(Alliance News) - Stock prices in London opened lower on Friday as US Federal Reserve Chair Jerome Powell failed to soothe fears of a surge in inflation, while London Stock Exchange Group's annual results underwhelmed.
The FTSE 100 index was down 44.69 points, or 0.7%, at 6,606.19. The mid-cap FTSE 250 index was down 163.78 points, or 0.6%, at 21,132.45. The AIM All-Share index was down 0.6% at 1,166.66.
The Cboe UK 100 index was down 0.8% at 657.50. The Cboe 250 was down 0.8% at 18,834.85 and the Cboe Small Companies was flat at 13,542.82.
In mainland Europe, the CAC 40 in Paris was down 1.2% while the DAX 30 in Frankfurt was down 1.1%.
As the US economy recovers, Fed Chair Powell said "you could see prices moving up" but those increases are likely to be transient. "And this is a difference between a one-time surge in prices and ongoing inflation."
However, while Powell said the Fed was ready to step in when needed, traders were left disappointed that he did not indicate the central bank would act on the rise in yields such as increasing its bond purchases.
The yield on benchmark 10-year US Treasuries spiked back above 1.5% at a one-year high after his comments. Yields rise as prices fall. Inflation makes bonds less attractive by eroding the value of their income payments.
"The Federal Reserve's insistence that it believes these inflation moves are transitory was not enough to arrest a further spike in bond yields, as investors fretted that there were no plans to control the longer end of the yield curve. At the same time, the perceived threat of higher interest rates arriving earlier than expected washed through to the shares which could be most obviously affected by the resultant slowing of profits," said Richard Hunter, head of Markets at interactive investor.
In the FTSE 100, shares in oil majors BP, Royal Dutch Shell 'A' and 'B' were up 0.3%, 0.1% and 0.1% respectively, tracking spot oil prices higher following the OPEC meeting on Thursday.
The OPEC group of oil producers and its allies decided to allow a slight rise in crude output in April after talks, with market demand still fragile.
Brent oil was quoted at USD67.76 a barrel Friday morning, higher from USD67.11 late Thursday.
A statement released after the ministerial-level talks said participants "approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130,000 and 20,000 barrels per day, respectively, due to continued seasonal consumption patterns".
The oil exporting countries are largely extending their restrictive production policy for another month until the end of April.
At the other end of the large-caps, London Stock Exchange Group was the worst performer, 4.9% lower. The trading and clearing operator and index calculator said it delivered a strong financial performance in 2020, saying revenue growth continued across its businesses as it prepared to take on new acquisition Refinitiv.
For 2020, LSEG posted total revenue of GBP2.12 billion, up 2.9% from GBP2.06 billion in 2019, and total income rose 6% to GBP2.44 billion from GBP2.31 billion. The figures were in-line with company-compiled consensus forecasts.
LSEG hailed its "transformational" acquisition of Refinitiv saying it will ramp up its growth strategy and position as a leading global financial markets infrastructure and data provider by adding leading data, analytics and multi-asset class capital markets capabilities.
Refinitive was bought for USD27 billion and received its final regulatory approvals in January.
Scottish Mortgage Trust was once again in the red, down 4.5%, tracking falls in high-profile US tech stocks Tesla and Amazon in its portfolio. Tesla and Amazon ended down 4.5% and 0.9% respectively in New York on Thursday, while the tech-heavy Nasdaq Composite index ended down 2.1%. FTSE 250-listed Baillie Gifford US Growth Trust - which also holds shares in Tesla - was the mid-cap index's worst performer, off 7.5%.
In the FTSE 250, Spirent Communications was the best performer, up 8.5%, after the telecommunications networks services provider said it has acquired US-based automated wireless test solutions provider octoScope for USD55 million on a debt and cash free basis.
Aggreko was up 1.1% at 898.79 pence on Friday in London, giving a market capitalisation of GBP2.28 billion. The Glasgow-based temporary power generation supplier announced it has accepted a GBP2.32 billion takeover offer from Albion Acquisitions.
Albion Acquisitions is a company newly formed by funds managed by Miami-based private equity firm I Squared Capital Advisors US LLC and investment funds managed by London-based private equity firm TDR Capital LLP.
Under the acquisition's terms, Albion will acquire Aggreko for 880p per share in cash, reflecting a 2.0% discount to the company's closing price of 889.00 pence on Thursday, but a 39% premium to the closing price of 635p on February 4, the last day before the start of the offer period.
The dollar strengthened following Powell's comments. The pound was quoted at USD1.3855 early Friday, down sharply from USD1.3989 at the London equities close Thursday.
The euro was priced at USD1.1937, lower from USD1.2047. Against the Japanese yen, the dollar was trading at JPY108.35, up sharply from JPY107.56.
The Japanese Nikkei 225 index closed down 0.2%. In China, the Shanghai Composite ended flat, while the Hang Seng index in Hong Kong finished 0.4% lower. The S&P/ASX 200 in Sydney closed down 0.7%.
China's leaders on Friday set a growth target "above 6.0%" for 2021, putting it back above pre-pandemic levels, after the virus was largely brought under control at home thanks to strict lockdowns and mass testing.
The goal comes after the world's number-two economy suffered its slowest rate of expansion in four decades because of the strict containment measures and as the disease wiped out global trade.
"In setting this target, we have taken into account the recovery of economic activity," said Premier Li Keqiang at the opening of the country's annual legislative session, adding that this dovetails with future goals such as "high-quality development", innovation and reform.
Beijing usually sets annual economic growth targets that it regularly exceeds, though it did not set a target last year owing to the outbreak of the virus pandemic.
Gold was trading at USD1,697.15 an ounce early Friday, down from USD1,718.65 at the London equities close Thursday.
Friday's economic calendar has the US jobs report for February at 1330 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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