(Alliance News) - Stocks in Europe were solidly higher midday Monday, as easing US rate hike expectations boosted risk appetite, taking some steam out of a rampant dollar.
Markets now believe a 75 basis point hike from the US Federal Reserve is the most likely outcome on July 27. Expectations of a sharper full percentage point hike had grown last week after figures showed the US annual inflation rate raced to 9.1% in June, from 8.6% in May.
Focus elsewhere will be on US corporate earnings season - with both Goldman Sachs and Bank of America reporting before the opening bell in New York on Monday - and also the European Central Bank, which has interest rate quandaries of its own.
The FTSE 100 was up 84.37 points, or 1.2%, at 7,243.38 midday Monday in London. The FTSE 250 index climbed 179.20 points, or 1.0%, to 19,013.00. The AIM All-Share index was up 9.44 points, or 1.1%, at 883.79.
The Cboe UK 100 index was up 1.0% at 721.96. The Cboe 250 was up 0.9% at 16,526.16, and the Cboe Small Companies was up 0.4% at 13,144.69.
In mainland Europe, the CAC 40 stock index in Paris and the DAX 40 in Frankfurt both surged 1.3%.
"Investors seem to be taking the view that the US Federal Reserve will not be overly aggressive with the pace of interest rate hikes, in the belief that the central bank would not want to risk plunging the country into economic turmoil," AJ Bell analyst Danni Hewson commented.
The dollar came under pressure as a result.
The pound was quoted at USD1.1974 midday Monday, up from USD1.1853 late Friday. Against the yen, the dollar was trading at JPY138.18, down from JPY138.56.
Gold, which has an inverse relationship with the greenback, benefited from dollar weakness. The precious metal rose to USD1,715.40 an ounce midday Monday from USD1,704.08 late Friday.
The euro stood at USD1.0152 midday Monday in London, up from USD1.0074 at the European equities close on Friday, further above parity, below which it fell briefly last week.
The ECB has said it will lift its key interest rates at Thursday's meeting by 25 basis points. Though what it does after this is less certain.
Last month, the Frankfurt-based central bank kept the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50% respectively.
The ECB makes its decision this week as Europe faces a potential energy supply crisis and political uncertainty in Italy.
Since last week Monday, Nord Stream 1 has not been delivering gas due to scheduled maintenance work. The work is scheduled to last until Thursday. Several Western politicians have expressed scepticism about whether Russia's Gazprom will deliver gas again afterwards.
Meanwhile, Italian Prime Minister Mario Draghi will address lawmakers this week with his future also less than certain. Last week, President Sergio Mattarella refused to accept Draghi's resignation. Draghi is a former ECB president.
Stocks in New York are called higher. The Dow Jones Industrial Average is called up 0.9%, the S&P 500 up 1.0% and the Nasdaq Composite up 1.2%.
Still to come on Monday, Goldman Sachs becomes the latest bellwether to report quarterly results, in what has been a largely disappointing corporate earnings season from the US banking sector so far.
JPMorgan Chase and Morgan Stanley kicked off proceedings last week Thursday, both reporting profit falls. Wells Fargo did the same on Friday.
Goldman shares were 1.1% higher in pre-market trade on Monday.
In London, shares in Euromoney surged 9.4% as the business media and events firm accepted a takeover tilt from a consortium of Luxembourg-based private equity firm Astorg Asset Management and London-based private equity firm Epiris.
The stock was trading at 1,452.62 pence. It has a market capitalisation of GBP1.45 billion.
The offer from Becketts Bidco values the FTSE 250 listing at GBP1.61 billion on a fully diluted equity basis and GBP1.66 billion on an enterprise value basis.
Becketts will pay 1,461p per Euromoney share, a 10% premium to its 1,328.00p close price on Friday. The bid is a 34% premium to Euromoney's last "undisturbed" stock price of 1,094p on June 17, the final trading day before Euromoney confirmed the takeover approach on June 20.
"The board believes the offer represents value for shareholders and reflects the attractions of Euromoney's business model and performance," Chair Leslie Van de Walle commented.
In addition, Euromoney said it now expects annual results to top board expectations.
Revenue in the nine months to June 30 surged 30% to GBP304.3 million, it said. Euromoney's financial year ends in September.
Fellow events organiser Hyve added 4.2% in a positive read across.
At the bottom of London mid-caps, insurer Direct Line cautioned on "heightened volatility across the UK motor insurance market". The stock was down 12% in midday trade.
"We have seen claims inflation in motor in the first half of 2022 spike above the levels assumed in our pricing. As a result, we are revising our combined operating ratio target range for 2022 to 96% to 98%," Chief Executive Officer Penny James commented.
Direct Line had previously targeted a combined operating ratio range of 93% to 95%. A ratio below 100% indicates an insurer is making underwriting profit. A ratio of 98% would be only barely profitable.
In addition, the company said it will not proceed with a second GBP50 million tranche of a GBP100 million buyback. It expects an unchanged interim payout of 7.6p.
Insurance peers suffered as well. Sabre Insurance fell 1.4%, Admiral was down 6.5%.
Save for a 20% share price slide for a trimmed down GSK, Admiral was the worst FTSE 100-listed performer.
The demerger of GSK's consumer arm, which houses brands such as Sensodyne, Voltaren, Panadol and Centrum, came into effect on Monday.
Haleon went straight into the FTSE 100 index, where GSK also remains.
As a result, the lowest ranked FTSE 100 stock based on closing prices on Monday will be demoted to the FTSE 250 to make room for Haleon, index provider FTSE Russell previously said. A consolidation of GSK shares will be implemented on Monday, after the market close.
Haleon shares were trading at 320.85p around midday, giving the company a market value of GBP29.63 billion.
Brent oil was quoted at USD103.19 a barrel midday Monday in London, up from USD101.57 late Friday.
By Eric Cunha; ericcunha@alliancenews.com
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