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LONDON MARKET CLOSE: Europe rises but debt ceiling doubt sours mood

19th May 2023 17:00

(Alliance News) - London's FTSE 100 rose on Friday, while Frankfurt's DAX 40 hit a record level, though shares ended off session highs as a poor development in US debt ceiling talks kept a lid on optimism as the European trading session drew to a close.

The mood was slightly more uncertain in New York. Shortly before the European close, news emerged that a Republican negotiator walked out of talks, hurting the dollar.

The FTSE 100 index closed up 14.57 points, 0.2%, at 7,756.87. The FTSE 250 slipped just 9.15 points to 19,289.10. The AIM All-Share fell 0.97 of a point, 0.1%, to 808.97.

For the week, the FTSE 100 ended slightly higher, the FTSE 250 up 0.5% though the AIM All-Share lost 1.0%.

The Cboe UK 100 rose 0.3% to 776.40, the Cboe UK 250 lost 0.2% at 16,824.35, and the Cboe Small Companies ended 0.1% lower at 13,564.01.

In European equities on Friday, the CAC 40 index in Paris closed up 0.6%, while the DAX 40 in Frankfurt added 0.7%, after hitting a record high.

Helping the DAX 40 hit its record were gains for industrial firms.

Heidelberg Materials added 0.8%, while Siemens rose 1.3%. Year-to-date, the stocks have surged 32% and 23%. Weapons maker Rheinmetall is also among the DAX's best year-to-date performers, up 41%, though shares fell 0.6% on Friday.

While markets in Europe were upbeat, stocks in New York were in the red. The Dow Jones Industrial Average lost 0.5%, while the S&P 500 and Nasdaq Composite were down 0.4%.

Bloomberg reported House Speaker Kevin McCarthy's top debt-ceiling negotiators walked out of a meeting with White House representatives.

Republican Representative Garret Graves said "they're just unreasonable", Bloomberg reported.

Earlier on Friday, a White House official said "steady progress" was being made in talks on raising the US debt ceiling.

The US government is expecting to hit the legal borrowing limit by as soon as June 1 – raising the possibility of the world's largest economy defaulting on debt repayments for the first time.

The pound was quoted at USD1.2463 at late Friday in London, higher compared to USD1.2399 at the close on Thursday. The euro stood at USD1.0812, higher against USD1.0764. Against the yen, the dollar was trading at JPY137.64, lower compared to JPY138.64.

Aside from debt ceiling developments, the dollar also came under slight pressure before the end of the European equity trading session after Federal Reserve Chair Jerome Powell said US interest rates may not need to rise as high as thought, due to tighter credit conditions.

Powell was speaking at an event in Washington, DC.

Up until Friday afternoon, it was a largely positive week for the dollar, however. It had bought JPY135.39 this time last week. The pound had traded around USD1.2465 and the euro at USD1.0857.

Conversely, it's been a tricky week for gold, amid its inverse relationship with the greenback.

Gold was quoted at USD1,972.99 an ounce late Friday, higher against USD1,953.31 on Thursday, but down markedly from USD2,010.46 a week earlier.

Gold has played "second fiddle" to the dollar this week, KCM Trade analyst Tim Waterer commented.

"The gold price has gone off the boil this week in the face of the surging US dollar. The price fell below the USD1,970 support line, which opened a new leg lower for the precious metal. With US policymakers moving somewhat inevitably towards a last-minute resolution on the debt ceiling, and Fed officials donning their hawkish hats this week with respect to US interest rates, the greenback has been the currency of choice this week for investors," Waterer added.

Brent oil was quoted at USD75.74 a barrel late Friday in London, down from USD76.23 late Thursday.

In London, Paddy Power owner Flutter rose 2.2%, among the best blue-chip performers, after Citigroup raised the stock to 'buy'.

JD Sports shed 7.6%, typifying a tough week for the stock. The athleisure firm gave back 8.1% this week.

Friday's price action was down to a negative read-across from New York-listed sportswear retailer Foot Locker. Shares in Foot Locker slid 27% in New York as it cut guidance.

Foot Locker now expects annual sales to fall between 6.5% and 8.0%. Its previous guidance was for a decline between 3.5% and 5.5%.

"However, our sales have since softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory," Chief Executive Officer Mary Dillon said.

Morgan Stanley fell 1.6% in New York. Chief Executive James Gorman on Friday said he will soon step down from the post and assume the role of executive chair.

At the company's annual general meeting, Gorman said the plan is for him to step down as CEO "within the next 12 months". The specific time of the move is yet to be decided.

The Morgan Stanley board has spotted three strong candidates to replace him, Gorman said. He will then become executive chair "for a period of time".

Gorman has been CEO of the investment bank since January 2010. He also assumed the role of chair two years later. His stint with the company began in February 2006.

The news puts a bit of a spotlight on JPMorgan Chase's Jamie Dimon ahead of an investor day on Monday. Dimon has served as JPMorgan CEO since the start of 2006. JPMorgan shares were down 0.4%.

Back in London, drinks maker C&C plunged 15% as it announced a leadership shake-up and said it encountered "significant challenges" in implementing a complex enterprise resource planning system upgrade for the Matthew Clark and Bibendum, or MCB, businesses in Great Britain.

Referring to its drinks wholesaler Matthew Clark and its wine seller Bibendum, C&C said: "The implementation process has taken longer and been significantly more challenging and disruptive than originally envisaged, with a consequent material impact on service and profitability within MCB."

C&C expects a one-off hit of EUR25 million from the ERP disruption in financial 2024.

Knights Group added 12%.

The law firm expects revenue of about GBP142 million for the financial year that ended on April 30, up 13% from GBP125.6 million the year before. It predicts underlying pretax profit to be about GBP21.5 million, up 19% from GBP18.1 million in financial 2022.

Chief Executive Officer David Beech says: "Knights has made good progress during the year, delivering on our strategy of selectively making acquisitions, attracting high quality talent, driving operational improvements across the business and strengthening our team of client services directors."

Monday's economic calendar has a eurozone flash consumer confidence reading at 1500 BST. The week picks up pace with a host of flash purchasing managers' index readings on Tuesday, a UK inflation reading on Wednesday and US gross domestic product on Thursday.

The local corporate calendar has annual results from digital services provider Kainos and logistics firm Wincanton on Monday.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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