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(Alliance News) - Stock prices in Europe bounced back on Friday, putting Federal Reserve hawkishness to one side for now, as hopes of a reversal of zero-Covid policies in China lifted the mood.
The Fed was in focus once again, however, after the release of a hotter-than-expected US jobs report. The chunkier than expected reading may strengthen the case for another sharp Fed interest rate hike.
The FTSE 100 index shot up 146.21 points, 2.0%, at 7,334.84. For the week, it added 4.1%.
The FTSE 250 ended up 231.96 points, 1.3%, at 18,341.57, while the AIM All-Share added 5.18 points, 0.6%, at 815.05. Over the course of the week, the FTSE 250 added 2.4% and the AIM All-Share climbed 1.2%.
The Cboe UK 100 closed up 2.4% at 735.66, the Cboe UK 250 ended 1.9% higher at 15,812.85, and the Cboe Small Companies ended up 0.8% at 12,456.53.
In European equities on Friday, the CAC 40 in Paris surged 2.8%, while the DAX 40 in Frankfurt jumped 2.5%.
It was a less convincing day for New York equities so far, however. The Dow Jones Industrial Average was up 0.2% at the time of the London close. The S&P 500 was up 0.4%, while the Nasdaq Composite was 0.3% higher.
Recent reports have suggested that lockdown measures may be ease in China. Bloomberg reported that travel restrictions may be eased, including reducing quarantine times.
"The Hang Seng index recorded its biggest weekly gain in 11 years, rising 8.7% to 16,161. A good chunk of those gains came on Friday, as stocks jumped in anticipation that the Chinese government would relax its zero-Covid policy from March next year. Prior to this week's rally, Asian stocks had struggled this year amid fears about a sharp slowdown in economic growth partially caused by stringent Covid lockdown rules in China," AJ Bell analyst Russ Mould commented.
China-exposed stocks were among the best performers in London.
Asia-focused insurer Prudential added 9.6%, and miners Rio Tinto and Anglo American surged 7.8% and 12%, respectively. China is among the world's largest mineral importers, so a revival of its economy would be good news for diversified miners.
Luxury retail firms Burberry and LVMH, rose 5.2% and 5.1% in London and Paris, respectively. China is a key market for luxury goods.
CMC Markets UK analyst Michael Hewson commented: "These reports, which still haven't been confirmed in any official capacity, have prompted a huge relief rally in equity markets, despite concerns that any reopening is unlikely to happen in the immediate future, and the very real risk that it is merely a sucker's rally. As we head into the winter months it seems highly improbable that China would be able to reopen its economy in any meaningful or sustainable way without triggering a more widespread outbreak of Covid infections. Notwithstanding all that investors are piling in just in case, in a classic case of FOMO, fear of missing out."
Lender HSBC, also boosted by China hopes, rose 1.8%. Shares were on the up despite major investor Ping An Insurance publicly calling for a break-up.
"As one of the major shareholders of HSBC, what Ping An cares the most is for HSBC to improve its business performance, create and enhance its long-term value. We have always upheld a candid and open attitude and keen to listen to all voices in the market. We will support any initiatives including a spin-off that are conducive to improve HSBC’s performance and value; we will consider any suggestions that will help HSBC improve its development and operation strategy," Ping An said.
Friday's "relief rally" follows a poor day for European markets on Thursday. Only a slide for the pound prevented the FTSE 100 from joining a sea of red across major European benchmarks.
Stocks were spooked by hawkish words from Federal Reserve Chair Jerome Powell late Wednesday. The Fed moved into focus once again on Friday following the release of the latest US jobs report.
The US economy added more jobs than anticipated in October, according to the latest nonfarm payrolls from the Bureau of Labor Statistics.
Total nonfarm payroll employment increased by 261,000 in October, only slightly slower than the 263,000 rise in September.
The US labour market was expected to have added 200,000 new jobs last month, according to market consensus cited by FXStreet, however.
"The prospect of the Fed shifting to 50bp rate from December, while our call, is not guaranteed," ING analysts commented.
