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FTSE 100 extends gains as US economic data subdues interest rate concerns

The FTSE 100 outperformed European indices on Friday as strength in utilities and energy shares helped support the index before investors received positive US inflation data which helped UK stocks extend gains.

The FTSE 100’s tick higher on Friday will help boost investor confidence after a pretty poor week of declines driven by concerns around interest rates.

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“After hitting record highs, the UK’s flagship index hit a bit of a wall and investors will be hoping it can now push on to set new all-time highs. Today’s move higher was being powered by gains in the energy sector,” said AJ Bell head of investment analysis Laith Khalaf.

One of the main the economic data points this week was saved for 1.30pm on Friday in the form of US Core PCE – an important indicator used by the Federal Reserve to gauge inflation.

US April Core PCE price index rose 2.8%, meeting expectations, while spending rose slightly less than expected. The data was welcomed by markets because it demonstrated slow pricing pressures, increasing the chances of the Federal Reserve cutting rates over the summer – although it isn’t enough to nail on a rate cut in June.

The FTSE 100 was at session highs shortly before 2pm, up 0.67% to 8,268.

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Utilities companies were the best performers as the sector rebounded following a period of heavy selling sparked by National Grid’s right issue. Indeed, National Grid was the highest riser on Friday with a 3.8%. Centrica was not far behind, gaining 3.6%.

JD Sports, down 5.8%, was the biggest faller as investors reacted to warnings of a challenging market. JD Sports spooked investors after operating profit fell 8% in the last year and group sales slipped in the first quarter of this year.

“One of UK retail’s biggest success stories, JD Sports, has found life a bit trickier in recent years and not just thanks to the pandemic,” said Laith Khalaf.

“While its youthful demographic, with some of its customers still living at home, may not have been as immediately impacted by the cost-of-living crisis, ultimately there have been limits on their capacity and appetite to drop hundreds of pounds on the latest set of must-have trainers.

“Fashion is typically cyclical and the athleisure trend, which saw people wear the same clothing for trips to the gym, socialising and relaxing at home, may be starting to sputter having sustained momentum at JD for some time.

“A dip in full-year profit despite higher revenue reflects the cost challenges facing the business and a drop in like-for-like sales in the new financial year, which started at the end of January, is sticking in the craw of investors.”

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