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(Alliance News) - Stocks in London are expected to rise on Friday, after a positive finish in New York amid hopes for an economic soft landing.
US economic growth was markedly stronger than expected at the end of last year, numbers showed on Thursday, suggesting the world's largest economy was coping well with historically high interest rates. Further, inflation pressures - according to the personal consumption expenditures index - eased during the fourth quarter.
The data suggests that the US economy could be on track for a so-called 'soft landing' - where inflation is managed to be brought down to target, without causing a recession.
The market will now be paying close attention to the monthly PCE data for December, including the Federal Reserve's preferred core measure, which is released at 1330 GMT on Friday. The next Fed decision is on Wednesday next week.
"At the moment markets seem convinced that the Fed might spring a surprise in March and slip in an early rate cut if inflation shows further signs of slowing. That might make sense if the US economy was struggling but this week's economic numbers clearly suggest it isn't, and if anything is still growing at a decent clip. There is a danger that in cutting rates in March they drive market expectations of further cuts into overdrive, something they have been keen to push back on with recent commentary," said CMC Markets UK chief market analyst, Michael Hewson.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 33.1 points, 0.4%, at 7,562.83
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Hang Seng: down 1.4% at 15,992.27
Nikkei 225: closed down 1.3% at 35,751.07
S&P/ASX 200: financial markets in Sydney were closed for Australia Day
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DJIA: closed up 242.74 points, 0.6%, at 38,049.13
S&P 500: closed up 25.61 points, 0.5%, at 4,894.16
Nasdaq Composite: closed up 28.58 points, 0.2%, to 15,510.50
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EUR: flat at USD1.0832 (USD1.0835)
GBP: flat at USD1.2698 (USD1.2695)
USD: up at JPY147.76 (JPY147.66)
Gold: up at USD2,021.98 per ounce (USD2,015.06)
Oil (Brent): up at USD82.02 a barrel (USD81.37)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
10:00 CET eurozone M3 money supply
08:30 EST US personal consumption expenditure index
10:00 EST US pending home sales
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British negotiators paused free trade talks with Canada after years of discussions between the two Commonwealth nations, Ottawa said. British cheese imports to Canada and Canadian beef exports to the UK remain major sticking points, a source close to the negotiations told AFP. "We are disappointed that negotiations with the UK are being paused," a spokesperson for Canadian Trade Minister Mary Ng said in a statement. "Their decision to continue to maintain market access barriers for our agriculture industry and unwillingness to reach a mutual agreement has only stalled negotiations," the official said.
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Consumer confidence in the UK has reached its highest level in two years as optimism for the coming 12 months strengthens, according to a long-running survey. GfK's consumer confidence index rose by three points to minus 19 this month – its best headline score since January 2022. Confidence in personal finances gained two points and now stands at zero, ending 24 consecutive months of negative scores and "the best single indicator for how the nation's households feel about their income and expenditure", GfK said.
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German consumers are feeling significantly more pessimistic heading into February, a key survey showed Friday, as the downturn in Europe's largest economy drags on. Pollster GfK said its forward-looking survey of around 2,000 people plunged to minus 29.7 points, a drop of 4.3 points compared with a month earlier. Analysts surveyed by financial data firm FactSet had expected another rise in consumer sentiment after two months of increases. "Crises and wars, as well as persistently high inflation are unsettling consumers and thus preventing an improvement in consumer sentiment," said GfK, which published the survey with the Nuremberg Institute for Market Decisions. The survey found that respondents were more downbeat about the prospects for the economy as well as their own income expectations for the months ahead.
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BROKER RATING CHANGES
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Berenberg cuts St James's Place price target to 850 (1,500) pence - 'buy'
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Barclays cuts Molten Ventures to 'equal weight' (overweight) - price target 3.30 (4.30) pence
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COMPANIES - FTSE 250
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WH Smith reported a "strong" start to its financial year, ahead of its annual general meeting. In the 20-week period to January 20, the retailer said its travel business was growing strongly across all its divisions, with revenue up 13%. It also said its UK performance was notably strong, with total revenue up 15% or 14% on a like-for-like basis. For the group as a whole, revenue was up 8%, or 9% on a constant currency basis, but 5% on a like-for-like basis. WH Smith said it was on track to open over 110 stores in the financial year, with over 50 of these to be in North America where it is making "excellent progress". "The group is trading well and is in its strongest ever position as a global travel retailer. We are confident of another year of significant growth in 2024," said Chief Executive Carl Cowling.
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Paragon Banking reported on trading in its first quarter - the three months to December 31. The firm noted "improved customer sentiment" driving rising enquiry levels, which should translate into improving volumes over the year. However, new lending was GBP610.7 million in the quarter, down from GBP861.7 million the year before. Deposit balances grew 7.0% in the quarter, bringing year-on-year growth to 26.5%. Paragon said its guidance for margins, new business flows, operating costs and return on tangible equity remain unchanged, though its margins are currently "slightly ahead of expectations". "The first quarter of the new year has started well. The positive momentum seen in the business in 2023 has continued, alongside robust margins and a resilient credit performance. This, coupled with a notable improvement in sentiment, gives us encouragement for the remainder of the year," said Chief Executive Nigel Terrington.
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OTHER COMPANIES
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Beach holiday retailer On the Beach said its financial year began with a "record forward order book and significant momentum". This continued into its peak booking period with total transaction value for the year 27% of the equivalent period of financial 2023. "The group has taken the opportunity to price competitively and focus on volume growth to capture share in a growing market, and remains confident in delivering FY24 profit in line with current market expectations," the firm said. It cites company-compiled market consensus as adjusted pretax profit of GBP30.0 million for the financial year ending September 30.
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Saga responded to media reports about the firm considering a sale of its cruise arm. Late Thursday, Sky news had reported the over-50s travel and insurance firm was considering outsourcing the operation of its two ocean cruise ships. Saga said: "The board is exploring opportunities to optimise Saga's operational and strategic position in Cruise, where exceptional demand for its boutique ocean cruise offer means it is operating at close to capacity. It has concluded that a partnership arrangement for Ocean Cruise would be consistent with group strategy to move to a capital-light business model to support further growth and crystalise value, reduce debt and enhance long-term returns for shareholders." However, it said no decision had been made yet, and there was no certainty of any partnership agreement.
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Clothing retailer Superdry reported on its half-year period to October 28. Over the 26 weeks, Superdry said revenue dropped 24% on-year to GBP219.8 million from GBP287.2 million. This stemmed from the "challenging" consumer retail market, unseasonal weather, and an underperformance in its Wholesale segment. It swung to a pretax profit of GBP3.3 million from a loss of GBP17.7 million on a statutory basis, but its adjusted pretax loss widened to GBP25.3 million from GBP13.6 million. The statutory figure received a boost from the sale of its intellectual property in the Asia Pacific region, which was partially offset by a non-cash impairment of GBP10.2 million. "Milder weather and heavy discounting across the sector impacted Christmas trading and, consistent with our December update, we expect full year results to reflect the more challenging environment seen to-date," Superdry warned.
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By Elizabeth Winter, Alliance News deputy news editor
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