LONDON MARKET CLOSE: Strong Friday sees first weekly gain this month

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Stocks in London surged into the weekend, rebounding from Thursday's PMI-induced losses, as investors were spurred on by US Federal Reserve Chair Jerome Powell's testimony to US lawmakers.

The FTSE 100 index closed up 188.36 points, or 2.7%, at 7,208.81. The FTSE 250 ended up 430.73 points, or 2.3%, at 19,123.71, and the AIM All-Share closed up 10.41 points, or 1.2%, at 896.27.

For the week, the FTSE 100 added 2.7%, its first weekly gain in three weeks. The FTSE 250 added 1.1%, though the AIM All-Share lost 0.5%.

The Cboe UK 100 ended up 2.7% at 719.15, the Cboe UK 250 rose 2.0% to 16,760.86, and the Cboe Small Companies rose 0.2% at 13,501.66.

In European equities, the CAC 40 stock index in Paris jumped 3.2% higher, while the DAX 40 in Frankfurt added 1.6%.

The Dow Jones Industrial Average was up 2.2% at the time of the closing bell in London. The S&P 500 was up 2.3% and the Nasdaq Composite was 2.2% higher.

Equities got a boost as US Federal Reserve tightening expectations ebbed. Chair Jerome Powell on Thursday testified before US lawmakers.

Powell's words have been forensically analysed this week, with fears of a recession now intensifying.

BDSwiss analyst Marshall Gittler commented: ‘The market took [Powell's] words to heart. Even though he didn't balk at the idea of a 100 basis point hike, the fed funds futures started to price in less tightening in the next year or so and more easing in 2024, presumably on the assumption that the Fed will drive the US into recession and have to loosen again by then.’

The dollar was largely weaker on Friday. The pound was quoted at $1.2282 late on Friday, up from $1.2260 at the London equities close Thursday. The euro was priced at $1.0549, up from $1.0517. Against the yen, the dollar was quoted at JP¥135.10, higher against JP¥134.56.

The dollar struggled, but oil prices advanced.

Brent oil was trading at $113.44 a barrel at the time of London equities close on Friday, up from $111.15 a barrel late Thursday. Gold stood at $1,830.41 an ounce, lower against $1,837.04.

In London, Ultra Electronics advanced 12%, the best mid-cap performer 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.

A private equity takeover of a UK company in a sensitive industry always threatens to be controversial.

Cobham itself exited the London Stock Exchange in January 2020, following a contentious acquisition by US private equity company Advent, which raised national security risks.

Cruise ship operator Carnival jumped 8.7%. It reported a narrowed loss in the second quarter, thanks to surging revenue with passengers now back allowed on cruise ships, but still expects to report a loss in the third quarter.

In the three months to March 31, it recorded a net loss of $1.83 billion, narrowed from the $2.07 billion loss seen in the same period the year before.

Total revenue in the second quarter jumped to $2.40 billion from $50 million.

Retailers ended mixed, meanwhile. Ted Baker lost 3.4%, Superdry fell 3.3%, though Next gained 2.1% and JD Sports rose 4.3%. Price action in the sector was mixed after latest figures showed UK retail sales declined last month.

A backdrop of rising inflation as households across the country continue to grapple with the cost-of-living crisis hit retail sales, numbers from the Office for National Statistics showed.

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.

Analysts at Lloyds commented: ‘The outlook is uncertain, inflation is set to remain elevated in the coming months, with peak food price inflation likely to coincide with the further rise in the Ofgem price cap in the autumn. Despite tight labour markets supporting strong nominal wage growth, see our latest labour market update, further downward pressure on real disposable incomes will likely accentuate the squeeze on consumer spending.’

Lamprell plunged 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.

Monday's economic calendar has US durable goods orders data at 1330 BST. The week picks up pace with a US consumer confidence reading on Wednesday, eurozone unemployment data on Thursday, before inflation data from the single currency area on Friday.

Monday's local corporate calendar has annual results from eggless cakes maker Cake Box and specialist active fund manager Polar Capital.

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