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LONDON MARKET MIDDAY: FTSE 100 has record in sight; US earnings begin

13th Jan 2023 12:18

(Alliance News) - London's FTSE 100 index reached its best level since May 2018 on Friday, and even edged close to a record high, as European markets continued to climb after a report on Thursday showed slower US inflation.

There was also good news from the UK and German economies, while the early market response to US banking sector earnings was mixed.

The FTSE 100 was up 34.74 points, or 0.5%, at 7,828.78 midday Friday. The index's best-ever level is 7,903.50 points, achieved on May 22, 2018. A closing high of 7,877.45 was achieved that day.

"After the Brexit vote, UK stocks were off the menu for many international investors and valuations plummeted. This remained the case for some time until some canny players realised the opportunities to be had, leading to a wave of takeovers – decent businesses picked up on the cheap. Last year was a big turning point, whereby the UK was one of the few major markets around the world not to see a big slump. Now if the FTSE 100 breaks a new record, it's another trophy in the cabinet for the UK and a reason to shout from the hilltops that the market is not as dull as people think," AJ Bell analyst Russ Mould commented.

The FTSE 250 was up 57.89 points, or 0.3%, at 19,899.02, and the AIM All-Share was 1.50 points, or 0.2%, higher at 860.97.

The Cboe UK 100 was up 0.3% at 783.44. The Cboe UK 250 was also up 0.3%, at 17,393.02. The Cboe Small Companies was up 0.2% at 13,978.89.

In European equities on Friday, the CAC 40 in Paris climbed 0.5% and the DAX 40 in Frankfurt was 0.3% higher.

The dollar was mixed following Thursday's figures that showed US inflation ebbed in December. The greenback was clawing back losses against the pound and yen and trading higher against the euro.

The pound was quoted at USD1.2175 midday Friday, unchanged from USD1.2171 late Thursday. The euro slipped to USD1.0809 from USD1.0814. Against the yen, the dollar still was lower, quoted at JPY128.69 versus JPY129.68 late Thursday.

The UK economy registered marginal growth in November. Gross domestic product was helped by the start of the football World Cup, which boosted consumer-facing sectors, the Office for National Statistics explained.

UK GDP grew by 0.1% month-on-month in November, slowing from October's unrevised growth of 0.5%. The economy had been expected to shrink by 0.2% in November, according to consensus cited by FXStreet.

The reading lifts hope that the UK may have averted a recession last year, though falling GDP for the three months to November strengthens the case that the nation is already in one.

GDP fell by 0.3% in the three months to November 2022 compared with the three months to August 2022.

The UK economy is "stalling" but not "slumping", analysts at German bank Berenberg commented.

"The rise in real GDP through the first two months of Q4 is in contrast to survey measures of output such as the PMIs, which had suggested that output had continued the decline that had started in Q3. However, the rise is in line with the small improvement in consumer and business confidence – albeit from very depressed levels," the analysts commented.

Germany's economy expanded in 2022, but at a slower rate than in 2021, data from Destatis showed.

Germany's price-adjusted gross domestic product increased by 1.9% year-on-year in 2022. Europe's largest economy had increased by 2.6% in 2021, following a 3.7% contraction in pandemic-hit 2020.

Analysts at Capital Economics commented: "Annual GDP data for Germany suggest that the economy avoided a contraction in Q4 and that the eurozone as a whole will probably prove more resilient to the energy crisis than we initially feared. But activity clearly shifted down a gear last quarter. And with the hit from higher rates still to be fully felt, a near-term improvement is unlikely."

In London, shares in travel stocks were on the up. British Airways-owner IAG rose 1.2%, while budget airlines Wizz Air and easyJet climbed 1.9% and 2.1%. Ryanair was up 1.4% in Frankfurt.

Spanish news website El Confidencial on Thursday reported that the Spanish government has met with the chief executives of both IAG and takeover object Air Europa in order to expedite a closing of their on-and-off deal.

Stockbroker Davy, meanwhile, lifted Wizz Air to 'outperform'.

C&C dropped 9.1%. The Magners cider maker now expects annual operating profit between EUR84 million and EUR88 million. Analysts at Davy predicted profit of EUR95 million for the Irish alcoholic drinks firm.

The FTSE 250 constituent said it has been hurt by "consumer spending pressure" and UK strike action.

On AIM, Morses Club shares jumped more than three-fold to trade at 1.76 pence. The stock closed 60% lower at 0.47p on Thursday.

The Nottingham-based doorstep lender said that that JO Hambro Capital Management sold its entire stake in the company. JO Hambro had owned 8.8 million shares and had committed to support the company's proposed delisting from AIM.

This means shareholder support for the delisting announced on Thursday has fallen to just under 45% from 51%. It needs the backing of 75% of shareholders.

Stocks in New York were pointed mostly lower on Friday. The Dow Jones Industrial Average was called to open up 0.1%, though the S&P 500 and Nasdaq Composite are called down 0.1% and 0.2%.

Asset manager BlackRock traded 0.5% higher in pre-market dealings in New York. It said its assets under management declined 14% on-year to USD8.594 trillion in the final quarter of 2022.

Fourth-quarter revenue fell 15% year-on-year to USD4.34 billion from USD5.11 billion. Net income was 23% lower at USD1.26 billion from USD1.64 billion. Diluted earnings per share fell 22% to USD8.29 from USD10.63.

Revenue was largely in line with CNN-cited consensus of USD4.3 billion. Diluted EPS came in ahead of consensus of USD8.13.

In the banking sector, JPMorgan Chase reported improved quarterly earnings, though its stock fell 2.4% in the New York pre-market. Bank of America edged up 0.2% after also reporting improved fourth-quarter figures.

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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