Diageo Share News (DGE)

(Alliance News) - London stocks staged a partial rebound early Wednesday from big losses the day before, helped by Spirax-Sarco, Diageo and miners.

However, caution lingers ahead of US inflation numbers due later on Wednesday.

The FTSE 100 index was up 40.24 points, or 0.6%, at 6,988.23 early Wednesday, having closed down 175.69 points, or 2.5%, on Tuesday.

The mid-cap FTSE 250 index was up 94.64 points, or 0.4%, at 22,261.78. The AIM All-Share index was up 0.2% at 1,238.48.

The Cboe UK 100 index was up 0.7% at 697.07. The Cboe 250 was up 0.4% at 20,032.89, and the Cboe Small Companies up 0.4% at 15,030.75.

In mainland Europe, the CAC 40 in Paris was down 0.1%, while the DAX 30 in Frankfurt edged up 0.1% early Wednesday.

At the top of the FTSE 100 in opening trade was Spirax-Sarco, up 2.7% after the firm said organic sales growth in the four months to the end of April was ahead of global industrial production.

"The group operating profit margin in the first four months of the year was higher than previously anticipated for the full year 2021, supported by the strong sales growth and higher operational gearing," the thermal energy management and niche pumping specialist said.

Diageo was in second place, rising 2.4%, as it restarted its return-of-capital programme to shareholders following a strong trading performance.

The company said its performance in North America has remained "particularly strong", while Europe has benefited from robust off-trade sales. The brewer and distiller said it now expects organic operating profit growth to be at least 14% in the current financial year, slightly ahead of organic net sales growth.

As a result of its trading performance, Diageo said it will restart the return-of-capital programme of up to GBP4.5 billion to shareholders that was first announced back in July 2019. It is initiating the second phase of the programme of up to GBP1.0 billion to be completed by the end of the 2022 financial year. As such, it has entered into an agreement with UBS to buyback shares worth up to GBP500 million until November 12.

"The board's decision to resume our return-of-capital programme at this time reflects Diageo's improved performance in the first half of fiscal 21, the continued strong recovery of our business, and our expectation that we will be back within the top end of our target leverage ratio of 2.5-3.0x at 30 June 2022, post completion of the second phase of the return of capital programme," said Chief Executive Ivan Menezes.

Miners Glencore, Anglo American and Rio Tinto were up 2.3%, 1.7% and 1.4% respectively early Wednesday, in a week that has seen prices of industrial metals such as copper and iron ore surge.

Gold was quoted at USD1,835.05 an ounce early Wednesday, up on USD1,829.77 on Tuesday. Brent oil was trading at USD68.95 a barrel, up from USD68.08 late Tuesday.

Surging to the top of the FTSE 250 was UDG Healthcare, shares jumping 23% to 1,032 pence after agreeing to be taken private.

Nenelite, an affiliate of private equity manager Clayton, Dubilier & Rice, has agreed to buy UDG for 1,023 pence per share, representing a premium of 22% to Tuesday's closing price of 842.0p. This values UDG's share capital at GBP2.61 billion and implies an enterprise value of GBP2.78 billion.

"While the UDG board remains confident in the long-term fundamentals of the group, we believe that this is an attractive offer for UDG shareholders, which secures the delivery of future value for shareholders in cash today," commented UDG Chair Shane Cooke.

UDG also reported first-half results to March 31. Pretax profit rose by 5% to USD65.1 million from USD62.3 million a year before, despite a 5% revenue decline to USD661.4 million from USD693.6 million.

With market jitters over inflation weighing on markets, focus will be on Wednesday's US consumer price index reading at 1330 BST.

The US annual inflation rate is expected to tick up sharply to 3.6% in April, according to FXStreet, from 2.6% in March. However, the month-on-month rate is set to ease to 0.2% from 0.6%.

"If today's number matches the [year-on-year inflation] forecast, we could see the markets selling off further. The fact the Federal Reserve continues to think that the current increase in the inflation is nothing but transitory will continue to bother traders," said Naeem Aslam, chief market analyst at AvaTrade.

Germany's annual inflation rate ticked up for the fourth month in a row to stand at 2.0% in April, Destatis said on Wednesday. This was in line with the flash result released a fortnight ago, as was April's month-on-month rise of 0.7%.

The annual rate ticked up from 1.7% in March, and now stands at more than double the 1.0% price growth reported for January. The country exited 2020 in deflationary territory.

The dollar was stronger ahead of the US inflation figures.

Sterling was quoted at USD1.4144 early Wednesday, soft on USD1.4150 at the London equities close on Tuesday, after figures showed the UK economy shrank at the start of 2021.

Gross domestic product is estimated to have contracted 1.5% in the quarter to March on a sequential basis, reversing 1.3% growth in the final quarter of 2020. However, Wednesday's figure was slightly ahead of consensus, according to FXStreet, of a 1.6% fall.

"Compared with the same quarter a year ago, when the initial economic impacts of the coronavirus pandemic began to show, the UK economy fell by 6.1%," the Office for National Statistics said.

The UK economy is now 8.7% smaller than its pre-pandemic size, the statistical body added.

Positively, though, the UK economy is estimated to have grown 2.1% in March, the fastest monthly pace since August 2020 as lockdown measures started to ease.

The euro traded at USD1.2141 early Wednesday, falling from USD1.2165 late Tuesday. Against the yen, the dollar rose to JPY108.74 from JPY108.50.

Before US inflation, the economic events calendar on Wednesday eurozone industrial production at 1000 BST.

By Lucy Heming; lucyheming@alliancenews.com

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