LONDON MARKET MIDDAY: Shares rise as market forgets inflation fears

(Alliance News) - London stocks charged ahead on Friday after a fat US inflation reading was shrugged off as temporary ahead of next week's Federal Reserve meeting.

The FTSE 100 index was up 45.81 points, or 0.7%, at 7,133.99 on Friday at midday. The mid-cap FTSE 250 index was up 110.04 points, or 0.5%, 22,718.80. The AIM All-Share index was up 0.2% at 1,248.69.

The Cboe UK 100 index was up 0.7% at 710.84. The Cboe 250 was up 0.4% at 20437.17, and the Cboe Small Companies up 0.4% at 15186.49.

In mainland Europe, the CAC 40 in Paris was up 0.6%, while the DAX 30 in Frankfurt was up 0.3%, early Friday afternoon.

"Sentiment remains positive as major economies emerge from lockdowns, while central banks are still keen to maintain their emergency stimulus measures in place," said Fawad Razaqzada, market analyst at ThinkMarkets.

"It appears as though the market is so confident that the Fed will maintain its current policy stance that even a 5% CPI inflation in the US didn't scare the markets...investors clearly believe that the Fed will still stick to script next week and re-iterate its view that the upsurge in prices is going to be temporary."

The US Federal Reserve's meeting next week will follow the European Central Bank's decision on Thursday to carry on with an accelerated pace of bond-buying, despite economic prospects for the eurozone improving.

In the statement for June's monetary policy decision, the ECB said it expects purchases under its pandemic bond-buying programme over "the coming quarter" to continue to be conducted at a "significantly higher pace" than in the first few months of the year. This was despite the ECB now seeing eurozone gross domestic product growth for 2021 at 4.6%, up from a forecast of 4.0% previously.

Sophie Griffiths, market analyst at Oanda, commented: "It is fair to say that high inflation prices are pretty much fully priced in, as is the reaction by the Fed...Add into the mix, the dovish reassurance from the ECB, and markets are relaxed that the stimulus high that they have been running on, won't be taken away just yet."

Wall Street is set to extend gains on Friday amid calm over US inflation. The Dow Jones is called up 0.2%, the S&P 500 up 0.1%, and the Nasdaq Composite flat.

Despite signs of UK economic recovery, sterling was quoted at USD1.4156 midday Friday, down on USD1.4174 at the London equities close on Thursday.

Gross domestic product expanded 2.3% month-on-month in April, marking the fastest monthly growth since July 2020, as lockdown restrictions eased. This marks an uptick from a rise of 2.1% for March, though April's reading was slightly below expectations, according to FXStreet, for 2.4% growth.

While UK GDP remains 3.7% below pre-pandemic levels, it is now 1.2% above the initial recovery peak in October 2020.

Against the yen, the dollar edged down to JPY109.50 from JPY109.56. The euro traded at USD1.2158 at midday, soft on USD1.2168 late Thursday.

Gold was quoted at USD1,892.91 an ounce on Friday, slightly higher than USD1,891.85 on Thursday.

Brent oil was trading at USD72.67 a barrel, firm on USD72.45 late Thursday, as the International Energy Agency said oil demand is set to rise above pre-pandemic levels by the end of next year.

In its first detailed look at next year in its regular monthly review of the oil market, the IEA sees a gradual return of demand as vaccine distribution widens and economic activity returns to normal in many countries and sectors.

London's oil majors were tepidly higher, with BP up 0.4% and Royal Dutch Shell 'A' and 'B' shares up 0.7% and 1.0% respectively.

Elsewhere in London, Ashtead shares dipped 1.5% after Deutsche Bank cut the equipment rental firm to Hold from Buy.

Mid-cap stock Sanne surged 11% to 854p. It agreed to enter talks with Cinven after the private equity firm raised its takeover offer to GBP1.42 billion.

The provider of alternative asset and corporate services in late May rejected Cinven's fourth offer of 850p, believing it did not reflect its long-term prospects.

However, Sanne has now decided to enter takeover talks after receiving a 875p bid - Cinven's fifth approach - and has been granted an extension to the put-up-or-shut-up deadline for Cinven to either announce a firm offer or walk away. The new deadline is July 9. There can be no certainty an offer will be made, Sanne said.

On AIM, Frontier Developments fell 10% as it guided to revenue of GBP130 million to GBP150 million for its 2022 financial year, up from GBP91 million expected in financial 2021. This "prudently assumes" its F1 2022 management game is released early in the 2023 financial year as opposed to late in the 2022 year.

AJ Bell investment director Russ Mould noted that the 2022 financial year revenue consensus figure for Frontier was GBP146 million.

"That's partly down to expectations that its F1 management game may be pushed back to the 2023 financial year. Given the disappointment associated with the latest Elite game, it's prudent that Frontier doesn't rush any more releases," said Mould.

Naked Wines slipped 4.5% on a widened full-year loss.

Revenue for the financial year ended March 29 grew 68% to GBP340.2 million from GBP202.9 million, with "strong growth" across all geographies. However, Naked Wines posted a widened pretax loss of GBP10.7 million from GBP5.4 million the year before. The wider loss was partly due to a fair value adjustment of deferred consideration from the sale of Majestic Wine. Adjusted pretax loss narrowed to GBP500,000 from GBP2.9 million.

Sigma Capital shares leapt 25% to 200.65p after the company agreed to be taken over by funds managed by PineBridge Benson Elliot in a deal worth GBP188.4 million.

The build-to-rent housing provider shareholders will receive 202.1 pence per share in cash, representing a premium of 36% to Sigma's closing price on Thursday. PineBridge Benson Elliot is a pan-European real estate private equity specialist, with USD3.2 billion of managed equity.

By Lucy Heming; lucyheming@alliancenews.com

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