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(Alliance News) - It was a light-red start for London stocks on Friday, with the FTSE 100 spared the worst of the steep losses seen in Asia and New York overnight as the pound retreated from the USD1.40 mark amid broader risk-off moves.
The large-cap index was down 28.65 points, or 0.4%, at 6,623.31 early Friday. Many of the FTSE 100's constituents are major dollar earnings and so benefit from a stronger dollar when translating results into sterling.
The mid-cap FTSE 250 index was down 145.44 points, or 0.7%, at 21,052.68. The AIM All-Share index was down 0.8% at 1,182.13.
The Cboe UK 100 index was down 0.4% at 660.17. The Cboe 250 was down 1.0% at 18,710.72, and the Cboe Small Companies down 0.3% at 13,160.20.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 1.1% early Friday.
"It seems like traders and investors aren't listening to official policymakers, and they have set their minds on one thing: interest rates will increase sooner than later," said Naeem Aslam, chief market analyst at AvaTrade.
"Traders believe that the current coronavirus vaccination process has the ability to stop the pandemic, and the economic data has shown more resilience than many have thought," said Aslam. "Thus, for these reasons, central banks will start to increase interest rates."
The vaccination effort has been accelerating recently, with the US on Thursday hailing progress in turning around its troubled Covid-19 vaccine rollout and the EU said it also was on track to meet jab targets as global coronavirus deaths topped 2.5 million.
US President Joe Biden declared the US rollout is now "weeks ahead of schedule" as he celebrated 50 million vaccines administered since he took office on January 20, but he warned Americans to keep masking up. The US is the world's hardest-hit country, with coronavirus deaths crossing the 500,000 mark earlier this week.
The EU announced Thursday it expected to vaccinate 70% of adults by the end of the summer, after months of problems and friction. Britain, which has forged ahead with its vaccine drive, said it was lowering its alert level from the highest tier - from 5 to 4 - citing a dip in cases.
Stocks in Asia slumped badly overnight. The Japanese Nikkei 225 index closed down 4.0%. In China, the Shanghai Composite ended down 2.1%, while the Hang Seng index in Hong Kong ended down 3.6%. The S&P/ASX 200 in Sydney finished 2.4% lower.
Other risk assets also took a step back. The pound backed down from the USD1.40 mark, with sterling quoted at USD1.3930 early Friday, tumbling from USD1.4130 at the London equities close on Thursday. The euro fell to USD1.2152 from USD1.2230 late Thursday.
The safe-haven Japanese yen held its own against the safe-haven dollar, however. The US currency was quoted at JPY106.05 early Friday in London, down from JPY106.22 last Thursday.
Gold was quoted at USD1,760.48 an ounce early Friday, lower than USD1,778.65 on Thursday. Brent oil fell to USD66.17 a barrel from USD66.90 late Thursday.
Scottish Mortgage Investment Trust was the worst performer in London's FTSE 100 early Friday, down 3.0%. Scottish Mortgage - which holds investments in tech firms such as Amazon.com and Tesla - tumbled after the tech-heavy Nasdaq Composite slid 3.5% in New York on Thursday.
"A higher interest rate environment is usually negative for stocks given the slowing of growth and it is therefore of little surprise that the likes of big tech have been in the firing line if future growth is to be compromised. The Nasdaq, for example, separately hit by some earlier rotation as investors switched into recovery sectors such as materials and industrials, is now ahead by 1.8% for the year to date, as compared to over 8% just a week ago," commented Richard Hunter, head of markets at Interactive Investor.
At the top of the index was British Airways owner International Consolidated Airlines, rising 2.2%. The airline operator swung to a loss for 2020, as it flew just 34% of 2019's passenger capacity last year. Current plans for the first quarter of 2021 is for capacity of 20% of 2019 levels, IAG said, but this remains "uncertain and subject to review".
Total revenue for 2020 slumped 69% to EUR7.81 billion, while IAG swung to a hefty pretax loss of EUR7.81 billion from a EUR2.28 billion profit in 2019. The company turned to an operating loss of EUR7.43 billion from a EUR2.61 billion profit. Before exceptional items, the operating result was a EUR4.37 billion loss, slightly better than the EUR4.45 billion loss forecast by analysts, but swung from a EUR3.29 billion profit in 2019.
Given the uncertainty over Covid-19, including the duration of the pandemic, IAG said it is not providing profit guidance for 2021.
Michael Hewson at CMC Markets said: "All in all, while these numbers are undoubtedly bad, they aren't surprising either. IAG's biggest problem however is not a pickup in passengers on an economic re-opening. It will be able to benefit from the return of domestic passengers like its smaller peers EasyJet and Ryanair. Its main problem will be getting the same levels of long-haul business travel that it had before the pandemic."
In the FTSE 250, Pets at Home rose 2.5% after lifting its guidance on strong recent trading. The pet care business said that its performance over the last eight weeks has been ahead of expectations, with continued strong and broad-based growth across all channels and categories. As such, Pets at Home now expects full-year underlying pretax profit, including the previously announced repayment of business rates relief of GBP28.9 million, to be around GBP85 million, which is ahead of previous guidance of at least GBP77 million.
"While recent positive progress around vaccinations for Covid-19 reduces the level of uncertainty ahead, our priority remains safeguarding the health, safety and wellbeing of all of our colleagues, partners and customers," said Pets at Home.
By Lucy Heming; lucyheming@alliancenews.com
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