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(Alliance News) - Stocks in London were higher at midday on Thursday, despite a slew of downbeat PMI readings across Europe, as investors were encouraged by comments from US Federal Reserve Chair Jerome Powell that were more jolly than expected.
Speaking at an event in Washington on Wednesday, Powell suggested that the US central bank could ease its pace of interest rate hikes "as soon as" December.
"The message that an easing in the pace of rate hikes could come before the end of the year was just what investors were looking for and raises the prospect of a Santa Rally heading into Christmas," said AJ Bell's Russ Mould.
The FTSE 100 index was up 7.17 points, 0.1%, at 7,580.22 at midday on Thursday. The FTSE 250 was up 180.54 points, 0.9%, at 19,343.95, and the AIM All-Share was up 3.79 points, 0.5%, at 852.38.
The Cboe UK 100 was down 0.1% at 852.38, the Cboe UK 250 was up 1.0% at 16,749.52, and the Cboe Small Companies flat at 13,285.59.
The UK manufacturing sector continued to weaken in November to one of the lowest levels in the past 14 years, figures showed.
The seasonally adjusted S&P Global/CIPS UK manufacturing purchasing managers' index edged up to 46.5 points in November from 46.2 points in October. The October reading was a 29-month low.
"A lethal cocktail of Brexit, logistics constraints, high costs and low demand contributed to the continued decline in manufacturing output in November which also fed into deteriorating job numbers for a second month in a row," said John Glen, chief economist at Chartered Institute of Procurement & Supply.
The eurozone's manufacturing sector also remained in negative territory last month and firms still have a "pessimistic" outlook, according to survey results.
The latest S&P Global eurozone manufacturing PMI inched slightly higher to 47.1 points in November from 46.4 points the month before. October's reading had been a 29-month low.
November marks the fifth month that the eurozone's manufacturing PMI has come in below the 50.0 mark, which separates growth from decline.
"The PMI signals some welcome moderation in the intensity of the eurozone manufacturing downturn in November, which will support hopes that the region many not be facing a winter downturn as severe as previously anticipated by many," said S&P Global Chief Business Economist Chris Williamson.
The unemployment rate in the eurozone hit a record low in October, suggesting the single currency area's jobs market is showing resilience in the face of chunky interest rate hikes by the European Central Bank.
Eurostat said the eurozone unemployment rate edged down to 6.5% in October from 6.6% in September. It had been expected to remain at 6.6%, according to consensus cited by FXStreet. It was the lowest unemployment reading since the current Eurostat series began in 1998.
In European equities early Thursday afternoon, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was up 0.7%.
In the FTSE 100 in London, Pearson and Anglo American were down 4.0% and 3.1%, respectively, following broker ratings downgrades.
Exane BNP cut Pearson to 'neutral' from 'outperform', while RBC cut Anglo American to 'sector perform' from 'outperform'.
Spirax-Sarco, meanwhile, was up 2.0% after it completed its acquisition of Durex International, a US-based specialist in custom electric thermal solutions for ultra-high criticality equipment.
The thermal energy management and pumping company bought the firm also known as Durex Industries for a total of USD342.2 million on a cash and debt free basis.
Durex Industries is now part of Spirax-Sarco's Electric Thermal Solutions business.
In the FTSE 250, Essentra rose 4.1% after it announced the acquisition of Wixroyd for an initial GBP29.5 million.
Wixroyd is a UK-based mechanical components manufacturer and distributor. It has a portfolio of over 100,000 products and 9,000 customers. Essentra said it expects revenue and purchasing synergies to "materially benefit" as a result of the acquisition, its first since unveiling a new strategy to become a pure-play components business.
Auction Technology dropped 10% despite swinging to an annual profit in the financial year that ended September 30 and reporting a double-digit rise in revenue.
The online auction operator swung to a profit of GBP9.3 million for financial 2022 from a loss of GBP25.0 million, as revenue surged 71% to GBP119.8 million from GBP70.1 million thanks to growth in gross merchandise value and an additional boost from value-add services.
Elsewhere in London, Foresight Group jumped 9.5% as it reported a sharp rise in interim profit and revenue. Foresight is an investment fund focused on sustainable infrastructure.
In the six months ended September 30, Foresight posted pretax profit of GBP25.4 million, up from GBP13.1 million the previous year. Revenue jumped to GBP50.7 million from GBP39.7 million.
This came as assets under management climbed to GBP12.5 billion at September 30 from GBP8.8 billion at the same time a year prior. It explained this rise was driven by the significant acquisition of Australia-based Infrastructure Capital Group, which added around GBP3.0 billion to the firm's AuM.
On AIM, Pelatro plunged 31%. The marketing software specialist said annual earnings before interest, tax, depreciation and amortisation will fall below market expectation, after currency fluctuations and rising interest rates hurt revenue.
Pelatro explained that "a significant portion" of its revenue is denominated in Indian rupees rather than US dollars, meaning it is exposed to currency fluctuations on revenue as well as costs.
It said "the continuing weakening of INR [versus] USD is therefore expected to result in a shortfall against management expectations for INR-denominated revenue on translation to USD."
The overall hit is likely to be around USD700,000 to USD800,000, the company said.
Stocks in New York were called lower on Thursday. The S&P 500 was called down 0.1%, the Nasdaq Composite down 0.2%, and Dow Jones Industrial Average down 0.2%.
The dollar was weaker at midday. Ricardo Evangelista blamed the drop on improved risk appetite weighing on the safe-haven dollar.
"But perhaps more importantly," Evangelista explained, "there is a growing consensus in the markets that the Federal Reserve will not go quite as far in its rate hiking cycle as previously expected. This sentiment found even more traction yesterday, with Jerome Powell saying in a speech that the slowdown in rate hikes is likely to start in December. These comments by the chairman of the Fed were more dovish than expected, and accentuated the ongoing dollar weakness."
The pound was quoted at USD1.2166 at midday on Thursday in London, up sharply from USD1.1907 at the London equities close on Wednesday.
The euro stood at USD1.0438, notably higher against USD1.0295 late Wednesday. Against the yen, the dollar was trading at JPY136.12, down significantly from JPY139.54.
Brent oil was quoted at USD88.00 a barrel early Thursday, up from USD85.44 late Wednesday. Gold fetched USD1,781.33 an ounce, sharply up from USD1,753.29.
By Heather Rydings; heatherrydings@alliancenews.com
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