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LONDON MARKET OPEN: Stocks slip after central bank rate calls

22nd Sep 2023 08:42

(Alliance News) - Stock prices in London opened lower on Friday, but managed to avoid the steep declines seen in New York, as investors mulled over an eventful week dominated by central bank decisions.

The FTSE 100 index opened down 9.11 points, 0.1%, at 7,669.51. The FTSE 250 was down 39.16 points, 0.2%, at 18,599.39, and the AIM All-Share was down 0.08 of a point at 738.83.

The Cboe UK 100 was down 0.1% at 764.55, the Cboe UK 250 was down 0.2% at 16,248.88, and the Cboe Small Companies was up 0.2% at 13,582.63.

In European equities on Friday, the CAC 40 in Paris was down 0.9%, while the DAX 40 in Frankfurt was down 0.5%.

In early UK economic news, retail sales recovered somewhat in August after a washout in July amid wet weather. Sales volumes rose 0.4% from the prior month in August, after falling 1.1% in July, according to the Office of National Statistics.

The ONS explained that monthly sales growth came from food stores and non-food stores, after wet weather in July had reduced sales of clothing and supermarket food sales.

Non-store retailing, mostly online retailers, saw also saw lower sales, after getting a boost from the wet weather and a range of promotions in July.

Additionally, UK consumer confidence continued to rise as inflation eased, according to GfK's indicator.

JD Sports added 0.9%, with Frasers rising 0.7%. However, some FTSE 100 retailers weren't able to shake off the cautious trading mood, with Next down 0.9%, Associated British Foods 0.8%, and newly-returned Marks & Spencer down 0.7%.

Meanwhile, Chemicals firm Croda International fell 0.5%, as it appointed Danuta Gray as its chair designate. Gray will join the board from February 1 next year, succeeding Anita Frew at the end of its annual general meeting on April 24. Frew will then retire from the board after serving as chair for nine years.

Gray is currently chair at Direct Line Insurance, and serves as a non-executive director at Burberry. Shares in Direct Line fell 0.4%.

AstraZeneca managed to escape the sell-off, with its shares up 1.4%. The pharmaceutical firm said phase three data showed that datopotamab deruxtecan delivered improvement in progression-free survival in breast cancer patients.

The Cambridge-based pharmaceutical firm said the drug demonstrated a "statistically significant and clinically meaningful" to progression-free survival when compared with chemotherapy in patients with breast cancer previously treated with endocrine-based therapy and systemic therapy.

In the FTSE 250, Ascential was the top performing, adding 3.5% after strong interim results.

The company said revenue in its first half climbed to GBP307.4 million from GBP260.7 million a year before. Its pretax loss narrowed to GBP11.8 million from GBP41.6 million. The business-to-business media and events firm said it has seen a "solid start" to its second half, which is seasonally weaker than the first six months of the year.

"Despite continued macro uncertainty impacting the industries we serve and currency headwinds, our businesses remain well set for the year, supported by multiple growth levers," Ascential CEO Duncan Painter said.

Meanwhile, the UK's competition regulator said the revised merger deal proposed by Microsoft for its takeover of Activision Blizzard "addresses previous concerns and opens the door to the deal being cleared".

After blocking the acquisition earlier this year, Microsoft had submitted a restructured transaction to the UK Competition & Markets Authority in August.

The revised deal would see Activision's cloud gaming rights sold to an independent third party, Ubisoft Entertainment, before Microsoft completes the takeover

Sterling was quoted at USD1.2284 early Friday, down from USD1.2297 at the London equities close on Thursday.

Investors were digesting the latest decision from the Bank of England, after it maintained bank rate at 5.25%, a more than 15-year high, in what was something of a surprise move. According to FXStreet cited consensus, a 25 basis point hike was expected, though a tamer UK inflation reading earlier this week meant some investors dialled back their rate hike bets.

The focus now is on whether the BoE hikes again, and when it might see fit to begin rate cuts.

Swissquote Bank senior analyst Ipek Ozkardeskaya contended that import prices are likely to creep back up, given the UK's still elevated inflation, rising energy prices, the ongoing war in Ukraine, and the weakness of sterling.

"It's hard to see how, with all these developments, the BoE won't be obliged to hike, again. The only way is a really bad economic performance," she mused.

The euro traded at USD1.0653, slightly lower than USD1.0658.

Against the yen, the dollar was quoted at JPY148.04, up versus JPY147.38. The yen weakened after the Bank of Japan left its ultra-loose monetary policy in place, as was widely expected, and showed no sign of shifting its approach to monetary policy.

The BoJ said it voted unanimously to keep its negative interest rate of minus 0.1%, which was expected by the market, according to FXStreet-cited consensus. The bank said it would maintain its yield curve control range of plus or minus 0.5 percentage points of its target level for its 10-year Japanese government bonds.

The BoJ added it will "not hesitate to take additional easing measures if necessary".

Swissquote's Ozkardeskaya commented: "They didn't even give a hint of normalization, meaning that the yen will hardly strengthen from the actual levels."

Shortly before the decision was announced, official data showed Japan's consumer price inflation was 3.1% in August, unchanged from July, and slightly higher than market estimates of 3.0%. Meanwhile, survey data showed a slight slowdown in the country's private sector activity during September, led by weaker growth in services.

The au Jibun Bank flash services purchasing managers' index fell to 53.3 points in September from 54.3 in August. The manufacturing downturn worsened slightly, with the sector's PMI falling to 48.6 from 49.6. The composite PMI, which measures both factory and service activity, fell to 51.8 from 52.6.

On Friday, the Nikkei 225 index in Tokyo closed down 0.5%. In China, the Shanghai Composite added 1.5%, while the Hang Seng index in Hong Kong was up 1.7%. The S&P/ASX 200 in Sydney closed up 0.1%.

In the US on Thursday, Wall Street ended in the red, with the Dow Jones Industrial Average down 1.1%, the S&P 500 down 1.6% and the Nasdaq Composite down 1.8%.

"US markets endured a bruising session, with sentiment turning sour on reflection of this week’s hawkish developments...Intensifying the downbeat mood was the possibility of a government shutdown. This added to rising treasury yields and oil prices and an auto workers strike, any or all of which threaten to derail the economic soft landing on which investors are currently pinning their hopes," explained interactive investor's Richard Hunter.

Gold was quoted at USD1,925.54 an ounce early Friday, higher than USD1,918.13 on Thursday. Brent oil was trading at USD93.74 a barrel, lower than USD94.17.

Friday's economic calendar has a slew of flash PMI readings, including the eurozone at 0900 BST, the UK at 0930 and the US at 1445 BST.

By Elizabeth Winter, Alliance News senior markets reporter

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