LONDON MARKET CLOSE: FTSE 100 shakes off red-hot US inflation gauge

(Alliance News) - London's FTSE 100 outperformed on Thursday, enjoying a solid rise on largely well-received corporate earnings and a share price jump for miner Anglo American after it received a takeover bid from peer BHP.

Stocks slumped in New York and elsewhere in Europe, however, after unfavourable US data.

The FTSE 100 index ended up 38.48 points, 0.5%, at 8,078.86. The FTSE 250 ended down 117.39 points, 0.6%, at 19,601.98, and the AIM All-Share ended down 1.57 points, 0.2%, at 753.12.

The Cboe UK 100 ended up 0.5% at 806.44, the Cboe UK 250 closed down 0.7% at 16,943.92, and the Cboe Small Companies ended up 0.8% at 15,446.19.

In European equities on Thursday, the CAC 40 in Paris ended down 0.9%, while the DAX 40 in Frankfurt slipped 1.0%.

In New York, stocks were lower. The Dow Jones Industrial Average was slumped 1.6%, S&P 500 shed 1.2%, and the Nasdaq Composite plunged 1.7%.

Stocks retreated following US gross domestic product data.

US economic growth slowed in the first three months of the year, coming in weaker than expected, though inflation pressure picked up, according to numbers from the Bureau of Economic Analysis.

The BEA said US gross domestic product grew 1.6% quarter-on-quarter on an annualised basis in the three months to March 31. Growth eased from a 3.4% rally in the final three months of 2023.

The latest reading fell short of FXStreet cited consensus, which had predicted a 2.5% climb.

The personal consumption expenditures index grew 3.4% quarter-on-quarter, picking up speed from a 1.8% rise in the final quarter of last year, and further stoking inflation worries.

The growth in the core PCE index picked up to 3.7% on-quarter at the start of the year, accelerating from 2.0% in the final three months of 2023. The core PCE reading excludes food and energy, and it is the Federal Reserve's preferred inflationary gauge.

"The market impact of this report has weighed on equities," XTB analyst Kathleen Brooks commented.

"The Fed's preferred measure of inflation, the core PCE, rose to its highest level since June 2023, and has eroded the gains made in recent quarters back towards the Fed's 2% target."

Brooks added: "Friday's core PCE report for March is likely to be higher than the 2.6% expected, which could also erode market sentiment. American exceptionalism had been focused in growth in recent months, however, now that it looks like growth is slowing, America looks exceptional at generating inflation, which is likely to cause a headache for the Fed ahead of its meeting next week."

The pound was quoted at USD1.2490 late Thursday in London, up compared to USD1.2432 at the equities close on Wednesday, though it had trade above USD1.25 before the US data. The euro stood at USD1.0713, higher against USD1.0687 a day earlier. Against the yen, the dollar was trading at JPY155.52, up compared to JPY155.06.

Friday's economic calendar has the monthly US PCE reading for March at 1330 BST, before the US Michigan consumer sentiment index at 1500. In the early hours, the Bank of Japan announces its latest interest rate decision.

The BoJ decides on rates amid a lingering backdrop of yen weakness. The dollar rose as high as JPY155.74 on Thursday.

Rabobank analysts commented: "As we have argued before, foreign exchange intervention is unlikely to turn a currency pair around until the fundamental picture is in the process of changing. This implies that the JPY is likely to be on the back foot versus the USD until it is clear that Fed rates are about to turn lower, which could be some months away. That said, a hawkish policy statement from the BoJ tomorrow could lend the JPY support."

In London, Anglo American jumped 16% after it received a takeover tilt from mining peer BHP. The deal would value Anglo at around GBP31 billion.

BHP ended 2.2% lower.

The deal would include Anglo American splitting off Johannesburg-listed divisions Anglo American Platinum and Kumba Iron Ore.

Analysts at Berenberg commented: "Overall, we can see the sense in the deal for the copper assets, but BHP is potentially buying a group of assets that need some care and attention, which, in our view, offer limited upside at this point. Current valuation multiples would also imply a slightly dilutive deal for BHP. It would also have to assume a net debt position of USD10.6 billion, which would increase post-closing of deal, we think, as both Kumba and Anglo Platinum, which are consolidated, are net cash. Overall, we expect Anglo to push for a higher premium."

Also supporting the FTSE 100, Barclays rose 6.7%, AstraZeneca added 5.9% and Unilever shot up 5.7%, as earnings from the trio impressed.

Barclays said first-quarter pretax profit fell to GBP2.28 billion from GBP2.60 billion a year prior, though the lender beat consensus.

Pharma firm Astra reported pretax profit jumped 24% in the first three months of 2024 to USD2.80 billion from USD2.26 billion a year prior.

Consumer goods firm Unilever said sales in the first three months of the year rose 1.4% to EUR14.96 billion, raising hope that Chief Executive Hein Schumacher is racing ahead with the firm's turnaround.

"There are signs of life in Unilever's recovery under Hein Schumacher with the business benefiting from strong trading in its beauty brand and across its 30 leading 'power brands' where its resources are set to be focused," AJ Bell analyst Russ Mould commented.

"Despite coming in ahead of forecasts in the first quarter, Unilever is leaving its full-year guidance unchanged for now. A dose of conservatism is probably no bad thing, as it leaves scope for Unilever to under-promise and over-deliver," he added.

Elsewhere in London, rail ticketing platform Trainline slumped 12%, while FirstGroup fell 4.1%. FirstGroup operates in the rail space through South Western Railway and Great Western Railway.

The opposition Labour party has pledged to renationalise the UK railways if elected, with the shadow transport secretary saying that "today's broken model simply doesn't work".

A Labour government would expect to transfer the 10 remaining privately run rail networks to public ownership "well within the first term" by folding existing private passenger rail contracts into a new body as they expire, Louise Haigh said at a launch event.

One listing with an exposure to railway whose shares did not hit the buffers was Cordel. Cordel jumped 25% after it said it has won a contract with "a major national railway in the Asia Pacific region".

The company's flagship platform uses artificial intelligence to supply transport corridor analytics. Cordel said the customer has agreed to proceed with a 12-week paid trial of Cordel's forward facing video solution.

Chief Executive John Davis said: "We are delighted to welcome a new major customer, with a 4,000 kilometre rail network which is being reinvigorated by unprecedented government investment, including a digital engineering programme, which utilises the best digital technology to improve network performance, safety and efficiency."

Brent oil was quoted at USD86.48 a barrel late in London on Thursday, down from USD88.12 late Wednesday. Gold was quoted at USD2,331.32 an ounce, higher against USD2,329.42.

Friday's UK corporate diary has quarterly results from lender NatWest, and a trading statement from education products publisher Pearson.

By Eric Cunha, Alliance News news editor

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