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LONDON MARKET OPEN: Miners lift FTSE; Biden says US will avoid default

26th May 2023 09:04

(Alliance News) - Stock prices in London opened mostly in the green on Friday, as a strong performance from miners helped to lift the FTSE 100 out of the week's slump amid fears of a US debt default.

The FTSE 100 index opened up 20.38 points, 0.3%, at 7,591.25. The FTSE 250 was down 18.05 points, 0.1% at 18,822.70, and the AIM All-Share was up 0.83 of a point, 0.1%, at 793.37.

The Cboe UK 100 was up 0.1% at 757.68, the Cboe UK 250 was down 0.3% at 16,372.62, and the Cboe Small Companies was marginally higher at 13,357.67.

The Office for National Statistics on Friday estimated that retail sales volumes in April rose 0.5% from the previous month, after a downwardly revised fall of 1.2% in March.

The reading was slightly higher than FXStreet-cited market consensus of 0.3%.

"Despite the undoubted levels of cost pressures currently being felt by consumers, rising wages and high employment rates have provided some insulation," interactive investor's Richard Hunter considered.

In other retail news, Asos rose 1.7%, as it announced it has raised GBP75 million through a share placing, in order to support its Driving Change agenda.

The online fashion retailer placed a total of 17.9 million shares at 418.1 pence each.

The funds raised will go towards its new agenda, which is designed to return Asos to sustainable profit and cash generation by the second half of this year.

"Free cash flow and net debt have been on the rise, so grasping the nettle and securing new finance is the right way to go, albeit it may be seen as evidence of just how tough the trading environment is," commented Hargreaves Lansdown's Sophie Lund Yates.

Meanwhile, shares in motoring and cycling retailer Halfords struggled, falling 5.6%, as the Royal Bank of Canada cut the stock to 'sector perform'.

The pound was stronger against the dollar, after hawkish rhetoric from a Bank of England official late Thursday.

The central bank cannot rule out more interest rate increases, Jonathan Haskel - a member of its decision-making body - told an audience in Washington, DC. He said that inflation could be worse, but that the bank might be forced to increase interest rates again in order to bring it back to its 2% target.

Sterling was quoted at USD1.2347 early Friday, higher than USD1.2330 at the London equities close on Thursday.

Meanwhile, UK Chancellor Jeremy Hunt said he is "comfortable" with the UK falling into a recession, if that's what is needed to tackle elevated inflation, according to Sky News.

"If we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take," Hunt told Sky News.

The euro traded at USD1.0737, up from USD1.0723. Against the yen, the dollar was quoted at JPY139.79, down slightly versus JPY139.85.

In European equities on Friday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.3%.

In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average rising 0.1%, and the S&P 500 climbing 0.9%. The tech-heavy Nasdaq Composite stormed ahead, adding 1.7%, as chipmaker Nvidia jumped 24%.

"Away from technology, the twin concerns of debt ceiling negotiations and Federal Reserve policy continued to be mulled over by investors," ii's Hunter added.

President Joe Biden declared Thursday the US would avoid a disastrous credit default, even as lawmakers went on a 10-day break without a deal on raising the nation's borrowing limit to keep paying the bills.

There are seven days until June 1 – the earliest possible point when the government estimates it could run out of money to service its debts – and missed loan repayments would likely spark a recession, roiling world markets.

Despite the spectre of a US debt default, stocks in Asia took their cue from Wall Street. The Nikkei 225 index in Tokyo closed up 0.4%. In China, the Shanghai Composite closed up 0.4%, while financial markets in Hong Kong closed for Buddha Day. The S&P/ASX 200 in Sydney closed up 0.2%.

In the FTSE 100, miners were on the up.

Rio Tinto added 4.3%, as Morgan Stanley upped the stock to 'overweight'. Antofagasta added 3.5%, as Anglo American and Glencore rose 2.9%.

Gold was quoted at USD1,950.71 an ounce early Friday, up slightly from USD1,945.11 on Thursday. Brent oil was trading at USD76.39 a barrel, higher than USD76.15.

Over on AIM, digital publisher XLMedia shares fell 16%.

The firm warned that it expects current softness in the market to persist into the early summer. Despite a "strong start" to the first quarter in the US, it expects first-half revenue to fall behind the prior year - which had benefitted from the launch of online sports betting in New York.

The acquisition spend by operators in the first half is not comparable with the previous year, XLMedia noted, with "less generous" promotions available to attract new customers. It said trading in Europe has been in line with expectations, supported by the Cheltenham and Aintree horse racing festivals in the UK. It will update further on the first half in late-July.

Still to come on Friday's economic calendar, there's the latest US core personal consumption expenditures reading is reported at 1330 BST. Core PCE is the Federal Reserve's preferred inflationary reading.

By Elizabeth Winter, Alliance News senior markets reporter

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