Sterling was quoted at USD1.1301 late Friday, higher than USD1.1184 at the London equities close on Thursday. The euro traded at USD0.9915, higher than USD0.9754. Against the yen the dollar edged up to JPY147.16 from JPY147.08.
Gold was quoted at USD1,672.83 an ounce at late on Friday in London, higher than USD1,625.97 late Thursday. Brent oil was trading at USD97.52 a barrel, higher than USD95.21.
Back in London, Morgan Advanced Materials surged 15%.
The advanced carbon and ceramic materials manufacturer upgraded annual guidance after a strong year-to-date.
It said sales in the nine months to September were up 11% year-on-year, on an organic constant currency basis. It expects full-year organic constant currency growth to be between 7% to 9%, higher than previous guidance. It also expects adjusted operating profit to be "marginally above" the top end of market consensus.
Elsewhere, sofa seller DFS Furniture rose 6.0%.
Having warned of a markedly softened upholstery market from April to September, DFS said the trend has been more positive since then. Order volumes are up from the previous year, and are also higher compared to pre-pandemic levels.
Reach shares rose 1.8%, while National World traded 3.6% lower.
Late Thursday, National World said it was considering mounting a takeover bid for the Daily Mirror owner.
National World, a newspaper industry investor and owner of JPIMedia Publishing, said it is in the "early stages of exploring a possible offer" for Reach.
National World said it has not yet approached Reach's board, however.
Reach owns the Daily Mirror, Sunday Mirror and Daily Express. National World Executive Chair David Montgomery was formerly chief executive of Mirror Group, which later merged with Liverpool Echo owner Trinity to form Trinity Mirror. That tie-up was eventually renamed as Reach in 2018.
Over in Frankfurt, focus was on the boardrooms of historic sports apparel rivals Adidas and Puma.
Adidas stock traded up 21% in Frankfurt, Puma was down 0.5%
Adidas may turn to the current boss of neighbour Puma to take charge of the sportswear firm, the company said, as it looks to revive its fortunes.
Herzogenaurach, Germany-based Puma itself on Friday said it has named Arne Freundt as its new chief executive and management board chair, with effect January 1. Current CEO Bjorn Gulden's stint on the Puma board is due to expire at the end of this year.
It is Gulden that Adidas may name as its next CEO, the company said. The company, also based in Herzogenaurach, said it is in talks with Gulden to replace Kasper Rorsted.
Gulden has been Puma CEO since 2013. He was formerly managing director of Europe's largest footwear retailer Deichmann and, prior to sitting on company boards, he played football in Norway for Stromsgodset and in Germany for Nuremberg-based FC Nurnberg.
It has been a somewhat troubling time for Adidas recently. Profit warnings, macroeconomic uncertainty and more recently an end to its collaboration with Kanye West have rocked the stock.
Adidas and Puma are based in the town of Herzogenaurach in Bavaria, Germany, where the duo were founded by brothers Adolf Dassler and Rudolf Dassler, respectively.
Adolf, or Adi, founded Adidas before being joined by brother Rudolf. Relations between the duo soon soured, with Rudolf then going on to form what is now known as Puma. The two firms have been rivals ever since.
Monday's economic calendar has the latest Halifax UK house price index reading and German industrial production data at 0700 GMT.
The week picks up pace with a eurozone retail sales reading on Tuesday, Chinese inflation data on Wednesday, before consumer price index readings from the US and Germany on Thursday and Friday.
On the political front, US mid-term elections take centre-stage on Tuesday.
Monday's UK corporate calendar has a trading statement from Kingscourt, Ireland-based building materials company Kingspan.
In focus as the week progresses will be Primark owner AB Foods, as it reports annual results on Tuesday, while Marks & Spencer posts half-year numbers on Wednesday. Next week also has trading statements from housebuilder Taylor Wimpey, pub firm JD Wetherspoon and lender Permanent TSB.
By Eric Cunha; ericcunha@alliancenews.com
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