Stocks in Europe nudged cautiously higher early Friday, though gains may be short-lived if a key US inflation reading comes in hotter-than-expected this afternoon.
Ahead of the reading, equities across the globe have been jittery amid fears that the Federal Reserve may keep rates higher for longer. In early UK corporate updates, Cineworld’s stock plunged as it looks unlikely shareholders will recover any value as the troubled cinema chain’s bankruptcy proceedings continue.
The FTSE 100 index opened up 24.81 points, 0.3%, at 7,932.53. It has lost roughly 0.9% so far this week, however. The FTSE 250 was up 32.54 points, 0.2%, at 19,823.03, and the AIM All-Share was up just 0.1 of a point at 855.61.
The Cboe UK 100 was up 0.3% at 794.21, the Cboe UK 250 was up 0.2% at 17,310.56, and the Cboe Small Companies was down 0.1% at 13,968.63.
Investors were waiting on the US core personal consumption expenditures data for January at 1330 GMT, which is the US Federal Reserve’s preferred measure of inflation. Core PCE is expected to fade to 4.3% in January, from 4.4% in February. The rate of core PCE inflation has steadily declined since spiking to 5.2% back in September.
Recent US data has been slightly hotter-than-expected, particularly in the labour market. Should the core PCE inflation rate top forecasts, investors may be spooked.
The dollar was slightly firmer against major currencies ahead of the PCE reading, out at 1330 GMT. Sterling was quoted at $1.2022 early Friday, little changed from $1.2023 at the London equities close on Thursday. The euro traded at $1.0591, edging down from $1.0593. Against the yen, the dollar was quoted at $134.83, up versus $134.72
Stocks in New York closed in the green on Thursday, with the Dow Jones Industrial Average ending up 0.3%, the S&P 500 up 0.5% and the Nasdaq Composite 0.7% higher
In European equities on Friday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was marginally higher . The German economy saw a worse contraction than initially thought in the final quarter of 2022. According to Destatis, German gross domestic product fell by 0.4% in the fourth quarter from the previous quarter, worsening from a preliminary forecast of a 0.2% contraction.
The German economy has surprised by showing more resilience than feared, despite facing a long series of crises; ING’s Carsten Brzeski commented.
However, while this resilience, driven by fiscal support and warm winter weather, has prevented the economy from falling into a deep recession, it is definitely no guarantee for a strong rebound anytime soon, the analyst added. ING warned that Europe’s largest economy could see a technical recession, given the recent stream of weak economic data.
Meanwhile, in the UK, consumer confidence has made a surprise rebound from historic lows despite ongoing cost-of-living woes, a figure showed. GfK’s long-running consumer confidence index rose by a significant seven points in February, although the headline score remains at a severely depressed negative 38.
Joe Staton, client strategy director at GfK, said: ‘Despite widely reported headwinds of inflation continuing to outstrip wage rises, and the ongoing household challenge from the cost-of-living crisis, consumers have suddenly shown more optimism about the state of their personal finances and the general economic situation, especially for the coming year.’
In the FTSE 100, International Consolidated Airlines fell 2.0%. The British Airways parent swung to a pre-tax profit of £415 million from a £3.51 billion loss a year before. Annual revenue in 2022 was £23.07 billion, up from £8.46 billion. The strong recovery was driven by sustained leisure demand and the reopening of markets, IAG said.
The firm said forward bookings are ‘robust’ and it expects pre-exceptional annual operating profit to be between £1.8 billion and £2.3 billion in 2023. However, the firm said it is ‘mindful of uncertainty’ in the macro environment as well as fuel and non-fuel inflation.
On Thursday, the firm had announced the acquisition of Air Europa for £500 million from the Spanish company Globalia. ‘This acquisition will enable us to grow Madrid as a hub, offering a gateway to Latin America and beyond’, Chief Executive Luis Gallego said. Elsewhere in the index of large-caps, Rolls-Royce added to Thursday’s gains, rising 5.0%. It had closed up 24%, after better-than-expected full-year results, and the launch of a new strategic plan.
In the FTSE 250, Jupiter Fund Management was up 12%. The London-based investment manager said, at December 31, assets under management fell 17% year-on-year to £50.2 billion from £60.5 billion. Pre-tax profit plunged 68% over in 2022 to £58.0 million.
Jupiter blamed macro-economic events, which hit market valuations and investor sentiment. However, the second half was more positive, with positive net inflows for the first time since 2017. The fund cut its dividend to just 8.4p, from 17.1p in 2021, but extended its share buyback programme by up to £16 million, bringing the total programme to £26 million.
Elsewhere, Cineworld shares plummeted 37%, as it warned shareholder value will probably be wiped out. The world’s second-largest cinema chain said it has received non-binding proposals from a number of counterparties for some or all of its businesses.
‘None of these proposals involves an all-cash bid for the entire business,’ the beleaguered cinema business confirmed. At present, Cineworld said that none of the proposals received to date would provide ‘any recovery’ for holders of its equity interests. Cineworld said there is unlikely to be sufficient creditor support for any reorganisation plan that includes any recovery of shareholder value.
It now expects to emerge from Chapter 11 proceedings in the first half of the year. Business operations continue as usual, the firm said.
On AIM, Webis Holdings fell 12%. The Isle of Man-based gaming firm said turnover in the half-year to November 30 fell to £6.2 million from £6.8 million a year before, as pre-tax loss widened to £325,000 from £70,000. This was primarily due to weather conditions in September through November, which led to the cancellation of a large of horse-racing content.
