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(Alliance News) - Stocks in London were called to open higher on Friday, after a weak US jobless claims reading threw "cold water" over expectations for an interest rate hike by the Federal Reserve next week.
Elsewhere on the central banking front, the People's Bank of China also was under the spotlight, after a tame Chinese inflation reading increased pressure for economic stimulus measures.
Stocks in New York ended higher on Thursday, bolstered by the weaker-than-expected US jobless claims reading, which took some pressure off the Fed to raise interest rates on Wednesday next week.
Initial claims for unemployment support in the week ended June 3 totalled 261,000, an increase of 28,000 from the previous week's revised level. The previous week's level was revised up by 1,000 to 233,000 from 232,000.
The data reinforced expectations that the Federal Reserve will decide against an interest rate hike. The federal funds rate currently stands at 5.00% to 5.25%.
"The faster than expected jump in US initial jobless claims threw some cold water on the heated hawkish Federal Reserve pricing yesterday," Swissquote analyst Ipek Ozkardeskaya commented.
China's annual inflation rate quickened slightly last month, but stayed not far above zero. The consumer price index rose 0.2% on-year, picking up a bit of speed from 0.1% in April, the National Bureau of Statistics said. The figure fell short of FXStreet-cited consensus which predicted an uptick to 0.3% annual inflation.
While policymakers elsewhere in the world have pumped the monetary policy brake pedal to contain red-hot inflation, Beijing has kept interest rates low compared to other major economies. But the near-zero inflation in China highlights challenges faced by policymakers there, as they try to stimulate the economy.
In early UK corporate updates, Network International agreed to a private equity takeover, while CMC Markets has backed a blockchain solutions firm.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.1% at 7,609.74
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Hang Seng: up 0.7% at 19,427.34
Nikkei 225: closed up 2.0% at 32,265.17
S&P/ASX 200: closed up 0.3% at 7,122.50
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DJIA: closed up 168.59 points, or 0.5%, at 33,833.61
S&P 500: closed up 0.6% at 4,293.93
Nasdaq Composite: closed up 1.0% at 13,238.52
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EUR: flat at USD1.0777 (USD1.0774)
GBP: firmer at USD1.2559 (USD1.2541)
USD: up at JPY139.36 (JPY139.05)
GOLD: lower at USD1,964.78 per ounce (USD1,966.33)
(Brent): lower at USD75.49 a barrel (USD76.28)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
09:00 BST ECB Vice-President Luis de Guindos speaks during seminar on capital requirements regulation in Madrid
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The UK high street has recorded negative sales for the first time in more than two years as the cost of living bites, according to new figures. Total like-for-like retail sales, combining in-store and online, fell by 1.5% overall compared with last May, according to business advisory firm BDO's latest high street sales tracker. Online sales fell by 3.3%, one of the lowest results recorded outside of the pandemic, while in-store sales rose by just 1% across the month.
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The US is looking to the UK to "lead the effort" on how artificial intelligence is regulated, US President Joe Biden said. The US president expressed his confidence in how UK Prime Minister Rishi Sunak in heading up international co-ordinated action to mitigate the risks of the emerging technology. Speaking at a joint press conference with the PM at the White House, Biden described the technological change AI could bring as "staggering". He said architects of AI are themselves "very concerned about it getting out of hand and we've got to make sure we're all on the same page". Biden added: "And we're looking to Great Britain to lead that effort this fall in putting together a proposal, a group of nations to deal with, how do we deal with this." Sunak has announced that the UK will host the first global summit on AI safety in the autumn, with Downing Street describing it as an opportunity for "like-minded countries" to come together on the issue.
