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Miners lift FTSE; Biden says US will avoid default

(Alliance News) – Shares in London opened mostly in the green on Friday as a strong performance from miners helped pull the FTSE 100 out of the week’s slide amid fears of a US debt default.

The FTSE 100 opened up 20.38 points, or 0.3%, at 7,591.25. The FTSE 250 fell 18.05 points, or 0.1%, to 18,822.70 and the AIM All-Share gained 0.83 points, or 0.1%, to 793.37.

The Cboe UK 100 rose 0.1% to 757.68, the Cboe UK 250 fell 0.3% to 16,372.62 and the Cboe Small Companies rose slightly to 13,357.67.

The Office for National Statistics estimated on Friday that the volume of retail sales in April rose 0.5% from the previous month, following a downwardly revised 1.2% fall in March.

The reading was slightly above the market consensus quoted by FXStreet of 0.3%.

“Despite the undeniable level of cost pressures currently being felt by consumers, rising wages and high employment rates have provided some insulation,” said Richard Hunter of Interactive Investor.

In the retail sector, Asos gained 1.7% after announcing it had raised £75m. through an equity placement, to support its ‘Driving Change’ programme”.

The online fashion retailer placed a total of 17.9 million shares at 418.1 pence each.

The funds raised will be used to fund its new program which aims to enable Asos to return to sustainable profits and generate cash in the second half of this year.

“Free cash flow and net debt have increased, so taking the bull by the horns and securing new funding is the right solution, although this can be seen as evidence of the difficult business environment,” said Sophie Lund Yates, of Hargreaves Lansdown.

Meanwhile, shares in auto and bike retailer Halfords struggled, falling 5.6% as Royal Bank of Canada cut the stock to “sector perform.”

The pound strengthened against the dollar after an upbeat speech from a Bank of England official last Thursday.

The central bank cannot rule out further rate hikes, Jonathan Haskel, a member of its policymaking body, told a conference in Washington, DC. He said inflation could be worse, but the bank may have to raise rates again to bring them back to its 2% target.

The pound was trading at $1.2347 early Friday, higher than $1.2330 when London markets closed on Thursday.

Meanwhile, UK Chancellor Jeremy Hunt has said he is not opposed to Britain going into recession if necessary to tackle high inflation, according to Sky News.

“If we want prosperity, growth in the economy, reducing the risk of recession, we need to support the Bank of England in the tough decisions they make,” Hunt told Sky News.

The euro traded at $1.0737, down from $1.0723. Against the yen, the dollar was quoted at 139.79 yen, down slightly from 139.85 yen.

In Europe, the CAC 40 in Paris rose 0.5%, while the DAX 40 in Frankfurt rose 0.3%.

In the US, Wall Street ended higher on Thursday, with the Dow Jones index up 0.1% and the S&P 500 up 0.9%. The tech-heavy Nasdaq Composite advanced, adding 1.7% as chip maker Nvidia rose 24%.

“Away from technology, investors continued to be preoccupied with debt ceiling talks and Federal Reserve policy,” Hunter added.

President Joe Biden said Thursday that the United States would avoid a catastrophic default even as lawmakers adjourned for 10 days without agreeing to raise the nation’s borrowing limit to continue paying the bills.

There are seven days to June 1, when the government estimates it may run out of money to service its debt.

Despite the specter of a US debt default, stocks in Asia followed Wall Street’s lead. The Nikkei 225 index in Tokyo closed with 0.4 per cent. In China, the Shanghai Composite Index closed up 0.4%, while Hong Kong’s financial markets closed for Buddha Day. In Sydney, the S&P/ASX 200 index closed up 0.2 per cent.

In the FTSE 100, miners were up.

Rio Tinto rose 4.3% as Morgan Stanley raised the stock to “overweight”. Antofagasta rose 3.5%, while Anglo American and Glencore rose 2.9%.

Gold was trading at $1,950.71 an ounce early Friday, up slightly from $1,945.11 on Thursday. Brent crude traded at $76.39 a barrel, up from $76.15.

On AIM, shares in digital publisher XLMedia fell 16%.

The company warned that it expects the current market weakness to continue into early summer. Despite a “good start” to the first quarter in the US, revenue in the first half is expected to be lower than the previous year, which had benefited from the launch of online sports betting in New York.

Operator acquisition spend in the first half is not comparable to the previous year, XLMedia notes, with “less generous” promotions to attract new customers. XLMedia said business in Europe was in line with expectations, supported by the Cheltenham and Aintree horse racing festivals in the UK. The company will provide an update on the first half of the year at the end of July.

Friday’s economic calendar calls for the release at 1:30 p.m. of the core index of US household consumption expenditures. The Consumer Expenditure Core Index is the Federal Reserve’s preferred measure of inflation.

By Elizabeth Winter, Senior Reporter at Alliance News

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