LONDON MARKET OPEN: Stocks rally, waving off US inflation acceleration

(Alliance News) - London stocks were on course for a strong end to the week as global markets shrugged off the strongest pace of US annual inflation since 2008 and UK investors welcomed strong economic growth.

The internationally exposed FTSE 100 was helped as the pound softened despite the positive UK gross domestic product figures, with worries over virus variants clouding the economic outlook ahead.

The FTSE 100 index was up 37.99 points, or 0.5%, at 7,126.17 early Friday. The mid-cap FTSE 250 index was up 74.64 points, or 0.3%, 22,683.40. The AIM All-Share index was up 0.1% at 1,247.35.

The Cboe UK 100 index was up 0.6% at 709.98. The Cboe 250 was up 0.3% at 20,417.07, and the Cboe Small Companies up 0.3% at 15,176.51.

In mainland Europe, the CAC 40 in Paris was up 0.1%, while the DAX 30 in Frankfurt dipped 0.1% early Friday.

"Investors shrugged off a higher-than-expected inflation print having taken a good look underneath the bonnet," said Richard Hunter, head of markets at Interactive Investor.

"The 5% figure was higher than the 4.7% which had been widely expected, but major drivers of the increase were airline fares and the sale of used cars, the latter of which was partly prompted by the semiconductor shortage currently affecting the industry," he noted.

May's reading marked the largest 12-month increase in US consumer prices since a 5.4% rise in August 2008.

However, Wall Street took the figures in its stride and ended Thursday's session in the green. The Dow Jones Industrial Average added 0.1%, the S&P 500 0.5%, and the Nasdaq Composite 0.8%.

In Asia on Friday, the Japanese Nikkei 225 index ended flat. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was up 0.5%. The S&P/ASX 200 in Sydney finished up 0.1%.

In economic data on Friday, UK gross domestic product expanded 2.3% month-on-month. This was the fastest monthly growth since July 2020, as lockdown restrictions eased, and marks an uptick from a rise of 2.1% for March.

However, April's reading was slightly below expectations, according to FXStreet, for 2.4% growth.

While UK GDP remains 3.7% below pre-pandemic levels, it is now 1.2% above the initial recovery peak in October 2020.

Despite signs of the UK's economic recovery, sterling was quoted at USD1.4166 early Friday, soft on USD1.4174 at the London equities close on Thursday.

"Yes, there is much to celebrate but there's also a note of caution, we've been here before and we understand how fragile recovery can be and how quickly the pandemic can tilt the field," said Danni Hewson, AJ Bell finance analyst.

Elsewhere, the dollar was weaker against the yen and euro.

Against the yen, the dollar fell to JPY109.46 versus JPY109.56. The euro traded at USD1.2179 early Friday, higher than USD1.2168 late Thursday.

Gold was quoted at USD1,901.33 an ounce early Friday, higher than USD1,891.85 on Thursday. Shares in precious metals miners Fresnillo and Polymetal International gained 2.8% and 2.0% respectively.

Brent oil was trading at USD72.61 a barrel, firm on USD72.45 late Thursday.

In the FTSE 250, Sanne shares surged 12% to 864.50 pence as it said it is now in takeover talks with Cinven after receiving a fifth unsolicited approach worth 875 pence per share.

Sanne shares closed at 772p on Thursday, with the latest offer representing a premium of 13%.

The provider of alternative asset and corporate services in late May rejected Cinven's fourth offer of 850p, believing it did not reflect its long-term prospects.

However, Sanne has now decided to enter takeover talks after receiving the 875p bid, and has been granted an extension to the put-up-or-shut-up deadline for Cinven to either announce a firm offer or walk away. The new deadline is July 9. There can be no certainty an offer will be made, Sanne said.

In other M&A moves, build-to-rent housing provider Sigma Capital rocketed 36% to 202p after agreeing to be taken over by funds managed by PineBridge Benson Elliot, in a deal worth GBP188.4 million.

Sigma shareholders will receive 202.1p per share in cash, representing a premium of 36% to Sigma's closing price on Thursday. The offer has acceptances representing 61% of Sigma Capital shares and is recommended unanimously by Sigma's independent shareholders.

PineBridge Benson Elliot is a pan-European real estate private equity specialist, with USD3.2 billion of managed equity.

"We are delighted that our independent directors intend to recommend this offer from PineBridge Benson Elliot, having reviewed a number of options from other parties. We know the team well and believe that our complementary skills, experience and sector knowledge, as well as PineBridge Benson Elliot's capital backing, will make a powerful combination," said Sigma Capital Founder & Chief Executive Graham Barnet.

Domino's Pizza fell 1.8% on news Chief Financial Officer Neil Smith is leaving the company to take up another opportunity.

The pizza delivery master franchiser said it will now commence a search process to find a successor, with Smith set to depart on November 26 following completion of his notice period.

By Lucy Heming; lucyheming@alliancenews.com

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