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(Alliance News) - Stocks in London ended mixed on Friday as US treasury yields spiked after President Joe Biden signed his first major piece of legislation into law, as banks contributed to a rise in the FTSE 100.
Less than two months after taking office, Biden on Thursday put his name to the huge rescue plan that paves the way for a spending splurge widely seen as ramping up domestic and global growth.
The package - which includes up to USD1,400 in cash handouts, extended unemployment benefits and other aid programmes - comes as the US government pushes ahead with its vaccine drive against the coronavirus.
The yield on the benchmark 10-year US Treasury note sat at 1.63% on Friday afternoon from 1.52% at the same time on Thursday, around one-year highs touched last week.
The FTSE 100 index closed up 24.51 points, or 0.4%, at 6,761.47 and ended the week up 1.7%. The FTSE 250 ended down 26.63 points, or 0.1%, at 21,506.47, it ended up 1.0% this week.
The AIM All-Share fell 6.26 points, or 0.5%, at 1,191.46, rising 1.7% over the week.
The Cboe UK 100 ended up 0.4% at 673.51, the Cboe UK 250 closed flat at 19,147.52, and the Cboe Small Companies ended up 0.5% 13,868.88.
In Paris the CAC 40 ended up 0.2%, while the DAX 30 in Frankfurt ended down 0.5%.
CMC Markets analyst David Madden said: "Equity markets are a mixed bag this afternoon as higher government bond yields have chipped away at sentiment. Stock markets have enjoyed a positive run lately, largely due to the hopes in relation to economies loosening their restrictions in the months ahead, also President Biden signed off on the US's USD1.9 trillion stimulus package last night. The prospect of higher growth, comes at a cost, the likelihood of higher inflation, and that is pushing up yields.
"Financial stocks like, Barclays, Lloyds, HSBC and Prudential are benefiting from the tick higher in yields, which in turn is helping the FTSE 100."
Stocks in New York were mostly lower at the London equities close as tech stocks sank on Friday after bond yields rose again. Investors were once again worried a stronger US economy in months ahead could prompt the Federal Reserve to raise interest rates sooner than expected.
The spotlight will be on Fed Chair Jerome Powell at next week's monetary policy meeting to see if he provides any fresh commentary on the outlook for rates.
The DJIA was up 0.4%, but the S&P 500 index was down 0.5% and the Nasdaq Composite was 1.7% lower.
Patrick O'Hare of Briefing.com said the yield concerns and Biden's vow after markets closed Thursday to make all adults eligible for Covid-19 vaccines by May 1 pushed traders away from growth stocks like tech, and towards companies that will benefit from the economy reopening.
On the corporate front, Boeing rose 1.9% after the aerospace company said US investment firm 777 Partners ordered 24 of its 737 MAX 8 aircraft - with a price tag of USD2.9 billion - with an option to buy 60 more.
On the London Stock Exchange, Burberry Group ended the best blue-chip performer, up 6.9%, after the fashion house raised its annual guidance, enjoying a promising end to a Covid-19-hit year.
Burberry expects comparable store retail sales in the quarter ended March 27 to be between 28% and 32% higher annually. For the full-year, revenue is to decline between 10% and 11% from GBP2.63 billion.
The luxury retail sector began to be hit by the onset of the Covid-19 outbreak in the fourth quarter of Burberry's 2020 financial year.
Barclays finished up 3.6% after Goldman Sachs raised the lender to Buy from Neutral. Peers Lloyds, NatWest and HSBC ended up 1.8%, 2.0% and 0.8% respectively.
Tesco closed up 1.7% after the supermarket chain said the Polish Competition Authority has approved the sale of its business in Poland to Denmark's Salling Group. The total enterprise value agreed for the transaction was PLN900 million, about GBP181 million.
At the other end of the large-caps, Berkeley Group ended the worst performer, down 5.8%, after the housebuilder said it remains on track to deliver, in line with guidance, a "similar" profit to last year.
Berkeley said it expects profit for the year to the end of April to be around GBP504 million, broadly flat year-on-year, and forward sales are anticipated to be above GBP1.7 billion at the year-end. It noted that the market fundamentals remain strong, with low interest rates. Sales reservations have been "robust" where the company has had availability of stock.
The Cobham, England-based company, however, noted that it has decided to postpone the launch of new developments and phases into the market until the economy opens up post-lockdown, despite enquiry levels remaining "consistently strong". Berkeley said it anticipates the value of reservations for the current financial year to be around 20% lower than last year.
Mexican precious metals miner Fresnillo closed down 2.7%, tracking spot gold prices lower. Bullion was quoted at USD1,710.65 an ounce at the London equities close, down from USD1,722.35 late Thursday, as the dollar strengthened.
Scottish Mortgage Investment Trust closed down 1.7%, tracking falls in high-profile US tech stocks which it backs. The trust has a 5.1% stake in Elon Musk's Tesla and a 5.9% holding in Jeff Bezos's Amazon. Shares in Tesla and Amazon were down 2.8% and 1.8% in New York respectively.
The dollar was in demand as US bond yields spiked. The pound was quoted at USD1.3985 at the London equities close, down sharply from USD1.3970 at the close Thursday.
The euro stood at USD1.1940 at the European equities close, down from USD1.1960 late Thursday. Against the yen, the dollar was trading at JPY109.00, up sharply from JPY108.51 late Thursday.
Dollar strength meant sterling was unable to gain traction following positive economic data released on Friday morning. The UK economy weathered the lockdown restrictions imposed at the start of 2021 better than expected, official figures showed.
The UK economy contracted 2.9% month-on-month in January, a far better performance than market consensus, according to FXStreet, of a 4.9% decline. This followed 1.2% monthly growth in December.
UK GDP contracted by 1.7% sequentially in the three months to January, reversing a 1.0% increase in the three months to December.
UK Prime Minister Boris Johnson at the start of 2021 imposed the toughest national lockdown in England since March of last year, shutting schools, non-essential shops and restaurants.
January's gross domestic product was 9.0% below pre-pandemic levels, compared with 4.0% below in October.
In other data, the ONS said on Friday said the UK's total trade balance for January narrowed to a deficit of GBP1.63 billion from GBP6.20 billion in December. The goods trade deficit also narrowed, to GBP9.83 billion for January from GBP14.32 billion in December.
Moreover, in January, after the Brexit transition period ended, UK goods exports to the EU fell 41% in the month and imports dropped 29%, the largest declines since records began in 1997.
The UK service sector declined 3.5% in January from the month before, acting as the main drag on growth, while manufacturing fell by 2.3% month-on-month in the first decline since April 2020. Production was down 1.5%. Construction, meanwhile, posted 0.9% growth, driven by a rise in new work.
"GDP, Trade balance and services data all posted better than expected numbers, buoying hopes for a road to recovery post the lockdown in the UK. Industrial and manufacturing data remained very weak, suggesting Rishi Sunak, UK Chancellor, may still have work to do to provide stimulus to these ailing sectors," said analysts at OFX.
Brent oil was quoted at USD69.63 a barrel at the equities close, flat from USD69.32 at the close Thursday.
The economic events calendar on Monday has UK Rightmove house price index readings and China industrial production figures overnight.
The UK corporate calendar on Monday has annual results from Ascential and SThree.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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