London’s stocks finished higher on Friday, following some positive earnings from some big banks in the US, as well as a recent US producer price index print lifting hope that the the Federal Reserve’s hikes may come to an end.
The FTSE 100 index closed up 28.53 points, or 0.4% at 7,871.91 on Friday, ending the week 2.7% higher.
The FTSE 250 ended up 172.56 points, or 0.9%, at 19,242.69, finishing the week up 3.5%. The AIM All-Share closed up 5.55 points, or 0.7%, at 830.35, closing the week up 3.3%.
The Cboe UK 100 ended up 0.4% at 787.68, the Cboe UK 250 closed up 1.1% at 16,829.38, and the Cboe Small Companies ended up 0.5% at 16,829.38.
According to the CME FedWatch tool, markets see an 83% chance of the US central bank raising interest rates by another 25 basis point at its policy meeting next month. However, many believe this will likely be the peak for rates in the US.
‘Fed hawkishness indicates officials feel the need to do more to ensure inflation returns to target in a timely fashion, especially with consumer spending and jobs growth performing well in the first quarter,’ James Knightley, chief international economist at ING, said.
However, Knightley continued that with mounting recession risks in the US and inflationary pressures moderating, this will result in the Fed ‘reversing course’ in the fourth quarter or the year.
‘The combination of weaker activity and the prospect of rapid falls in inflation mean we continue to look for aggressive rate cuts, potentially amounting to 100 [basis points], before the end of the year,’ he said.
Hopes of an imminent peak came despite a top official at the Federal Reserve saying on Friday that the US should continue tightening monetary policy to bring down inflation.
‘Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further,’ Fed Governor Christopher Waller told a conference in Texas during prepared remarks.
‘How much further will depend on incoming data on inflation, the real economy, and the extent of tightening credit conditions,’ he said.
In London, HSBC said it remained committed to the sale of its retail banking business in France, but added that the disposal is not certain.
The bank explained that the French retail banking system is no longer classified as held for sale because a disposal was less certain due to interest rate increases. As it is no longer classified as held for sale, HSBC will see a $2 billion reversal of a previously booked impairment.
HSBC aims to sell the banking unit by the end of May 2024, with the framework agreement terminating automatically if a sale does not occur. HSBC announced the planned sale of the unit in June 2021.
Shares in the bank closed up 3.1%.
In the FTSE 250, Dechra Pharmaceuticals surged 40%, making it the index’s top performer at the close on Friday.
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 11% 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 20% 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 its 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,’ the company explained.
In European equities on Friday, the CAC 40 in Paris and the DAX 40 in Frankfurt both ended up 0.5%.
Stocks in New York were lower at the London equities close, with the Dow Jones Industrial Average down 0.7%, the S&P 500 index down 0.4%, and the Nasdaq Composite down 0.6%.
All eyes were on the big US banks as they kicked off the first quarter earnings seasons.
JPMorgan were up 7.1% as it reported a first-quarter revenue beat, though it warned of the impact of tighter financial conditions.
Citigroup rose 2.9% as it hailed a strong quarter for its fixed income arm and reported better results despite a ‘tumultuous environment for banks’.
The dollar regained ground amid the positive news for the US banking sector. The pound was quoted at $1.2427 at the London equities close on Friday, down from $1.2519 at the close on Thursday.
The euro stood at $1.0987, lower against $1.1053 at the same time on Thursday. Against the yen, the dollar was trading at JP¥133.68 late Friday, higher compared to JP¥132.41 late Thursday.
Brent oil was quoted at $86.42 a barrel at the London equities close on Friday, down from $87.01 late Thursday. Gold was quoted at $1,997.18 an ounce, sharply lower against $2,040.03 at the close on Thursday.
In Monday’s UK corporate calendar, there are trading statements from FTSE 250-listed firms Ashmore and PageGroup.
In the economic calendar next week, UK unemployment figures are published on Tuesday, ahead of UK inflation data on Wednesday. On Friday, there are a slew of PMI prints from the EU, UK, and the US.
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