LONDON MARKET MIDDAY: Stock prices stage partial rebound this week

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Equity markets were on track to post a positive week, partly making up for a losses seen in a tumultuous series of trading sessions the week before. What hasn't changed from one week to the next is the focus on central bank policy and the state of the trans-Atlantic economy.

The FTSE 100 index was up 97.30 points, or 1.0%, at 7,117.75 midday Friday and is up 1.4% so far this week. London's benchmark stock measure lost 4.1% last week.

The mid-cap FTSE 250 index was up 250.49 points, or 1.4%, at 18,943.47. The AIM All-Share index was up 8.58 points, or 1.0%, at 894.44.

The Cboe UK 100 index was up 1.4% at 709.60. The Cboe 250 was up 1.0% at 16,505.33, and the Cboe Small Companies up 0.4% at 13,519.71.

In mainland Europe, the CAC 40 stock index in Paris was up 1.6%, while the DAX 40 in Frankfurt was up 0.7%.

‘Market sentiment improved yesterday after Fed Chair Jerome Powell reaffirmed his 'unconditional' will to tame down inflation. However, while some investors perceived these words as good news, others remain sceptical about the impact of such policies while the economy starts to show signs of weakness,’ said ActivTrades analyst Pierre Veyret.

Powell admitted that recession is ‘a possibility’ for the US, but said the central bank's commitment to reining in inflation was ‘unconditional’. The central bank chief also told lawmakers on Thursday that sharply higher interest rates may push up unemployment.

In the FTSE 100, Barclays was up 1.4%. The bank said it is buying specialist mortgage lender Kensington Mortgage in a deal worth around £2.3 billion.

London-based bank Barclays is buying Kensington Mortgage from companies controlled by funds managed by private equity firms Blackstone Tactical Opportunities Advisors and Sixth Street Partners.

Conversely, International Consolidated Airlines was down 0.2% after British Airways workers based at Heathrow on Thursday voted to strike in a dispute over pay.

Members of the GMB and Unite backed industrial action. The unions said holidaymakers face disruption, warning of a summer of strikes.

Workers, including check-in staff, will now decide on strike dates, which the union said were likely to be held during the peak summer holiday period. Downing Street said strike action would add to passengers' ‘misery’ at airports and called for BA to put contingency measures in place.

In the FTSE 250, Ultra Electronics was the standout performer, up 13%, after its takeover by Cobham moved a step closer to completion.

The UK government on Thursday said it was ‘minded to accept’ remedies to address national security concerns raised by the £2.6 billion acquisition of the defence specialist by former London-listing Cobham.

UK Business Secretary Kwasi Kwarteng on Thursday launched a consultation into the undertakings offered by Cobham to acquire Ultra, which makes submarine-hunting equipment as well as control systems for the fleet of Trident submarines that carry the UK's nuclear deterrent.

Ultra Electronics said that if the secretary of state's formal approval is received following completion of the consultation, the next key step for the acquisition will be sanction by the court at the scheme court hearing.

At the other end of the midcaps, Energean was the worst performer, down 5.6% at 1,106.00 pence, following a substantial share sale.

Chief Executive Mathios Rigas sold 5 million shares via Growthy Holdings Co at £11.06 each, in a deal worth £55.3 million, in London on Thursday.

Growthy now holds around 15 million shares, an 8.5% stake in the exploration and production company.

In light of the sale, Energean said: ‘Rigas remains fully committed to the business and is confident in the outlook for Energean.’

Tui was down 2.6%. The travel operator promoted Chief Financial Officer Sebastian Ebel to chief executive officer, with effect on October 1.

He will be replacing Fritz Joussen, who is stepping down from the Anglo-German holiday operator at the end of September after nine years as CEO since 2013.

Tui said Joussen has exercised a right of resignation granted in connection with the conditions of the financial support provided by the German government in response to the Covid-19 pandemic, which badly hurt the travel sector.

Elsewhere, Lamprell was down 79%. The provider of oil field services received a ‘discounted’ cash takeover offer from 25% shareholder Blofeld Investment Management and also said it has been in discussions over a potential equity fundraise of $150 million.

Turning to current trading, Lamprell says its performance continues to be affected by the delivery of legacy, low-margin projects and insufficient revenue levels, as it emerges from a ‘prolonged period’ of low market activity due to low energy prices and Covid-19. The United Arab Emirates-based firm added that revenue will be heavily weighted towards the second half of 2022.

The pound was quoted at $1.2302 at midday on Friday, up from $1.2260 at the London equities close Thursday.

On the economic front, UK retail sales fell in May against a backdrop of rising inflation as households across the country continue to grapple with the cost-of-living crisis, according to figures from the Office for National Statistics.

On an annual basis, UK retail sales fell 4.7% in May, easing from a 5.7% decline in April. The latest reading missed the market forecast, cited by FXStreet, for a 4.5% drop.

UK retail sales fell 0.5% in May month-on-month, reversing a 0.4% rise in April. The print beat the market estimate of a 0.7% decline. The ONS said the decline in sales volumes over the month was because of food stores, which fell by 1.6%.

The figures come as data showed UK consumer confidence fell to its lowest level since records began in 1974 as a ‘stark new economic reality’ hits households.

GfK's long-running consumer confidence index dropped one point to minus 41 in June, setting a new record low for a second successive month.

Confidence in personal finances over the next 12 months fell three points to minus 28, which was 39 points lower than this time last year. Expectations for the general economic situation over the coming year also dropped, by one point to minus 57, 55 points lower than last June.

Meanwhile, UK Prime Minister Boris Johnson said he will ‘keep going’ after his authority was dealt a series of blows by a double by-election defeat which triggered the resignation of a Cabinet minister.

Johnson acknowledged on Friday that losing the former Tory stronghold of Tiverton and Honiton to the Lib Dems as well as surrendering Wakefield to Labour was ‘tough’, but he insisted he was pushing on, and vowed to ‘listen’ to voters.

Conservative Party Co-Chair Oliver Dowden quit, saying he and Tory supporters are ‘distressed and disappointed by recent events’, telling Johnson that ‘someone must take responsibility’.

The euro was priced at $1.0545, up from $1.0517. Against the yen, the dollar was quoted at JP¥135.02 in London, higher against JP¥134.56.

Brent oil was trading at $111.65 a barrel Friday at midday, up from $111.15 a barrel late Thursday. Gold stood at $1,827.30 an ounce, lower against $1,837.04.

New York was pointed to a higher open on Friday, looking to build on Thursday's rally.

The Dow Jones Industrial Average was called up 0.7% and the S&P 500 up 0.8% and the Nasdaq Composite up 1.0%. The indices had added 0.6%, 1.0% and 1.6% respectively on Thursday.

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