FTSE closes at 7,627.20
The FTSE 100 closed at 7,627.20, thanks to a late rally on reports a US debt deal is close.
However the index is still down 1.7% for the week.
Miners made up more of the top risers, with Rio Tinto gaining 3.6% to 4,929p.
Vodafone was the biggest faller, down 1.8%.
London shares follow Wall Street up
Shares in London have climbed following reports the US is close to a debt ceiling deal.
The FTSE 100 is now up 0.8% to 7633.47, having been down slightly in the late morning.
West End Final: The return of industrial policy is a big deal
“The chancellor committed news this morning, when he essentially said the quiet part out loud, that sometimes a recession is necessary to bring inflation down,” writes Jack Kessler. “That comment, while certainly noteworthy, drew attention away from a potentially much more consequential announcement.
“The Treasury has revealed a life sciences package worth £650m which it hopes will boost the sector, one of the UK’s most successful, worth more than £94bn to the economy in 2021.
“Whisper it quietly, but is this the return of industrial policy (at least, beyond the five ‘e’s, whatever they are?)”
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US stocks rise amid debt deal hopes
US shares soared after markets opened on Wall Street, amid greater optimism the White House and Congress can strike a deal tht would prevent default.
The S&P 500 is up 1% to 4194, while the Dow Jones is up 1.1% to 33112. The Nasdaq is up 1.4% to 12875, having now gained almost 400 points since markets opened yesterday.
AI hopes continued to drive shares up, with tech firms Adobe, Broadcom and Micron Technologies among the top risers
Half-term getaway hit as BA flight cancellations reach 175
Half-term holiday plans for thousands of families have been thrown into disarray after British Airways’ flight cancellations due to an IT failure reached 175.
Most of the affected flights were on short-haul routes to and from Heathrow Airport.
British Airways said the “technical issue” was resolved on Thursday night, but disruption continued into Friday because of aircraft and crew being out of position.
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US stocks set to open slightly higher on cautious debt deal hopes
US stocks are set to open slightly higher with investors cautiously optimistic that the country’s politicans will be able to work out a deal that will prevent a default.
Dow Jones futures are up 0.2% to 32866 and S&P 500 futures are also up 0.2%, to 4168. Nasdaq futures are up by 0.4% to 14025 after big gains yesterday.
The deadline for a deal on the country’s debt ceiling is getting ever-closer with the Treasury’s cash balance falling below $50 billion, but investors are hopeful of progress.
But Richard Hunter, head of markets at Interactive Investor, warned that the deadline to work out a deal would be before the Treasury exhausts its remaining funds.
“Time is running out even to push through any such reform in the required timeframe,” he said.
UK bond yields highest in G7
The UK’s 10-year bond yields are the highest in the G7, as markets continue to worry about the extent of interest rate hikes that will be needed to bring inflation back under control.
Worryingly the UK’s 10Y sovereign yield is now is now the highest in the G7. This didn’t even happen during the #minibudget in late 2022. On one level this reinforces Sunak/Hunt concerns at the time over inflation & juicing demand, but for this to happen on their watch is awkward pic.twitter.com/SHQa6jj1m2
— Simon French (@shjfrench) May 26, 2023
Central London prime office rents get big boost from Elizabeth line
Prime office rents along the Elizabeth line’s central London section have leapt, in some cases by 20% since pre-pandemic, as businesses look for the most commuter-friendly locations research shows.
The data comes in the same week Transport for London said 150 million journeys have been taken across the Elizabeth line in its first year since opening in May 2022.
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‘2024 is looking increasingly concerning’
Oxford Economics’ UK team warned that, while the economy appears resilient in the short term, there could be trouble on the way in 2024.
“The near-term outlook for activity continues to look reasonably good,” Andrew Goodwin and Edward Allenby said. “April saw a rebound in retail sales, while there was another decent outturn for the composite PMI in May.
“But the outlook for the latter part of this year and into 2024 is looking increasingly concerning.
“Our modelling suggests that this is the period when the maximum impact of past monetary tightening will bear down on activity. With further increases in interest rates and a slower fall in inflation adding to the headwinds to growth, we plan to significantly revise down our 2024 forecast when we publish our next update.”
The Standard View: Hunt speaks the uncomfortable truth on inflation
It is not something you hear a Chancellor say every day, not least 12 to 18 months out from a general election. Asked if he was “comfortable with the Bank of England doing whatever it takes to bring down inflation, even if that potentially would precipitate a recession”, Jeremy Hunt replied: “Yes”.
This is all the more remarkable given that recent economic forecasts from the Bank and the International Monetary Fund have suggested that Britain will avoid a contraction. However, that was before this week’s inflation figures
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