(Alliance News) - Stock prices in London were largely lower at midday on Friday, though the FTSE 100 outperformed, as investors looked to the prospect of further interest rate hikes in the UK, while also tracking developments in the US debt ceiling impasse.
The FTSE 100 index was up 10.95 points, or 0.1%, at 7,581.82. The FTSE 250 was down 56.49 points, or 0.3%, at 18,784.26, and the AIM All-Share was 0.95 of a point, or 0.1%, at 791.59.
The Cboe UK 100 was marginally lower at 756.94, the Cboe UK 250 was down 0.4% at 16,344.63, and the Cboe Small Companies was down 0.1% at 16,344.63.
UK Chancellor Jeremy Hunt has backed interest rate hikes being used to calm soaring inflation, even if they increase the risk of pushing the UK into recession.
Hunt told Sky News that prioritising measures to slow rising prices was necessary, even if rate hikes damage the UK's gross domestic product.
The chancellor's rhetoric followed hawkish talk from a member of the Bank of England's decision-making body on Thursday, who said that the central bank cannot rule out more rate rises.
"As difficult as our current circumstances are, embedded inflation would be worse," Jonathan Haskel told an audience in Washington DC, a day after the UK inflation rate was revealed to have hit 8.7% in April.
"The [Monetary Policy Committee] remains committed to bringing inflation sustainably back to the 2% target, and that is what we will do. But to do this, further increases in Bank rate cannot be ruled out," Haskel said.
The pound was quoted at USD1.2367 at midday on Friday in London, higher compared to USD1.2330 at the close on Thursday.
Sterling was on the up amid the prospect of more BoE hikes, and after somewhat upbeat UK retail sales data.
Retail sales edged up on a monthly basis in April. For many, this was a tentative sign that the year-long retail slump seen in 2022 may now be in the rearview.
The Office for National Statistics estimated that retail sales volumes in April rose 0.5% from the previous month, after a downwardly revised fall of 1.2% in March.
The reading was slightly higher than the FXStreet-cited market consensus of 0.3%. March was initially reported to have seen a 0.9% fall in retail sales.
"Following months of consumers tightening their belts to the detriment of retailers, April's uptick in spending suggests that there is light at the end of the tunnel for the businesses hit hardest by the cost-of-living crisis' impact on sales," said Phil Monkhouse, head of sales at Ebury.
In London, miners were the top performers in the blue-chip index at midday.
Rio Tinto was up 3.9%, Antofagasta up 2.9%, Anglo American up 2.5% and Glencore up 2.4%.
Russ Mould, investment director at AJ Bell, said the rally in mining stocks was driven by the first cabinet-level talks between the US and China "in months".
US Commerce Secretary Gina Raimondo met her Chinese counterpart Wang Wentao on Thursday and "had candid and substantive discussions on issues relating to the US-China commercial relationship," the US Department of Commerce said in a statement.
This included "the overall environment in both countries for trade and investment and areas for potential cooperation," it said.
Wang's visit to Washington represents a rare trip for a senior Chinese official to the US.
Brent oil was quoted at USD76.42 a barrel at midday in London on Friday, up from USD76.15 late Thursday. Gold was quoted at USD1,952.27 an ounce, higher against USD1,945.11.
In the FTSE 250, IntegraFin fell 4.2% as it reported a drop in interim profit as its revenue stayed roughly flat year-on-year.
Integrafin, which owns the investment platform Transact, said for the six months ended March 31, revenue remained stable at GBP66.5 million, compared to GBP67.0 million the previous year. Pretax profit, meanwhile, slipped 12% to GBP27.9 million from GBP31.7 million.
Asos lost 2.2%. The online fashion retailer said that it has raised GBP75 million through a share placing, in order to support its Driving Change agenda to return the company to sustainable profit and cash generation by the second half of this year.
AJ Bell's Mould said that the danger is that Asos hasn't raised enough this time around and will have to "dig out the begging bowl again before too long".
"Asos and other pure online plays did well during the pandemic as there was no alternative and people were less likely to make returns. That situation has now reversed leaving the company exposed to a difficult combination of rising costs and shrinking demand, as well as mounting competition," he said.
Elsewhere in London, Kin & Carta dropped 7.9% as the business consultancy predicted muted revenue in the year ending July 31.
Kin & Carta said it expects revenue in financial 2023 to be flat to about 2% higher compared to the year before, reflecting recent currency movements, which resulted in net revenue headwinds in the second half of about GBP3.0 million.
Chief Executive Officer Kelly Manthey says: "Although we're maintaining a pattern of quarter by quarter net revenue growth, it isn't as strong as we'd expected. The market is more difficult with clients cautious about committing to large programme spends. Normally we see a significant acceleration in our second half revenue growth, but this has not materialised."
On AIM, Itsarm shares nearly tripled to 0.62p after shareholders voted against the company placing itself into voluntary liquidation.
Itsarm has been a cash shell since March. At the time, it sold its only operating subsidiary, digital fashion brand In The Style Fashion, for GBP1.2 million.
At the end of April, Itsarm announced plans to place itself in liquidation and cancel its shares from trading on London's AIM. However, on Friday, shareholders voted against the resolution and the company will therefore remain quoted on AIM as a cash shell.
In European equities on Friday, the CAC 40 in Paris was marginally higher, while the DAX 40 in Frankfurt was down 0.1%.
The euro stood at USD1.0743, higher than USD1.0723. Against the yen, the dollar was trading at JPY139.71, lower compared to JPY139.85.
Stocks in New York were called higher. The Dow Jones Industrial Average was seen opening slightly higher, while the S&P 500 index was called up 0.1%, and the Nasdaq Composite was called up 0.3%.
President Joe Biden declared Thursday the US would avoid a disastrous credit default.
There are seven days until June 1 – the earliest possible point when the government estimates it could run out of money to service its debts – and missed loan repayments would likely spark a recession, roiling world markets.
But members of the House of Representatives began hitting the road for the Memorial Day recess after their final vote Thursday morning and are not due to return until June 4.
"There will be no default," Biden said at the White House, adding that his negotiations with Republican Speaker Kevin McCarthy, who leads the narrow majority in the House of Representatives, had been "productive."
Still to come on Friday's economic calendar, the latest US core personal consumption expenditures reading is reported at 1330 BST. Core PCE is the Federal Reserve's preferred inflationary reading.
"If we happen to see a softer reading on this key inflation gauge, it could offset some of the tough talk on rates that we have heard from Fed officials recently and take some steam out of the USD," said Tim Waterer, chief market analyst at KCM Trade.
"But that remains a big 'if,' given that the task of lowering inflation for the Fed has been challenging to say the least."
By Heather Rydings, Alliance News senior economics reporter
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