(Alliance News) - European equities opened solidly higher on Friday, but are still set for a weekly decline, as tariff worries have kept a lid on sentiment.
The FTSE 100 index traded up 31.11 points, 0.4%, at 8,573.67. The FTSE 250 was up 114.20 points, 0.6%, at 19,802.77, and the AIM All-Share was up 3.45 points, 0.5%, at 682.91.
The Cboe UK 100 was up 0.4% at 856.70, the Cboe UK 250 was 0.6% higher at 17,250.68, and the Cboe Small Companies rose 0.3% at 15,410.00.
In Paris, the CAC 40 rose 0.6%, while the DAX 40 in Frankfurt added 0.3%.
XTB analyst Kathleen Brooks commented: "It also looks like European equities have finally started to price in the prospect of tariffs this week, which could be a turning point. The Eurostoxx 50, the CAC 40 and the DAX index have all fallen 3% or more in the past 5 trading sessions, which is on par with the S&P 500. After outperforming US indices since the start of this year, is this a sign that Trump's tariff threats could finally be weighing on Europe's asset price?"
Brooks noted that hopes a political crisis in the US can be averted has boosted equities on Friday.
The US government was hours from shutting down Friday as Democrats smarting over President Donald Trump's spending cuts threatened to block his federal funding plans – although hopes were high for a resolution to the impasse.
Facing a Friday night deadline to fund the government or allow it to start winding down, the Senate is set to vote ahead of the midnight cut-off on a Trump-backed bill passed by the House of Representatives.
The deal would keep federal operations going for another six months, but Democrats are under pressure from their grassroots activists to defy Trump and reject a text they say is full of harmful spending cuts.
Top Senate Democrat Chuck Schumer – who has long insisted that it is bad politics to shut down the government – said he would support the bill, a move seen as improving its chances of success.
The pound was quoted lower at USD1.2937 on Friday morning London time, from USD1.2957 on Thursday. The euro stood at USD1.0854 early Friday, from USD1.0874 at the time of the European equities close on Thursday. Against the yen, the dollar was trading higher at JPY148.85 from JPY147.65.
The UK economy registered a surprise decline at the start of the year, numbers on Friday showed, with minor growth in the service sector more than offset by decline elsewhere.
The Office for National Statistics said UK gross domestic product shrank by 0.1% in January from December, confounding FXStreet-cited market expectations of a 0.1% rise. In December, the UK economy had grown 0.4% from November.
The ONS said the decline was "mainly caused by a fall in the production sector".
"Monthly services output grew by 0.1% in January 2025, following growth of 0.4% in December 2024, and grew by 0.4% in the three months to January 2025," the statistics agency explained.
"Production output fell by 0.9% in January 2025, following growth of 0.5% in December 2024, and fell by 0.9% in the three months to January 2025, with manufacturing output driving both the monthly and three-month falls. Construction output fell by 0.2% in January 2025, following a fall of 0.2% in December 2024, but grew by 0.4% in the three months to January 2025."
Analysts at ING commented: "Don't be distracted by volatility in the monthly GDP numbers, because despite a surprise fall in January's economic output, higher government spending should lead to reasonable growth through 2025. Whether that's enough to avert tough decisions for the Treasury, we're not so sure.
"The problem for the Treasury is that its independent forecaster, the Office for Budget Responsibility, has been far too optimistic on 2025 growth. Its 2% forecast looked wildly optimistic even when it was announced back in October. The truth is likely to be more like half that."
In London, Berkeley Group rose 1.9%. It said it has seen a continued modest improvement in sales reservations for new homes as it reiterated profit guidance for the next two years.
It said it expects to deliver pretax profit of at least GBP525 million in financial 2025 and GBP450 million in financial 2026. This will be down from GBP557.3 million in the financial year that ended April 30 last year, which itself was down by 7.7% from financial 2023.
Berkeley said enquiries are at a consistently good level, and it has seen the modest improvement in sales reservations noted at the time of the interim results continue.
Sales rates are ahead of those achieved last year, the company added.
But the housebuilder cautioned that for this improvement to continue and sales rates to return closer to the levels of three years ago, there needs to be greater confidence in the trajectory of interest rate reductions and wider economic stability.
Berkeley said it is "hugely encouraged" by the change in mind-set over planning, brought about by the new UK government's planning reforms and housing delivery ambitions.
But Berkeley voiced concerns over the extent and pace of regulatory changes of recent years. It said this, and the new building safety levy, could place significant pressure on the delivery of new homes. The levy is due to be put in place in response to the fatal Grenfell Tower fire in London in 2017.
Bodycote slumped 9.9%. Bodycote raised its dividend, despite a decline in revenue and profit in 2024.
The supplier of heat treatments and specialist thermal processing services booked exceptional items of GBP78.3 million, hurting profit. Pretax profit in 2024 fell by three-quarters to GBP28.4 million from GBP111.7 million.
Bodycote's revenue fell 5.7% in 2024 to GBP757.1 million, from GBP802.5 million in 2023. Adjusted pretax profit declined 0.5% to GBP119.5 million from GBP120.1 million.
Looking ahead, the firm said: "End markets remain mixed, with challenging conditions in Automotive and Industrial. Structural demand in Aerospace & Defence remains strong, although there continues to be a temporary impact from industry-wide supply chain disruption. Reflecting this backdrop, current run-rate profit performance is at a broadly similar level to H2 2024. We are successfully executing our Optimisation programme, which will deliver additional profit benefits as we move into H2 2025. Our continued focus on cost control and progressing our strategic actions is ensuring we are well positioned to capitalise when markets recover. We remain confident in the delivery of our medium-term financial targets."
Life Science REIT added 8.3%. The property business focused on the life science sector said it is undergoing a strategic review "to consider the future of the company". Options it will mull include a sale or managed wind down of the firm.
"The board acknowledges the challenges and significant headwinds that the company has faced since IPO, in common with the wider REIT sector, including higher inflation and elevated interest rates which have driven a fundamental slowdown in leasing activity and negatively impacted investor sentiment. These factors, coupled with the company's size and low levels of liquidity have led to an underperformance of the share price, which has, as a result, traded at a significant discount to net asset value for a prolonged period of time," the real estate investment trust said.
"At this time, the board also engaged with a number of shareholders to gather their feedback on the company and set key milestones for Ironstone, in particular around forecast leasing activity, occupancy levels and completion of development assets. Despite signs of improving confidence in the life science leasing market in the summer of last year, uncertainty has since returned to the broader market and as a result, these targets have proved difficult to achieve."
Gold was at USD2,990.41 an ounce early Friday, up slightly from USD2,982.53 at the time of the London equities close on Thursday. Brent oil was higher at USD70.64 a barrel from USD70.13.
Gold hit a record high above USD2,993 earlier on Friday.
"Gold, the premier hedging instrument of tariff risks, continues its surge toward record levels, with the market now eyeing a target of USD3,000 oz. This projection does not arise from a vacuum but is rooted in a current complex financial and geopolitical context. Recent tariff threats play a significant role in this dynamic, particularly with the White House hinting at imposing tariffs that could reach up to 200% on certain European products in the event of an escalation, in addition to anticipated tariffs at the 2nd of April on both Canada and Mexico as well as reciprocal tariffs," Pepperstone analyst Ahmad Assiri commented.
By Eric Cunha, Alliance News news editor
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