segment's financial performance has continued to be supported by periods of heightened-to-extreme levels of market volatility, supply disruption and tight physical market conditions, particularly relating to global energy markets,’ said Glencore, though adding that market conditions should normalise in the second half of the year.
Tesco shares edged up just 0.1% as it posted sales growth but flagged an ‘incredibly challenging’ backdrop.
Retail sales in the 13 weeks to May 28 came in at £13.57 billion, up 2.0% on a like-for-like basis on a year and up 9.9% like-for-like against three years ago. In the UK, where like-for-like sales fell 1.5% on an annual basis, the grocer notched market share growth of 37 basis points.
‘Whilst the market environment remains incredibly challenging, our laser focus on value, as well as the daily dedication and hard work of our colleagues, has helped us to outperform the market,’ said Chief Executive Ken Murphy.
Tesco's trading statement ‘takes on a little bit more meaning and profile for investors and the wider retail ecosystem as it emerges at a time when central banks are struggling to control inflation that they partly stoked, living standards in the group's retail markets are under-pressure, and shoppers are necessarily cutting back, particularly through online purchases,’ said Clive Black, head of Research at Shore Capital.
Magazine publisher Future rallied 5.5% in the FTSE 250 after confirming it is on track to meet full-year guidance as an ‘encouraging’ start to the second half continued.
‘The group continues to benefit from the effect of its diversified audiences and revenue streams, its operating leverage, excellent cash conversion and strong balance sheet,’ Future said.
M&C Saatchi shares fell 6.4% to 165.74 pence. The advertising agency no longer recommends shareholders vote in favour of its takeover by Next Fifteen Communications, given a recent ‘deterioration in value of Next 15 shares’.
In May, digital marketing services firm Next Fifteen announced it had reached an agreement with M&C Saatchi on a cash-and-shares takeover. It offered 0.1637 of a Next Fifteen share and 40p in cash for each M&C Saatchi share, valuing M&C shares at 247.2p each.
Since announcing the deal, Next Fifteen shares have fallen around 30%. This now means the Next Fifteen offer implies a value of 189p per M&C Saatchi share, the advertising agency noted on Friday.
‘Based solely on financial terms, the M&C Saatchi directors consider each of the [AdvancedAdvT] offer and Next 15 offer to be inferior to M&C Saatchi's standalone prospects. However, if those standalone prospects were incapable of being delivered as envisaged, then the M&C Saatchi directors consider the Next 15 offer to be superior to the ADV offer and Next 15 to be the preferred future owner of the M&C Saatchi business,’ said M&C.
Next Fifteen shares were down 2.5% at 887.00p, while AdvancedAdvT shares were untraded at 77.50p.
The economic events calendar on Friday has an inflation print from the eurozone at 1000 BST.
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