Shares in London kicked off Friday on the up, as investors digest a wave of central bank decisions, with the pound also climbing as the Bank of England prepares to move into the spotlight.
A hawkish European Central Bank also lifted the euro, while a key US Treasury yield narrowed, suggesting the market is not buying the Federal Reserve’s tough talk on inflation.
The FTSE 100 index opened up 25.03 points, 0.3%, at 7,653.27. The FTSE 250 was up 47.47 points, 0.3%, at 19,086.88, and the AIM All-Share was up 2.50 points, 0.3%, at 794.06.
The Cboe UK 100 was up 0.3% at 763.65, the Cboe UK 250 was 0.2% at 16,654.07, and the Cboe Small Companies was up 0.2% at 13,923.00.
In a week dominated by central bank decisions elsewhere, market attention is shifting to the BoE’s own decision next Thursday. The pound continued its upward trajectory, as sticky inflation data, combined with strong employment and economic growth prints, set the stage for the BoE to continue its rate-hiking cycle.
Sterling was quoted at $1.2788 early Friday, rising from $1.2759 at the London equities close on Thursday. The pound had risen past the $1.28 mark shortly after Friday’s equity market open in London. Sterling traded at its best level since April 2022.
The latest central bank decision came from the Bank of Japan, which said it would maintain its long-standing, ultra-loose monetary policy as it looks to boost economic growth.
It left its negative interest rate in place and did not adjust the band in which rates for 10-year government bonds fluctuate, a scheme known as yield curve control
Against the yen, the dollar was quoted at JP¥140.74, up versus JP¥140.52.
Officials had been widely expected to keep policies unchanged after the second two-day meeting chaired by new Governor Kazuo Ueda.
The central bank has gone against the grain as its global peers hike interest rates to tackle inflation, pushing down the value of the yen against the dollar.
The Nikkei 225 index in Tokyo closed up 0.7%, consolidating recent highs on the back of the weak yen.
In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong was up 1.4%. The S&P/ASX 200 in Sydney closed up 1.1%.
Asian equities got a boost after China’s central bank cut a key interest rate and injected $33 billion into financial markets on Thursday. This comes after recent data suggested the country’s economic recovery was flagging.
Gold was quoted at $1,961.01 an ounce early Friday, up from $1,955.88 on Thursday. Brent oil fetched $75.75 a barrel, rising from $74.81.
In European equities on Friday, the CAC 40 in Paris was up 0.1%, while the DAX 40 in Frankfurt was flat.
The euro traded at $1.0952 early Friday, higher than $1.0930 late Thursday.
The ECB lifted interest rates in the eurozone by 25 basis points, as expected, on Thursday. The Frankfurt-based central bank acknowledged in its statement on Thursday that inflation has been coming down, but is nonetheless projected to remain ‘too high for too long’.
ECB President Christine Lagarde said a pause was not even an option for the ECB. Her words suggest a hike in July is all but assured, and that the September meeting is also a live one.
Stocks on Wall Street rallied on Thursday, despite hawkish rhetoric from the US Federal Reserve, with the Dow Jones Industrial Average up 1.3%, while the S&P 500 and the Nasdaq Composite both rose 1.2%.
The Federal Reserve left interest rates unchanged on Wednesday but signalled further increases were on the way before the end of the year. But with US two-year Treasury yields narrowing to around 4.65% late Thursday, from 4.69% ahead of the Fed decision on Wednesday, there is a sign some investors are not buying the central bank’s hawkish narrative.
In London’s FTSE 100 index, Tesco fell 1.1%
The company said it was seeing signs that inflation is easing in the grocery market, and the supermarket chain backed annual guidance as it kicked off its financial year with a sales hike.
Tesco said revenue in the 13 weeks to May 27, its first quarter, rose 9.4% to £15.17 billion. The measure excludes both VAT and fuel, but includes Tesco Bank.
Looking ahead, Tesco said it still expects retail free cash flow within its £1.4 billion to £1.8 billion target range. At best, this would be a 16% fall from £2.13 billion in financial 2023.
It still expects a ‘broadly flat level’ of retail adjusted operating profit. Retail adjusted operating profit fell 6.1% to £2.49 billion from £2.65 billion in financial 2023.
Meanwhile, among mid-caps, Travis Perkins slumped 7.6%.
The builders’ merchant said it had delivered a ‘resilient’ performance in the first quarter of 2023, but it has not seen the anticipated easing of market conditions in the second quarter to date.
‘Volumes in both the new build housing and private domestic RMI markets continue to be impacted by higher interest rates and weaker consumer confidence driven by persistent, higher than anticipated consumer price inflation,’ Travis Perkins said.
ITV fell 0.6%. The media company and broadcaster confirmed a Reuters report from Thursday that it is considering an acquisition of production group All3Media. All3Media is jointly owned by Warner Bros Discovery and Liberty Global. According to Reuters sources, ITV is considering combining the business with its Studios unit, and Liberty Global could possibly retain a stake. As well as jointly-owning All3Media, Liberty Global has a roughly 9.9% stake in ITV.
Reuters had previously reported All3Media, which produces Fleabag and Midsomer Murders, could fetch a price tag over £1 billion.
On AIM, ValiRx fell 15%
The life sciences company, which focuses on early-stage cancer therapeutics and women’s health, said it has concluded its evaluation agreement with Hokkaido University.
‘Under this agreement, ValiRx committed to conducting a range of experiments following initial confirmation of the synthetic route and analysis. After overcoming initial challenges in synthesis and purification of the peptide, testing has been conducted on the product,’ it explained.
The product was subsequently found to be ‘unsuitable’ for further development, and the evaluation will now end.
Still to come on Friday’s economic calendar, there’s a eurozone inflation reading at 1000 BST.
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