LONDON MARKET OPEN: European equities take heart from US budget plan

(Alliance News) - Stock prices in London nudged higher early Friday, after a decent handover from Asia and with the report of a big US spending plan lifting sentiment.

The New York Times on Thursday said US President Joe Biden will propose a USD6 trillion budget that would take the US to its highest sustained levels of federal spending since World War II.

Treasury Secretary Janet Yellen told lawmakers on Thursday that though the upcoming spending plan will push US national debt higher, it would not be beyond the country's means.

In early corporate news in London, AstraZeneca said it has gained European Commission backing for a lung cancer drug, and Irn-Bru maker AG Barr said it is "encouraged" by current trading as UK lockdown measures ease.

The FTSE 100 index was up 21.14 points, or 0.3%, at 7,042.03 early Friday. The mid-cap FTSE 250 index inched up 11.76 points, or 0.1%, at 22,670.80. The AIM All-Share index was down 0.73 of a point, or 0.1%, at 1,249.75.

The Cboe UK 100 index was up 0.4% at 701.81 points. The Cboe 250 was largely flat at 20,413.76, and the Cboe Small Companies was up 0.1% at 14,986.96.

Biden on Thursday urged "generational" investment in US infrastructure to keep the economic superpower ahead of China while ensuring that less wealthy Americans are not left behind. Speaking at a community college in Cleveland, Ohio, the US president said his USD1.7 trillion American Jobs Plan is an opportunity to capitalize on the rapid US recovery from the Covid-19 shutdown.

"We're at an inflection point," he said. "We have a chance to seize the economic momentum...and this time we're going to deal everyone in, everyone who's been left out."

Looking at the day ahead, interactive investor analyst Richard Hunter commented: "In the meantime, inflationary nerves will be tested once more as the Commerce Department releases the PCE, or personal consumption expenditures, index later today. The measure tends to be one which the Federal reserve monitors closely and is more influential in deciding Fed policy than the more obvious consumer price index.

"Inflationary concerns continue to bubble under the surface. Although in abeyance for the moment, this could be short-lived as the economic data continues to point towards excess demand as growth kicks in, with supply struggling to keep pace. As such, a further switch into cyclical, value stocks underpins a flip-flop from investors trying to position themselves for all eventualities."

In Asia on Friday, the Shanghai Composite closed down 0.2%, as sentiment soured in late trade. The index had been up 0.3% in the early afternoon.

The Hang Seng in Hong Kong was up 0.1%, in late trade. The Nikkei 225 in Tokyo clung onto strong earlier gains, closing up 2.2%. The S&P/ASX 200 ended 1.2% higher.

In mainland Europe, the CAC 40 in Paris was up 0.3%, and the DAX 30 in Frankfurt was up 0.4%.

Equities in France ticked higher despite a gross domestic product reversal. The French economy shrank in the first quarter of 2021, latest numbers from INSEE showed Friday, a dramatic revision from a prior estimate which showed it grew.

The French economy slipped 0.1% quarter-on-quarter in the first three months of the year. The previous estimate reported at the end of April said it grew 0.4%. French gross domestic product is 4.7% below the final quarter of 2019, before the onset of the Covid-19 pandemic.

According to consensus cited by FXStreet, the 0.4% hike from the previous estimate was expected to be confirmed, so the real figure was below market expectations.

Still to come, US personal consumption expenditure figures for April are released at 1330 BST after eurozone consumer confidence at 1000 BST.

Sterling was quoted at USD1.4181 early Friday in London, flat from late Thursday. The euro stood at USD1.2184, down from USD1.2200 at the European equities close on Thursday.

Against the yen, the dollar was trading at JPY109.88, improved from JPY109.71.

In the UK, cases of the Indian variant have doubled in a week, leading to new concerns over the ending of Covid-19 restrictions in England next month.

UK Prime Minister Boris Johnson warned that freedom from restrictions on June 21 may have to wait as it emerged three-quarters of new cases are now the Indian mutation.

Ministers are remaining cautious on the prospect of all measures being scrapped in England on June 21, as set out in the prime minister's road map, although hospital admissions remain flat. Officials are examining the data after confirmed cases of the Indian variant of Covid-19 reached almost 7,000.

Travel and leisure stocks edged lower, Intercontinental Hotels and British Airways parent International Consolidated Airlines Group were both 0.5% lower, while caterer Compass fell 0.4%.

Ryanair fell 0.6%. Chief Executive Michael O'Leary accused the Irish government of bringing "untold damage" on the aviation and tourism sector.

He criticised Irish Transport Minister Eamon Ryan for having no "plan, policy or commitment" on aviation.

Mid-cap housebuilder Vistry Group was up 1.7% after Barclays raised the stock to Overweight from Equal Weight.

London's IPO market has been busy so far this year, with Darktrace and Deliveroo among those to debut in 2021.

On Friday, oxygen-equipment developer Belluscura said it raised GBP17.5 million in its AIM float. The company, an investee of Tekcapital, will have a GBP51 million market capitalisation on admission on Friday.

Tekcapital shares were up 3.4%.

Belluscura earlier in May said IPO funds would be used to improve marketing, research new products and help secure US Food & Drug Administration approvals. It priced its IPO at 40p and the stock was trading at 53.20p early Friday, up 15% and valuing it at GBP60.2 million.

Digital health platform Trellus Health said it raised GBP28.5 million in its float. It was valued at GBP64.6 million on admission. Shares fetched 40p each in its IPO and it was trading at 59.07p early Friday, up 48% from its float price. It has a market capitalisation of GBP95.4 million.

Brent oil was trading at USD69.16 a barrel early Friday in London, up from USD68.93 late Thursday. An ounce of gold fetched USD1,889.81, down slightly from USD1,891.30.

By Eric Cunha; ericcunha@alliancenews.com;

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