Stocks closed in the green as US producer prices raise investor sentiment despite hopes of early US rate cuts fading
The FTSE 100 index closed up 48.34 points, 0.6%, at 7,624.93. The FTSE 250 ended up 89.69 points, 0.5%, at 19,197.62, and the AIM All-Share closed up 4.34 points, or 0.6%, at 749.06. Over the course of the week the FTSE 100 was down 0.8%, the FTSE 250 lost 0.1% and AIM All-Share fell 0.2%.
The Cboe UK 100 ended up 0.6% at 761.85, the Cboe UK 250 closed up 0.6% at 16,663.91, and the Cboe Small Companies ended flat at 15,099.65.
In European equities on Friday, the CAC 40 in Paris ended up 1.1%, while the DAX 40 in Frankfurt ended up 1.0%.
According to the Bureau of Labor Statistics, producer prices rose 1.0% year-on-year in December, picking up speed from a 0.8% climb in November, but falling short of consensus. Producer prices had been expected to grow 1.3% annually in December, according to FXStreet.
In December 2022, producer prices had surged 6.4%.
This follows consumer price inflation data on Thursday.
According to the Bureau of Labor Statistics, the nation’s yearly inflation rate picked up to 3.4% in December, from 3.1% in November. The reading was hotter than expected. According to FXStreet cited consensus, the annual inflation rate was forecast to only slightly heat up to 3.2%.
The data comes ahead of the first Fed decision of the year on January 31.
Meanwhile, the next European Central Bank decision is on January 25. The Bank of England follows suit on February 1.
Early Friday, there was a better-than-expected UK gross domestic product reading.
The Office for National Statistics said the UK’s gross domestic product grew 0.3% on a monthly basis in November, having contracted by 0.3% in October. The market had been expecting 0.2% growth, according to FXStreet-cited consensus.
‘November’s surprisingly robust GDP figures could suggest that falling inflation is finally having an impact on people’s sense of wellbeing, but in reality it seems many were simply tempted by Black Friday sales which in turn boosted retailers, couriers and warehouse operators,’ Danni Hewson, head of financial analysis at AJ Bell.
‘The bigger question is whether the momentum continued through the final days of 2023 and we won’t find out the answer to that for another month, but the odds look pretty evenly stacked.’
The pound was quoted at $1.2760 at the London equities close Friday, higher compared to $1.2703 at the close on Thursday. The euro stood at $1.0971 at the European equities close Friday, up against $1.0945 at the same time on Thursday. Against the yen, the dollar was trading at JP¥144.62, down compared to JP¥146.07 late Thursday.
In the FTSE 100, Burberry plunged 4.8%, the bottom of the index.
The fashion firm cut its forecast for adjusted operating profit for the financial year ending March 30 to be in the range of £410 million to £460 million. The latest guidance would at worst represent a decrease of over a third from the £634 million achieved in financial 2023.
Back in November, it had guided for profit towards the lower end of the consensus range at that time of £552 million to £668 million.
The luxury fashion brand blamed the slowdown in demand within the luxury sector. It also said it expects a currency headwind of around £120 million to revenue and around £60 million to adjusted operating profit.
Other retailers faired better on Friday, with JD Sports up 3.8%.
In the FTSE 250, John Wood rose 4.2%, after it said that 2023 trading was in line with expectations, with contract wins and strong order book expected to drive growth through 2024.
The Aberdeen, Scotland-based engineering and consulting group expects revenue of around $6 billion for the year ended December 31, up 10% from USD 5.44 billion a year before.
John Wood reported that adjusted earnings before interest, tax, depreciation and amortisation were expected ‘slightly ahead of guidance’ at between $420 million and $425 million.
Amongst London’s small caps, Ceres Power lost 4.2%.
The clean energy technology developer’s stock fell as Royal Bank of Canada cut it to ’underperform’ from ’sector perform’.
Stocks in New York were mixed at the London equities close, The DJIA was down 0.4%, meanwhile the S&P 500 index and the Nasdaq Composite rose marginally.
Investors are also responding to the start of the US earnings season, with some of the big names in banking reporting results on Friday.
Citigroup lost 0.7% and grabbed headlines on Friday after it said it will slash 20,000 jobs amid a ‘very disappointing’ final quarter.
The New York-based lender said revenue in the fourth quarter of 2023 was $17.44 billion, down 3.1% from $18.01 billion the prior year. Citigroup also swung to a $1.84 billion net loss in the period, compared with its $2.51 billion net income the year before.
Meanwhile, Wells Fargo lost 2.5%.
The San Francisco-based bank said total revenue climbed 2.2% year-on-year to $20.48 billion in the fourth quarter of 2023, from $20.03 billion.
Net interest income fell 4.9% to $12.77 billion from $13.43 billion. Non-interest income however increased 17% to $7.70 billion from $6.60 billion.
In better shape was JPMorgan Chase, up 0.5%. It said it rounded off 2023 with a ‘solid quarter’.
The lender said its record 2023 stemmed from ‘over-earning’ on both net interest income and credit, but believes it is still in robust shape when that growth normalises.
Oil prices continued to trade above the $78 mark on Friday, amid tensions in the Red Sea. Brent oil was quoted at $78.65 a barrel at the London equities close Friday from $78.92 late Thursday.
Tensions continued to rise in the Middle East, after US and British air strikes pounded targets in rebel-held Yemen. This follows weeks of disruptive attacks on Red Sea shipping by Iran-backed Houthi forces acting in solidarity with Hamas.
The Houthis said there was ‘no justification’ for the air strikes and warned that attacks on Israel-linked shipping would continue.
‘While this event may not constitute the ’big one’ — a direct threat to Iranian leaders or assets — circumstances could evolve if the current escalation jeopardizes Iran’s credibility or an increasingly confident Israel expands its targets,’ commented SPI Asset Management’s Stephen Innes.
Gold was quoted at $2,053.68 an ounce at the London equities close Friday, up against $2,017.55 at the close on Thursday.
In Monday’s UK corporate calendar, there are trading statements from RS Group, Ashmore Group and PageGroup.
The economic calendar for Monday has eurozone industrial production and trade balance data.
Financial markets in the US will be closed on Monday for Martin Luther King Jr Day. They will reopen on Tuesday.
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