London midday: Stocks stay up ahead of US retail sales, bank earnings

(Sharecast News) - London stocks were still firmer by midday on Friday, with sentiment lifted by a cooler-than-expected US inflation print, as investors eyed US retail sales and bank earnings. The FTSE 100 was up 0.4% at 7,871.95.

Figures released on Thursday by the US Department of Labor showed that the producer price index for March fell 0.5% against expectations for a flat reading. Year-on-year, it rose 2.7%, down from 4.9% in February and below consensus expectations for a 3.4% increase.

The focus on Friday will be on US retail sales data for March, due at 1330 BST. Investors will also watch out for first-quarter results from JPMorgan, Citigroup and Wells Fargo.

Russ Mould, investment director at AJ Bell, said: "The FTSE 100 followed up yesterday's Wall Street gains as easing factory gate prices from across the pond suggested the Fed is nearing the end of its battle with inflation.

"Resulting strength in sterling versus the dollar, with the UK currency hitting a 10-month high against its US counterpart, weighed on the index a little thanks to its heavy exposure to overseas earnings which are relatively diminished by a higher pound.

"Sterling's recovery from near parity to the dollar in the wake of the disastrous mini-Budget in September 2022 has been Lazarus like.

"The recent banking crisis started across the Atlantic with the collapse of Silicon Valley Bank and the US regional banking sector is perceived as more vulnerable than UK banks.

"All eyes will be on the big US banks as they kick off the first quarter reporting season later today. The potentially dicier outlook for US institutions means the Federal Reserve may have to prioritise its role in preserving financial stability over pursuing further rate hikes to firmly stamp out inflation. Consequently, the market is now pricing in at least one more rate hike from the UK versus no more from the Fed in the near-term."

In equity markets, shares in Dechra Pharmaceuticals rocketed after the company announced late on Thursday that it was in talks with Swedish private equity firm EQT about a possible £4.6bn takeover.

Standard Chartered gained after Jefferies lifted its price target on the 'buy' rated stock to 1,000p from 950p. It said the 22% share price pullback since March "seems harsh in context of favourable operating trends".

Online electricals retailer AO World surged after saying it expects full-year profit to be around the top end of its guidance range as it continues to see positive traction from its initiatives to cut costs and improve margins.

888 was also up sharply after the William Hill owner said it expects "significantly" higher adjusted core profit for this year, but that revenue could be lower by a low-to-mid single digit percentage.

Iconic boot maker Dr Martens rallied despite lowering profit guidance for the second time in four months due to higher costs at its Los Angeles distribution centre and lower wholesale revenues.

Premier Inn owner Whitbread was lifted by an upgrade to 'buy' from 'add' at Peel Hunt.

Fashion retailer Superdry tumbled as it withdrew its "broadly breakeven" full-year profit guidance, pointing a challenging trading environment and disappointing retail sales in February and March.