London close: Stocks take a breather after recent losses

The FTSE 100 ended the session up 1.67% at 7,513.44, and the FTSE 250 was 1.56% firmer at 20,146.88.

Sterling, meanwhile, was in a mixed state, last gaining 0.74% on the dollar to $1.2572, while it weakened 0.34% against the euro to €1.1785.

“Lately there has been growing chatter that the European Central Bank might lift interest rates in July, and this morning, Christine Lagarde dropped a big hint that rates will be lifted,” said Equiti Capital market analyst David Madden.

“Lagarde, the European Central Bank president, said that rates could be brought out of negative territory by the end of the third quarter.

“Currently, the deposit rate is -0.5%, so such a move would require a hike of at least 50 basis points.”

Madden noted that the comments from Lagarde pushed the euro higher against most major currencies.

“Today’s sharp rally in the euro compounded the dollar’s issues, which is why the single currency has gained so much ground against it when compared with the British pound.

“Since March, the Federal Reserve has hiked rates twice, one of which was a 50 basis point lift, and there is speculation there might be another 50 basis points hike next month.

“Meanwhile, the Bank of England lifted rates four times in five months.”

CPI in the eurozone was at a record high, David Madden added, with the ECB looking likely to not let the interest rate differentials become too great.

On the economic front, industry data showed house prices pushing higher in May, hitting a fresh record as lack of supply weighed heavily.

According to Rightmove, the average asking price of a property coming to market hit a fourth consecutive record in May, rising 2.1% on the previous month to £367,501 - the highest for the time of year since May 2014.

Year-on-year the price jumped 10.2%.

Average asking prices had now risen £55,551 in the past two years, Rightmove said, compared to a rise of just £6,218 in the two years leading up to the pandemic.

The property portal said the latest increase had been caused by supply failing to keep up with still buoyant demand.

It said the number of buyers contacting estate agents in May was 31% higher than pre-pandemic levels, though it was down 14% year-on-year.

By contrast, the number of available properties was down 16% year-on-year, and tumbled 55% compared to 2019.

“People may be wondering why the housing market is seemingly running in the opposite direction to the wider economy,” said Tim Bannister, director of property science at Rightmove.

“What the data is showing us is that those who have the ability to do so are prioritising their home and moving, and the imbalance between supply and demand is supporting rising prices.

“We anticipate that the effects of the increased costs of living and rising interest rates will filter through to the market later in the year, and a combination of more supply of homes and people weighing up what they can afford will help to moderate the market.”

Across the channel, German business sentiment unexpectedly improved in May, according to a survey from the Ifo Institute.

The business climate index increased to 93.0 from 91.9 in April, coming in above expectations for a reading of 91.4.

Meanwhile, the expectations index ticked up to 86.9 in May from 86.8 the month before, while the current situation index rose to 99.5 from 97.3.

Andrew Kenningham, chief Europe economist at Capital Economics, said that while the Ifo index came in better than feared and suggested there were upsides risks to his forecast for a second quarter GDP contraction, it was still at a very low level by historic standards, with the long-term average standing at around 97.0.

"While the relationship between the index and economic growth is not perfect, the readings since March are all consistent at face value with GDP declining in year-on-year terms," he said.

In London’s equity markets, B&Q owner Kingfisher was up 2.19% after it reiterated annual guidance, reported an expected fall in first-quarter sales, and announced a £300m share buyback.

The company said total group sales fell 5.8% to £3.2bn in the three months to April 22, in line with its expectations, against tough comparators last year when a DIY boom amid Covid lockdowns boosted revenues.

IT provider Kainos Group surged 19.28% after its full-year results, and following an upgrade to ‘buy’ from ‘hold’ at Canaccord.

Moonpig Group was 11.15% higher after agreeing to buy UK gifting group Buyagift for £124m.

“Shares in Moonpig have jumped more than 13% as investors cheer the acquisition of this cash generative, high growth business,” said Victoria Scholar, head of investment at Interative Investor.

