15th Sep 2023 16:56
(Alliance News) - The FTSE 100 ended higher on Friday after a dovish hike from the European Central Bank on Thursday softened interest rate expectations for the Bank of England.
The FTSE 100 index closed up 38.30 points, or 0.5% at 7,711.38 on Friday and ended the week 3.1% higher.
The FTSE 250 ended down 109.93 points, or 0.6%, at 18,789.77 but ended the week up 1.8%.
The AIM All-Share closed down 0.58 of a point, or 0.1%, at 745.35 and closed 0.2% lower over the past five days.
The Cboe UK 100 ended up 0.5% at 769.76, the Cboe UK 250 closed flat at 16,414.74, and the Cboe Small Companies ended up 0.5% at 13,441.01.
The European Central Bank raised interest rates to an all-time high on Thursday. It lifted interest rates by 25 basis points as inflation in the euro area is expected to remain "too high for too long".
However, the central bank said that, based on its current assessment, it believes interest rates have reached levels that, when maintained for a "sufficiently long duration", will make a "substantial contribution to the timely return of inflation to the target."
For analysts at Brown Brothers Harriman, this wording meant that the ECB has now shifted from "how high to how long."
"We believe rates have indeed peaked but [ECB President Christine Lagarde] can't actually say that," BBH said.
The euro remained on the back foot on Friday due to this dovish repricing of interest rate expectations. The euro stood at USD1.0672 at the European equities close, virtually unchanged against USD1.0671 at the same time on Thursday.
Francesco Pesole at ING said the ECB's "doveish tilt" added fuel to the ongoing doveish re-pricing of Bank of England rate expectations and weighed on the pound.
However, Pesole cautioned that the UK inflation print on Wednesday, the day before the BoE next rate decision, could have a "good chance" of shifting market interest rate expectations.
The pound was quoted at USD1.2401, down from USD1.2414 at the close on Thursday.
In London, it was another great day for mining stocks after some better-than-expected economic data from China overnight and new support measures from the nation's central bank helped boost the outlook for commodity demand.
Endeavour Mining closed up 4.9%, Fresnillo up 2.8%, and Anglo American up 1.3%.
Chinese retail sales jumped 4.6% on-year in August, the National Bureau of Statistics said. That marks a big improvement on July's 2.5% and was far better than the 3.0% forecast in a survey of economists by Bloomberg.
Meanwhile, industrial production in China climbed 4.5% on-year, which was also a big increase from 3.7% in July and more than the 3.9% estimated.
SPI Asset Management analyst Stephen Innes said the data was a promising step in China's "recovery wagon".
In the FTSE 250, Games Workshop jumped 11% after it announced in its first financial quarter was ahead of expectations, driven by healthy growth across all channels.
The miniature wargames maker and retailer said core revenue in the three months to August 27 was around GBP121 million, rising 14% year-on-year from GBP106 million.
Charles Hall at Peel Hunt noted this was an "encouraging" start to the year and consequently upped his forecasts for the firm by 6%. This left "room for upside" should these trends continue, he added.
Elsewhere in London, Kier Group closed 8.7% higher, extending Thursday's gains. Alongside a strong set of annual results on Thursday, the infrastructure services, construction and property firm had announced that intends to resume dividend payments in financial 2024, beginning with an interim dividend.
On AIM, ECR Minerals plunged 24% after the company announced its chief executive officer intends to step down.
The Australia-focused mineral exploration and development company said CEO Andrew Haythorpe has decided to step down "in order to pursue his other interests." He was appointed to the role in April last year.
In European equities on Friday, the CAC 40 in Paris ended up 1.0%, while the DAX 40 in Frankfurt ended up 0.6%.
Meanwhile, stocks in New York were lower at the London equities close, with the Dow Jones Industrial Average down 0.5%, the S&P 500 index down 0.9%, and the Nasdaq Composite down 1.3%.
Investor mood on Wall Street failed to be lifted by the blockbuster initial public offering of UK chip designer Arm on the Nasdaq index on Friday. It was the largest IPO in nearly two years.
"Nvidia has been the go-to stock for investors looking to play the artificial intelligence theme this year, and many people have made decent money owning its shares. Attention is now shifting to Arm as a way to play AI, which means its first-day pop on the stock market might just be the start of things to come," added AJ Bell's Russ Mould.
Arm shares were up 0.8% in New York at the time of the London equities close, though they had soared some 25% higher earlier in the session.
Brent oil was quoted at USD93.72 a barrel at the London equities close on Friday, up from USD93.49 late Thursday. Gold was quoted at USD1,927.20 an ounce, sharply higher against USD1,908.80 at the close on Thursday.
Against the yen, the dollar was trading at JPY147.80 late Friday, higher compared to JPY147.11 late Thursday.
In Monday's UK corporate calendar, there are half-year results from Downing Renewables & Infrastructure, HgCapital Trust, and Artisanal Spirits Co.
The economic calendar next week has interest rate decisions from the US Federal Reserve on Wednesday and the Bank of England on Thursday.
There will also be the latest inflation prints for the EU and the UK on Tuesday and Wednesday.
By Heather Rydings, Alliance News senior economics reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.