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(Alliance News) - Share prices in London remained in positive territory at midday on Monday, despite travel and hospitality stocks being sold on expectations the UK will delay the full ending of lockdown restrictions.
Wall Street also was pointed to start the week on the front foot, with the S&P 500 set to extend its record-setting run, as investors look ahead to the US Federal Reserve meeting starting Tuesday.
The FTSE 100 index was up 35.42 points, or 0.5%, at 7,169.28. The mid-cap FTSE 250 index was up 81.11 points, or 0.4%, at 22,815.24. The AIM All-Share index was up 4.27 points, or 0.3%, at 1,253.92.
The Cboe UK 100 index was up 0.4% at 714.10. The Cboe 250 was up 0.3% at 20,523.76. The Cboe Small Companies was up 0.1% at 15,172.25.
In Paris the CAC 40 was up 0.3%, while the DAX 30 in Frankfurt was up 0.2%.
IG Group's Josh Mahony said: "European markets have kicked off the week on a positive footing, with the recent upward momentum in global stocks seemingly set to continue. On a day largely devoid of major economic releases, today is likely to see a significant amount of interest around the potential for another additional four-weeks of lockdown [in England] if rumours are to be believed.
"With the highly transmissible delta variant on the rise, it looks likely that the UK will take a cautious approach in a bid to avoid a third wave."
In the FTSE 100, Royal Dutch Shell was the best performer, with the 'A' and 'B' shares both up 2.1%, after Reuters reported on Sunday that the oil major is reviewing its holdings in the largest US oil field for a potential sale.
Citing people familiar with the matter, Reuters reported the move was part of Shell's shift away from fossil fuels as it faces growing pressure to slash carbon emissions. Recently, a Dutch court ruled that by 2030 Shell must reduce its net carbon emissions by 45%, compared to its 2019 level.
Reuters said the sale could be for part or all of Shell's position in the US Permian Basin, located mostly in Texas, which accounted for around 6% of the Anglo-Dutch company's total oil and gas output last year. The holdings could be worth more than USD10 billion, the people said.
"Plans from Royal Dutch Shell to potentially sell their Permian Basin holdings could bring a windfall for shareholders, yet it also does highlight how those seeking exposure to higher energy prices will invariably look towards small caps," said IG's Mahony.
BP was up 1.4% after the Shell peer said it has joined with Statkraft and Aker Offshore Wind in a ‎consortium bidding to develop offshore wind energy in Norway.
Each company will hold a third stake in the partnership, which will pursue a bid to develop offshore wind power in the Sorlige Nordsjo II licence area. The licence area's "favourable location" provides power export access to local and adjacent markets.
The ‎consortium also plans to explore opportunities to provide clean power to electrify ‎offshore oil and gas facilities.
Energy stocks also were getting a boost from higher oil prices on Monday. Brent oil was quoted at USD73.26 a barrel at midday in London, sharply higher than USD72.85 late Friday. The North Sea benchmark was trading at its highest levels since late 2018.
Tullow Oil was the best midcap performer, up 8.5%.
At the other end of the FTSE 100, gold miners Fresnillo and Polymetal International were among the worst performers, down 1.4% and 1.8% respectively, tracking spot gold prices lower.
The precious metal was trading at USD1,855.32 an ounce, down 2.0% from USD1,894.00 on Friday.
CRH was down 0.5% after Morgan Stanley downgraded the Irish building materials firm to Equal Weight from Overweight.
In the FTSE 250, Serco Group up 5.1%, after the outsourcer raised its profit guidance on the back of promising trading and sealed a UK defence deal alongside France's Engie, worth up to GBP3.4 billion.
Vivo Defence Services, a 50-50 joint-venture with Engie, has won contracts to provide facilities management services to the UK's Defence Infrastructure Organisation. The DIO is responsible for the UK Ministry of Defence's estate.
In addition, Serco on Monday said its "strong" trading at the start of the year has continued further into 2021.
