London close: Stocks rise as US PCE inflation slows

27th Sep 2024 16:58

(Sharecast News) - London stocks closed higher on Friday as investors digested a slowdown in the Federal Reserve's preferred inflation measure.

The FTSE 100 gained 0.43% to reach 8,320.76, while the more domestically focused FTSE 250 climbed 1.1% to finish at 21,240.56.

In currency markets, sterling was last down 0.15% on the dollar, trading at $1.3395, and was relatively flat against the euro, edging up 0.02% to change hands at €1.2005.

"Yet another fiscal stimulus by the People's Bank of China, which lowered its reserve requirement ratio by 50 basis points - the second reduction this year - provoked a 3% rally in the Shanghai stock index and stoked global risk on sentiment," said Axel Rudolph at IG.

"The German Dax 40 and Dow Jones made new record highs.

"The one exception was the Nikkei 225, which slid intraday by up to 5% but then settled down with a 2% loss as Japan's ruling party leadership election results led to Shigeru Ishiba becoming the nation's next prime minister."

Rudolph added that US PCE prices rising marginally and personal income growing less than expected were ignored, but US consumer sentiment being revised up to a five-month high was "feted" by market participants.

"The gold price came off Thursday's $2,685 record high while the oil price stabilised in what proved to be a difficult week for the bulls."

US PCE inflation moves closer to Fed target, UK retail sales show signs of recovery

In economic news, inflation in the US moved closer to the Federal Reserve's target in August, potentially paving the way for future interest rate cuts.

The personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, rose by just 0.1% month-on-month, bringing the annual rate down to 2.2% from 2.5% in July.

At the same time the core PCE index, which excludes food and energy prices, saw a modest 0.1% increase in August, with a year-on-year rise of 2.7%, only slightly above July's 2.6%.

Personal income and spending both grew by 0.2% for the month.

On home shores, UK retail sales showed signs of recovery in September, according to the Confederation of British Industry's latest distributive trades survey.

Sales volumes increased slightly, ending a three-month slump, with a balance of 4 compared to -27 in August.

Strong online demand helped drive the improvement, with digital sales experiencing their fastest growth since June 2023.

However, sales levels remained below seasonal expectations, highlighting ongoing challenges for retailers.

Looking ahead, the industry expected sales growth to remain steady in October.

"After a challenging summer, retailers will welcome modest growth in annual sales volumes this month," said Martin Sartorius, principal economist at the CBI.

"While some firms are beginning to see tailwinds from rising household incomes, others report that consumer spending habits are still being affected by the increase in prices over the last few years."

On the continent, economic confidence in the eurozone dipped in September as the region's recovery faltered.

The European Commission's economic sentiment indicator fell by 0.3 points to 96.2, reversing most of the gains seen in August.

Despite slight improvements in consumer and construction confidence, declines in retail trade and industry sentiment weighed on the overall outlook.

The indicator for the broader EU region remained flat at 96.7, reflecting persistent uncertainty across the bloc.

"Weaker growth prospects and easing inflation concerns show a clear turning in eurozone sentiment at the moment, which adds dovish pressure on the European Central Bank," said Bert Colijn, chief Netherland economist at ING.

"All main Eurozone surveys for September have now come in weak, and this means that with inflation relatively benign, the focus for policy makers is shifting from inflation to growth worries at this point."

Earlier in the day, Chinese stocks rallied after Beijing introduced several measures aimed at stimulating the economy.

The People's Bank of China cut the key interest rate on seven-day reverse repurchase agreements by 20 basis points to 1.5% and reduced the reserve requirement ratio for banks by 50 basis points, releasing about CNY 1trn (£106bn) into the financial system.

Those moves followed the announcement of a $114bn lending facility to support capital markets earlier in the week.

China-exposed stocks rise, Rightmove makes gains after fourth REA bid

On London's equity markets, shares of Prudential rose 2.7% on Friday after the company announced a long-term strategic bancassurance partnership with Bank Syariah Indonesia (BSI).

