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LONDON MARKET CLOSE: European stocks back in form but NY struggles

Equity prices in London ended higher on Thursday, with the FTSE 100 snapping a six-day losing streak, though there was nervy trade in New York ahead of the release of a key US inflation gauge on Friday.

The FTSE 100 index closed up 47.98 points, 0.6%, at 8,231.05. The FTSE 250 surged 234.53 points, 1.2%, at 20,670.87, and the AIM All-Share ended up 2.42 points, 0.3%, at 802.69.

The Cboe UK 100 ended up 0.7% at 821.68, the Cboe UK 250 surged 1.6% to 18,226.49, and the Cboe Small Companies jumped 2.5% to 17,229.48.

In European equities on Thursday, the CAC 40 in Paris closed up 0.6%, while the DAX 40 in Frankfurt ended up 0.1%.

Stocks in New York were weaker, however. The Dow Jones Industrial Average was down 1.0%, while both the S&P 500 and Nasdaq Composite dropped 0.5%.

According to the Bureau of Economic Analysis, US gross domestic product increased 1.3% quarter-on-quarter on an annualised basis in the three months to March 31. Growth eased from a 3.4% rally in the final three months of 2023.

The latest reading downwardly revised from a previously reported 1.6% rise.

Year-on-year, the US economy advanced 2.9% in the first-quarter, slowing from a 3.1% rise in the fourth. First-quarter growth was downwardly revised from 3.0%.

Inflation pressure was softer than initially expected. The personal consumption expenditures index rise 3.3% on-quarter in the first-quarter, tamer than the first estimate of a 3.4% rise. In the fourth-quarter, the index grew 1.8% from the third.

The core PCE index, the Fed’s preferred inflationary gauge, rose 3.6% on-year, softer than the initially reported 3.7% increase, but picking up speed from 2.0% in the fourth.

Capital Economics analyst Ryan Sweet commented: ‘The downward revision to Q1 GDP does not warrant a change to our near-term forecast and it will not rattle the Federal Reserve as a chunk of the weakness early this year was attributed to inventories and net exports, which are volatile components of GDP.

‘Revisions to the headline and core PCE deflator were modest, at best. The new data does not alter our subjective odds that the first rate cut will occur in September, but this is contingent on inflation moderating over the next couple of months.’

Eyes now shift to Friday’s PCE reading for the month of April.

According to FXStreet, numbers on Friday are expected to show that the core personal consumption expenditures index, the Federal Reserve’s preferred US inflation gauge, rose 2.8% year-on-year in April, the same pace of growth as in March.

The core PCE reading does not include food or energy. The headline index, which does, is expected to have risen 2.7% on-year in April, also the same pace of growth as in March.

Friday’s economic events calendar has the US PCE data at 1330 BST, after a Japanese unemployment reading in the early hours, and German retail sales at 0700 BST. Also in focus will be a eurozone consumer price index report at 1000 BST.

The single currency area’s annual inflation rate is expected to have picked up to 2.5% this month, from 2.4% in April, according to FXStreet.

Data this week may have cemented this expectation, with the harmonised rates of annual consumer price inflation picking up and beating forecasts in both Germany and Spain.

The eurozone data on Friday, which follows an inflation reading from France, will be in focus ahead of next week’s European Central Bank meeting.

Analysts at UBS commented: ‘The signals that emerged from the ECB meeting on 11 April and subsequent public remarks by ECB?officials have been clear: The ECB?is on track to cut rates by 25bps to 3.75%?in the upcoming meeting on 6 June. We think even disappointing May inflation data following the tick-up in the latest ECB negotiated wage growth release would not stop the ECB.’

According to data from the ECB last week Thursday, negotiated wages rose 4.7% on-quarter in the first three months of 2024. Growth picked up from 4.5% in the fourth-quarter.

The pound was quoted at $1.2738 late on Thursday afternoon in London, higher compared to $1.2710 at the European equities close on Wednesday. The euro stood at $1.0839, climbing from $1.0811. Against the yen, the dollar was trading at JP¥156.65, lower compared to JP¥157.56.

In London, shares in Auto Trader and athleisure retailers JD Sports and Frasers Group led the way in the FTSE 100. Frasers owns Sports Direct.

Online automotive marketplace operator Auto Trader jumped 14% on strong yearly earnings.

For the financial year that ended March 31, Auto Trader reported £345.2 million in pretax profit, up 18% from £293.6 million in financial 2023.

Revenue rose 14% to £570.9 million from £500.2 million, with double-digit percentage growth reported across all business segments. According to company-compiled consensus, the firm was expected to report revenue of £556.5 million.

JD Sports and Frasers climbed 3.2% and 6.1%. Supporting the shares, US peer Foot Locker Inc reported a ‘solid start to the year’. It also backed its 2024 outlook. Foot Locker traded 24% higher in New York.

JD Sports reports annual results on Friday.

Oil and gas producer EnQuest rose 8.7%. It said averaged 43,595 barrels of oil equivalent per day in the first four months of the year, in line with guidance 41,000 boepd to 45,000 boepd.

‘We continue to achieve top quartile production efficiencies across the portfolio, while our high performing decommissioning team continues to deliver sector leading performance, having completed ten well plug and abandonments in 2024 across Heather and Thistle,’ Chief Executive Amjad Bseisu said.

‘Following the commencement of EnQuest’s inaugural shareholder returns programme in April and with the foundations set for a pivot to growth during 2024, we are focused on delivering that growth through transformative acquisitions; utilising our differentiated operating capability and advantaged tax position to accrete value.’

Brent oil was quoted at $82.83 a barrel at the time of the London equities close on Thursday, down from $83.50 late Wednesday. Gold was quoted at $2,342.54 an ounce, higher against $2,339.63.

Friday’s UK corporate diary has the JD Sports yearly results, as well as annual results from car dealer Caffyns.

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