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LONDON MARKET OPEN: Pound at USD1.22 as UK GDP up, US inflation cools

13th Jan 2023 08:57

(Alliance News) - Stock prices in London opened higher on Friday, ending a bullish week in decent fashion as cooler US inflation and unexpectedly robust UK growth figures lifted the mood.

Attention now turns to the start of the US earnings season, which is traditionally led off by the big banks. JPMorgan Chase, Citigroup, Wells Fargo and Bank of America all report annual earnings before the opening bell in New York on Friday.

The FTSE 100 index was up 45.82 points, or 0.6%, at 7,839.86 early Friday. The FTSE 250 was up 39.57 points, or 0.2%, at 19,880.70, and the AIM All-Share was 1.37 points, or 0.2%, higher at 860.84.

The Cboe UK 100 was up 0.4% at 784.56. The Cboe UK 250 was up 0.3%, at 17,394.13. The Cboe Small Companies was down 0.2%, however, at 13,928.90.

In European equities on Friday, the CAC 40 in Paris climbed 0.4% and the DAX 40 in Frankfurt was 0.1% higher.

In Asia, the Shanghai Composite and Hang Seng in Hong Kong both rose 1.0%. The S&P/ASX 200 surged 0.7% in Sydney, though the Nikkei 225 in Tokyo fell 1.3%.

Share price falls from exporters, due to a rising yen, hurt the Nikkei. Carmaker Nissan fell 2.0% and Toyota lost 2.3%. Uniqlo owner Fast Retailing shed 8.0%, also responding to a profit fall reported on Thursday.

The yen gained on the dollar following a favourable US inflation report on Wednesday. The dollar faded to JPY128.22 early Friday London time from JPY129.68 late Thursday. The pound rose to USD1.2230 from USD1.2171, while the euro rose to USD1.0855 from USD1.0814.

Annually, the US consumer price index rose 6.5% in December, in line with FXStreet-cited consensus, and slowing from the 7.1% annual rise recorded in November.

Sterling was further supported after 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 report belied indications from business surveys that economic activity fell during the month. The unexpected gain means that GDP would now have to decline by more than 0.5% in December to be consistent with forecasts of a decline in GDP in Q4 as a whole," analysts at Lloyds Bank commented.

The UK's economic fate for December has opposing forces. Heavy snowfall and rail strikes may have halted activity, though the World Cup did not end until December 18, likely giving bars and pubs a boost despite England's early exit. Christmas shopping may have helped retail.

On the corporate front, eyes shift to New York. Earnings season kicks off. Away from large-cap banks, there are results from asset manager BlackRock and UnitedHealth on Friday.

In London, shares in International Consolidated Airlines Group continued to rise, climbing 2.7% after a 3.9% gain on Thursday.

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.

IAG's Spanish airline Iberia had agreed to buy Air Europa in late 2019 for EUR1 billion, but the price was slashed to EUR500 million after the Covid-19 pandemic grounded the entire travel sector.

In December 2021, IAG said it agreed to pay EUR75 million to break its agreement to buy the Spanish carrier. IAG said it would pay owner Globalia EUR35 million in addition to the EUR40 million break fee that was previously agreed. The pair had agreed that the EUR75 million could be applied against any future purchase price, if a new agreement for IAG to buy Air Europa was to be reached.

Magners maker C&C Group tumbled 10%. C&C now expects annual operating profit between EUR84 million and EUR88 million. Analysts at Davy predicted profit of EUR95 million for the alcoholic drinks maker.

"We believe consumer spending pressure is a driver behind this trading performance and will continue to be so in the near-term. Further, trading has been significantly impacted by rail network strikes in the UK, reducing footfall in urban areas over the key festive trading period," C&C explained.

The grim profit outlook came despite revenue rising 20% in the key month of December.

Medical device developer Belluscura added 7.1%. It hailed "considerable progress" in 2022.

It launched its X-PLOR portable oxygen concentrator product in September 2021. The product is now in distribution throughout the US through multiple sales channels.

"In addition, the collaboration agreement with the VGM Group has already resulted in 17 new distribution agreements in the last 3 months, including the agreement with a leading durable medical equipment provider and distributor in the US, announced in September 2022, which serves nearly 2 million patients both online and through over 1,000 locations," the company added.

"In December 2022 we also signed our first international distribution agreement, with MedHealth Supplies of South Africa, which sells to one of the world's leading respiratory device suppliers. We have already received orders for over 1,000 units, with their first shipment sold out within 48 hours."

Belluscura expects its annual adjusted loss before interest, tax, depreciation and amortisation to be in line with market expectations.

Brent oil was quoted at USD84.11 a barrel early Friday, up from USD84.03 late Thursday. Gold was quoted at USD1,904.17 an ounce, rising from USD1,891.07 on the back of the weaker dollar.

Gold is trading around its highest level since April.

By Eric Cunha, Alliance News news editor

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