The deal, which would allow Prudential to sell its products through BSI's network, came at a time when it was benefiting from China's recent stimulus measures, boosting its stock throughout the week.

Luxury fashion house Burberry gained 1.75%, continuing its upward trend as positive sentiment around China's economic prospects bolstered demand expectations.

The company, which relies heavily on Chinese consumers, had seen its stock climb steadily over the past week.

Elsewhere, Cranswick surged 6.68% after the food producer said it expected annual results to be at the upper end of forecasts, thanks to stronger-than-expected first-half trading.

The company reported robust performance across its product lines.

PureTech Health advanced 2.66% following news that a schizophrenia treatment it developed, and later sold to Bristol Myers Squibb, had been approved by US regulators.

The approval triggered a $29m payment to PureTech, and opened the door to potential future royalties.

Rightmove edged up 1.02% after urging shareholders to take no action on a fourth takeover bid from Rupert Murdoch's REA Group, valuing the property portal at £6.2bn.

Dan Coatsworth, investment analyst at AJ Bell, quipped that REA "doesn't seem to get" the message.

"The first three offers were rejected on the grounds they 'materially' undervalued the company," he noted.

"There is no way that Rightmove is going to change its tune simply for an extra 5p per share versus the previous offer and a 6p special dividend on top.

"To really get this deal over the line, REA needs to consider an all-cash offer and one that starts with an '8' and not a '7'."

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,320.76 0.43%

FTSE 250 (MCX) 21,240.56 1.10%

techMARK (TASX) 4,867.15 0.47%

FTSE 100 - Risers

Croda International (CRDA) 4,323.00p 3.35%

Smith & Nephew (SN.) 1,165.00p 2.96%

Prudential (PRU) 700.00p 2.70%

Frasers Group (FRAS) 866.50p 2.42%

Entain (ENT) 788.60p 2.42%

Halma (HLMA) 2,655.00p 2.35%

Smurfit Westrock (DI) (SWR) 3,766.00p 2.25%

Sainsbury (J) (SBRY) 299.80p 2.11%

Spirax Group (SPX) 7,645.00p 2.07%

International Consolidated Airlines Group SA (CDI) (IAG) 212.30p 2.02%

FTSE 100 - Fallers

Flutter Entertainment (DI) (FLTR) 17,800.00p -4.02%

Next (NXT) 9,742.00p -3.54%

Fresnillo (FRES) 621.00p -2.44%

Beazley (BEZ) 768.50p -2.35%

SSE (SSE) 1,916.50p -1.47%

Airtel Africa (AAF) 116.80p -0.85%

AstraZeneca (AZN) 11,632.00p -0.75%

Relx plc (REL) 3,568.00p -0.67%

CRH (CDI) (CRH) 6,906.00p -0.63%

Pershing Square Holdings Ltd NPV (PSH) 3,588.00p -0.55%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 1,523.00p 7.63%

Fidelity China Special Situations (FCSS) 214.00p 7.43%

Burberry Group (BRBY) 710.00p 6.96%

Cranswick (CWK) 5,030.00p 6.68%

Aston Martin Lagonda Global Holdings (AML) 159.50p 5.35%

Ocado Group (OCDO) 384.20p 4.92%

Indivior (INDV) 744.50p 4.34%

W.A.G Payment Solutions (WPS) 83.40p 4.25%

Harworth Group (HWG) 192.50p 4.05%

SThree (STEM) 377.00p 3.71%

FTSE 250 - Fallers

Hochschild Mining (HOC) 187.40p -5.73%

Moonpig Group (MOON) 207.50p -3.49%

Alpha Group International (ALPH) 2,250.00p -3.02%

Centamin (DI) (CEY) 153.10p -2.92%

Endeavour Mining (EDV) 1,826.00p -2.72%

Plus500 Ltd (DI) (PLUS) 2,490.00p -1.58%

Helios Towers (HTWS) 114.80p -1.20%

Bank of Georgia Group (BGEO) 3,775.00p -1.18%

Howden Joinery Group (HWDN) 916.00p -1.13%

Volution Group (FAN) 614.00p -1.13%