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London open: Stocks up on hopes for debt ceiling, US-China talks
Stocks in London were trading slightly higher at the end of the week, amid hopes that the talks underway to raise the US government’s debt ceiling might succeed.
Investor sentiment was also buoyed by news that US National Security advisor Jake Sullivan had met with China’s top diplomat, Wang Yi, in a bid to lower tensions.
Against that backdrop, as of 0836 BST the FTSE 100 was rising by 0.33% to 7,755.29.
Nevertheless, the top-flight index remained on track for a weekly loss.
Overnight, US President Joe Biden and the Republican speaker of the US House of Representatives, Kevin McCarthy, postponed until the following week a meeting that had been scheduled to take place on Friday.
The announcement sparked optimism that aides for both sides had made progress, something that was later reportedly confirmed.
In other economic news, the Office for National Statistics said that gross domestic product expanded at a quarter-on-quarter pace of 0.1% over the first three months of 2023, as expected.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted that the country’s economic output remained half a percentage point below its level from before the pandemic – unlike its G7 peers – mainly due to weak consumption on the part of households.
Still ahead, at 1215 BST Bank of England chief economist Huw Pill was scheduled to deliver a speech.
At 1330 BST, the University of Michigan was scheduled to release preliminary results for its closely followed consumer confidence survey covering the month of May.
THG hangs up on Apollo
Online retailer THG called off take-over talks with US private equity outfit Apollo Global Management. Like previous offers for THG, Apollo’s bid was said to have been rejected due to an “inadequate valuation” and the nature of the offer structure.
Infrastructure group Balfour Beatty said it expected annual profits to be flat, with current trading in line with expectations. In a trading update ahead of its yearly shareholders meeting, the company said its order book was £17bn compared with £17.4bn at the end of December.
Beazley posted strong first quarter growth and reiterated its full-year guidance. Gross premiums grew by 12% to $1.37bn with net premiums ahead by 24% to 1.07bn. The full-year combined ratio was still seen in the high 80s.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
3i Group Plc | +3.89% | +70.00 | 1,868.50 |
| 2 |  |
Rolls-royce Holdings Plc | +2.26% | +3.30 | 149.20 |
| 3 |  |
Gsk Plc | +2.03% | +29.40 | 1,474.20 |
| 4 |  |
Compass Group Plc | +1.94% | +41.00 | 2,155.00 |
| 5 |  |
Hiscox Ltd | +1.72% | +20.00 | 1,183.00 |
| 6 |  |
St. James’s Place Plc | +1.66% | +19.00 | 1,164.00 |
| 7 |  |
Antofagasta Plc | +1.37% | +19.00 | 1,401.00 |
| 8 |  |
Hsbc Holdings Plc | +1.36% | +8.10 | 601.70 |
| 9 |  |
Burberry Group Plc | +1.31% | +33.00 | 2,557.00 |
| 10 |  |
Sse Plc | +1.29% | +24.00 | 1,886.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Itv Plc | -1.80% | -1.36 | 74.22 |
| 2 |  |
Tui Ag | -1.75% | -9.20 | 517.20 |
| 3 |  |
Diageo Plc | -1.60% | -58.00 | 3,561.50 |
| 4 |  |
Mondi Plc | -1.19% | -15.50 | 1,283.00 |
| 5 |  |
Smurfit Kappa Group Plc | -0.93% | -28.00 | 2,994.00 |
| 6 |  |
Intercontinental Hotels Group Plc | -0.86% | -46.00 | 5,280.00 |
| 7 |  |
Vodafone Group Plc | -0.84% | -0.76 | 90.23 |
| 8 |  |
Land Securities Group Plc | -0.77% | -4.80 | 621.20 |
| 9 |  |
Ocado Group Plc | -0.75% | -3.40 | 449.60 |
| 10 |  |
Melrose Industries Plc | -0.70% | -3.20 | 455.20 |
US close: Stocks mixed as Disney results drag Dow lower
Wall Street experienced a mixed close on Thursday, with the Dow leading the decline after disappointing results from Disney.
The Dow Jones Industrial Average fell 0.66% to close at 33,309.51, while the S&P 500 registered a smaller loss, closing 0.17% lower at 4,130.62.
In contrast, the tech-heavy Nasdaq Composite climbed 0.18% to end the day at 12,328.51.
Investors were also reacting to news of the Bank of England’s latest interest rate hike from across the pond.
Currency markets saw the dollar gain against its major counterparts, last rising 0.9% on sterling to trade at 79.91p, and increasing 0.59% against the euro to 91.6 euro cents.
The greenback inched up 0.17% on the yen, meanwhile, to change hands at JPY 134.57.
“US markets slipped back even as we got further confirmation of slowing inflationary pressure,” said CMC Markets chief market analyst Michael Hewson.
“US PPI for April saw a further slowdown to 2.3% down from 2.7% while core prices also slowed to 3.2%.
