LONDON MARKET CLOSE: Banks and BT boost FTSE in mixed European session

(Alliance News) - The FTSE outperformed European counterparts on Thursday, edging higher as markets took a pause for breath, while digesting the latest US inflation data and what it would mean for monetary policy.

The FTSE 100 index ended up 12.13 points, or 0.2%, at 7,563.85. The blue-chip index closed at roughly a two-year high. The mid-cap FTSE 250 index closed down 88.68 points, or 0.4%, at 22,958.48. The AIM All-Share index fell 2.87 points, 0.2%, at 1,171.74.

The Cboe UK 100 index ended up 0.3% at 750.65. The Cboe 250 closed down 0.2% at 20,554.30, and the Cboe Small Companies rose 0.2% to 15,740.45.

The CAC 40 in Paris stock index ended down 0.5%, and the DAX 40 in Frankfurt closed 0.1% higher.

Equities in New York were mixed. The Dow Jones Industrial Average was up 0.5% at the time of the London close. The S&P 500 was down 0.1%, and the Nasdaq Composite was 0.6% lower.

On the inflationary front, numbers on Thursday showed the annual rate of producer price growth in the US ended 2021 at a record high. Month-to-month, however, producer price growth slowed.

The US producer price index print for December showed the highest rate of inflation since PPI was first reported back in 2011, at 9.7%, ticking up from a 9.6% in November. The December figure was just shy of the consensus estimate, cited by FXStreet, of 9.8%.

On a monthly basis, US PPI rose 0.2% in December, slowing sharply from a 1.0% rise in November and was below the market estimate of 0.4%.

The data followed numbers on Wednesday, which showed the highest rate of US consumer inflation since June 1982, at 7.0%.

On Wednesday's number, Oanda analyst Craig Erlam commented: "It does feel like markets are at peak fear on US monetary policy, which could make relief rallies more likely. But there is also underlying anxiety in the markets that could make for some volatile price action for the foreseeable future.

"Perhaps earnings season will bring some welcome normality to the markets after a period of fear, relief, and speculation."

On Friday's US corporate calendar, banks Citigroup, JPMorgan and Wells Fargo all report fourth quarter results, as does asset manager BlackRock.

Erlam continued: "And while earnings season will provide a distraction, it is happening against an uncertain backdrop for interest rates and inflation, which will keep investors on their toes."

An official at the US Federal Reserve would be open to supporting more than three interest rate rises this year if inflation surges higher, he told the Financial Times. Patrick Harker, president of the Philadelphia branch of the Federal Reserve, became the latest US central bank official to back a rate hike in March.

In addition, the Fed's second in command Lael Brainard said US inflation is "too high" and the Federal Reserve will make the issue a priority.

From Saturday, the Federal Open Market Committee enters a media blackout period until January 27, the day following its next interest rate decision.

The dollar was weaker on Thursday.

The euro was priced at USD1.1471 at the European equities close on Thursday, up from USD1.1425 late Wednesday. Against the Japanese yen, the dollar was trading at JPY114.05, down markedly from JPY114.73.

The pound was quoted at USD1.3738 late Thursday, up from USD1.3693 at the London equities close Wednesday.

Sterling was on the up despite pressure mounting on UK Prime Minister Boris Johnson. Johnson apologised on Wednesday for attending a "bring your own booze" party in the Downing Street garden in May 2020, when the rest of the country was in lockdown.

In London, focus was once again on the retail sector, and another string of Christmas trading updates.

One of the most notable of the lot came courtesy of fast fashion firm ASOS, which revealed plans to move to the London Main Market after more than two decades in the junior AIM market. The move would put ASOS in contention to join the FTSE 250 index.

ASOS also provided a trading update for the last four months of 2021. Total revenue rose by 2.1% to GBP1.39 billion from GBP1.36 billion a year before. In constant currency, the increase was 5%.

ASOS shares jumped 11%. AIM-listed boohoo rose 6.4% in a positive read across, while Frankfurt-listed Zalando climbed 2.9%.

Marks & Spencer dropped 7.9%. The retailer said it put in a strong performance in its financial third quarter and over the Christmas period.

For the 13 weeks to January 1, group sales were GBP3.27 billion, up 19% from the same time a year before.

M&S said it was more confident of its ability to deliver the increased guidance it set, and now expects full-year profit before tax and adjusting items of at least GBP500 million.

Interactive Investor analyst Keith Bowman commented: "However, signs of recovery have been seen before at M&S and not come to anything. Competitors such as Next and Sainsbury's are not standing still and working hard. Concerns about rising costs and supply chain challenges persist, and the dividend payment remains suspended."

Tesco shares ended 1.2% lower, despite the grocer reporting a decent festive period.

Tesco said it expects a retail operating profit for the financial year that ends in February "slightly above" estimates of GBP2.5 billion to GBP2.6 billion, which would be as much as a 31% rise from the previous year.

Total retail sales for the group were up 2.6% on a one-year like-for-like basis in the 19 weeks ended January 8. Over Christmas, sales grew 3.2% on a year before, and Tesco achieved the highest market share growth in Ireland.

CMC Markets analyst Michael Hewson commented: "It has in fact been a day of decent quarterly numbers for UK retail, not that you'd know it, with both Tesco and Marks & Spencer share prices slipping back. This could simply be a case that expectations were perhaps a little bit too high leading into the numbers, and there are concerns as we head into the final quarter, for both, that cost-of-living pressures might impact their final Q4 numbers."

JD Sports shares tumbled 7.3%. While already on track for a lower finish, the stock tanked further after a regulatory filing showed Executive Chair Peter Cowgill sold 10.0 million shares in the athleisure retailer, in a transaction worth GBP21.3 million in total.

Cowgill now has 9.7 million shares, a 0.2% stake, meaning he sold over half his existing stake. JD Sports gave no reason for the share disposal.

Elsewhere in London, BT shares rose 1.7%. The telecommunications company is close to agreeing a deal to sell its sports broadcasting arm to streaming service DAZN, Reuters reported late Wednesday.

The deal is worth roughly USD800 million, Reuters added. The FTSE 100 firm's BT Sport arm has highly sought after rights to broadcast England's Premier League as well as the Champions League, Europe's elite club football competition.

Landor & Fitch analyst David Powell commented: "DAZN's acquisition of BT Sport could be a win-win for both sides. For BT, it's an opportunity to streamline its architecture and focus on what it does best: technology innovation. For DAZN, it's an opportunity to show the world it really means business."

Also boosting the FTSE were gains for banks, with Barclays and HSBC both adding 2.5%.

Brent oil was quoted at USD84.80 a barrel late Thursday, down from USD84.68 late Wednesday. Gold stood at USD1,817.65 an ounce, down from USD1,822.60.

Friday's economic calendar has UK gross domestic product data at 0700 GMT. US retail sales are reported at 1330 GMT.

The UK corporate calendar has third quarter numbers from credit checking firm Experian, while electronics retailer Currys reports a trading statement.

By Eric Cunha; ericcunha@alliancenews.com

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