Tech shines as investors cheer US inflation ease

(Alliance News) - Stock prices in Europe closed higher on Friday, while tech shares surged in New York, after a cooler US inflation reading offered hope that the end of the Federal Reserve's hiking cycle is closer.

Despite Friday's advance, London's FTSE 100 suffered a decline in the second quarter, a period beset by interest rate worries, inflation, growth fears out of China and the US debt ceiling crisis.

London's blue-chip benchmark added 59.84 points, 0.8%, at 7,531.53 on Friday.

For the week, the FTSE 100 added 0.9%. It rose 1.2% in June but fell 1.3% for the whole of the second quarter.

The FTSE 250 closed up 146.03 points, 0.8%, at 18,416.76 on Friday. The AIM All-Share rose 2.78 points, 0.4%, at 753.51.

For the week, the FTSE 250 surged 2.0%, though the AIM All-Share fell 1.8%.

The Cboe UK 100 closed up 0.8% at 751.67 on Friday, while the Cboe UK 250 surged 1.0% at 16,094.80. The Cboe Small Companies closed marginally higher at 13,711.32.

In European equities, the CAC 40 index in Paris rose 1.2% and the DAX 40 in Frankfurt climbed 1.3%.

US inflation pressure eased last month, defying economic forecasts, according to the latest personal consumption expenditures report on Friday.

The year-on-year headline PCE reading eased to 3.8% in May, the Bureau of Economic Analysis said, from 4.3% in April. April's figure was downwardly revised from 4.4%. May's figure came in well-off the FXStreet-cited consensus of an uptick to 4.6%.

Annual core PCE, the Federal Reserve's preferred inflationary gauge, eased to 4.6% in May, from 4.7% in April. It had been expected to remain unchanged in May, according to FXStreet. The core PCE figure, which excludes food and energy, has sat at either 4.6% or 4.7% since December.

The data meant the dollar was ending the week on the back foot.

The euro traded at USD1.0916 late Friday afternoon, up from USD1.0886 at the European equities close on Thursday. Sterling was quoted at USD1.2706, higher than USD1.2611. Against the yen, the dollar was quoted at JPY144.58, down from JPY144.70.

"The apparent weakness of consumption growth and slowdown in core inflation in the second quarter leave us a bit more confident in our view that the Fed's next rate hike will prove to be the last," Capital Economics analyst Andrew Hunter commented.

The dollar struggled, but New York-listed equities were on the up, supported by the hope that Fed may soon take its foot off the monetary policy tightening brake pedal.

The Dow Jones Industrial Average was up 0.7%, the S&P 500 surged 1.0% and the Nasdaq Composite jumped 1.4%.

Apple shares powered above USD3 trillion in market valuation as stocks rose the data had showed the key US inflation measure eased.

Apple shares were up 1.6% at USD192.58 each in New York on Friday afternoon, giving it a market capitalisation of USD3.03 trillion.

"The first half of 2023 is ending with a bang as stocks reach their highest levels of the year. Keys to the second half will be the persistence of inflation. Shelter costs will come down but won't approach to 2% inflation target of the Fed. High rates will be inflationary while one can't count on energy costs falling as fast as they did in the first half of the year. For stocks to continue upward, markets need to see a relatively soft landing and measurable progress in the war against inflation," analysts at Tower Bridge Advisors commented.

In London, gains for the FTSE 100 were broad-based, with only a handful of stocks ending the rest. Among them were United Utilities and Severn Trent, falling 1.5% and 1.3% as the Thames Water drama continues to weigh on the utility stocks.

Elsewhere in London, Revolution Beauty surged 13%. The stock has risen in every trading day since shares were re-admitted to AIM after a lengthy suspension on Wednesday. boohoo, which holds roughly a 27% stake in the firm and eyes replacing its board, added 3.2%.

Revolution Beauty hailed a "very positive reaction" since the retailer's stock was re-admitted.

"The board continues to believe in the exciting future growth prospects of the business and believes the company's shares are still significantly undervalued. The company has received positive feedback from a wide group of stakeholders, all of whom see this as the start of the next phase in the company's journey following the troubles of the past 12 months," Revolution Beauty said.

The re-admission followed a stormy annual general meeting which saw three Revolution Beauty ousted, before later returning.

boohoo called the Revolution Beauty board "self-serving" and said it is "contravening best practice in relation to corporate governance". Revolution Beauty on Friday labelled that accusation as ironic, given the fast fashion firm's own "long and well documented track record of substandard corporate governance".

Revolution Beauty defended the share options granted Chief Executive Officer Bob Holt and Chief Financial Officer Elizabeth Lake, two of the directors who were initially ousted from the board at the AGM.

"These amounts pale in comparison to the extremely management-friendly incentive packages boohoo have awarded in the past, including most recently awarding the executive team significant cash bonuses even after missing certain financial targets," Revolution Beauty added.

Revolution Beauty called on boohoo to clarify its "strategy and future plans" for the company.

Petrofac rose 7.4%. The energy infrastructure company secured a USD700 million contract, being picked up Adnoc Gas Processing for the engineering, procurement and construction of a new gas processor plant at the Habshan complex, west of Abu Dhabi.

Also winning a deal, Pod Point added 2.2%. The electric vehicle charging infrastructure provider signed a partnership agreement with UK Power Networks. UK Power Networks serves 8.3 million homes and businesses across London, the south east and east of England.

The deal will provide flexibility services by adjusting electric vehicle charging schedules to help match renewable power generation, Pod Point said.

Trackwise Designs tanked 56% as continued manufacture and delivery issues contributed to the delay of its audited results. Its shares will be suspended next week as a result.

The Tewkesbury, England-based manufacturer of products using printed circuit technology also announced a pessimistic update on its anticipated annual results.

Trackwise said it expects a pretax loss of GBP7.7 million for 2022, widened from GBP2.0 million the year before. Its adjusted operating loss should be around GBP3.0 million, stretching from GBP580,000. It expects to report GBP7.5 million in revenue, down from GBP8.0 million.

A barrel of Brent oil rose to USD75.58 on Friday in London, up from USD73.70 late Thursday. Gold bought USD1,915.48 an ounce, up from USD1,911.17.

Monday's UK corporate calendar has half-year results from filtration technology firm Porvair.

The economic calendar has a slew of manufacturing purchasing managers' index readings, including from China and Japan overnight, before the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST. Financial markets in New York close at 1300 local time on Monday for Independence Day. They stay closed on Tuesday for the public holiday.

The week picks up speed on Wednesday with services PMI readings from across the globe and the latest US nonfarm payrolls on Friday.

By Eric Cunha, Alliance News news editor

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