FTSE 100 picks up on hopes BoE rates have peaked

(Alliance News) - Stock prices in London mostly picked up at midday Friday, after investors shook off the steep falls suffered on Wall Street.

Stocks in France and Germany, however, continued to fall, on the prospect of the US's interest rates staying higher for longer.

The FTSE 100 index was up 47.47 points, 0.6%, at 7,726.09. The FTSE 250 was [up/down] 52.49 points, 0.3%, at 18,586.06, and the AIM All-Share was up 0.14 of a point at 739.05.

The Cboe UK 100 was up 0.6% at 770.15, the Cboe UK 250 was down 0.3% at 16,222.86, and the Cboe Small Companies was down 0.2% at 13582.85.

"Thursday was a truly miserable day for US stocks, with the Nasdaq down 1.8% and the S&P falling 1.6%. The prospect of interest rates staying higher for longer has given investors a lingering headache and sentiment has worsened as the week progressed," said Russ Mould, investment director at AJ Bell.

Stocks in New York were called higher on Friday, shaking off Thursday's lows. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.5%.

However, some European equities on Friday followed New York's downward spiral, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.1%.

On Thursday, the Bank of England followed the US Federal Reserve's footsteps and decided against a hike.

Unlike the Fed, the BoE's decision and accompanying statement were interpreted as dovish, putting pressure on sterling. Sterling was quoted at USD1.2257 shortly after the decision, down versus USD1.2295 just beforehand.

The pound continued to trade lower on Friday. It was quoted at USD1.2243 at midday in London, compared to USD1.2297 at the equities close on Thursday.

The BoE maintained its bank rate at 5.25%, a more than 15-year high, in what was somewhat of a surprise move. According to FXStreet cited consensus, a 25 basis point hike was expected, though a tamer UK inflation reading earlier this week meant some investors dialled back their rate hike bets.

Further data on Friday indicates that the BoE made the right decision.

The severity of the UK private sector downturn deepened in September, according to preliminary survey data.

The S&P Global/CIPS flash UK flash composite purchasing managers' index fell to a 32-month low of 46.8 points in September from the final reading of 48.6 in August. This was worse than FXStreet-cited market consensus of 48.7 points.

Survey respondents pointed to weaker demand amid a cost-of-living crisis and high interest rates, as well as cutbacks in client spending in real estate and construction.

"With the Bank of England having had sight of the survey data prior to its latest policy decision, the worrying signals from the survey of heightened recession risk and cooling inflationary pressures are likely to have added to calls to halt rate hikes," said Chris Williamson, chief business economist, S&P Global Market Intelligence.

However, interest rate sensitive shares were on the up. Housebuilders Barratt Developments and Persimmon and climbed 0.3% and 1.2%. Insurers Direct Line, Aviva and Admiral all rose by 0.3%.

Croda International rose 1.0%

It said it has Danuta Gray as its chair designate.

Gray will join the board from February 1 next year, succeeding Anita Frew at the end of its annual general meeting on April 24. Frew will then retire from the board after serving as chair for nine years.

Gray is currently chair at Direct Line Insurance.

Elsewhere, Microsoft had closed down 0.4% in New York, but in pre-market trade it was up 0.4%.

It seems that Microsoft's new takeover deal for Activision Blizzard is set for UK approval, following a long-winded back and forth with the UK Competition & Markets Authority.

Redmond, Washington-based technology firm Microsoft is planning to buy Activision, the Santa Monica, California-based gaming company behind Call of Duty, for USD68.7 billion.

Edison Group's Dan Ridsdale said the acquisition "would be a welcome turnaround and a reminder that the UK is an attractive place to do business."

In the FTSE 250 index, Ascential rose 5.5%.

The business-to-business media and events company reported a pretax loss of GBP11.8 million in the first half of 2023, compared with a GBP41.6 million loss the year before. Group revenue meanwhile increased 16% on an organic basis to GBP307.4 million from GBP260.7 million.

"Our businesses have continued to trade strongly in the first half of 2023," said Chief Executive Officer Duncan Painter. "In particular, both Cannes Lions and Money20/20 enjoyed extremely successful editions in June and have progressed even further ahead of their pre-pandemic benchmarks."

On London's AIM, OptiBiotix Health rose 19%.

The life sciences company, which develops edible compounds to tackle chronic conditions like obesity and diabetes said it has reached an agreement to launch its own brands of SlimBiome, GoFigure, and Snacksmart products online with Boots.

Boots is one of the largest retailers in the UK and Ireland with 58,000 employees in 2,200 shops across the UK and Ireland and reported revenue of GBP6.5 billion in 2022. Its parent company is Illinois, US-based retailer Walgreens Boots Alliance.

Against the yen, the dollar was trading at JPY148.17, up compared to JPY147.38. The yen weakened after the Bank of Japan left its ultra-loose monetary policy in place, as was widely expected, and showed no sign of shifting its approach to monetary policy.

The euro stood at USD1.0645, lower against USD1.0658.

Brent oil was quoted at USD93.01 a barrel at midday in London on Friday, down from USD94.17 late Thursday. Gold was quoted at USD1,925.33 an ounce against USD1,918.13.

Still to come on Friday's economic calendar, there are more flash PMI readings, notably the US at 1445 BST.

By Sophie Rose, Alliance News reporter

Comments and questions to [e-mail]

Copyright 2023 Alliance News Ltd. All Rights Reserved.