As a result, Serco raised its underlying trading profit guidance by GBP15 million to GBP200 million. This would represent growth of 23% from GBP163.1 million posted in 2020.
UK Prime Minister Boris Johnson is facing a furious backlash from Tory members of Parliament as he prepares to put the final lifting of coronavirus lockdown restrictions in England on hold.
Johnson is expected to announce the ending of social-distancing rules - which had been slated for June 21 - will be delayed for four weeks to July 19, with the BBC reporting early on Monday the decision had been signed off by senior ministers.
The move follows warnings from scientists that the rapid spread of the delta variant first identified in India risks a "substantial" third wave if it is allowed to spread unchecked.
Johnson is expected to appeal to the public to show patience, with one last push to ensure that when controls do finally end it is "irreversible".
However, it comes as a huge setback to many businesses - particularly in the battered hospitality sector - which had pinned their hopes on a full summer reopening to recoup some of the losses of the past year.
There was deep frustration among lockdown sceptics on the Conservative benches who said there was no reason not to end the restrictions as those most at risk of death or serious illness are now fully vaccinated.
Former minister Mark Harper, the chair of the Covid Recovery Group of Tory MPs, said any postponement would be a "political choice". He warned that if the unlocking did not go ahead as planned, restrictions could carry on through the autumn and into the winter as other respiratory infections picked up.
Travel stocks International Consolidated Airlines, easyJet and Ryanair were down 3.0%, 1.8% and 1.3% respectively. Hospitality firms InterContinental Hotels Group and Whitbread were off 1.2% and 0.8% respectively.
"The travel sector is waiting with bated breath to start taking more passengers overseas, but hopes are fading for widespread flying this summer," commented AJ Bell's Russ Mould.
The pound was quoted at USD1.4090 at midday on Monday, down from USD1.4105 at the London equities close Friday, amid market expectations of the delay.
Analysts at ActivTrades commented: "It is unlikely that the formal announcement of the delay will trigger any sharp currency movements, as it won't come as a shock. However, should Johnson surprise the markets by confirming the end of restriction on June 21, the pound would be likely to reverse this morning's losses."
The euro was priced at USD.2114, up from USD1.2096. Against the Japanese yen, the dollar was trading at JPY109.68, lower from JPY109.80.
On the economic front, the eurozone's industrial output growth came in above estimates in April, data from Eurostat showed. According to Eurostat, industrial output in the eurozone rose 0.8% monthly in April, following a 0.4% climb in March.
According to consensus cited by FXStreet, another month of 0.4% growth was expected in April, so the figure topped forecasts. On an annual basis, eurozone output growth was 39% in April, up from March's 12% hike, and beating forecasts for a 37% rise.
Meanwhile, US President Joe Biden will take part in his debut NATO summit on Monday as the 30 countries look to put the strained years of Donald Trump's administration behind them and instead turn their attention to external threats.
After the G7 summit in Cornwall, England, Biden arrived in Brussels on Sunday evening for the NATO meeting. Leaders are expected to send a pointed message to an increasingly aggressive Russia - the defence alliance's traditional adversary - and to address China's ascendancy on the world stage, security issues linked to climate change, cyber defence and new military technology.
In addition, the allies should sign off a reform plan for 2030 and formally decide to start overhauling their core strategic concept, which was last updated in 2010.
US stock market futures were pointed up slightly after the S&P 500 index ended last week at an all-time high of 4,247.44 points.
The Dow Jones Industrial Average was called up 0.1%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.3%.
The key risk event this week is the US Federal Reserve's interest rate decision on Wednesday. It will be followed by policy announcements by the Swiss National Bank on Thursday and Bank of Japan on Friday.
"The week ahead features three major central bank decisions, albeit no changes are expected from any. Still, all eyes will be on the Federal Reserve as investors wonder how [chair] Powell and his FOMC colleagues will react to the above-forecast inflation jump in May and what rising price pressures means for the future path of monetary policy now that there is less need to keep emergency stimulus measures in place," said ThinkMarkets analyst Fawad Razaqzada.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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