LONDON MARKET OPEN: Prudential and miners rise on positive China news

(Alliance News) - China exposed stocks led the way in London on Friday morning, while the pound continued to get a boost from a cooler-than-expected US inflation reading, despite glum UK economic figures.

The FTSE 100 index opened up 21.84 points, 0.3%, at 7,397.18. The mid-cap FTSE 250 was up 218.48 points, or 1.1%, at 19,595.72, and the AIM All-Share was up 4.90 points, 0.6%, at 846.47.

The Cboe UK 100 was up 0.1% at 740.09, the Cboe UK 250 surged 1.3% to 16,925.58, while the Cboe Small Companies was flat at 12,685.88.

Stocks on the continent were higher. The CAC 40 index in Paris was up 0.9%, while the DAX 40 in Frankfurt was 0.4% higher.

US inflation slowed in October, the latest data from the US Bureau of Labor Statistics showed, falling short of market expectations.

The consumer price index rose 7.7% in October against the prior year, slowing from the 8.2% rise recorded in September. Market consensus, as cited by FXStreet, had expected for inflation to cool to 8.0% in October, so the actual figure came in shy of forecasts.

The reading had prompted the tech-heavy Nasdaq Composite index to notch its largest-ever daily points rise. The index rose 760.97 points, 7.4%, on Thursday. The Dow Jones Industrial Average added 3.7%, while the S&P 500 jumped 5.5%.

"Investors reacted to the latest US inflation data as if a miracle happened. But in reality, US inflation remains very high compared to what the Fed is willing to achieve: the 2% target. Therefore, the Fed will certainly hike by 50bp in December, and will probably hike another two times in the first quarter of next year, by 25bp each, to reach the 5% terminal rate. So, yes, yesterday was a fantastic day, really, but the markets went clearly well ahead of themselves and we will certainly see some correction and consolidation moving forward," Swissquote analyst Ipek Ozkardeskaya commented.

While stocks have surged post-US CPI, the dollar moved in the opposite direction. The euro is somewhat comfortably above greenback parity, while the pound topped the USD1.17 mark.

The pound rose to USD1.1729 on Friday morning in London, from USD1.1661 late Thursday. The euro traded at USD1.0248, up from USD1.0162. Against the yen, the dollar faded to JPY141.18, from JPY141.78.

The last time cable topped USD1.17 was on September 13, 10 days before the poorly-received UK government mini-budget announcement, which sparked mayhem in bond markets and saw the pound hit a record low.

The pound remained above USD1.17 despite a somewhat poor GDP reading.

UK GDP fell 0.2% quarter-on-quarter in the entirety of the third quarter of 2022. GDP had increased 0.2% in the second quarter from the first.

The third-quarter figure came in above FXStreet cited consensus of a chunkier 0.5% decline.

Though the number from the Office for National Statistics was not as bad as feared, it may suggest the UK is already in recession, as the Bank of England predicted. The long-standing definition for a technical recession is two successive quarterly GDP falls.

The BoE has predicted the nation to enter recession in the fourth quarter of 2022.

In Asia, stocks also surged on Friday. The Shanghai Composite in China was 1.7% higher and the Hang Seng in Hong Kong jumped 7.7%. In Tokyo, the Nikkei 225 rose 3.0%, while the S&P/ASX 200 in Sydney added 2.8%.

China announced the relaxation of some of its hardline Covid-19 restrictions on Friday, after authorities had vowed to stick to a zero-tolerance virus approach despite mounting economic damage.

The country is the last major economy welded to a strategy of stamping out virus flare-ups as they occur, through a combination of snap lockdowns, mass testing and lengthy quarantines.

Top leaders had pledged to stick "unswervingly" to the policy, which has forced business closures, roiled international supply chains and weighed heavily on growth.

But a notice from the country's disease control agency on Friday said the Politburo Standing Committee – the apex of power in China – met Thursday to rubberstamp limited relaxations.

According to the notice, quarantines for inbound travellers will be cut from 10 days to eight, consisting of five days in a state isolation centre and three days at home.

Inbound arrivals will still be required to undergo six nucleic acid tests and will not be allowed to freely set foot outside during those eight days, the notice says.

The news lifted shares in China-exposed stocks.

Asia-focused insurer Prudential added 7.7%, while miners Antofagasta and Rio Tinto rose 3.9% and 3.6%. China is a key buyer of minerals. Elsewhere, luxury retailer Burberry added 3.5%.

On AIM, Caspian Sunrise rose 7.4%. The Kazakhstan-focused oil & gas exploration and production company declared a maiden 0.0444 pence per share dividend.

"The size of this maiden dividend is indicative of the levels to be expected in the future. The Board intends that the future dividends will be paid on a monthly basis, based on the higher of GBP1 million per month or a pay-out ratio of broadly 35-40% of free cashflows," Caspian added.

Gold rose to USD1,759.83 an ounce early Friday, from USD1,745.45 late Thursday. Brent oil fetched USD96.00 a barrel, rising from USD93.90.

By Eric Cunha; ericcunha@alliancenews.com

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