“This has added to the prevailing narrative that pressure on prices is continuing to subside, although weekly jobless claims edged higher to 264,000, even as continuing claims slowed to just over 1.8 million.”
Initial jobless claims unexpectedly rise, Bank of England hikes rates
On the economic front, the US Labor Department reported an unexpected rise in the number of Americans filing for unemployment benefits last week.
Initial jobless claims increased by 22,000 to 264,000, surpassing expectations of 245,000 and reaching the highest level since 30 October 2021.
The four-week moving average – a somewhat more reliable indicator – rose by 6,000 to 245,250, marking the highest level since 20 November 2021.
“While the April jobs data surprised to the strong side, the latest jobless claims data are consistent with loosening labour market conditions,” noted analysts at Oxford Economics.
“It’s just one week of data, but the increase in claims last week pushed the four-week moving average for claims to the highest level since November 2021.
“Evidence of cooling demand for labour will allow the FOMC to refrain from raising rates at the June meeting.”
Elsewhere, the Bureau of Labor Statistics revealed that US producer prices grew at their slowest pace since January 2021 in April.
The producer price index for final demand increased 2.3% year-on-year, while the month-on-month index rose 0.2%.
Core wholesale inflation, excluding volatile food and energy prices, increased by 0.2% from March and 3.2% year-on-year in April.
In the UK, the Bank of England raised interest rates to 4.5% – the highest level since 2008 – in an attempt to curb persistently high inflation.
The 25-basis point increase marked the 12th consecutive rate hike by the Monetary Policy Committee (MPC) since December 2021.
In its decision, the MPC hinted at another potential hike, with its projections based on a market-implied path for Bank Rate peaking at around 4.75% in the fourth quarter of 2023.
UK inflation currently stood at 10.1% – the highest among G7 economies.
Finally on data, China’s consumer inflation in April dropped to its lowest rate in more than two years, while producer price deflation deepened.
The National Bureau of Statistics reported a year-on-year increase of 0.1% in the consumer price index (CPI), down from 0.7% in March, marking the lowest rate since February 2021.
Disney falls on quarterly figures, Robinhood Markets jumps
In equities, Walt Disney saw a significant decline of 8.73% after its second-quarter results exposed a drop in subscriber numbers.
“One of the biggest gripes investors have had with the company is the fact its Disney+ streaming platform has been losing large amounts of money,” said Russ Mould, investment director at AJ Bell.
“News that the platform reduced its operating losses from $1.1bn to $659m quarter-on-quarter should have been seen as significant progress towards its goal of making Disney+ profitable.”
However, Mould said the market seemed to have been fixated by the four million fewer subscribers reported by Disney.
“Given that most of the subscriber exits can be attributed to showing fewer Indian cricket matches, it hardly seems to be a disaster as it still has more than 231 million subscribers across its three platforms, which includes ESPN+ and Hulu.”
Elsewhere, Beyond Meat also experienced a slump, with shares dropping 18.27% by the close.
The decrease for the meat substitute specialist came despite the company reporting better-than-expected sales for the most recent quarter, as well as improved revenue guidance.
On the upside, Robinhood Markets surged 6.39% after the retail trading platform outperformed first-quarter expectations, and announced plans to launch a new 24-hour, five-day stock trading service within the next week.
Friday newspaper round-up: Grocery inflation, income tax, rail strikes, landlord rules
Supermarkets have told ministers that food prices have peaked and will start falling significantly in the coming months. The Treasury held a call with leading supermarkets after Andrew Bailey, governor of the Bank of England, blamed the “very big underlying shock” for stubbornly high inflation. – The Times
The Treasury will be able to slash the basic rate of income tax by 2p if Britons who left jobs during the pandemic return to work, a Cabinet minister has declared. Mel Stride, the Work and Pensions Secretary, who is responsible for overseeing the Government’s drive to boost employment numbers, said there were still 400,000 fewer workers than before Covid. A 2p cut in the basic rate of income tax would mean a fall from 20 per cent to 18 per cent. – Telegraph
Rail services across Britain will be severely disrupted on Friday as train drivers stage the first of the latest wave of planned strikes in a long-running pay dispute. Members of the drivers’ union Aslef will strike for 24 hours across virtually all the big passenger operators in England, stopping some major intercity and commuter services entirely. – Guardian
President Zelensky has been blocked by the BBC and other international broadcasters from addressing the world at the Eurovision Song Contest. A request by the Ukrainian leader to make a surprise video appearance during the final, in which he was expected to urge the global audience of 160 million to continue their support for his country in the face of Russian aggression, was turned down by event owners. – The Times
Landlords in England will be able to evict tenants for antisocial behaviour more easily as part of a wider package of reforms to the rental market, after heavy lobbying by industry organisations and Conservative backbenchers. Michael Gove will use the renters’ reform bill, which could be introduced to the Commons as soon as next week, to strengthen landlords’ rights when it comes to dealing with alleged antisocial behaviour. – Guardian
