LONDON MARKET MIDDAY: Technologies stocks hit as central banks tighten

(Alliance News) - European equities had a tepid morning on Friday, as a week dominated by central banks and inflation draws to an unenthusiastic close.

The Bank of Japan decided on Friday to scale back its pandemic-related funding measures, completing a series of tightening steps by major central banks this week.

On Wednesday, the US Federal Reserve had set out a path to taper away quantitative easing by March. On Thursday, the Bank of England lifted its key Bank Rate, and the European Central Bank said it will end its PEPP stimulus programme in March.

Reinforcing concerns about rampant inflation, numbers from Eurostat showed the eurozone's annual inflation rate accelerated to 4.9% in November from 4.1% in October.

The FTSE 100 index was up 18.55 points, or 0.3%, at 7,279.16 midday Friday. The mid-cap FTSE 250 index trading flat, rising just 0.63 of a point to 22,648.59. The AIM All-Share index was down 6.48 points, 0.6%, at 1,160.73.

The Cboe UK 100 index was up 0.2% at 722.03. The Cboe 250 was 0.4% higher at 20,125.71. The Cboe Small Companies was up 0.2% at 14,780.20.

In mainland Europe, the CAC 40 stock index in Paris was down 0.8%, while the DAX 40 in Frankfurt was 0.7% lower.

The FTSE 100 was outperforming continental peers on Friday, getting a lift from strong UK retail sales figures.

Takeaway delivery company Delivery Hero hit Frankfurt's DAX and semiconductor firm STMicroelectronics weighed on the CAC in Paris, as tech names struggled, tracking falls by New York-listed peers on Thursday.

"European markets are following their US and Asian counterparts lower today, with the initial positive reaction in the face of Fed and BoE monetary tightening faltering as we head into the weekend," IG Markets analyst Joshua Mahony commented.

"Between growing Omicron cases and monetary tightening, belief in an impending Santa rally has been somewhat shaky this time around."

The pound was quoted at USD1.3292 midday Friday, down from USD1.3320 late Thursday. The euro stood at USD1.1317, up from USD1.1310 at the European equities close on Thursday. Against the yen, the dollar was trading at JPY113.46, down from JPY113.60.

A decline in GfK's UK consumer confidence tracker and a fall in the Ifo Germany business climate index showed how the rampant spread of the Omicron variant has hit optimism in Europe, IG's Mahony remarked.

The GfK's long-running consumer confidence index fell by one point to minus 15 in December. The Ifo Institute's Business Climate Index for Germany fell to 94.7 points in December from 96.6 in November.

"Coming into a critical festive period for businesses, there is a strong chance that we see spending and consumption fall short of previous expectations," Mahoney said. "Nonetheless, while we are likely to see bumps in the road, there is a strong chance that stocks continue to gain ground thanks to loose monetary policy and a relatively effective set of Covid vaccines and treatments developed over the course of the past two-years."

More promisingly, numbers on Friday showed UK retail sales grew at a faster pace than expected in November, helped by the Black Friday discounting event.

Figures from the Office for National Statistics showed UK retail sales advanced 4.7% yearly in November, beating a Trading Economics-cited market consensus of a 4.2% rise.

Hargreaves Lansdown analyst Susannah Streeter commented: "There is an expectation that our love of luxury goods will also have rebounded as the festive season approaches."

Burberry shares climbed 1.4%.

Equally, there is a feeling that some shoppers have turned to bargain hunting, Streeter said, lifting B&M European, whose shares were up 1.3% at midday.

Elsewhere in the London retail sector, Primark-owner Associated British Foods rose 2.1% and WH Smith added 2.4%.

Technology stocks struggled, however.

Ahead of the New York equities open, the tech-heavy Nasdaq Composite was called down 0.8%. The S&P 500 was called down 0.3% and the Dow Jones Industrial Average down 0.1%.

"With the era of cheap money coming to an end a lot faster and a higher interest yield environment expected, reducing the value of future earnings, there are concerns the tech juggernaut could be slowed," HL's Streeter said.

Scottish Mortgage Investment Trust, with stakes in major US tech companies, was among the worst FTSE 100 performers, down 1.9%. Cybersecurity stock Darktrace was down 1.8%.

In Paris, STMicroelectronics shed 3.3%, while Delivery Hero fell 4.2% in Frankfurt.

London's takeaway delivery sector similarly struggled, with Deliveroo down 2.1%. Just Eat Takeaway was off 0.9%, despite announcing a pact with grocer Asda. It is Just Eat Takeaway's first partnership in the UK grocery sector.

From January, consumers from five locations will be able to do Asda grocery shopping on the Just Eat platform. The pact is expected to grow to more locations over the course of next year.

Gold stood at USD1,809.51 an ounce midday Friday, up from USD1,796.70 late Thursday. Gold miner Fresnillo was the best large-cap performer in London, up 3.2%, while Centamin was among the best of the mid-caps up 4.3%.

On AIM, Tekmar jumped 10%. The Darlington-based offshore energy industry services firm has won a deal to supply cable protection systems at the Dogger Bank wind farm, just off the north east coast of England.

The project, a joint venture among SSE, Eni and Equinor, will become the world's largest offshore wind farm.

Brent oil was quoted at USD73.73 a barrel midday Friday, down from USD74.90 late Thursday.

By Eric Cunha; ericcunha@alliancenews.com

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