LONDON MARKET OPEN: Pound gains from UK chancellor's support package


Sterling was rallying against the dollar early Friday, supported the economic support programme unveiled on Thursday by the UK government and by the US central bank's less-hawkish-than-feared policy stance.

The FTSE 100 index was down 17.13 points at 7,547.79 early Friday. The large-cap index was being curbed by the stronger pound in early trade, but is 2.1% higher so far this week.

The pound was quoted at $1.2622 early Friday in London, up from $1.2580 at the London equities close on Thursday.

The mid-cap FTSE 250 index was down 15.09 points, or 0.1%, at 20,233.65. The AIM All-Share index was up just 0.26 of a point at 958.26.

The Cboe UK 100 index was down 0.3% at 751.91. The Cboe 250 was down 0.2% at 17,980.77, and the Cboe Small Companies was 0.1% lower at 14,620.41.

In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt rose 0.4% early Friday.

In Tokyo on Friday, the Nikkei 225 ended up 0.7%. The Shanghai Composite ended 0.2% higher, while the Hang Seng in Hong Kong was up 2.2% in late trade. The S&P/ASX 200 added 1.1%.

The Dow Jones Industrial Average finished up 1.6%, the S&P 500 up 2.0% and the Nasdaq Composite up 2.7%.

Worries about inflation have stifled equity markets so far this year, as have fears of the monetary policy tightening required to get price rises back under control.

Market focus on Friday will be on the US personal consumption expenditure price data at 1330 BST. The core index reading is the Fed's preferred gauge of inflation.

According to FXStreet-cited consensus, annual PCE inflation is expected to be stable at 6.6% in April. Core PCE inflation is forecast to slow to 4.9% from 5.2%.

Ahead of the data, the dollar was weaker. The euro rose to $1.0742 early Friday from $1.0725 late Thursday in London. Against the yen, the dollar was trading at JP¥126.18, fading from JP¥127.37.

Minutes of the early May meeting of the Federal Open Market Committee showed that US Federal Reserve policy makers are not considering more-aggressive 75-point rate hikes. Most participants in the meeting were of the view that 50-basis-point increases in the target range - as done at the May meeting - ‘would likely be appropriate at the next couple of meetings’, the minutes showed.

In the FTSE 100, stocks were reacting to the UK chancellor's announcements on Thursday of support for households suffering from higher energy prices, paid for with a windfall tax on energy companies.

Athleisure firm JD Sports added 1.7%. Retail stocks were among the best performers on Thursday on the notion that UK consumers will have more disposable income available in the wake of the chancellor's cost-of-living support package.

Leisure stocks also were largely on the up, boosted by the cost-of-living support. Ten pin bowling operator Hollywood Bowl was 3.1% higher, while Gym Group added 2.0%.

Conversely power utility SSE was down 2.9%.

‘Investors have...reacted positively to the unveiling of the government's more generous-than-expected support plan on Thursday,’ said Matthew Ryan, senior market analyst at financial services firm Ebury.

‘The support package includes £15 billion in financial assistance, and a 25% windfall tax on oil and gas producer profits. While this only goes part of the way in alleviating the ongoing cost of living crisis, we are optimistic that the government's targeted fiscal measures will ease at least some of the downside stemming from the recent boom in inflation.

‘This appears to be supporting sterling, which looks likely to post its second consecutive week of gains against the dollar.’

Elsewhere, postal service operator Royal Mail was 0.9% lower. Bernstein cut the stock to 'market-perform' from 'outperform'.

Among London mid-caps. Moonpig was down 8.2%, the greetings card seller surrendering some of its chunky weekly gain. Sentiment in the stock has been on the up this week, as the market hailed its foray into physical and experiential gifts.

So far this week, Moonpig has advanced 6.3%.

On AIM, Advance Energy tumbled 24%, one of the junior market's worst performers.

The company said a production sharing contract will lapse, turning the energy firm into a cash shell, under AIM rules.

Carnarvon Petroleum Timor has opted against entering the next period of the TL-SO-T 19-14 production sharing contract, which Advance calls the Buffalo licence. It is located in southeast Asian nation East Timor.

‘As a consequence the Buffalo licence will lapse on 27 May 2022, and the company will become an AIM Rule 15 cash shell on that date,’ Advance said.

It now has six months to make an acquisition that constitutes as a reverse takeover. Or it can become an investing company, requiring the raising of at least £6 million.

Should it do neither, shares will be suspended, and then potentially cancelled six months later.

Prior to becoming a cash shell, Advance aimed to grow ‘through acquisition or farm-in to non-operated interests in discovered upstream projects’.

Brent oil quoted at $117.06 a barrel early Friday in London, flat from $117.05 late Thursday. Gold stood at $1,857.91 an ounce, up from $1,846.75.

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