“While Moonpig is best known for selling greetings cards online, its plans to expand further into gifts via this acquisition could help broaden its product offering and boost margins, particularly for some of the more expensive add-on products beyond its bread and butter.”

Scholar said Moonpig was also likely to benefit from “significant synergies”.

“After an initial surge on IPO day last year, Moonpig shares have struggled alongside other UK tech companies like TGH.

“With shares down around 40% since the January high, today’s acquisition comes as a welcomed update for investors and arguably could mark the start of a more bullish phase for the online greetings cards business.”

Flutter Entertainment and Entain were both on the front foot, by a respective 1.68% and 1.14%, after Australia's Crown Resorts agreed to be taken over by private equity firm Blackstone in a £5bn deal.

Spirax-Sarco Engineering reversed earlier losses to add 0.67%, after it said it was considering closing its loss-making Chromalox manufacturing facility in Soissons, France.

The company said it had started consulting with trade unions about the financial underperformance of the facility and its consequences, including potential closure of the site.

Quilter also clawed back above the waterline during the afternoon, having earlier fallen after it confirmed it was returning £328m to shareholders via an issue of B shares.

On the downside, Intertek Group was knocked 3.94% lower by a downgrade to ‘hold’ at Stifel.

Market Movers

FTSE 100 (UKX) 7,513.44 1.67%
FTSE 250 (MCX) 20,146.18 1.56%
techMARK (TASX) 4,415.19 1.29%

FTSE 100 - Risers

Royal Mail (RMG) 332.00p 5.26%
M&G (MNG) 216.70p 4.79%
Intermediate Capital Group (ICP) 1,462.00p 4.73%
Aviva (AV.) 429.20p 4.15%
Vodafone Group (VOD) 126.10p 4.13%
ITV (ITV) 74.36p 3.97%
Ocado Group (OCDO) 783.60p 3.82%
Anglo American (AAL) 3,654.00p 3.70%
Barclays (BARC) 157.74p 3.29%
NATWEST GROUP PLC ORD 100P (NWG) 217.00p 3.19%

FTSE 100 - Fallers

Intertek Group (ITRK) 4,706.00p -3.94%
Harbour Energy (HBR) 446.80p -1.04%
SEGRO (SGRO) 1,105.00p -1.03%
Rolls-Royce Holdings (RR.) 83.14p -0.20%
United Utilities Group (UU.) 1,129.00p -0.04%
Smurfit Kappa Group (CDI) (SKG) 3,095.00p -0.03%
Next (NXT) 6,130.00p 0.00%
Pearson (PSON) 759.20p 0.05%
Whitbread (WTB) 2,670.00p 0.11%
B&M European Value Retail S.A. (DI) (BME) 423.00p 0.14%

FTSE 250 - Risers

Kainos Group (KNOS) 1,231.00p 19.28%
Moonpig Group (MOON) 261.20p 11.15%
Virgin Money UK (VMUK) 152.60p 8.15%
Discoverie Group (DSCV) 760.00p 7.04%
Auction Technology Group (ATG) 960.00p 6.31%
Bridgepoint Group (Reg S) (BPT) 302.60p 6.18%
TBC Bank Group (TBCG) 1,400.00p 6.06%
Ferrexpo (FXPO) 181.30p 5.96%
Pantheon International (PIN) 296.00p 5.71%
Hochschild Mining (HOC) 111.60p 5.28%

FTSE 250 - Fallers

Quilter (QLT) 121.90p -14.29%
Coats Group (COA) 72.10p -4.38%
Vietnam Enterprise Investments (DI) (VEIL) 654.00p -2.55%
TUI AG Reg Shs (DI) (TUI) 196.40p -2.53%
Carnival (CCL) 952.80p -2.40%
Johnson Matthey (JMAT) 2,304.00p -2.37%
Capricorn Energy (CNE) 198.00p -1.98%
Countryside Partnerships (CSP) 240.00p -1.23%
Allianz Technology Trust (ATT) 218.00p -0.91%
Brewin Dolphin Holdings (BRW) 508.00p -0.78%