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BROKER RATING CHANGES
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Barclays raises Hammerson to 'overweight' ('underweight') price target 30 (25) pence
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Stifel raises B&M European Value Retail to 'buy' ('hold') - price target 600 (500) pence
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COMPANIES - FTSE 100
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Croda International said sales volumes have come under pressure from continuing customer destocking, and it predicts an annual profit fall. The chemicals firm said that while sales volumes in its Consumer Care arm were up on the final quarter of 2022, they were down by a double-digit percentage year-on-year for the five months ended May 31. "Price increases implemented in 2022 and favourable foreign exchange rates so far in 2023 have helped to offset this impact, with revenues broadly flat versus the first five months of 2022. However, principally due to the lower sales volumes, operating profit margin has remained at a similar level to the second half of 2022," the company said. Croda said it achieved pretax profit of GBP143 million in the first five months of 2023, helped by "minimal net finance costs". With customer destocking set to continue in its consumer-focused division, Croda now predicts full-year pretax profit of GBP370 million to GBP400 million, down as much as 52% from GBP780.0 million in 2022.
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AstraZeneca said it has struck an exclusive option and license agreement with Quell Therapeutics to develop engineered T-regulatory cell therapies to potentially treat Type 1 diabetes and inflammatory bowel disease. AstraZeneca will pay the biopharmaceutical firm USD85 million upfront. Quell may also receive over USD2 billion for further development and commercialisation milestones, as well as tiered royalties. "AstraZeneca will have the option to further development and commercialisation of successful clinical candidates in T1D and IBD," AstraZeneca said. Syncona, an investor in healthcare companies, noted the announcement. It owns just over a third of Quell.
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AstraZeneca also said a US Food & Drug Administration committee unanimously recommended its antibody nirsevimab for the prevention of respiratory syncytial virus lower respiratory tract disease in infants. The Cambridge-based pharmaceutical company said that if approved, nirsevimab would be the first preventive option targeted to protect infants through their first RSV season, which typically starts in autumn. There has been progress on preventative options against RSV recently. GSK on Wednesday had announced that its RSV vaccine Arexvy became the first EU-approved vaccine against the virus for adults aged 60 and older. In May, the vaccine had received full approval for that age group in the US.
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COMPANIES - FTSE 250
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Network International agreed to a GBP2.2 billion takeover from entities backed by private equity firm Brookfield Asset Management. Brookfield will pay 400 pence per Network International share, a 64% premium to Network International's 243.6p share price at the close of play on April 12, the day before the Middle East and Africa-focused payments provider first received buyout interest. Back then, it was a private equity consortium featuring CVC Capital Partners and tech-focused investor Francisco Partners Funds that showed an interest. This then led to a 387p per share takeover proposal. Later in April, Brookfield made a 400p proposal, which has now been agreed. Brookfield had a 'put up or shut up' deadline of May 19, though this was twice extended, first to June 1 and then to Friday. Network International Chair Ron Kalifa said: "The board has carefully considered the Brookfield offer in the context of the long term growth prospects and opportunities available to the business, balanced against the current challenges and uncertainty in the global macroeconomic environment and the expected timeframe that would be required to generate a similar level of value creation for Network shareholders. The Brookfield offer represents an opportunity for Network shareholders to crystallise, in cash, the value of their investments at a significant premium."
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CMC Markets said it has struck a deal to acquire a third of blockchain solutions business StrikeX. It did not give the terms of the investment. CMC said the deal is a "significant milestone for both companies and the digital asset industry". "This arm's length investment presents CMC Markets with further opportunity for growth. The partnership will allow CMC Markets access to the latest blockchain related products and services with the opportunity to leverage these for our customers over the longer term," CMC said.
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OTHER COMPANIES
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S4 Capital backed annual guidance but cautioned that growth so far in 2023 has been "more modest" than in 2022, Executive Chair Martin Sorrell will say at the company's annual general meeting on Friday. The digital advertising agency, which had experienced like-for-like net revenue growth of 26% in 2022, said growth was more muted in the first four months of 2023, "reflecting the slowdown in the growth rates of our two main addressable markets". It still expects 2023 like-for-like net revenue growth of between 8% and 12% excluding impact of one "whopper" reduction and 6% and 10% including it. A whopper is a major client for S4 Capital.
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By Eric Cunha, Alliance News news editor
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