City of London skyline
FTSE leads a blue-chips in demand / Image source: Adobe

Blue chips were in demand at midday on Friday, ahead of a US inflation print later in the session, which is expected to show a softening of the core personal consumption expenditures inflation gauge.

The FTSE 100 index traded 46.01 points higher, 0.6%, at 8,225.69. The FTSE 250 rose 50.55 points, 0.3%, at 20,382.352, while the AIM All-Share climbed 1.52 points, 0.2%, at 765.99.

The Cboe UK 100 rose 0.5% to 818.58, the Cboe UK 250 firmed 0.2% at 17,748.24, but the Cboe Small Companies was down 0.1% at 16,907.31.

A bright start is seen in New York. The Dow Jones Industrial Average is expected to open 0.1% higher, the S&P 500 is seen 0.3% firmer while the Nasdaq Composite is called to open 0.4% to the good.

Much will depend on US data which is expected to show the core personal consumption expenditures inflation gauge faded to 2.6% in May, from 2.8% in April, according to FXStreet cited consensus.

Russ Mould, investment director at AJ Bell explained: ‘US core PCE price index is the Federal Reserve’s preferred gauge to measure inflation and this new round of data will play a crucial role in the central bank‘s decision-making as it looks at when to ease monetary policy.’

‘The market is likely to react positively if inflation comes in as expected as it would boost confidence that we’re only a stone’s throw away from the Fed cutting rates.’

In European equities on Friday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt jumped 0.7%.

The first round of the French legislative election takes place on Sunday. The latest Ifop poll on Thursday showed Marine Le Pen’s National Rally on 36%, ahead of the left-wing alliance on 29%, and President Emmanuel Macron’s centrist group on 21%.

Citi thinks markets might be overly optimistic about the French election, pricing in a fairly benign election outcome, where fiscal policy does not become a major flashpoint.

‘This all means the election poses continued and meaningful risks to French and European equities,’ Citi said.

An ‘extreme’ outcome, where the left, or right-wing secure a majority could lead to a 10% to 20% de-rating in equities, Citi warned.

Election fever is also gripping the UK with the national vote next Thursday.

On Friday, the ruling Conservative Party, reeling from opinion polls suggesting an electoral mauling, received some brighter economic news.

The UK economy grew at a slightly sharper pace than expected at the start of the year, according to a revision from the Office for National Statistics.

UK gross domestic product grew by 0.7% quarter-on-quarter in the three months to March, recovering after falls of 0.3% and 0.1% in the previous two quarters, and topping the prior estimate of a 0.6% increase.

Year-on-year, growth was upwardly revised to 0.3% from 0.2%. The UK economy had declined 0.2% on-year in the final quarter of 2023.

‘In output terms, services grew by 0.8% on the quarter with widespread growth across the sector; elsewhere the production sector grew by 0.6% while the construction sector fell by 0.6%,’ the ONS said.

An estimate earlier this month showed the UK economy registered no growth at the start of the second-quarter. GDP was unchanged on-month in April, following a rise of 0.4% in March, the ONS said earlier this month.

Neil Shah at Edison said the figures show that the UK economy ‘is slowly starting to turn corner’.

‘Albeit slow, the economy has increased in the latest quarter following two consecutive quarters of negative growth and is slowly showing signs of a bounce back despite significant headwinds,’ Shah added.

The pound was quoted at $1.2646 at midday Friday, down from $1.2650 at the time of the London equities close Thursday. The euro stood at $1.0705, ebbing from $1.0710. Against the yen, the dollar was trading at JP¥160.55, down from JP¥160.67.

In London’s FTSE 100, Intertek rose 2.4% as Goldman Sachs upgraded to ’buy’ from ’neutral’.

But JD Sports Fashion slid 4.4% in a negative read-across after disappointing results and guidance from Nike.

Shares in Nike were down 15% in pre-market trading in New York after fourth quarter sales missed forecasts and the sportswear retailer cut guidance for financial 2025 once more.

Analysts at Citi think Nike’s more ‘limited lifestyle product success will continue to present a headwind for JD Sports, but could create near-term opportunity for Adidas and Puma.’

In Frankfurt, shares in Adidas held firm, up 1.0%, but Puma sank 4.7%.

In London, Tyman shares rose 2.6%. The window and door components supplier said shareholders will receive a special dividend, in addition to a takeover consideration from Quanex, following investor engagement.

In a bid to soothe investor concern over the Quanex stock price since the cash and shares deal was announced, as well as adverse currency movements, Tyman shareholders also stand to receive a special interim dividend of 15 pence per share.

That will be in addition to the agreed consideration of 240p cash plus 0.05715 of a Quanex share, for each Tyman share owned.

‘The Tyman directors believe that the transaction, as amended by this announcement, is in the best interests of Tyman shareholders as a whole and continue to recommend unanimously that Tyman shareholders vote or procure votes in favour of the scheme at the court meeting and to vote or procure votes in favour of the special resolution,’ Tyman added.

Also the object of M&A interest, Keywords Studios rose 5.8%.

It said it would be ‘minded to accept’ a takeover proposal from private equity firm EQT Group, which values the provider of technical and creative services for video game production at 2,450 pence per share, or £2.1 billion on a fully-diluted basis.

It followed a revised cash offer of 2,430p made on Wednesday.

On the wane, Gulf Marine Services fell 13% after Seafox International sold a 4.8% stake in the company, for £8.7 million. The stake was sold in a placing. Following the disposal, it owns just under a 24% stake in GMS.

On firmer ground, shares in Tavistock Investments rose 8.8% after it said it was considering a number of potential transactions, including a possible disposal of part of the group’s business to Saltus.

But the Ascot, Berkshire-based financial advice and investment management firm, which was responding to press reports, cautioned there was no guarantee that the deal with Saltus, a financial planning and investment management services group, would go ahead.

Brent oil was quoted at $85.74 a barrel midday Friday, up from $85.13 late Thursday. Gold was quoted at $2,336.19 an ounce, up from $2,327.60.

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Issue Date: 28 Jun 2024