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(Alliance News) - Stocks in London ended higher on Friday bringing an end to a volatile week of trading, which saw equity markets endure heavy losses due to persistent inflation fears.
The narrative was reinforced this week with US consumer prices coming in far above estimates on Wednesday, followed by data on Thursday showing US producer price index at its highest since comparable records began in 2010.
Global equities have been convulsed for months by expectations that a swift economic recovery will send prices rocketing, forcing central banks - particularly the Federal Reserve - to taper the ultra-loose monetary policies that have helped drive a rally for more than a year.
However, a raft of prominent Federal Reserve speakers this week moved to quell fears over the sharp rise in inflation and a potential change in monetary policy stance.
Fed governor Christopher Waller, late Thursday, reiterated that the increase in inflation was likely driven by temporary factors related to the pandemic, including massive financial stimulus, supply-chain bottlenecks and a surge in demand as the economy reopens.
"I expect the FOMC to maintain an accommodative policy for some time. We have said our policy actions are outcome based, which means we need to see more data confirming the economy has made substantial further progress before we adjust our policy stance, because sometimes the data does not conform to expectations, as we saw last Friday," Waller said in a speech at the Global Interdependence Center's 39th Annual Monetary and Trade Conference.
Earlier this week, Federal Reserve Vice Chair Richard Clarida said he was "surprised" by the spike in US consumer prices, but also maintained "it is not yet time" to ponder a change in monetary policy.
The FTSE 100 index closed up 80.28 points, or 1.2%, at 7,043.61 - but finished the week down 0.5%.
The FTSE 250 ended up 266.79 points, or 1.2%, at 22,336.10, ending the week 0.7% lower and the AIM All-Share closed up 11.37 points, or 0.9%, at 1,236.21 - closing down 1.3% for the week.
The Cboe UK 100 ended up 1.2% at 702.80, the Cboe UK 250 closed up 1.2% at 20,097.40, and the Cboe Small Companies ended up 0.6% at 15,008.30.
In Paris the CAC 40 ended up 1.5%, while the DAX 30 in Frankfurt ended up 1.4%.
"It looks like a positive end to the week for risk assets, which have recovered from their inflation panic 48 hours ago. Stocks are advancing on a broad front, with advancers far outpacing the decliners in both New York and London. Yet again what had threatened to turn into a more dramatic selloff has been neutered, dip buyers seemingly as keen as ever to hit the button and jump in on any weakness," IG Group's Chris Beauchamp said.
In the FTSE 100, Whitbread closed up 3.9% after Morgan Stanley raised the Premier Inn owner to Overweight from Equal Weight.
Sage Group closed up 3.8% after the accounting software provider reported a fall in interim profit but strengthened its outlook for organic recurring revenue growth.
In addition, JPMorgan upgraded the stock to Neutral from Underweight.
Revenue for the half-year to March 31 fell 4% to GBP937 million. Organic total revenue, meanwhile, rose 1.4% and organic recurring revenue was up 4.4%, underpinned by software subscription revenue growth of 11%. Pretax profit fell to GBP190 million from GBP275 million.
Despite the profit fall, the firm bumped up its dividend by 2% to 6.05 pence from 5.93p paid a year ago.
Following the strong performance in the half, Sage said it now expects organic recurring revenue growth for the full-year to be towards the top end of its 3% to 5% guidance range. As previously guided, the organic operating margin is expected to be up to three percentage points below the 2020 financial year, reflecting "strategic investment" in the business.
At the other end of the large-caps, miners Rio Tinto, Antofagasta and BHP ended among the worst performers, down 2.7%, 2.2% and 1.3% amid lower base metal prices. Steelmaker Evraz ended 1.0% lower.
In base metals, spot copper slumped to USD10,260.50 a tonne from USD10,546.00, and spot aluminium slid to USD2,436.00 a tonne from USD2,492.50.
"The underperformance in the FTSE 100 is primarily being driven by mining stocks which are getting clobbered on the back of a sharp slide in iron ore and copper prices, after Chinese authorities expressed concern over their recent steep rise, amidst a surge in production at Chinese steel mills," said CMC Markets analyst Michael Hewson.
"The CRB commodities index also underwent its biggest one day fall since 18th March yesterday, on the back of a broad-based decline across the commodity space. While this is not good news for miners, it's much better news for the rest of us given that a lot of the concerns about inflation have been driven by recent surges in commodity prices," said Hewson.
In the FTSE 250, Sanne Group ended the standout performer up 21% at 732.00p. The fund and corporate services firm said it rejected three unsolicited takeover proposals from Cinven in recent months, including one worth 830 pence per share which it believes significantly undervalues the company. The offer would value Sanne at GBP1.35 billion.
Sanne called the approach "opportunistic" and said didn't reflect its prospects as the economy recovers. Cinven earlier had confirmed it had made the offer.
The London-based private equity firm said it is considering its position and there can be no certainty any offer will be made. Cinven has until the close of play on June 11 to either make a firm offer for Sanne, or walk away.
The pound was quoted at USD1.4088 at the London equities close, up from USD1.4045 at close Thursday.
The euro stood at USD1.2138 at the European equities close, down from USD1.2071 late Thursday. Against the yen, the dollar was trading at JPY109.40, down from JPY109.60 late Thursday.
New York equity markets were higher at the London equities close, ending the week on a high note after inflation fears caused stocks to sink earlier this week.
The DJIA was up 0.8%, the S&P 500 index 1.1% and the Nasdaq Composite 1.8%.
Sentiment was also lifted after the US Centers for Disease Control and Prevention removed mask requirements for people who are fully vaccinated against Covid-19.
On the corporate front, Walt Disney Co was down 3.5% after subscriber additions for the Disney+ streaming service fell short of expectations in the second quarter.
Brent oil was quoted at USD68.30 a barrel at the equities close, up from USD67.55 at the close Thursday.
Gold was quoted at USD1,837.50 an ounce at the London equities close, higher against USD1,823.80 late Thursday.
The economic events calendar on Monday has China retail sales overnight and Italy inflation at 0900 BST.
The UK corporate on Monday has annual results from Irish carrier Ryanair Holdings and interim results from cables maker Diploma.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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