LONDON MARKET CLOSE: Stocks close higher as US inflation measure eases

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Stocks in London ended in the week in the green after the latest inflation data from the US lifted hopes that inflationary pressures have peaked and price increases could be slowing.

According to the Bureau of Economic Analysis, the core personal consumption expenditures price index rose 4.9% year-on-year in April, slowed from 5.2% in March and in line with consensus. The figure, which excludes food and energy prices, is the US Federal Reserve's preferred inflation gauge.

The wider PCE price index grew 6.3% annually in April, slowing from a 6.6% rise in March. The figure came in below FXStreet-cited market consensus, which had forecast the PCE price index to remain unchanged at 6.6%.

April's PCE reading will fuel hope that inflationary pressures have peaked.

The FTSE 100 index ended up 20.54 points, or 0.3%, at 7,585.46 on Friday - rising 2.7% this week.

The mid-cap FTSE 250 index closed up 123.78 points, or 0.6%, at 20,372.52. The AIM All-Share index ended up 10.25 points, or 1.1%, at 968.25.

For the week, the FTSE 250 gained 2.7%, while the AIM All-Share rose 1.1%.

The Cboe UK 100 index closed up 0.2% at 756.03. The Cboe 250 ended up 0.2% at 18,055.54 and the Cboe Small Companies rose 0.2% to 14,657.62.

In mainland Europe, the CAC 40 stock index in Paris closed up 1.6%, while the DAX 40 in Frankfurt ended up 1.6%.

‘It has been another bullish run for equity markets in the US and Europe as traders are less fearful about the possibility of an extremely hawkish Federal Reserve,’ said Equiti Capital analyst David Madden. ‘The [core PCE] reading is the Fed's preferred measure of inflation, and the fact that it retreated adds weight to the view the Fed will not be overly aggressive when it comes to lifting interest rates in the months ahead.’

In the FTSE 100, Scottish Mortgage Investment Trust ended the best performer, up 6.6%, tracking a rise in the tech-heavy Nasdaq Composite index in New York. The trust has stakes in the likes of Tesla and Amazon.

At the other end of the large-caps, oil producers were still reeling from the UK government's plans to introduce a windfall tax on oil and gas operators.

Harbour Energy ended the worst performer, down 11%, while BP and Shell lost 1.1% and 1.0% respectively. Smaller North Sea-focused producers EnQuest and Serica Energy closed down 10% and 6.8% respectively.

On Thursday, UK Chancellor Rishi Sunak announced a £15 billion support package for households around the country to offset some of the rising energy bills.

At the same time he said that the government would try to raise £5 billion by slapping an extra 25% on the tax that North Sea oil producers pay to HM Revenue & Customs. It came with a promise that the firms can claim heavy tax relief if they invest in the UK, but only for investments in oil and gas.

In response, Shell questioned the UK government's decision not to allow its green investment to count towards the tax relief it will get from the new windfall tax.

Shell said: ‘In its current form the levy creates uncertainty about the investment climate for North Sea oil and gas for the coming years.

‘And, longer term, the proposed tax reliefs for investment don't extend to the renewable energy system we want to drive forward in the UK and invest in very substantially.

‘When making plans for the next decade and beyond, we need certainty.’

Rival oil major BP on Thursday said it would review its investments in the North Sea in light of the government's windfall tax plans.

Sunak, meanwhile, insisted he did not time handing out £21 billion worth of cost-of-living support to deflect from the controversy over Downing Street lockdown parties.

Royal Mail closed down 1.9% after Bernstein downgraded the postal operator to 'market perform' from 'outperform'.

The pound was quoted at $1.2612 at the London equities close, up from $1.2580 at the close Thursday.

The euro stood at $1.0705 at the European equities close, down from $1.0725. Against the yen, the dollar was trading at JP¥127.17, lower against JP¥127.37.

Stocks in New York were higher at the London equities close. The DJIA was up 0.7%, the S&P 500 index up 1.5% and the Nasdaq Composite up 2.3%.

On Wall Street, Workday was down 9.0% after the HR and finance application vendor, late Thursday, reported a widened first-quarter loss.

Brent oil was quoted at $117.73 a barrel at the equities close, up from $117.05 at the close Thursday.

Gold stood at $1,852.40 an ounce at the London equities close, higher against $1,846.75 late Thursday.

The economic events calendar on Monday has Germany inflation readings at 1300 BST. Financial markets in the US will be closed on Monday for Memorial Day.

The UK corporate calendar on Monday has annual results from equipment rental firm Speedy Hire and a trading statement from ad agency S4 Capital.

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