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LONDON MARKET OPEN: China data drives FTSE 100 higher; oil prices rise

15th Sep 2023 08:56

(Alliance News) - Global markets were in a largely buoyant mood early Friday following the latest interest rate decision from the European Central Bank, the successful mega-listing of Arm in New York, and some surprisingly robust economic data from China.

The FTSE 100 was no exception, opening up 59.69 points, 0.7%, at 7,732.77. The FTSE 250 was up 57.09 points, 0.3% at 18,956.79, and the AIM All-Share was up 2.05 points, 0.3%, at 746.82.

The Cboe UK 100 was up 0.7% at 771.22, the Cboe UK 250 was up 0.7% at 16,539.37, and the Cboe Small Companies was flat at 13,468.28.

Investors were pleasantly surprised by the latest release of economic data from China.

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% forecast in a survey of economists by Bloomberg. Meanwhile, industrial production climbed 4.5% on-year, which was also a big increase from July and more than estimated.

The retail data drove luxury fashion company Burberry towards the top of the FTSE 100, up 2.2%, with China being a key market for the retailer.

In China, the Shanghai Composite closed down 0.3%, while the Hang Seng index in Hong Kong was up 1.2%.

The stronger demand outlook from a robust Chinese industrial sector helped to lift oil prices further, with Brent oil trading at USD94.26 a barrel early Friday, higher than USD93.49 on Thursday.

"This is a difficult development, with fuel accounting for a significant portion of overall inflation. The triggers behind the increase stem from fears that global consumption will outweigh production, with the International Energy Agency predicting a significant supply shortfall in the coming months," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

BP was up 0.3% and Shell was trading flat at the London market open, but have climbed 11% and 8.8% respectively over the past month as oil prices ascended.

Gold was quoted at USD1,917.00 an ounce, higher than USD1,908.80.

Miners were also getting a boost from the strong data in China, with Endeavour Mining up 1.5%, Fresnillo up 1.4% and Rio Tinto rising 1.3%.

In European equities on Friday, the CAC 40 in Paris up 1.2%, while the DAX 40 in Frankfurt was up 0.9%.

European markets continued Thursday's rally after the market interpreted comments from the ECB as being fairly dovish. The Frankfurt-based bank hiked rates by 25 basis points. Many believe it may be the central bank's last rate lift of the current hiking cycle.

The ECB 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".

The euro continued to struggle early Friday, trading at USD1.0659, down from USD1.0671 at the London equities close on Thursday.

In the eyes of Ipek Ozkardeskaya, senior analyst at Swissquote Bank, it is "naive" to think the ECB can't continue to hike rates, given the "sour" economic outlook and the bank's upwardly-revised inflation expectations.

"They can. They can, because they have a single mandate – price stability. As such, the market certainly remains too enthusiastically, and unrealistically dovish about the ECB.

"When I hear 'data dependency', I immediately look at energy prices and you know what I see there: further inflation pressures and a real possibility for further rate hikes," Ozkardeskaya considered.

Sterling was quoted at USD1.2425, higher than USD1.2414. Against the yen, the dollar was quoted at JPY147.69, up versus JPY147.11.

London-listed housebuilders were also having a solid morning, with Persimmon, Barratt both up 2.0%, while Taylor Wimpey rose 1.9%.

Games Workshop was the top FTSE 250 performer, up 7.2%, as the Warhammer maker said its trading in the three months to August 27 - its first financial quarter - was ahead of its expectations.

It said core revenue was around GBP121 million, rising year-on-year from GBP106 million. Core revenue refers to direct sales of its core products to external customers, via its retail network, independent retailers, or online. Licensing revenue doubled to around GBP6 million.

While noting the performance was better than the previous year, the miniature wargames maker and retailer said "it is still early" in the financial year. It declared a dividend of 50 pence per share, bringing the total declared payout in the financial year so far to GBP1.95 per share, compared to GBP1.20 a year prior.

In the US on Thursday, Wall Street ended in the green, with the Dow Jones Industrial Average up 1.0%, while the S&P 500 and the Nasdaq Composite both rose 0.8%.

Sentiment was boosted by the initial public offering of UK chip designer Arm Holdings, as its shares rose almost 25% in their Nasdaq debut. It was the largest IPO in nearly two years.

The shares opened at USD56.10 on the Nasdaq on Thursday, after having been priced at USD51. They closed at USD63.59, giving Arm a market value of USD68 billion, rising a further 6.9% in after-hours trade.

"The huge enthusiasm around trading suggests there is still very much still appetite for high-growth names, and there's growing hope that the IPO market will now become more buoyant next year. IPO activity is a strong indicator of overall sentiment – people rarely come to market when things are highly uncertain," said HL's Lund-Yates.

It is a key moment for the Japanese technology investor SoftBank Group, which acquired Arm in 2016, as well as investment banks such as Goldman Sachs that recently have taken in far less revenue from underwriting and advisory fees.

SoftBank will retain a nearly 90% stake in Arm, and its shares closed up 2.1% in late dealings in Tokyo. The wider Nikkei 225 index gained 1.1%.

The S&P/ASX 200 in Sydney closed up 1.5%.

Still to come, the economic calendar has US industrial production data at 1415 BST.

By Elizabeth Winter, Alliance News senior markets reporter

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