LONDON MARKET OPEN: Flat start after weak UK retail sales; insurers up

(Alliance News) - European equities struggled for direction early Friday, taking a pause for breath after a busy week of central banking action, though UK retail sales gave traders something to chew on ahead of a raft PMI readings.

The FTSE 100 was up 5.46 points, or 0.1%, at 7,275.97 early Friday. The FTSE 250 index fell 36.16 points, or 0.2%, at 19,673.08. The AIM All-Share index lost 1.64 points, or 0.2%, at 900.69.

The Cboe UK 100 index was up 0.3% at 725.42. The Cboe 250 was marginally higher at 17,130.15, and the Cboe Small Companies was up 0.1% at 13,560.28.

In mainland Europe, the CAC 40 stock index in Paris was down 0.2%, while the DAX 40 in Frankfurt was flat.

In London, FTSE 250-listed insurer Beazley was among the standout performers, adding 12%, as it reported an interim pretax profit fall, though its combined ratio - signifying underwriting profit - was at its best level in seven years.

It said it "maintained the momentum of the second half of 2021" during the first six months of 2022.

Gross written premiums increased 26% yearly to USD2.55 billion from USD2.04 billion. However, pretax profit declined 87% to USD22.3 million from USD167.3 million.

Expenses increased 23% to USD1.59 billion, figures showed. That number includes a 22% rise in net insurance claims to USD969.6 million.

"A challenging investment environment has impacted profit; however I'm delighted that we have achieved our best combined ratio at a half year since 2015," Chief Executive Officer Adrian Cox said.

The combined ratio improved to 87% from 94% a year prior. Any ratio below 100% signifies an underwriting profit, so the lower the better.

The London-listed insurance sector endured a difficult start to the week, after Direct Line cautioned on "heightened volatility across the UK motor insurance market", and dragging shares in peers Admiral and Sabre - which issued its own profit last week - with it.

Those stocks were faring better on Friday. Sabre was up 0.1%, Direct Line and Admiral both added 1.2%.

Quilter lost 3.7% after JPMorgan cut the stock to 'neutral' from 'overweight' and placed the wealth manager on 'negative catalyst watch'.

On Wednesday, Citigroup had cut Quilter to 'neutral' from 'buy'.

Elsewhere in London, Mirriad Advertising lost 37% as the in-content advertising technology said it expects revenue in 2022 to be "flat year-on-year" at roughly GBP2 million due to weaker market conditions in China.

First half revenue roughly halved to GBP577,000 from GBP1.1 million.

"Revenue is not currently where we would like it to be, but company plans always assumed a significantly backloaded revenue profile and, factoring the elements outlined above, we anticipate H2 will show substantially higher revenues than H1," Mirriad said.

The dollar was mixed early Friday, making strides against the pound and euro but surrendering some progress against the safe haven yen.

The pound was quoted at USD1.1932 early Friday in London, lower from USD1.1958 at the London equities close on Thursday. The euro stood at USD1.0145, down with USD1.0195. Against the yen, the dollar was trading at JPY137.63, off from JPY137.93.

Analysts at ING commented: "We see the dollar potentially gaining a bit more ground today, as markets start to position for a hawkish Fed statement next week, and the global macro picture continues to weigh on sentiment."

The Fed is expected to raise rates by 75 basis points next week Wednesday, according to consensus cited by FXStreet.

In the most recent meeting in June, the Fed had also enacted a 75 basis points interest rate hike, taking the federal funds rate to a range of 1.5% to 1.75%. It was the first hike of that magnitude since November 1994.

On Thursday, the European Central Bank turned to "frontloading" and lifted interest rates by 50 basis points, despite previously guiding for a quarter percentage point hike. The Bank of Japan earlier on Thursday left rates unchanged, however, as did the People's Bank of China on Wednesday. Minutes released on Tuesday of the Reserve Bank of Australia's latest meeting showed the central bank is eyeing more rate increases.

The ECB also unveiled a new crisis-fighting tool Thursday to counter an "unwarranted" jump in borrowing costs for more indebted eurozone governments as it hikes its interest rates for the first time in over a decade.

By buying up a specific country's bonds, the ECB aims to prevent "fragmentation" in the euro area, or a divergence in sovereign debt costs between fiscally sound members like Germany and more fragile ones like Italy, Spain or Portugal.

Still to come on Friday are PMI scores due from the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST.

Already out, UK retail sales data for June painted a mixed picture, with the sector seeing a slight Platinum Jubilee holiday boost. The cost-of-living crisis was also evident, however.

According to the Office for National Statistics, UK retail sales volumes fell 5.8% annually in June, worsening from a 4.7% decline in May. The figure was worse than the FXStreet-cited market consensus of a smaller 5.3% fall.

On a monthly basis, sales fell 0.1% in June from May. In May, they had fallen 0.8% from April, and that figure was downwardly revised from a 0.5% fall.

Excluding fuel, retail sales fell 5.9% yearly in June, following a 5.5% decline in May. June's figure, though worse than May's, beat an FXStreet-cited forecast of a 6.3% decline.

On monthly basis, fuel-excluded retail sales were 0.4% higher, defying expectations of a 0.4% decline, and swinging from a 1% fall in May.

Asian shares were mixed on Friday. In Tokyo, the Nikkei 225 closed 0.4% higher. The S&P/ASX 200 index in Sydney ended a touch lower. The Shanghai Composite ended down 0.1%. The Hang Seng index in Hong Kong was 0.1% higher in late dealings.

Brent oil was quoted at USD104.28 a barrel early Friday UK time, up from USD103.48 at the London equities close on Thursday. Gold stood at USD1,716.00 an ounce, up from USD1,710.60.

By Eric Cunha; ericcunha@alliancenews.com

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