(Alliance News) - Shares in London ended the week on the front foot, as markets priced in rising speculation that the Federal Reserve could yet deliver a bigger-than-expected rate cut next week.
The FTSE 100 index rose 32.12 points, or 0.4%, at 8,273.09. The FTSE 250 ended up 199.60 points, 1.0%, at 20,895.37, and the AIM All-Share firmed 3.87 points, or 0.5%, at 745.23.
For the week, the FTSE 100 rose 1.1%, the FTSE 250 climbed 2.0% and the AIM All-Share gained 0.1%.
The Cboe UK 100 rose 0.4% to 827.40, the Cboe UK 250 advanced 1.0% at 18,416.81, and the Cboe Small Companies ended up 0.4% at 16,785.63.
In European equities on Friday, the CAC 40 in Paris climbed 0.4%, while the DAX 40 in Frankfurt gained 0.9%.
On Wall Street at the time of London's close, the Dow Jones Industrial Average was 0.9% higher, and the S&P 500 and Nasdaq Composite were up 0.5%.
The mood in New York was lifted as a measure of US consumer sentiment rose by more than expected in September to the highest level since May.
The University of Michigan's consumer sentiment index registered a preliminary reading of 69 in September. That beat economists expectations of a reading of 68.5 and August's reading of 67.9.
"Year-ahead expectations for personal finances and the economy both improved . . . despite a modest weakening in views of labour markets," said Joanne Hsu, University of Michigan's survey of consumers director.
The encouraging data came as investors weighed the chances of a surprise 50 basis point rate cut by the US central bank next Wednesday.
"Remarks from former FOMC member Bill Dudley and some media reports pointing to a close 25bp to 50bp decision have triggered a fresh round of dovish Fed bets ahead of next Wednesday's meeting," analysts at ING noted.
Former New York Federal Reserve President Bill Dudley said on Thursday there was a strong case for a 50bp interest rate cut while the Wall Street Journal reported the central bank was facing a "dilemma" on how much to cut rates, balancing inflation risks and job market conditions.
Analysts at Brown Brothers Harriman noted the so-called "Fed whisperer", referring to WSJ reporter Nick Timiraos, has struck again.
"US rates expectations adjusted sharply lower overnight after Wall Street Journal reporter Nick Timiraos wrote that next week's Fed decision would be a close call," BBH noted.
BBH called the timing of the story "odd, coming at a time when a 25bp cut had become baked in the cake due to the inflation data".
The CME FedWatch tool put the chances of a 50bp rate cut at 45% on Friday, rising from 28% on Thursday, and as low as 15% on Wednesday.
The market chatter pushed the dollar lower. The pound was quoted at USD1.3137 late Friday afternoon in London, up compared to USD1.3079 at the equities close on Thursday. The euro stood at USD1.1084, up against USD1.1036. Against the yen, the dollar was trading at JPY140.53, down compared to JPY142.33.
The US decision precedes a UK rate call on Thursday when the Bank of England is widely expected to leave interest rates unchanged.
Deutsche Bank expects a 7-2 vote in favour of the status quo.
"We expect the [Monetary Policy Committee] to stick to its August guidance, that the MPC will reassess how restrictive policy will be every meeting. We also think the MPC will retain its language around the need for sufficiently restrictive policy. However, we see dovish risks too, with the MPC signalling more confidence in the wage and price outlook, setting the stage for a November rate cut."
The weaker dollar was one factor behind a spike in the gold price. The price of the yellow metal climbed to USD2,578.76 an ounce on Friday, up from USD2,552.77 at the time of the London close on Thursday.
"The glittering performance has been buoyed by sustained high levels of purchases by central banks in the face of a weakening dollar, geopolitical uncertainty and the downward looking trajectory for interest rates," said Hargreaves Lansdown analyst Derren Nathan.
These conditions, Nathan said, could persist for a while, potentially creating the "high-water mark" for gold to rise further in the coming months.
Gold miners Fresnillo and Endeavour led the FTSE 100 risers, adding 5.7% and 11%, respectively, tracking the gold price higher. In the FTSE 250 Hochschild Mining climbed 4.0%.
But AstraZeneca missed out on more optimistic mood, falling 1.0%.
The Cambridge-based pharmaceuticals firm has endured a tough week after a disappointing drug trial update.
On Friday, Deutsche Bank downgraded the stock to 'sell' from 'neutral' and lowered its price target to 10,500 pence from 11,000p.
Flutter Entertainment edged up 0.1% after it agreed a deal which will see the firm join the rostrum in Brazil's fast-growing gambling industry.
It said it has forked out USD350 million to secure a majority stake in NSX Group, which operates the Betnacional brand.
Shore Capital Markets analyst Greg Johnson commented: "We see this as a sensible move, further expanding and accelerating its growth profile, consistent with its expansion profile."
"We would also see a positive read across to Entain and the implied valuation of its larger Brazil within the context of the wider group," Johnson remarked.
Entain rose 2.9%.
Vodafone rose 1.1% despite the UK's competition regulator stating a tie-up with Three in the UK could mean "tens of millions of mobile customers" seeing price increases.
The UK Competition & Markets Authority said the deal will lead to a "substantial lessening of competition".
The CMA said it welcomes responses to its provisional findings until October 4, and sets a deadline of September 27 for a notice of possible remedies.
A final decision is due on December 7, the CMA said.
Balfour Beatty rose 0.5% after winning a GBP363 million contract with National Grid.
The London-based infrastructure construction contractor will deliver the Bramford to Twinstead reinforcement project under a contract with National Grid's RIIO-2 framework.
Chief Executive Officer Leo Quinn said: "This award demonstrates the momentum we are capturing in the energy security and transition market."
Brent oil was quoted at USD72.58 barrel at the time of the London equities close on Friday, up from USD72.35 late Thursday.
Next week's local corporate calendar sees half-year results from retailers Kingfisher and Next, and a trading statement from technology platform and retailer Ocado.
Central bank meetings dominate the economic calendar with interest rate decisions by the US Federal Reserve, Bank of England and Bank of Japan on Wednesday, Thursday and Friday respectively.
By Jeremy Cutler, Alliance News reporter
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