A partial retreat in commodities prices and a hint that the mergers and acquisition market is about to get back into gear was giving stock prices a lift midday Friday, with the FTSE 100 looking set to record a gain for the week as a whole.
Apollo Global Management confirmed it is in the early stages of evaluating a cash offer for London-based publishing and education company Pearson, sending the stock more than 20% higher.
The FTSE 100 index was up 108.74 points, or 1.5%, at 7,207.83 midday Friday. At this level, the index is on pace the end the week 3.1% higher, though still down 4.0% in 2022 so far.
The mid-cap FTSE 250 index was up 454.09 points, or 2.3%, on Friday at 20,409.64. The AIM All-Share index was up 12.80 points, or 1.3%, at 996.35.
The Cboe UK 100 index was up 1.8% at 717.55. The Cboe 250 was up 2.3% at 17,935.01, and the Cboe Small Companies was up 0.6% at 14,423.53.
In mainland Europe in the early afternoon, the CAC 40 in Paris was 2.7% higher, while the DAX 40 in Frankfurt was up 3.3%.
‘The pall of war shrouds the capital and commodity markets ahead of the weekend. Indications that Ukraine recognizes that it cannot join NATO is not sufficient for Moscow that appears to be fighting for an unconditional surrender of the Kyiv government,’ Marc Chandler at Bannockburn Global Forex said.
He noted the Stoxx 600 in Europe - which represents large, mid and small capitalization companies across 17 countries in Europe - is up about 2.3% this week, which would be only the second weekly advance this year.
In London, Pearson was up 23% after New York-based private equity and investment management firm Apollo said that one of its affiliated funds would make the cash offer if it materialises.
‘There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made,’ Apollo said.
Apollo said that its statement follows recent market speculation around Pearson. At 151.00 pence - which is up 23% on Thursday’s close - Pearson has a market cap of about £6.06 billion.
Ocado advanced 2.9% after it landed a ‘conclusive victory’ in a legal dispute, as judges once again ruled the online grocer did not infringe on patents held by Norwegian rival AutoStore.
The International Trade Commission rejected every patent infringement claim made by AutoStore, a warehouse technology systems provider.
In October 2020, Autostore sued and filed complaints in the US and the UK, accusing Ocado’s Smart Platform of infringing Autostore’s patented technology.
In response, Ocado said it is continuing to pursue claims of its own against AutoStore, for infringing on Ocado’s IP rights in both the US and Europe.
Among London midcaps, there was a rush back into travel and leisure stocks. Cineworld was up 8.6%, Wizz Air 7.6%, 888 Holdings 6.1%, and Carnival 5.5%.
Hochschild Mining and Centamin were anchored to the bottom of the FTSE 250 index - down 3.8% and 2.1%, respectively - following an easing in gold prices. Larger peer Fresnillo was down 3.8% in the FTSE 100.
Gold stood at $1,978.90 an ounce midday Friday, down sharply from $1,995.65 late Thursday.
Ricardo Evangelista, senior analyst at ActivTrades said: ‘Gold prices are hedging down during early Friday trading, but still look set to end the week in the green, as the sentiment in the markets remains under the influence of the war in Ukraine. The price of the precious metal retreated from the maximums reached earlier in the week, as the scope for gains created by risk aversion is somehow capped by the prospect of an hawkish Fed, which supports the US dollar.’
Gold was quoted at $1,961 an ounce late Friday last week, so remains up 0.9% this week.
Back on the London Stock Exchange, DP Eurasia shed 9.1%. The master franchisee of Domino’s Pizza brand in Turkey, Russia, Azerbaijan and Georgia, said there has been no material disruption to its operations so far. ‘Trading from its 188 stores in Russia continues, and the group remains dedicated to the communities it serves,’ it asserted.
DP Eurasia did, however, say it felt it is ‘prudent’ to limit any further investment into its operations. It also has suspended royalty payments from its Russian operations.
The stock is down 55% so far in 2022.
The pound was quoted at $1.3111 midday Friday, down on $1.3125 late Thursday.
The UK economy returned to growth in January, and has exceeded market expectations, data from the Office of National Statistics showed Friday.
Gross domestic product expanded 0.8% from the previous month in January, rebounding from December’s 0.2% drop, and was ahead of market consensus - provided by FXStreet - of 0.2% growth.
‘All sectors contributed positively to GDP growth in January 2022. Services were the main driver contributing 0.6 percentage points, with production and construction both contributing 0.1 percentage points,’ the ONS said.
The ONS data showed industrial production growth was 0.7% in January versus the previous month, primarily driven by 0.8% growth in manufacturing. This follows industrial production growth of 0.3% in December 2021.
The market had predicted a measly 0.1% rise in industrial production, while manufacturing was guided to rise by 0.2%.
Services output grew by 0.8% in January and is 1.3% above its pre-coronavirus pandemic level, the ONS noted. This followed a 0.5% fall in December 2021.
‘The war in Ukraine means that UK inflation is going to stay higher for longer,’ commented Dutch bank ING. ‘That indicates that the Bank of England is likely to raise rates again next Thursday and probably again in May. But with growth prospects deteriorating, we think that might be more or less it. Markets are likely overestimating the pace of tightening this year.’
The next BoE interest rate decision is due on Thursday next week at noon.
Inflation in Germany remained high in February, accelerating from the month before due to soaring energy prices, new data showed on Friday.
From a year before, consumer prices in February rose by 5.1%, the Federal Statistic Office Destatis reported. They rose 0.9% from January, when prices had increased 4.9% year-on-year.
Significant price increases at upstream stages and delivery bottlenecks had ‘a major impact’ on the rate of inflation, Destasis said.
‘The effects of the Covid-19 pandemic are increasingly superimposed by uncertainties related with the Russian attack on Ukraine,’ said FSO President Georg Thiel.
The euro was priced at $1.1030, firm from $1.1007 at the London equities close Thursday. Against the yen, the dollar was trading at JP¥116.90, up from JP¥116.05.
New York was pointed to a strong open on Friday. The Dow Jones Industrial Average was called up 1.3%, the S&P 500 up 1.4%, and the Nasdaq Composite up 1.7%.
US President Joe Biden will announce on Friday that he wants to strip Russia of its ‘most favoured nation’ trade status, according to a source familiar with the matter told news agency AFP, a move that would pave the way for tariff hikes.
Final approval on the new measure in response to the invasion of Ukraine - to be taken in coordination with the G7 countries and the EU - will be decided by Congress, the source added.
Brent oil was quoted at $111.10 a barrel on Friday around midday in London, down from $112.45 late Thursday.
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