LONDON MARKET MIDDAY: Shares climb ahead of key US inflation gauge

(Alliance News) - European markets were on the rise early Friday afternoon after eurozone inflation data failed to spring any negative surprise.

A slight, but expected, uptick in core inflation suggests there is still work for the European Central Bank to do, however. Focus shifts to a US inflation reading this afternoon.

Among London stocks, shares in NCC slumped on a profit warning, while a deal for US firm UnitedHealth to acquire Emis will face a deeper UK probe.

The FTSE 100 index rose 18.76 points, 0.3%, at 7,639.19. The FTSE 250 edged up 9.47 points, 0.1%, to 18,917.21. The AIM All-Share was down 0.80 of a point, 0.1%, at 805.04.

The Cboe UK 100 was 0.2% higher at 763.57, and the Cboe UK 250 was up 0.1% at 16,526.82. The Cboe Small Companies, however, was down 1.0% at 13,145.91.

In European equities on Friday, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.5%.

This week's progress means the FTSE 100 is on track to end the quarter better than where it started it.

London's blue-chip benchmark has added 2.5% so far this year.

"It's all quiet on the Western front for equities as the first quarter finishes on a welcome note of calm," AJ Bell analyst Russ Mould commented.

The FTSE 100 has lost 3.0% in March alone, however.

The month started fairly quietly, though the collapse of tech sector lender Silicon Valley Bank led to fears of a global banking crisis. A buyout of Credit Suisse by compatriot UBS, and pressure on Deutsche Bank, transferred the focus of concern to Europe.

Equities are ending the month strongly, however, on an absence of fresh banking stumbles. The FTSE 100 is set for a fifth-successive daily rise.

Eyes on Friday were on eurozone inflation data. The single currency area's annual inflation rate eased to 6.9% in March from 8.5% in February. The figure was shy of the FXStreet-cited consensus of 7.1%.

The core inflation rate - which excludes energy, food, alcohol and tobacco - quickened, however. Coming in at 5.7% in March, it picked up speed from 5.6% in February. This was an outcome that met market consensus.

Analysts at Capital Economics commented: "Policymakers at the ECB won't read too much into the drop in headline inflation in March and will be more concerned that the core rate hit a new record high. So March's consumer price data will do nothing to change their view that more rate hikes will be necessary to bring inflation down to the 2% target."

The euro traded at USD1.0844 midday London time, down from USD1.0900 late Thursday. The euro is up from USD1.0744 this time seven days ago, however. It has been a difficult week for the dollar.

"We think EUR/USD may break 1.10 next week before the US payrolls, as the dollar remains vulnerable despite some repricing of dovish Fed expectations," analysts at ING commented.

"If that's the case, cable should follow with a break above 1.25."

Cable is the exchange rate between sterling and the dollar. The pound traded at USD1.2381 midday Friday in London, up from USD1.2371 at the London equities close on Thursday.

Final figures confirmed the UK economy registered marginal growth in the final quarter of 2022.

According to an estimate from the Office for National Statistics, gross domestic product in the fourth quarter grew 0.1% from the third quarter, which was upwardly revised from an initially reported estimate of no growth.

This follows a contraction of 0.1% seen in the third quarter, which was revised from a 0.2% decline. This means the UK averted a technical recession, which is defined as two consecutive quarters of negative growth.

Against the yen, the dollar was quoted at JPY133.41, up versus JPY132.69. With markets in a more risk-off mood, as banking crisis pressure fades, the safe-haven yen has been hurt this week.

Still to come on Friday is the US core personal consumption expenditure index reading at 1330 BST. It is the Federal Reserve's preferred inflationary gauge.

Among London shares, airlines were on the up. British Airways-owner International Consolidated Airlines Group added 2.4%, while easyJet rose 4.2%.

Barclays raised the duo to 'overweight' from 'equal-weight'.

Insurer Beazley added 2.1%. UBS double upgraded it to 'buy' from 'sell'.

NCC plunged 36%. The cybersecurity firm lowered annual guidance for the financial year ending on May 31, as it faces a "further deterioration in the macro-economic and market environment".

NCC lowered its adjusted operating profit to a range of GBP28 million to GBP32 million, having previously expected GBP47 million.

It warned buying decision delays and cancellations were being exacerbated by tech sector layoffs. Recent turmoil in the banking sector also has hit market confidence, resulting in a "reduced appetite" for spending on technology, NCC said.

Also falling hard, Emis shed 23%.

The UK's competition watchdog referred its acquisition by US healthcare insurer UnitedHealth to a phase 2 investigation.

Earlier in March, the Competition & Markets Authority said it was concerned the deal would hurt competition in the fields of population health management and medicines optimisation software.

Both Emis and UnitedHealth-owned Optum Health Solutions (UK) provide software services to GPs in the UK.

In response, UnitedHealth proposed a remedy to divest of Optum's Medicines Optimisation and Population Health Management businesses in the UK

The CMA rejected the remedy, and confirmed it would refer the acquisition for a phase 2 investigation. Emis and UnitedHealth said they were "disappointed" with the decision, believing the divestment would directly address the CMA's competition concerns.

On the up, Jersey Oil & Gas said it is in "advanced" exclusive discussions with an unnamed "significant" UK North Sea operator as part of the Greater Buchan area farm-out process.

The company has agreed heads of terms with the unnamed "well-funded industry heavyweight".

Jersey Oil & Gas Chief Executive Andrew Benitz said: "Whilst there can be no guarantees of a successful conclusion, we are aiming to finalise the farm-out in the near future and look forward to updating shareholders shortly."

Jersey Oil & Gas shares jumped 51%.

Gold was quoted at USD1,980.31 an ounce early Friday afternoon, higher than USD1,972.45 on Thursday. Brent oil was trading at USD78.81 a barrel, up from USD78.48.

Shares in New York were called to open mixed on Friday. The Dow Jones Industrial Average and the S&P 500 were called up 0.2%. The Nasdaq Composite was called down 0.1%, however.

US President Joe Biden called on banking regulators to reinstate tougher rules on mid-sized banks, saying that doing so would prevent future failures like that of Silicon Valley Bank.

A White House official called the measures "common-sense steps that can be taken under existing authority" and without congressional approval, in a briefing with journalists.

While the largest US banks such as Citigroup and JPMorgan Chase are subject to the strict capital and liquidity requirements, mid-sized banks saw an easing of standards under former US President Donald Trump.

Biden called for annual stress tests for banks of this size; so-called "living wills" laying out how assets would be wound down in case of failure; and strong capital requirements.

By Eric Cunha, Alliance News news editor

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