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LONDON MARKET MIDDAY: Stocks hit fresh highs as winning run continues
London’s blue-chips remained in demand, pushing to new highs, with investors hoping US inflation data later does not derail the optimistic mood.
In the FTSE 100, ConvaTec was an outlier, after Peel Hunt downgraded the firm’s investment rating. On the other side of the index was NatWest, with a set of well received results.
The FTSE 100 index was up 35.73 points, 0.4%, at 8,114.59. The FTSE 250 was up 227.47 points, 1.2%, at 19,829.45, and the AIM All-Share was up 2.48 points, 0.3%, at 755.60.
The Cboe UK 100 was up 0.5% at 810.22, the Cboe UK 250 was up 1.1% at 17,121.29, and the Cboe Small Companies was up 0.4% at 15,502.11.
In European equities on Friday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.7%.
The FTSE 100 continued its record run on Friday, hitting an intraday high of 8,136.52.
‘What a fantastic week for the FTSE 100. We‘ve had new record highs, yet more takeover action, and everyone is talking about UK stocks in a positive way which hasn’t been seen for ages,’ said AJ Bell’s Russ Mould.
However, a key inflation reading from the US could dampen the mood.
The monthly PCE reading for March is released at 1330 BST on Friday.
The core PCE inflation gauge is predicted to have cooled to 2.6% last month, from 2.8% in February, according to FXStreet-cited consensus.
This is the final piece of market moving data of the week.
So far this week, numbers from the Bureau of Economic Analysis on Thursday showed that US economic growth slowed in the first three months of the year, coming in weaker than expected, though inflation picked up.
The BEA said US gross domestic product grew 1.6% quarter-on-quarter on an annualised basis in the three months to March 31. Growth eased from a 3.4% expansion in the final three months of 2023.
‘The only real show in town yesterday when it came to driving markets was the first release of US Q1 GDP. It’s fair to say that the data combination seen was a bit of a disaster from the perspective of the Fed. In terms of why we say this, the GDP reading came in significantly below consensus, while the core PCE reading came in much higher,’ analysts at Dutch bank Rabobank commented.
The PCE index grew 3.4% quarter-on-quarter, picking up speed from a 1.8% rise in the final quarter of last year, and further stoking inflation worries.
The pound was quoted at $1.2509 at midday on Friday in London, higher compared to $1.2490 at the equities close on Thursday. The euro stood at $1.0729, up against $1.0713.
The Bank of Japan kept its ultra-low interest rates unchanged Friday and stopped short of signalling another hike, pushing the yen to a fresh 34-year low against the dollar.
‘With more confidence on the ongoing wage-driven inflation dynamics and a strong appetite for policy normalization, the BoJ looks more likely to end its zero-interest rate policy in the autumn,’ said analysts at Oxford Economics.
Against the yen, the dollar was trading at JP¥156.75, higher compared to JP¥155.52.
In the FTSE 100, ConvaTec was an outlier, slipping 6.2%.
Broker Peel Hunt highlighted a draft proposal released Thursday that would restrict reimbursement for certain skin grafts in the US Medicare network.
Peel Hunt downgraded ConvaTec to ’reduce’ from ’add.’
‘As the ramifications are understood, there could be some turmoil in the Wound Care space, potentially impacting valuations through multiple contraction and earnings softness,’ Peel Hunt suggested.
Also in the red was Anglo American, down 0.5%, though it outperformed on Thursday.
On Friday, Anglo American said its board has ‘unanimously’ rejected an ‘opportunistic’ offer from larger peer BHP Group, on grounds that it ‘significantly undervalues’ the London-based miner.
This comes after Australia’s BHP on Thursday confirmed it had offered to buy Anglo American in an all-share deal valuing the mining group at £31.1 billion.
On the other hand, results from NatWest were well received, sending the stock 4.4% higher.
The Edinburgh-based lender said operating profit fell 27% to £1.33 billion in the first three months of 2024 from £1.81 billion a year before, but it highlighted ‘improving’ confidence amongst customers.
This profit decrease reflected a 10% drop in total income to £3.48 billion from £3.88 billion. Within this, net interest income decreased 8.6% to £2.65 billion from £2.90 billion.
‘Though macro-uncertainty continues, customer confidence and activity is improving, with both lending and deposits up in the quarter and impairments remaining low, reflecting our well-diversified business,’ Chief Executive Paul Thwaite commented.
In the FTSE 250, Darktrace shares shot up 17% to 606.52 pence.
Darktrace said it has agreed to an all-cash takeover offer worth $5.32 billion from funds managed by private equity firm Thoma Bravo.
Cambridge, England-based Darktrace is a cybersecurity provider. Chicago-based Thoma Bravo focuses on software investments.
Thoma Bravo ‘firmly believes that the acquisition will benefit Darktrace, Darktrace’s customers, and the wider technology ecosystem through supporting the development of enhanced products and Darktrace’s cybersecurity capability,’ the two companies said.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.7%, and the Nasdaq Composite up 1.0%.
Brent oil was quoted at $88.11 a barrel at midday in London on Friday, up from $86.48 late Thursday.
Gold was quoted at $2,346.90 an ounce, higher against $2,331.32.
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