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LONDON MARKET CLOSE: Europe struggles but record highs in New York

Thu, 16th May 2024 16:54

(Alliance News) - Large-cap European equities closed lower on Thursday, underperforming New York counterparts, which continued to push higher following Wednesday's softer US inflation data.

The FTSE 100 index edged down 7.15 points, 0.1%, at 8,438.65. The FTSE 250 added 47.21 points, 0.2%, at 20,822.84, and the AIM All-Share closed up 0.89 of a point, 0.1%, at 792.50.

The Cboe UK 100 lost 0.2% at 841.48, the Cboe UK 250 ended up 0.2% at 18,140.27, and the Cboe Small Companies shot up 0.6% at 16,301.31.

In European equities on Thursday, the CAC 40 in Paris fell 0.6%, while the DAX 40 in Frankfurt ended down 0.7%.

In New York, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite were each up 0.3% at the time of the London close.

Walmart helped lift sentiment on Thursday on a first-quarter earnings beat and a guidance hike. The retailer traded 5.8% higher at the time of the closing bell in Europe, the best performer on the Dow, helping propel the index to a record high. The S&P 500 and Nasdaq Composite also traded at their best-ever level.

"Notably, after a two-month period of FTSE outperformance, May has started to see that pattern reverse as US markets start to regain their foothold as the go to place for investors," Scope Markets analyst Joshua Mahony commented.

"While US markets may have pushed into record highs, yesterday's inflation data did little to encourage the view that above-target inflation is going away. Headline CPI remains in the mud, stuck above 3% for 37 consecutive months now. With markets pricing a whopping 75% chance of a September rate cut, that decision looks likely to take place against a backdrop of a CPI figure that is not too far removed from the current 3.4% announced yesterday. With market pricing looking out of kilter with reality, the weakness we have seen the in dollar looks likely to reverse if we see the Fed push back against those September rate cut expectations over the coming months."

The pound was quoted at USD1.2671 late on Thursday in London, up slightly compared to USD1.2668 at the equities close on Wednesday. The euro stood at USD1.0870, down a touch against USD1.0872. Against the yen, the dollar was trading at JPY155.26, higher compared to JPY154.85.

Numbers on Thursday showed US initial jobless claims were higher than expected for a second successive week.

According to the Department of Labor, initial claims for unemployment benefits in the week to May 11 totalled 222,000, topping the FXStreet cited consensus of 220,000.

New claims were lower than the 232,000 registered in the week to May 4. The prior week's level was upwardly revised from 231,000. The reading for last week was the highest since August, and it topped the consensus of 210,000.

Pantheon Macroeconomics analyst Ian Shepherdson commented: "Last week's spike in claims always looked unsustainable; about half the increase appears to have been due to short-term benefit claims from NYC schools employees over spring break. That increase duly reversed almost in full, but claims elsewhere remain higher than two weeks ago. This is much too short a run of data to be definitive but it is consistent, at least, with signals of a rising trend in layoffs from the Challenger survey, [worker adjustment & retraining notification] notices, the NY Fed's consumer survey of job loss fears, and Google searches for 'claim benefits'. We have long been expecting claims to trend higher in the spring, though we need to see a few more weeks' data before we can be sure this upturn is real."

In London, share price falls for a number of index heavyweights kept a lid on the FTSE 100. Oil majors Shell and BP each lost 1.4%, pharmaceutical firm GSK gave back 1.6% and consumer goods company Unilever lost 0.5%. The stocks all went ex-dividend on Thursday, meaning new buyers will not qualify for the latest payout.

The index's biggest faller, meanwhile, was Sage. The enterprise software firm slumped 9.4%.

In the six months ended March, Sage said pretax profit rose 47% to GBP203 million from GBP139 million a year prior. Revenue climbed 5.5% to GBP1.15 billion from GBP1.09 billion.

Underlying annualised recurring revenue rose 11% to GBP2.25 billion from GBP2.03 billion, reflecting growth across all regions balanced between new and existing customers.

Its guidance disappointed, however. It expects the rate of organic total revenue growth for the full year "be broadly in line" with the 9% seen in the first-half. It had previously predicted growth in line with financial 2023, when it grew 10%.

The firm's boss handed a vote of confidence to the London market, meanwhile. Steve Hare told the PA news agency the group was "very proud of its UK roots" and was not considering switching its listing away from London.

The domestic market has struggled to attract new listings and has seen a number of constituents in recent years either leave the London Stock Exchange altogether, or pursue primary listings elsewhere.

Helping add a chink of light on what had been a dark outlook for initial public offerings in the City, Raspberry Pi said it plans to list on the London Main Market. Raspberry Pi makes low-cost single board computers and compute modules for industrial 'internet-of-things' uses, as well as for enthusiasts and educators.

The announcement from the firm followed a Reuters report that Chinese fast-fashion retailer Shein will list in London and a Bloomberg report that Walgreens Boots Alliance will sell or spin-off UK pharmacy chain Boots, with a London listing one of the possibilities.

On Thursday, Sky News reported that wound care technology firm Advanced Oxygen Therapy, or AOTI, is planning a float on AIM. The listing would value the company at GBP160 million.

BT shares jumped 17% after a set of results that helped ease some pressure on the stock. It lifted its dividend as it forecast significantly improved cash flow in the coming years now that peak investment in its full-fibre roll-out has passed.

Looking ahead, BT said it would focus on the UK and "explore all options to optimise our global business".

"When a share price is trading no higher than it did in 1984, it is fair to say that expectations are very low, and BT's new boss Allison Kirkby is doing a fine job of skipping over a low bar with her first set of full-year results in charge," AJ Bell analyst Russ Mould commented.

Revenue for the year to March 31 rose 0.6% to GBP20.80 billion. Pretax profit, however, fell 31% to GBP1.19 billion.

BT increased its full-year dividend by 3.9% to 8.0 pence per share from 7.70p a year.

Watches of Switzerland Group surged 20% after hailed a strong finish to its financial year, calming some concern about the tricky outlook for the luxury goods sector.

Chief Executive Officer Brian Duffy said: "We finished the year strongly, with Q4 sales in line with guidance and ahead of consensus. Particularly pleasing was the performance in the US, with sales up 14% in the period."

Fourth-quarter revenue climbed 3% on-year to GBP380 million, as it noted "strong" demand for key brands. It said its pre-owned Rolex watch offering is "performing ahead of expectations".

Costain rose 3.3%. It said trading in the year to date is in line with expectations, underpinned by a number of contract wins.

The Maidenhead, England-based construction and engineering company said that, while it is "mindful of the macro-economic backdrop, it remains confident in the group's strategy and medium to long-term prospects."

Costain said it continues to have a high-quality forward work position that "aligns with its strategic plans" for both the Transportation and Natural Resources divisions.

The company said it is in line to deliver its margin targets of an adjusted operating margin run-rate of 3.5% during the course of 2024 and 4.5% during the course of 2025.

Brent oil was quoted at USD83.05 a barrel late Thursday afternoon in London, up from USD82.42 late Wednesday. Gold was quoted at USD2,381.33 an ounce, largely unmoved from USD2,381.08.

Friday's economic calendar has a eurozone inflation reading at 1000 BST.

The local corporate calendar has annual results from property investor Land Securities.

By Eric Cunha, Alliance News news editor

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