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(Alliance News) - The FTSE 100 managed to overturn early morning losses by midday on Friday as investors look ahead to the US jobs report in the afternoon.
US Federal Reserve Chair Jerome Powell failed to soothe fears of a surge in inflation fuelled by the expected global economic recovery post-pandemic, which investors fear could force the central bank to hike interest rates earlier than previously thought.
Powell reiterated that the Fed would not tighten its policies until its goals of full employment and consistently high inflation had been met, and that was likely to be some time away.
The 10-year US Treasury yield held above the 1.5% level as investors continue to monitor the rise in bond yields.
The FTSE 100 index was up 14.61 points, or 0.2%, at 6,665.49 and is on track to end the week 0.2% higher.
The mid-cap FTSE 250 index was down 56.44 points, or 0.3%, at 21,239.79. The AIM All-Share index was down 0.6% at 1,166.67.
The Cboe UK 100 index was up 0.3% at 665.50. The Cboe 250 was down 0.1% at 18,970.85 and the Cboe Small Companies was up 0.3% at 13,576.82.
In mainland Europe, the CAC 40 in Paris was down 0.4% while the DAX 30 in Frankfurt was down 0.6%.
"European indices are reeling from Jerome Powell's latest remarks, with the Fed chairman serving to heighten fears over rising inflation and Treasury yields. The value composition of UK markets does help alleviate some of that selling pressure, with pro-cyclical sectors such as banks and energy on the rise today. Rising yields provide an alternative for equities, with portfolio managers provided an alternate asset to allocate funds into as a means of hedging volatility. However, rising yields also heighten the cost of borrowing for businesses, tightening conditions for those same firms hoping to make up lost ground when the reopening starts," said IG Group's Josh Mahony.
In the FTSE 100, shares in oil majors BP and Royal Dutch Shell 'A' and 'B' were up 2.9%, 2.1% and 2.0% respectively, tracking spot oil prices higher following the OPEC meeting on Thursday.
The OPEC group of oil producers and its allies decided to allow a slight rise in crude output in April after talks, with market demand still fragile.
Brent oil was quoted at USD67.25 a barrel Friday at midday, up from USD67.11 late Thursday. The North Sea benchmark hit a high of USD68.50 in morning trade - its highest level in 14 months.
A statement released after the ministerial-level talks said participants "approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130,000 and 20,000 barrels per day respectively, due to continued seasonal consumption patterns".
The oil exporting countries are largely extending their restrictive production policy for another month until the end of April.
"The group agreed to increase supply in April, which appears to be a win-win solution. With vaccine rollout programmes accelerating, the reopening of global economies is expected to pick up substantially over the coming month, which could put a solid floor under the price of oil ahead of any increase in supply next month," said analysts at Oanda Markets.
At the other end of the large-caps, London Stock Exchange Group was still the worst performer, 11% lower, after underwhelming annual results.
The trading, clearing operator and index calculator said it delivered a strong financial performance in 2020, saying revenue growth continued across its businesses as it prepared to take on new acquisition Refinitiv.
For 2020, LSEG posted total revenue of GBP2.12 billion, up 2.9% from GBP2.06 billion in 2019, and total income rose 6% to GBP2.44 billion from GBP2.31 billion. The figures were in-line with company-compiled consensus forecasts.
LSEG hailed its "transformational" acquisition of Refinitiv saying it will ramp up its growth strategy and position as a leading global financial markets infrastructure and data provider by adding leading data, analytics and multi-asset class capital markets capabilities.
Refinitiv was bought for USD27 billion and received its final regulatory approvals in January.
Michael Hewson, chief market analyst at CMC Markets UK, said LSEG hopes the Refinitiv deal will help growth revenue by up to 7%, and the decline in LSEG shares on Friday suggests some shareholders may be sceptical about such an ambitious revenue growth target.
Scottish Mortgage Trust was once again in the red, down 4.5%, tracking falls in high-profile US tech stocks Tesla and Amazon in its portfolio. The trust has a 5.1% stake in Tesla and a 5.9% holding in Amazon. The tech-heavy Nasdaq Composite index ended down 2.1% Thursday.
Tesla and Amazon are down 1.0% and flat respectively in New York in pre-market trade Friday.
Baillie Gifford US Growth Trust - which also holds shares in Tesla - was the worst mid-cap performer in London, off 7.5%.
Also in the FTSE 250, Spirent Communications was the best performer, up 7.5%, after the telecommunications networks services provider said it has acquired US-based automated wireless test solutions provider octoScope for USD55 million on a debt and cash free basis.
ConvaTec was up 3.5% after the wound dressings maker reported that revenue edged up in 2020 and said its outlook for the year ahead is "positive".
Revenue for 2020 rose 3.7% to USD1.89 billion, up 4.0% on a constant currency basis. Adjusting for the disposal of the US Skincare product line and the acquisition of Southlake Medical, revenue grew 4.2% on an organic basis.
The dollar strengthened following Powell's comments. The pound was quoted at USD1.3895 at midday Friday, down sharply from USD1.3989 at the London equities close Thursday.
The euro was priced at USD1.1968, lower from USD1.2047. Against the Japanese yen, the dollar was trading at JPY107.95, up from JPY107.56.
Analysts at ActivTrades commented: "The dollar's winning streak continued during early Friday trading, with the greenback reaching a fresh three-month high following Jerome Powell's Thursday speech, in which he shrugged aside concerns related to rising treasury yields.
"The chairman of the Fed dismissed the significance of the recent bond sell-off that forced a jump in yields, considering it orderly and unlikely to require the intervention of the central bank. These comments reverberated throughout the markets, with the benchmark 10-year treasury yield rising to around 1.6% and resulting in increased dollar strength."
Gold was trading at USD1,698.15 an ounce midday Friday, down from USD1,718.65 at the London equities close Thursday, as the dollar strengthened.
US stock market futures were called for a mixed open ahead of the closely watched jobs report for February at 1330 GMT.
The Dow Jones Industrial Average is called up 0.1%, the S&P 500 flat and the Nasdaq Composite down 0.1%.
According to FXStreet, the US economy is expected to have added 182,000 jobs in February, while the unemployment rate is forecast to be unchanged at 6.3%.
"The headline jobs number will also be important to watch, but with some of the pre-NFP leading indicators disappointing expectations, it may come in below forecasts. However, if it is unexpectedly strong, then this may mean good news for the dollar but bad news for stocks as it would increase speculation about tighter monetary conditions," said ThinkMarkets analyst Fawad Razaqzada.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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