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Stocks in London managed to claw back losses on Friday, ending the week firmly in the green, as comments from US Federal Reserve Chair Jerome Powell eased fears about the pace of interest rate rises.
In an interview with the Marketplace radio on Thursday, Powell made clear his determination to get inflation under control. However, the Fed chief acknowledged the central bank's ability to execute this without triggering a recession - also known as a 'soft landing' - may depend on external factors outside its control.
‘If the economy performs about as expected,’ Powell said, ‘it would be appropriate for there to be additional 50-basis point increases at the next two meetings.’
‘So a soft landing is, is really just getting back to 2% inflation while keeping the labor market strong. And it's quite challenging to accomplish that right now, for a couple of reasons,’ Powell said.
Powell noted that with a tight jobs market pushing up wages, avoiding a recession that often follows aggressive policy tightening will be a challenge.
When asked if a hefty 75 basis-point increase was off the table, Powell reiterated that the Fed was not ‘actively considering’ such a move, according to a transcript from Marketplace.
The comments came after the US Senate on Thursday overwhelmingly confirmed Powell for a second term, almost seven months after President Joe Biden first submitted the nomination.
The FTSE 100 index closed up 184.81 points, or 2.6%, at 7,418.15. Over the week as a whole, the blue-chip index rose 0.4%.
The FTSE 250 ended up 441.01 points, or 2.3%, at 19,921.89 - adding 0.5% over the week-to-date.
The AIM All-Share closed up 16.53 points, or 1.8%, at 955.60, but lost 2.3% over the course of the week.
The Cboe UK 100 ended up 2.5% at 739.68, the Cboe UK 250 closed up 2.0% at 17,577.12, and the Cboe Small Companies ended up 1.0% at 14,608.96.
In European equities, the CAC 40 stock index in Paris ended up 2.5%, while the DAX 40 in Frankfurt closed up 2.1%.
‘After the recession rout there was a calmer feel to market proceedings on Friday,’ said AJ Bell investment director Russ Mould. ‘Fed chair Jerome Powell did his best to douse some of the burning panic which had set in over the latest US inflation number and what it might mean for interest rates by suggesting talk of 0.75 percentage point rate hikes was off the mark.’
In the FTSE 100, Scottish Mortgage Investment Trust, which invests heavily in US tech stocks, ended the best performer up 7.3%, aided by the reversal of fortunes by the Nasdaq Composite in New York.
Sage Group closed up 3.5% after the accounting software provider left its full-year outlook unchanged, after what it called a strong first-half performance, with its Business Cloud offering leading a rise in recurring revenue.
In the six months to March 31, Sage recorded pretax profit of £189 million, down slightly from £190 million in the same period a year prior.
Revenue also was broadly flat, slipping to £934 million from £937 million. Sage noted, however, that organic revenue was up 5%, driven by Sage Business Cloud growth of 21%.
Meanwhile, annualised recurring revenue rose by 10% to £1.78 billion from £1.63 billion a year before. ‘Cloud native’ ARR growth was 43%, Sage said.
Sage upped its interim dividend by 5.0% to 6.30 pence from 6.05p.
For financial 2022, Sage continues to expect organic recurring revenue growth in the region of 8% to 9%.
At the other end of the large-caps, Vodafone Group ended among a handful of names in the red, down 0.7%, after Jefferies downgraded the telecommunications firm to 'hold' from 'buy'.
The broker said the cost of living crisis, caused by rampant inflation and, more specifically, soaring energy prices, make Vodafone's near-term outlook tricky. Vodafone will report annual results next Tuesday.
On AIM, Fulcrum Utility Services closed down 23% after the energy and utility services provider indicated it was loss-making in the second half of its financial year.
Fulcrum expects to report adjusted revenue for the year ended March 31 of £57.4 million, representing year-on-year growth of 22%. However, it expects earnings before interest, tax, depreciation and amortisation of £500,000. This indicates it made a loss of £500,000 in the second half, after posting interim Ebitda of £1.0 million.
Since the Sheffield-headquartered company's fundraise in December, it noted that the UK energy market has remained volatile. Amid a turbulent backdrop for the UK energy sector, Fulcrum expects the value of its order book to fall by 14% to £48 million at the end of March from £56.1 million a year ago. At the end of September 2021, its order book stood at £80.9 million.
The pound was quoted at $1.2230 at the London equities close, flat from $1.2229 at the close Thursday.
The euro stood at $1.0410 at the European equities close, down from $1.0417. The common currency for the euro area sank to an intraday low of $1.0350 in early trade against the greenback, its lowest level since January 2017.
Against the yen, the dollar was trading at JP¥129.28, up from JP¥128.25 late Thursday.
Stocks in New York were higher at the London equities close following a lower close on Thursday. The DJIA was up 1.4%, the S&P 500 index 2.2% and the Nasdaq Composite up 3.3%.
On Wall Street, Twitter was down 7.8% after Elon Musk said he was putting a temporary halt on his much-anticipated deal to buy the social media platform.
‘Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,’ he wrote on the platform.
Musk, the world's richest man and co-founder of automaker Tesla, had made the eradication of spam accounts and bots one of the centrepieces of his proposed $44 billion takeover of Twitter.
Brent oil was quoted at $111.00 a barrel at the equities close, up sharply from $108.55 at the close Thursday.
Gold stood at $1,940.80 an ounce at the London equities close, higher against $1,838.71 late Thursday.
The economic events calendar on Monday has China retail sales overnight and eurozone foreign trade at 1000 BST.
The UK corporate calendar on Monday has interim results from Diploma and a trading statement from Greggs.
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