31st Jan 2025 12:03
(Alliance News) - The FTSE 100 traded close to new all-time highs around midday on Friday, led by an 11% jump in Smiths Group, ahead of key US inflation data.
The blue-chip index is on track to post a gain of around 6.2% for January, its biggest monthly gain since November 2022.
Russ Mould at AJ Bell said: "Investors will be relieved that the markets have successfully negotiated a week full of major events including a Federal Reserve interest rate meeting and the start of the Magnificent Seven earnings season."
"Later on, there’s one more hurdle to get over this week as core PCE inflation data is released in the US. This metric is a big factor in informing the decision making of the Fed so a surprise in either direction could make markets increasingly febrile again."
The FTSE 100 index climbed 33.01 points, 0.4%, at 8,679.97. It earlier hit a new high of 8,692.84.
The FTSE 250 was up 77.66 points, 0.4%, at 20,882.73, and the AIM All-Share firmed 0.57 of a point, 0.1%, at 718.80.
The Cboe UK 100 was up 0.3% at 869.85, the Cboe UK 250 rose 0.4% to 18,273.39, but the Cboe Small Companies was down 0.5% at 15,849.94.
The feel good factor in equities spread to Europe. In Frankfurt, the DAX 40 rose 0.3% in early afternoon trade, just below a new intra-day all-time high, while the CAC 40 was 0.5% to the good.
Over in New York, the Dow Jones Industrial Average is called up 0.3%, the S&P 500 is seen rising 0.5% and the Nasdaq Composite 0.8% higher.
Apple, the world's most valuable listed firm, is 3.5% higher in premarket trading after a mixed results.
The firm delivered better than expected earnings, and reassuring guidance, despite weak iPhone sales and a muted showing in China.
Gains in stock markets came despite fresh warnings of tariffs from Donald Trump, which prompted fresh dollar strength.
Deutsche Bank's Jim Reid noted Trump has said that he plans to follow through on his threat to impose 25% tariffs on February 1, saying that "we’ll be announcing the tariffs on Canada and Mexico for a number of reasons", citing trade deficits, immigration and fentanyl flows.
But Reid said Trump's comments did leave an open question on the exact scope of tariffs to be announced, notably saying he was still considering whether Canadian oil would be exempted.
"We’ll have to wait and see just what measures are implemented, or indeed if last minute concessions might yet be reached, or if the most aggressive tariffs are short lived. But it does look less likely that Feb 1st will pass with no tariff action and the exact approach may be instructive for how the new administration are going to approach the tariff question more broadly."
But Reid thinks Trump has to "follow through" on some of his threats or "he will lose some negotiating power".
The pound traded at USD1.2418 on Friday, down from USD1.2461 late Thursday. The euro fell to USD1.0378 from USD1.0423. Against the yen, the dollar rose to JPY154.68 from JPY154.37.
Ahead of the US open, investors will assess the Federal Reserve's favoured inflation gauge, core personal consumption expenditures price index.
JPMorgan predicts the core PCE deflator for December, rose 0.2% on month or 2.8% annually.
In November, core PCE rose 0.1% on-month for an annual rate of 2.8%. The Federal Reserve's target for core PCE is 2.0%.
Fed officials generally consider the core reading to be a better gauge of long-run inflation trends as it excludes the volatile gas and groceries category.
On the FTSE 100, Smiths Group jumped 11% after it responded to an activist investor's call for change with plans for a break-up and increased share buy backs.
London-based Smiths said it plans to sell its electronic connectors business by the end of 2025 and separate is threat detection arm, either by UK demerger or sale.
This will leave the group focused on the John Crane and Flex-Tek businesses giving a focus on "high performance industrial technologies for efficient flow and heat management".
Smiths said the proposals would "unlock significant value and enhance returns to shareholders."
Analysts at Stifel were pleased. "This is a big, bold plan, finally breaking up the group's conglomerate structure. We think it should unlock material value."
Earlier this month, US activist investor Engine Capital said Smiths should explore a split, according to a Financial Times report.
Analysts at Citi noted Friday's proposals stop short of re-listing John Crane in the US, as recommended by the activist, but "we see the plan as significant".
Retailer Next rose 2.6% after UBS upgraded to buy' from 'neutral and increased its share price target to 11,700 pence from 10,500p.
"We believe Next is at an inflection point in terms of growth and valuation" with "a de-risked near term outlook", the broker said, adding it sees Next as a "safe haven".
But J Sainsbury fell 1.6% after HSBC downgraded the grocer to 'hold' from 'buy' with a 285p share price target.
A barrel of Brent declined to USD75.50 on Friday lunchtime, from USD77.18 at the time of the London equities close on Thursday.
An ounce of gold rose to USD2,779.2 an ounce from USD2,793.57, although it eased from an all-time high posted on Thursday of more than USD2,500.
Elsewhere in London, Tribal Group leapt 23%. The educational software and services provider expects to report a "positive trading performance" for 2024. Adjusted earnings before interest, tax, depreciation and amortisation, as well as revenue, are to be ahead of current market expectations.
It puts revenue consensus at GBP85.6 million, with the market adjusted Ebitda forecast at GBP14.4 million.
Still to come in Friday's global economic calendar, US personal consumption expenditures price index and employment cost index data at 1330 GMT.
By Jeremy Cutler, Alliance News reporter
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