A better batch of Chinese data gave equity markets something to celebrate on Friday, with the FTSE 100 looking set to round off a decent week with another advance.
Stocks with a strong Asian exposure were among the better performers, while a robust Brent price supported Shell and BP.
It was a difficult morning for the euro, with investors believing the European Central Bank may be done hiking.
The FTSE 100 index was up 57.33 points, 0.8%, at 7,730.41. The FTSE 250 was down 25.48 points, 0.1%, at 18,874.22, and the AIM All-Share was up 1.06 points, 0.1%, at 745.83.
The Cboe UK 100 was up 0.5% at 769.87, the Cboe UK 250 was up 0.3% at 16,473.85, and the Cboe Small Companies was down 0.1% at 13451.00.
Chinese retail sales jumped last month, data showed Friday, beating expectations and fuelling hopes that the country’s army of consumers are returning to help kickstart the world’s number two economy after an extended period of weakness.
The data, which also revealed a better-than-expected lift in industrial output, is the latest pointing to a stabilisation and will follow a number of stimulus measures by Beijing.
Retail sales – the main indicator of household consumption that is closely followed by markets – jumped 4.6% on-year in August, the National Bureau of Statistics said. That marks a big improvement on July’s 2.5% and was far better than the 3.0% forecast in a survey of economists by Bloomberg.
Meanwhile, industrial production climbed 4.5% on-year, which was also a big increase from 3.7% in July and more than the 3.9% estimated.
‘There’s a growing sense of optimism among a cohort of investors who believe that Beijing’s recent initiatives to stimulate the economy and stabilize financial markets are showing signs of success,’ said SPI Asset Management’s Stephen Innes.
The data boosted the FTSE 100 index. Luxury fashion company Burberry rose towards the top of the index, up 2.6%
Asia-focused bank Standard Chartered was up 1.2%. Insurer Prudential, which is also Asia-focused, rose 1.4%.
Miners were also getting a boost from the strong data in China, with Endeavour Mining up 0.8% and Rio Tinto rising 1.6%.
The stronger demand outlook from a robust Chinese industrial sector helped to lift oil prices further, with Brent oil trading at $93.98 a barrel at midday Friday, higher than $93.49 on Thursday.
Blue-chip oil firms BP and Shell were up 0.5% and 0.3% on Friday at midday.
In European equities on Friday, the CAC 40 in Paris was up 1.5%, while the DAX 40 in Frankfurt was up 1.0%.
The European Central Bank raised interest rates to an all-time high on Thursday. It lifted interest rates by 25 basis points as inflation in the euro area is expected to remain ‘too high for too long’.
It means the Frankfurt-based central bank has hiked its policy rates by a cumulative 450 basis points during the current tightening cycle.
‘The rate increase today reflects the Governing Council’s assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission,’ the ECB said in its policy statement.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, believes it is ‘naive’ to think the ECB can’t continue to hike rates, given the ‘sour’ economic outlook and the bank’s upwardly-revised inflation expectations.
But some are not convinced that the ECB will hike again, putting pressure on the euro.
The single currency stood at $1.0663, lower against $1.0671 at London market close on Thursday.
Rate sensitive stocks in London were on the up Friday, with the Bank of England deciding on interest rates next week. Housebuilders Taylor Wimpey, Barratt Developments and Persimmon were up 0.8%, 1.2%, and 0.9%, respectively.
All eyes are now on the US Federal Reserve, which will hold its policy meeting next week following hotter-than-expected US consumer prices on Wednesday.
The pound was quoted at $1.2423 at midday on Friday in London, higher compared to $1.2414 at the equities close on Thursday. Against the yen, the dollar was trading at JP¥147.88, lower compared to JP¥147.11.
In the FTSE 250, Games Workshop rose 12%, after it said trading in its first financial quarter was ahead of expectations.
The Nottingham, England-based miniature wargames maker and retailer said core revenue in the three months to August 27 was around £121 million, rising 14% year-on-year from £106 million.
Core revenue refers to direct sales of its core products to external customers, via its retail network, independent retailers, or online. Licensing revenue doubled to around £6 million.
Among London’s small-caps, Petra Diamonds was down 4.5%.
The Southern Africa-focused diamond miner and supplier reported its annual results for the 12 months to June 30.
Revenue fell 42% year-on-year to $325.3 million from $563.7 million, whilst the firm swung to a loss of $38.8 million from $139.5 million.
Stocks in New York were called to open mixed. The Dow Jones Industrial Average was called up 0.3%, and the S&P 500 index up 0.1%. Meanwhile, the Nasdaq Composite was called down 0.1%.
On Thursday, Wall Street had closed in the green. Sentiment was boosted by the initial public offering of UK chip designer Arm Holdings, as its shares rose almost 25% in their Nasdaq debut. It was the largest IPO in nearly two years.
Gold was quoted at $1,917.55 an ounce against $1,908.80.
Still to come, the economic calendar has US industrial production data at 1415 BST.
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