International Airlines Share News (IAG)

LONDON (Alliance News) - UK stocks closed higher on Tuesday, advancing in the wake of positive updates from FTSE 100 outsourcer Capita and budget airline easyJet, helping to outweigh losses for housebuilders.

The FTSE 100 ended up 0.7%, or 41.84 points, at 6,156.65. The FTSE 250 closed up 0.2%, or 37.36 points, at 16,724.42, and the AIM All-Share rose 0.1%, or 0.53 point, to end at 724.02.

Connor Campbell, a financial analyst at Spreadex, said a strong market open in the US helped ensure European markets ended higher. European markets had been boosted earlier in the day as Greece made progress with debt relief talks.

"Whilst the market enthusiasm for the day's Greek good news began to wane this afternoon a strong US open helped secure a decent chunk of the morning's European gains," Campbell said.

Brent oil was quoted at USD44.985 a barrel Tuesday at the London equities close, up from USD43.825 a barrel on Monday. Jasper Lawler, market analyst at CMC Markets, said "equities and oil prices remain very interlinked, with both markets having topped in late April and moving higher in unison on Tuesday."

In Paris, the CAC 40 index ended up 0.4%, while the DAX 30 in Frankfurt finished up 0.7%. US shares were higher at the London close, with the Dow 30 up 1.1%, the S&P 500 up 0.9% and the Nasdaq Composite up 0.8%.

Capita was the biggest gainer, up 4.3%, after the outsourcer affirmed its 4.0% organic revenue growth target for 2016 following a solid start to the year. The company, which handles back-office tasks on behalf of a range of private and public sector clients, said it has seen increased organic growth in its divisions so far in 2016.

Capita said it has secured GBP458.0 million in major contracts to date in 2016, including a GBP139.0 million, nine-year shared services contract with five district councils in the UK, and being named preferred bidder to become technical services provider to Darwen Council. Its bid pipeline, reported at GBP4.7 billion at the end of February, remains active in both the private and public sectors, Capita said.

UBS analyst Rory McKenzie was less convinced, saying that Capita has made a slower start to the year. The GBP458.0 million contracts figure was lower compared with the GBP1.2 billion in contract wins at the same stage a year earlier.

easyJet, up 2.7%, said it will increase its annual dividend payout ratio to 50% of post-tax income, from 40% previously, with Chief Executive Carolyn McCall confident of growing passenger numbers, revenue and profit over the full year, even though the terror attacks in Brussels in late March are set to hit third-quarter revenue per seat.

The guidance came as easyJet said it suffered a GBP24.0 million pretax loss in the six months ended March 31, having made a GBP7.0 million pretax profit in the corresponding half a year earlier.

Aviva Investors, the sixth-largest shareholder in easyJet, welcomed the planned change to the payout ratio. Trevor Green, head of UK equities at Aviva Investors, said the move sent "a clear message to investors as to the company's confidence in the low cost carrier business model".

Other travel and tourism stocks were also among the leading risers in the FTSE 100. TUI AG, the travel and tourism company, closed up 3.0%, and is due to report first-half results on Wednesday. Intercontinental Hotels rose by 1.3%, while International Consolidated Airlines Group, the owner of British Airways, closed up 1.0%.

Housebuilders ended among the heaviest fallers in the FTSE 100. Taylor Wimpey was the biggest faller, down 2.0%, Berkeley Group Holdings, down 1.4%, Barratt Developments, down 0.4%, and Persimmon, down 0.3%, were hit. The weakness in their share prices came after The National Institute of Economic and Social Research downgraded the growth outlook for the UK economy.

The think tank said activity was weighed down by uncertainty surrounding the outcome of the UK's June 23 referendum on whether to remain a member of the European Union or leave. Meanwhile Dublin-based Grafton Group, the builders' merchant and DIY company, down 1.2%, warned that its current activity levels are being affected by the referendum. That wasn't good for sentiment, Charlie Campbell, an analyst at Liberum, told Alliance News.

Associated British Foods closed down 1.7%. The AB Sugar and Primark owner plans to sell its Chinese sugar business for USD1.0 billion, Bloomberg reported, citing a person familiar with the matter. The source said the process was in the very early stages and there is no timetable for completion. A spokesperson for AB Foods declined to comment on the story.

This comes after AB Foods revealed last month that it is buying the remaining 48.65% of Johannesburg-listed sugar producer Illovo Sugar which it doesn't already own for GBP262.0 million.

In the FTSE 250, Lookers, an automotive retailer and distributor in the UK, closed up 3.3%. Earlier on Tuesday, Cambria Automobiles, an AIM-listed car dealer, said it made a GBP5.7 million pretax profit in the six months to the end of February, up 72% from the corresponding half a year earlier. Chief Executive Mark Lavery said Cambria's performance was strong in the "all-important" plate change month of March, meaning he and the board are confident of being ahead of what the market had expected for the year as a whole. Cambria closed up 7.1%.

Virgin Money was up 3.2% after Investec reiterated a Buy rating on the stock. Sections of the market "seemingly took fright" at Virgin Money's first-quarter update last week, according to Investec analyst Ian Gordon, who prefers the stock to any of the FTSE 100 banks.

Gordon said it is "perfectly true" that Virgin Money's net interest margin of 1.60% in the three months ended March 31 was a "shade below" what he had expected, as the bank chose to focus on growing volumes. He was "particularly pleased" that Virgin Money opted to fully participate in the "attractive" mortgage market in the quarter.

Net interest margin is a measure of profitability showing the difference between the interest a bank earns and the interest it pays as a percentage of its assets.

P2P Global Investments, the London-listed investment trust which invests in loans originated through online peer-to-peer platforms, closed down 2.6%. Late on Monday, the company said its manager is tracking carefully developments at LendingClub Corp, whose Chief Executive Officer Renaud Laplanche resigned after an internal review.

Laplanche's resignation followed an internal review of sales of USD22 million in near-prime loans to a single investor, in contravention of the investor's express instructions as to a non-credit and non-pricing element, LendingClub said in a statement Monday. The announcement sent LendingClub's shares down by about a quarter.

P2P said it does not participate in LendingClub's near-prime program. In addition, P2P said its "purchase of LendingClub loans are restricted to the 'prime' program offered by LendingClub." Moreover, P2P said it has "no exposure" to LendingClub equity or equity-linked securities.

At the London equities close, the euro traded at USD1.1389, down from USD1.1405 at the equities close Monday. The pound was at USD1.4457, up versus the USD1.4406 late Monday. Gold was quoted at USD1,259.09 an ounce at the London equities close, down from USD1,266.09 the same stage on Monday.

In the economic calendar, expect API weekly crude oil stock data at 2130 BST. Wednesday will bring the leading economic index in Japan at 0600 BST, followed by UK industrial and manufacturing production data at 0930 BST. US EIA crude oil stocks data are due at 1530 BST.

In the UK corporate calendar, TUI is set to report first-half results, as is catering and support services company Compass Group. Fellow blue-chip Experian, the data and analytics company, reports full-year earnings, while residential property developer Barratt Developments issues a trading statement.

In the FTSE 250, trading statements are due from specialist lender OneSavings Bank, coach operator National Express, JRP Group, John Wood Group, and William Hill.

Trading statements are due also from Cape, Novae Group, Premier Oil, Renishaw, Savills, IFG Group, Centaur Media. Arrow Global publishes first-quarter results.

Vertu Motors reports full-year results, as does Purplebricks Group.

By Samuel Agini; samagini@alliancenews.com; @samuelagini

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