LONDON MARKET CLOSE: FTSE 100 stages afternoon recovery to finish flat

(Alliance News) - It was a soft end to a difficult week for stocks in London, weighed on by coronavirus concerns in Asia and reports that US President Joe Biden is planning a capital gains tax hike.

However, some bright economic data from Europe and the US helped to lift spirits on Friday.

The FTSE 100 index closed just 0.32 of a point higher at 6,938.56 on Friday - recovering well from an intra-session slide below the 6,900 mark - though ended 1.2% lower for the week overall.

The FTSE 250 ended up 7.39 points at 22,372.26 on Friday, but has shed 0.7% since the start of the week, and the AIM All-Share rose 1.93 points, or 0.2%, at 1,265.62, gaining 0.9% over the course of the week.

The Cboe UK 100 ended down 0.1% at 689.99, the Cboe UK 250 closed flat at 19,991.13, and the Cboe Small Companies ended up 0.3% at 14,448.80.

"It's been a lacklustre end to what has been a negative week for European stocks, with concerns about surging Covid-19 infection rates in Asia weighing on sentiment over the past few days," said Michael Hewson, chief market analyst at CMC Markets.

India is grappling with a devastating wave of coronavirus infections, reporting on Friday more than 330,000 new infections - a world record - and 2,000 deaths in a single day. Meanwhile, Japan declared a state of emergency in Tokyo and three other regions, just three months before the country is supposed to host the Olympics.

Friday's upbeat PMI data has helped lift stocks off their lows, Hewson said, though reports President Biden is looking at hiking capital gains tax on top earnings has kept a lid on enthusiasm.

The flash IHS Markit-CIPS UK services purchasing managers' index print jumped to 60.1 points in April, from 56.3 in March, and signalled the fastest pace of expansion since August 2014. The UK flash manufacturing PMI print was 60.7 points in April, up from 58.9 in March and beat the market estimate of 59.0. In addition, the April figure was the highest since July 1994.

The UK composite flash PMI score was 60.0 in April, up from 56.4 in March and well above the market forecast of 58.2.

The pound was quoted at USD1.3847 at the London equities close Friday, up slightly compared to USD1.3838 at the close on Thursday.

There was also good news in the eurozone, with the bloc's composite PMI rising to 53.7 points in April from 53.2 in March.

In European equities, the CAC 40 in Paris ended down 0.2% and the DAX 30 in Frankfurt fell 0.3%. The euro rose to USD1.2062 at the European equities close Friday, against USD1.2014 at the same time on Thursday.

"As we head into the weekend...we're well off the lows of the day, with the FTSE 100 finding support from basic resource stocks, on the back of firmer metals prices, with Rio Tinto and Evraz leading the way," said CMC's Hewson. "Financials are also slightly higher, led by NatWest Group and Lloyds Banking Group ahead of their Q1 numbers next week."

Evraz shares closed 2.6% higher while Rio Tinto gained 1.9%. Amongst financials, Lloyds closed up 1.6% and NatWest advanced 1.4% - ahead of their first quarter results on Wednesday and Thursday next week respectively.

In the FTSE 250, Workspace Group ended as the worst performer, falling 4.5% after Barclays cut the flexible office space provider to Underweight from Overweight.

Towards the other end of the mid-cap index was FirstGroup, rising 4.5% after agreeing to sell its US bus operations to Swedish private equity firm EQT for up to GBP3.3 billion, putting shareholders in line for a payout.

The public transport operator will sell school bus operator First Student and passenger service provider First Transit to EQT Infrastructure. The GBP3.3 billion headline enterprise value includes an earnout of up to GBP170 million for First Transit.

The Aberdeen-based company said it will use GBP1.35 billion of the proceeds to cut debt and GBP336 million to fund its UK pension schemes, and will return about GBP365 million to shareholders in 2021, equivalent to 30p per share, a long-awaited payout for investors in a company, which hasn't paid a dividend since 2013.

Stocks in New York were rebounding at the London equities close on Friday, with the Dow Jones up 0.6%, the S&P 500 index up 1.0%, and the Nasdaq Composite up 1.2%.

Wall Street ended in the red on Friday after reports that President Biden is planning to almost double the capital gains tax rate for wealthy individuals to 39.6%.

This would be an increase from the current rate of 20%, and would apply to those earning USD1 million or more, Bloomberg reported. The New York Times on Thursday also reported that Biden is proposing raising capital gains taxes on the wealthy.

Biden is expected to release the proposal next week as part of the tax increases to fund social spending in the forthcoming American Families Plan.

Aiding the recovery on Friday, though, were figures showing the US private sector hit a record high in April. The composite output index surged to a record high of 62.2 points in April from 59.7 in March. The services index grew to 62.1 from 60.4, while the manufacturing PMI grew to 60.6 from 59.1.

Brent oil was quoted at USD66.09 a barrel at the London equities close Friday, up from USD65.58 late Thursday. Gold eased, quoted at USD1,776.95 an ounce at the London equities close Friday against USD1,782.29 at the close on Thursday.

Against the Japanese yen, the dollar fell to JPY108.34 compared to JPY108.11 late Thursday.

The economic calendar on Monday has the Ifo's German business climate at 0900 BST and US durable goods orders at 1330 BST.

The UK corporate calendar for Monday has first quarter results from educational publisher Pearson.

By Lucy Heming; lucyheming@alliancenews.com

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