London share prices opened higher on Friday, withstanding a ‘worrying’ but expected 80% hike to the energy price cap in the UK.
An agreed takeover of FTSE 250 software provider Micro Focus International provided some additional distraction for investors ahead of the day's, and week's, main market event, a speech by the US Federal Reserve chair.
Jerome Powell will deliver the keynote address on Friday at 1500 BST to the annual gathering of top central bankers in Jackson Hole, Wyoming. Powell is widely expected to confirm that more interest rate hikes are on the way as Fed officials try to bring inflation down from highs not seen in four decades.
The FTSE 100 was up 39.80 points, or 0.5%, at 7,519.54. The FTSE 250 index was up 107.32 points, or 0.6%, at 19,365.22. The AIM All-Share index was up 1.64 points, or 0.2%, at 902.40.
The Cboe UK 100 index was up 0.5% at 750.80. The Cboe 250 was up 0.5% at 16,648.06. The Cboe Small Companies was up 0.1% at 14,063.70.
In Paris, the CAC 40 stock index was up 0.5%, while the DAX 40 in Frankfurt climbed 0.6% in early trade.
In the FTSE 100, InterContinental Hotels Group was down 0.5% after JPMorgan downgraded the Crowne Plaza and Holiday Inn owner to 'neutral' from 'overweight'.
In the FTSE 250, Micro Focus International was the standout performer, up 92% at 512.20 pence, after the enterprise software provider agreed to be taken over by Waterloo, Ontario-based OpenText.
Under the terms of the deal, Micro Focus' shareholders will receive 532 pence per share, valuing the Newbury-based company, including its debt, at around £5.1 billion.
Shares in OpenText closed at $37.27 in New York on Thursday and lost 4.8% in after-hours trade.
Micro Focus said its directors intend to recommend unanimously that Micro Focus shareholders vote in favour of the takeover at a court meeting and the resolutions to be proposed at a general meeting. The transaction is expected to be completed during the first quarter of 2023.
The deal comes five years after Micro Focus acquired Hewlett Packard Enterprise's software arm in 2017 as part of a reverse takeover for $8.8 billion. The stock is down 75% since then.
The loss of another UK technology listing comes as London struggles to hold on to technology companies amid overseas interest.
Earlier this week, London's largest listed software firm Aveva was the subject of takeover interest from majority shareholder Schneider Electric, though it is yet to receive a formal approach from the French company.
Aveva shares were up 1.0% early Friday. Schneider was up 0.4% in Paris.
London also looks set to miss out on a potential listing of SoftBank's chip designer Arm, with New York the most probable destination for the one-time UK tech listing.
Meanwhile, the UK's energy regulator Ofgem said it will increase the annual energy price cap on default tariffs by 80%.
From October 1, energy suppliers in Great Britain can charge up to £3,549 per year for energy bills, up from the previous cap of £1,971.
In August 2021, Ofgem set the price cap at £1,277 from October 2021, meaning the cap has nearly tripled over a one-year period.
The cap for households on prepayment meter bills will rise by 79% to £3,608 from £2,017. In August 2021, Ofgem set that cap from October 2021 at £1,309.
Ofgem regulates energy prices for England, Scotland and Wales, while Utility Regulator sets the price cap in Northern Ireland.
On Thursday, Centrica's British Gas said it will donate 10% of its profit made during the energy crisis towards grants for customers who are under pressure from rising energy bills. British Gas generated a pretax profit of £98 million for the first half of 2022, meaning that the initial contribution to the British Gas Energy Support Fund should be £9.8 million.
However, British Gas said it will increase its contribution to £12 million, to ensure that there is enough available for the winter, when energy usage will be at its highest. From then on, British Gas will contribute 10% of its interim profit to the fund, which will provide customers with grants expected to average £750 per household.
‘We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make. I talk to customers regularly and I know that today's news will be very worrying for many,’ said Ofgem Chief Executive Officer Jonathan Brearley.
He added: ‘Ofgem has also today strengthened the rules around direct debits to ensure suppliers set them at the right level, meaning that customers only pay exactly what they need to. The changes will stop suppliers from building up excessive customer credit balances and using them in a risky way as working capital.’
Centrica shares were up 1.1%. Fellow power utility SSE was up 0.4%.
New York ended higher on Thursday, with the Dow Jones Industrial Average up 1.0%, S&P 500 up 1.4% and Nasdaq Composite up 1.7%.
In Asia on Friday, the Nikkei 225 index in Tokyo closed up 0.6%. In China, the Shanghai Composite closed down 0.3%, while the Hang Seng index in Hong Kong was up 0.8%. The S&P/ASX 200 in Sydney finished up 0.8%.
The dollar was higher across the board. The pound was quoted at $1.1790 early Friday, down from $1.1815 at the London equities close Thursday.
The euro was priced at $0.9955, down from $0.9975. Against the yen, the dollar was trading at JP¥137.01 in London, higher against JP¥136.72.
Brent oil was quoted at $100.55 a barrel on Friday, up from $100.48 a barrel at the London equities close Thursday. Gold stood at $1,753.74 an ounce, soft against $1,756.33.
In the economic calendar, there is US personal consumption expenditure data at 1330 BST.
Copyright 2022 Alliance News Limited. All Rights Reserved.
