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LONDON MARKET OPEN: Stocks on front foot ahead of BoE, US PPI

11th May 2023 09:03

(Alliance News) - Stock prices in London opened higher on Thursday, with the FTSE 100 turning positive for the week, ahead of the latest Bank of England interest rate decision.

Inflation data in the US lifted technology shares overnight, though a tame consumer price index reading in China hurt London-listed miners.

The FTSE 100 index opened 41.42 points higher, 0.5%, at 7,782.75. The blue-chip index is up 0.1% so far this week. The FTSE 250 was up 55.99 points, or 0.3%, at 19,329.28, and the AIM All-Share was down 10.06 points, or 1.2%, at 815.13.

The Cboe UK 100 was up 0.6% at 778.50 and the Cboe UK 250 was up 0.3% at 16,942.61, but the Cboe Small Companies was marginally lower at 13,554.56.

European indices were mixed early Thursday, with the CAC 40 in Paris up 0.8% and the DAX 40 in Frankfurt was 0.3% higher.

Thursday's economic calendar has the UK interest rate decision at 1200 BST, before a US producer price reading at 1330 BST. US jobless claims also are at 1330 BST.

The Bank of England is expected to lift UK interest rates by 25 basis points on Thursday, but attention will be on whether it guides for more hikes in meetings ahead, or suggests a pause is coming.

The expected quarter-point hike would take the benchmark rate to 4.50%. The announcement at 1200 BST is followed by a press conference with Governor Andrew Bailey at 1230 BST.

Indications about where bank rate goes thereafter will be closely scrutinised. Last week, the European Central Bank raised eurozone interest rates by 25 basis points, a slowdown from a 50 point hike previously, but it said there is still "more ground to cover" in the fight against inflation.

A day earlier, the Federal Reserve in the US also announced a quarter-percentage-point lift, but strongly hinted of a pause thereafter.

Inflation in the US is running around half as hot as in the UK, however. It slowed to 4.9% in April from 5.0% in March, according to data released on Wednesday. In the UK in March, inflation was 10.1%.

Ahead of the BoE decision, the pound was buying USD1.2582 on Thursday morning, down from USD1.2620 late Wednesday. The euro traded at USD1.0934 early Thursday, down from USD1.0975 at the time of the European equities close on Wednesday. The dollar traded JPY134.45, largely flat from JPY134.48.

Stocks in New York ended largely higher on Wednesday, with tech shares getting a boost after the data that showed US inflation slowing. The Nasdaq Composite surged 1.0%, the S&P 500 added 0.5%, though the Dow Jones Industrial Average edged down 0.1%.

Disney shares lost 4.8% in after hours trade in New York. In the quarter that ended April 1, the California-based entertainment company said net income from continuing operations nearly trebled to USD1.27 billion from USD470 million a year earlier.

Revenue rose 13% to USD21.82 billion from USD19.25 billion.

However, it said subscribers at streaming service Disney+ fell by four million to 157.8 million at the start of April, from 161.8 million at the end of December.

In Asia on Thursday, the Shanghai Composite lost 0.3%, while the Hang Seng in Hong Kong was 0.2% lower in late trade. The Nikkei 225 in Tokyo close flat. The S&P ASX 200 was ended down 0.1%.

In London, Rolls-Royce shares fell 1.9%, amid some disappointment that the jet engine maker did not lift yearly guidance.

It opted to maintain its outlook, though it said its transformation under new Chief Executive Tufan Erginbilgic "is moving at pace".

Its performance in the four months ended April was "in line with our expectations".

Rolls-Royce backed its underlying operating profit guidance range of GBP800 million to GBP1.0 billion for the full-year, and maintained its free cash flow guidance of GBP600 million to GBP800 million.

"While there may be some disappointment that Rolls-Royce has left its guidance unchanged, everything that we've seen in today's trading update appears to suggest that the company appears to be ahead of schedule, in its recent recovery. With the share price still well below the levels it was pre-Covid, the results from Melrose Industries GKN operation yesterday suggest that civil aerospace is on the way back," CMC Markets analyst Michael Hewson commented.

Mining shares were lower, after an inflation reading in China suggested an economic bounce there is proving elusive.

Rio Tinto fell 0.7%, while Anglo American lost 0.3%.

Inflation in China ebbed to a more than two-year low, according to figures from the National Bureau of Statistics. Consumer prices grew just 0.1% on-year in April, slowing from a 0.7% climb in March and falling short of FXStreet cited consensus of a 0.3% rise.

It was the tamest annual inflation rate since consumer prices fell 0.2% year-on-year in February 2021. On a monthly basis, consumer prices fell 0.1% in April, after declining 0.3% in March from February. The outcome was shy of consensus, which had predicted prices to be flat monthly, according to FXStreet.

The inflation readings may boost the case for fiscal policy stimulus. On Tuesday, trade data suggested demand in China is on precarious footing, despite Covid-19 curbs being eased recently. Imports slid last month, while growth in exports slowed.

Imports fell much more sharply than expected in April, dropping 7.9% year-on-year, compared with a 1.4% decline in March. Analysts polled by Bloomberg had expected imports to decline by 0.2%.

FirstGroup shed 3.9% as it suffered a blow after the UK government said train services run by TransPennine Express will be nationalised after months of delays and cancellations.

UK Transport Secretary Mark Harper announced the decision to bring the operator's services under government control, but warned it is "not a silver bullet".

FirstGroup CEO Graham Sutherland said the company has "worked extremely hard to improve services". FirstGroup owns TransPennine.

Over in Frankfurt, shares in pharmaceutical firm Bayer fell 4.8%. It said it suffered a "slow start" to the 2023.

Revenue in the first quarter declined by 1.1% to EUR14.40 billion from EUR14.64 billion. Net profit fell by 34% to EUR2.18 billion from EUR3.29 billion.

Elsewhere in mainland Europe, ING added 2.5% in Amsterdam, as the bank benefitted from rising interest rates in the first quarter.

Total income was up 21% to EUR5.57 billion from EUR4.60 billion a year earlier. Net profit jumped to EUR2.34 billion from EUR668 million. Net interest income - excluding targeted longer-term refinancing operations - jumped 20% to EUR4.01 billion from EUR3.33 billion a year earlier.

ING also announced today the start of a share buyback programme, for a maximum total amount of EUR1.5 billion.

Gold rose slightly to USD2,025.90 an ounce from USD2,023.42. A barrel of Brent fetched USD76.88, flat from USD76.85.

By Eric Cunha, Alliance News news editor

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