LONDON MARKET OPEN: Europe mixed as dust settles on central banks

Fri, 17th Dec 2021 08:54

(Alliance News) - European equities were mixed early Friday, with London an outperformer among European markets, as the FTSE 100 cautiously nudged higher despite sterling holding onto its post-rate hike gain.

Risk sentiment has taken a hit, however, as equities in Asia struggled following a fall in tech shares in New York overnight.

The FTSE 100 index was up 13.98 points, or 0.2%, at 7,274.59 early Thursday. The mid-cap FTSE 250 index was up just 5.26 points at 22,653.22. The AIM All-Share index was down 5.47 points, 0.5%, at 1,161.74.

The Cboe UK 100 index was up 0.1% at 721.80. The Cboe 250 was 0.4% higher at 20,137.64. The Cboe Small Companies was down 0.2% at 14,721.22.

In mainland Europe, the CAC 40 stock index in Paris was down 0.1%, while the DAX 40 in Frankfurt was 0.3% lower.

The pound was quoted at USD1.3323 early Friday, up from USD1.3320 late Thursday.

"GBP/USD moved briefly above 1.3350 yesterday after the Bank of England raised interest rates to 0.25%, but it has subsequently drifted back towards 1.33. The rise against the euro was also short-lived, especially after the ECB announced that QE would continue into next year but at a reduced pace," analysts at Lloyds Bank commented.

UK retail sales grew at a faster pace than expected in November, figures on Friday showed, helped by clothing store sales topping pre-virus levels for the first time.

Figures from the Office for National Statistics showed UK retail sales advanced 4.7% yearly in November, beating Trading Economics cited market consensus of a lesser 4.2% rise. Sales had fallen by 1.5% in October.

On a monthly basis, retail sales rose 1.4% in November, following a 1.1% climb in October.

The ONS noted clothing store sales volumes in November topped pre-virus levels by 3.2%.

Consumers shopped early and "shopped hard", AJ Bell analyst Danni Hewson commented.

"More cash was spent on clothing as people got their glam ready to socialise in the run up to Christmas, sales actually soared above pre pandemic levels for the first time as people grew more and more confident about their festive plans," Hewson added.

The euro stood at USD1.1332 early Friday, up from USD1.1310 at the European equities close on Thursday. Against the yen, the dollar was trading at JPY113.56, unchanged from JPY113.60.

Friday's economic calendar has eurozone inflation readings at 1000 GMT.

Ahead of the data, figure from Destatis showed inflationary pressures at the factory gate have eased, at least on a monthly basis.

Producer prices in Germany rose 0.8% monthly in November, following growth of 3.8% in October. The figure undershot FXStreet expectations of a 1.4% climb.

Annually, producer prices climbed 19%, following October's 18% rise. The annual increase came in below forecasts of 20%.

Asian equities struggled on Friday. The Nikkei 225 in Tokyo closed down 1.8%. The Shanghai Composite and Hang Seng in Hong Kong both fell 1.2%. Faring better, the S&P/ASX 200 in Sydney closed up 0.1%.

The Bank of Japan, like other major central banks this week, announced a slight hawkish turn. The BoJ decided on Friday to scale back its pandemic-related funding measures.

From April 2022, the purchases of securities will be of the same amount as prior to the Covid-19 pandemic, so that the amounts outstanding of these assets will decrease gradually to the pre-pandemic levels, namely, about JPY2 trillion, around USD17 billion, for commercial paper and about JPY3 trillion for corporate bonds.

The BoJ move completed a series of tightening steps by major central banks this week. On Wednesday, the US Federal Reserve set out a path to raise interest rates, the Bank of England on Thursday lifted its key Bank Rate, and the European Central Bank on Thursday said it will end its PEPP programme in March.

On the London Stock Exchange early Friday, Johnson Matthey rose 1.0%. It has sold a majority stake in its Health unit to Altaris Capital Partners for an enterprise value of GBP325 million. Altaris is a healthcare-focused investment firm.

"Johnson Matthey will retain approximately a 30% equity stake from which it expects to realise significant additional future value," the specialist chemicals maker explained, adding completion is expected in mid-2022.

The company will exit London's FTSE 100 index of large-caps on Monday, when a quarterly review takes effect.

HSBC fell 0.1%. The UK's Financial Conduct Authority has fined the company GBP63.9 million for anti-money laundering failures. The fine concerns an eight-year period between March 2010 and March 2018.

"HSBC used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime. However, the FCA found that three key parts of HSBC's transaction monitoring systems showed serious weaknesses," the FCA explained.

HSBC did not dispute the FCA findings and settled the matter at the earliest opportunity, qualifying it for a 30% discount. The fine would have amounted to GBP91.4 million without the discount.

Elsewhere in London, Just Eat Takeaway fell 1.7%. The company announced its first partnership in the UK grocery sector, teaming with Asda.

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.

Peers such as Deliveroo already have UK grocery partnerships. Deliveroo shares were down 3.6%.

Elsewhere in London, boohoo shares extended losses, down 5.1%. After a troubling trading update, the stock has since suffered from two broker rating cuts.

Investec on Thursday cut the stock to Sell from Hold. Barclays on Friday cut its recommendation to Equal Weight from Overweight.

Brent oil was quoted at USD74.25 a barrel early Friday, down from USD74.90 late Thursday. Gold stood at USD1,808.84 an ounce, up from USD1,796.70.

By Eric Cunha; ericcunha@alliancenews.com