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LONDON MARKET CLOSE: Powell comments, hope for UK economy lift stocks

8th Feb 2023 17:01

(Alliance News) - Stocks in London were higher at the close on Wednesday, with sentiment buoyed by a steady message from US Federal Reserve Chair Jerome Powell and indications that the UK may narrowly avoid a recession.

The FTSE 100 index closed up 20.46 points, or 0.3% at 7,885.17 on Wednesday. The blue-chip index hit an intraday high of 7,934.30, surpassing the record set on Friday.

The FTSE 250 ended up 114.81 points, or 0.6%, at 20,303.81. The AIM All-Share closed up 4.10 points, or 0.5%, at 883.23.

The Cboe UK 100 ended up 0.3% at 788.68, the Cboe UK 250 closed up 0.8% at 17,753.74, and the Cboe Small Companies ended up 0.4% at 13,854.58.

Speaking at The Economic Club of Washington, Fed Chair Jerome Powell said the US central bank will need to keep raising interest rates.

"We think that we'll need to do further rate increases and we think we will need to hold policy at a restricted level for some time," Powell said, echoing his language at a press conference last week.

AJ Bell's Russ Mould said this was "just the soothing message the market was looking for."

"Concerns that last Friday's bumper jobs report would see the Fed react to what it perceived as an overheating labour market were eased, with Powell's relatively relaxed response possibly reflecting the seasonal anomalies which often affect the January numbers," Mould explained.

Lifting market mood closer to home, meanwhile, was a new forecast from the National Institute of Economic & Social Research which predicted that the UK will swerve a technical recession this year.

It is a more optimistic outlook for the UK economy than that offered by the Bank of England last week, which predicted a shallower but still protracted recession, as well as a recent gloomy prediction from the International Monetary Fund, which saw Britain being the only major economy to suffer a contraction this year.

Sterling strengthened following the more-positive forecast. The pound was quoted at USD1.2084 at the London equities close on Wednesday, up from USD1.2015 at the close on Tuesday.

In the FTSE 100, BP held on to Tuesday's gains, finishing 2.4% higher. The oil major said that its underlying replacement profit more than doubled in 2022 and was also higher in the fourth quarter, in line with increasing natural gas and oil sales from rising prices.

Barratt Developments closed up 1.4% as it reported double-digit interim growth in both revenue and profit, but warned of lower reservation rates early in 2023 due to "tentative" demand.

For the half-year that ended on December 31, the housebuilder said revenue rose 24% year-on-year to GBP2.78 billion from GBP2.25 billion. Pretax profit rose 16% to GBP501.5 million from GBP432.6 million, despite operating margin worsening to 17.8% from 19.3%.

Smurfit Kappa fell 3.5% despite raising its dividend amid a rise in profit during 2022, as it noted high energy costs and inflation.

The Dublin-based packaging maker said pretax profit rose 42% to EUR1.29 billion in 2022 from EUR913 million in 2021. Revenue climbed 27% to EUR12.82 billion from EUR10.11 billion.

The company recommended a final dividend of 107.6 euro cents per share, up 12% from 96.1 cents a year prior.

However, Smurfit noted high costs driven by energy: "The year was characterised by unprecedented cost inflation, especially in energy, which moderated in the latter part of the year."

The company said that cost of sales in 2022 rose by 25% to EUR8.75 billion from EUR7.02 billion in 2021.

In the FTSE 250, PZ Cussons dropped 9.0% despite reporting double-digit rises in both interim profit and revenue, and keeping its dividend unchanged.

The Manchester-based manufacturer of personal care brands such as Imperial Leather said, in the six months to December 3, revenue rose 19% to GBP336.9 million from GBP283.7 million a year before.

It explained that this was led by the Childs Farm acquisition, favourable foreign exchange market and the "impact of additional reporting days in the period".

Pretax profit surged 72% to GBP40.5 million from GBP23.5 million, as administrative expenses declined to GBP30.7 million from GBP45.1 million a year earlier.

Future lost 6.1% as it warned of a slowdown in consumer spending.

The magazine publisher said trading in the four-month period that ended on January 31 has been broadly in-line with expectations, but added that the market slowdown in audience numbers and consumer spending seen towards the end of its last financial year has continued, impacting the "growth of digital advertising and affiliate for products revenue, notably in the consumer technology vertical".

Elsewhere in London, Speedy Hire plunged 12% as the tool and equipment hire services company said a count for its 2023 audit identified a GBP20.4 million deficiency in the value of its non-itemised assets.

It has launched an external investigation into the issue, and said the deficiency is expected to be recorded as a one-off non-cash write down in its balance sheet for the year ending March 31.

Speedy Hire also said it has closed 20 depots at the end of January, which will cost around GBP2.9 million.

In European equities on Wednesday, the CAC 40 in Paris ended 0.2% lower, while the DAX 40 in Frankfurt ended up 0.6%.

The euro stood at USD1.0734 at the European equities close on Wednesday, higher against USD1.0700 at the same time on Tuesday. Against the yen, the dollar was trading at JPY131.29, higher compared to JPY131.17 late Tuesday.

Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 0.2%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 1.3%.

Brent oil was quoted at USD84.01 a barrel at the London equities close on Wednesday, up from USD82.75 late Tuesday. Gold was quoted at USD1,878.10 an ounce, higher against USD1,875.35 at the close on Tuesday.

In Thursday's UK corporate calendar, there are full-year results from pharmaceutical firm AstraZeneca, cigarette maker British American Tobacco, and consumer goods firm Unilever.

In the economic calendar, there US will publish its weekly unemployment insurance claims report at 1330 GMT.

By Heather Rydings, Alliance News senior economics reporter

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