Share price falls for London's big listed banks were threatening to prevent the FTSE 100 from recording a positive month of April, while a string of economic readings from across Europe were painting a picture of slowing growth and stubborn price inflation.
The FTSE 100 index was up just 1.01 points at 7,510.20 midday Friday. The mid-cap FTSE 250 index was up 130.99 points, or 0.6%, at 20,750.61. The AIM All-Share index was up 6.77 points, or 0.7%, at 1,021.63.
The Cboe UK 100 index was up 0.2% at 747.84. The Cboe 250 was up 0.8% at 18,297.24. The Cboe Small Companies climbed 0.4% to 15,165.82.
In mainland Europe, the CAC 40 in Paris rose 0.3% and the DAX 40 in Frankfurt was up 0.8% in the early afternoon Friday.
Share price declines for the banking sector and Vodafone clipped the FTSE's wings.
Bank of America cut the telecommunications firm to 'neutral' from 'buy'. Vodafone shares were down 3.7%.
NatWest was down 3.5% despite reporting largely positive first-quarter numbers. Peer Lloyds Banking was 1.6% lower and HSBC lost 0.6%.
NatWest reported a strong rise in profit in the first quarter as the bank boasted of its capital strength and said it is confident of securing income well above £11.00 billion in 2022 in its core operations.
In the three months to March 31, the Edinburgh-headquartered bank recorded an operating pretax profit of £1.25 billion, surging 41% from £885 million in the same period a year prior. Attributable profit rose 36% to £841 million from £620 million.
NatWest - formerly Royal Bank of Scotland - saw total income rise 17% to £3.03 billion from £2.59 billion. Net interest income rose to £2.05 billion from £1.86 billion, while non-interest income increased to £982 million from £727 million.
Looking ahead, NatWest said its 2022 income excluding notable items will be ‘comfortably’ above £11.0 billion in the 'go-forward group' - advancing at least 4.7% from total income of £10.51 billion in 2021.
‘Like several of its rivals, NatWest smashed forecasts but for investors the focus is much more on the outlook, which despite the boost to profit implied by rising interest rates, is heavily clouded by the risk of an increase in bad debts linked to the cost-of-living crisis,’ AJ Bell analyst Russ Mould added.
Cost of living increases are causing problems for more than just lenders.
AO World shares slumped 19%. The electrical goods retailer predicted annual revenue will decline, as inflation hits discretionary consumer spending.
AO World expects revenue in the financial year that ended March 31 to be £1.56 billion, down 6% on the year before, amid ‘exceptionally strong prior year comparatives’ due to the Covid lockdown-driven online shopping boom that year.
It expects to generate adjusted earnings before interest, tax, depreciation and amortisation of just £8 million for the year amid higher costs in its UK logistics operations, driver shortages, and higher marketing costs in Germany. Adjusted Ebitda in the 2021 financial year was £64 million.
Looking ahead, AO World said it is cautious on its outlook for revenue and profit in the near-term amid ‘volatile market conditions, inflationary cost pressures and logistical challenges in the supply chain, together with the escalating cost of living for consumers’.
In addition, the former FTSE 250 constituent said Founder & CEO John Roberts has decided to dispose of a small part of his 22% stake in the business ‘on an annual basis’. AO World noted that since its float in 2014, Roberts has maintained his shareholding and increased it with ‘selected’ share purchases.
The dollar was weaker midday Friday in London. The pound was quoted at $1.2577, up from $1.2458 late Thursday. The euro stood at $1.0565, up from $1.0524. Against the yen, the dollar was trading at JP¥130.09, down from JP¥131.00.
The eurozone's economy grew at a slower pace than expected in the first quarter of 2022, according to numbers on Friday, while separate data showed inflation picked up slightly in April.
According to Eurostat, eurozone gross domestic product grew 0.2% quarter-on-quarter in the first three months of 2022. The figure fell short of an FXStreet cited estimate of 0.3% growth.
Separate figures from Eurostat showed inflation accelerated to another record high in April, as expected.
The eurozone annual inflation rate for April was 7.5%, an uptick from 7.4% in March. The April figure was in line with FXStreet cited consensus.
‘For the ECB, the continued - albeit slowing - economic growth means that it is likely to act sooner rather than later,’ commented Bert Colijn, eurozone senior economist at ING.
‘The central bank seems keen to battle second-round effects and keep inflation expectations anchored around 2%. While the economy remains weak and this definitely is not an environment in which the ECB can hike as much as the Federal Reserve, don't expect the ECB to wait much longer’ to hike interest rates.
A key US inflation gauge is reported at 1330 BST. Annual core personal consumption expenditure inflation, the Federal Reserve's preferred inflationary gauge, is forecast to slow to 5.3% in March from 5.4% in April.
Ahead of the PCE report, US equities were called lower. The Dow Jones Industrial Average was called down 0.4%, the S&P 500 down 0.7% and the Nasdaq Composite 1.0% lower.
Amazon was down 8.6% in pre-market dealings. Amazon suffered a first-quarter loss as the e-commerce company took a hit from its investment in electric vehicle maker Rivian Automotive.
For the three months to March 31, net sales were down to $116.44 billion from $108.52 billion in the first quarter last year.
Amazon swung to a first-quarter net loss of $3.84 billion from a profit of $8.11 billion.
Back in London, Johnson Matthey shares were on the up, jumping 17% on Friday.
A regulatory filing on Friday showed industrial investor Standard Investments LLC has built a 5.2% stake in the specialist chemicals firm. Standard Investments is based in New York.
Chinese technology shares closed higher in Hong Kong on Friday. Tencent jumped 11%, while Alibaba added 16%.
The Hang Seng Index in Hong Kong, stacked with Chinese tech shares, rose 4.0% on Friday.
China's tech stocks were on the march after a meeting at which top officials called for the ‘healthy development’ of the sector, fuelling hope among investors that a damaging state crackdown may ease.
FTSE 250-listed Fidelity China Special Situations PLC was up 4.8%, while Baillie Gifford China Growth Trust added 6.7%. Both have stakes in Chinese tech shares.
Gold and Brent prices were higher on Friday.
Gold rose to $1,915.63 an ounce midday Friday, from $1,887.75 late Thursday. Brent oil was quoted at $108.78 a barrel, rising from $106.55 late Thursday.
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