17th Jan 2025 12:01
(Alliance News) - The FTSE 100 was firmly in the green at midday on Friday, trading just below a new all-time peak, boosted by a further fall in sterling on rising rate cut hopes, and strong growth data from China.
The FTSE 100 index was up 99.25 points, 1.2%, at 8,491.24. It had earlier reached a new intra-day high of 8,496.42.
The FTSE 250 was 36.40 points higher, 0.2%, at 20,564.10, and the AIM All-Share advanced 1.87 points, 0.3%, at 719.18.
The Cboe UK 100 was up 1.2% at 850.84, the Cboe UK 250 climbed 0.3% at 17,940.01, and the Cboe Small Companies was 1.7% higher at 15,670.12.
Weak retail sales figures put further pressure on sterling, but gave a boost to exporters. The pound was quoted lower at USD1.2209 at midday on Friday in London, compared to USD1.2241 at the equities close on Thursday.
Dan Coatsworth, investment analyst at AJ Bell explained: "Three quarters of companies in the FTSE 100 generate their earnings overseas, and the relative value of those foreign earnings is boosted when the pound weakens."
Ashtead rose 2.3%, Reckitt Benckiser firmed 2.3% and Diageo gained 1.4%.
Softness in sterling followed a drop in UK retail sales in December, which added to Thursday's disappointing economic growth figures.
According to the Office for National Statistics, UK retail sales volumes decreased 0.3% month-on-month in December, worsening from 0.1% growth in November and falling far short of the FXStreet-cited market consensus of 0.4% growth.
As a result, Kathleen Brooks at XTB said the market is now predicting a 91% chance of a rate cut from the Bank of England next month, noting there was only a 73% chance at the start of the week.
"The interest rate futures market is also on the way to pricing in nearly three rate cuts from the BoE this year, earlier this week there had been less than two cuts priced in."
Yields on UK 10-year bonds dropped further, down five basis points, to 4.63%. They had topped 4.9% as recently as last week.
Rates sensitive housebuilders were given a further boost by a report in the Times that mortgage rules could be relaxed for first time buyers.
Financial regulators are understood to be looking at allowing banks and other lenders greater flexibility to allow "responsible risk-taking" from borrowers, the report said.
The moves come in response to demands from Chancellor Rachel Reeves for UK regulators to embrace a "pro-growth agenda" after a meeting in the Treasury on Thursday, the report added.
Persimmon was 0.9% higher while Barratt Redrow advanced 1.1%.
Also boosting stocks, strong miners amid M&A chatter and better-than-hoped data from China.
Glencore rose 3.1% and Rio Tinto climbed 1.4% after Bloomberg said the two were exploring a merger.
However, analysts poured cold water on the prospects of a deal.
"The prospect of Glencore merging with Rio Tinto is like trying to force a square through a circle-shaped hole," commented AJ Bell's Coatsworth.
"Fundamentally it wouldn't fit, and the only solution would be to trim off the sides such as getting rid of Glencore's coal assets. Even then, it would be like picking up two magnets and putting the like poles together, instantly repelling each other. This would not be a marriage made in heaven," he added.
Further boosting miners, growth figures from China suggesting stimulus measures are delivering the desired impact.
Gross domestic product jumped 5.4% on-year in the fourth quarter of 2024, accelerating from 4.6% in the previous quarter, and well ahead of the 5% consensus.
"With a package of incremental [stimulus] policies . . . confidence was effectively bolstered and the economy recovered remarkably," the National Bureau of Statistics said.
Banks were in the green as the Bank of England said it is delaying the start of new capital rules by a year while it waits to see how the incoming Trump administration will implement the global Basel agreement in the US.
In a statement, the BoE’s Prudential Regulation Authority said: "Given the current uncertainty around the timing of implementation of the Basel 3.1 standards in the US, and taking into account competitiveness and growth considerations, the PRA, having consulted with HM Treasury, has decided to further delay implementation of the rules."
Barclays rose 1.9%, Lloyds firmed 0.7% and NatWest advanced 1.2%.
In European equities on Friday, the CAC 40 in Paris was up 1.0%, as was the DAX 40 in Frankfurt.
The euro eased slightly to USD1.0300 at midday on Friday against USD1.0305 at the time of the European market close Thursday. Against the yen, the dollar was trading higher at JPY155.71 compared to JPY155.19.
Stocks in New York were called higher. The Dow Jones Industrial Average and the S&P 500 index were called up 0.4%, and the Nasdaq Composite up by 0.5%.
On the FTSE 100, Smiths Group rose 5.3% after it responded to a call from an activist investor to break the firm up.
The London-based company, which makes products spanning the aerospace, communications, energy and security sectors, said it has a "clear focus" on creating shareholder value.
Smiths was responding to a letter from US activist investor Engine Capital which asked the firm to explore a break-up, as reported by the Financial Times.
"We believe that Smiths has significant value that is currently unrealised due to its conglomerate structure," wrote Engine managing partner Arnaud Ajdler and partner Brad Favreau. "It is time for the board to announce a strategic alternatives process."
Entain firmed 4.3%, after positive trading news from fellow bookmaker, Evoke.
Evoke, which owns William Hill and Mr Green, expects adjusted earnings before interest, tax, depreciation and amortisation to be at the high end of guidance of GBP300 million to GBP310 million for the full year, and well ahead of market expectations.
The firm said it had benefited from a number of "operator friendly results."
In 2023, Evoke reported adjusted Ebitda of GBP308.3 million.
In response, Peel Hunt raised its full-year Ebitda forecast to GBP309 million from GBP284 million.
"We believe investors will be encouraged by two consecutive quarters of revenue growth and [2024] upgrades," the broker added.
In response, shares in Evoke soared 8.0%.
Blue-chip fallers were hard to find, but gold miner Fresnillo fell 2.5% after a fall in the price of the yellow metal.
Gold was quoted lower at USD2,706.24 an ounce at midday in London on Friday against USD2,719.78 on Thursday.
Brent oil was quoted higher at USD81.32 a barrel from USD79.90 late Thursday.
The latest upwards move gave a boost to BP, up 2.0%, and Shell, up 1.3%.
Elsewhere, shares in McBride jumped 19% as it pledged to reinstate annual dividends in response to strong trading and securing long-term financing.
The private label products maker for the domestic household and professional cleaning and hygiene markets estimates that adjusted operating profit in the six months that ended December 31 was up 8% from a year prior, on a constant currency basis.
Full year adjusted operating profit is expected to be in line with internal expectations, the company added.
By Jeremy Cutler, Alliance News reporter
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