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(Alliance News) - Stocks in London ended mostly higher on Tuesday after the International Monetary Fund upgraded its forecast for global economic growth in 2021, coupled with hopes for a potentially game-changing Covid-19 vaccine from Johnson & Johnson.
Optimism that new vaccines will bring the pandemic under control and allow activity to resume, in addition to stimulus measures in major economies, has boosted the global economic growth forecast this year to 5.5%, the IMF said.
The UK economy is forecast to contract a whopping 10% in 2020 - the worst in the G7 - before rebounding 4.5% in 2021, 1.4 percentage points slower than October's forecast. More positively, the UK economy should expand a further 5.0% in 2022, revised up by 1.8 percentage points.
The FTSE 100 index ended up 15.16 points, or 0.2%, at 6,654.01 on Tuesday. The FTSE 250 index closed up 97.95 points, or 0.5%, at 20,448.36. The AIM All-Share index finished down 0.1% at 1,196.88.
The Cboe UK 100 ended up 0.5% at 662.34, the Cboe UK 250 closed up 0.5% at 17,770.07, and the Cboe Small Companies ended down 0.2% at 12,205.16.
In Paris the CAC 40 ended up 0.9%, while the DAX 30 in Frankfurt ended up 1.7%.
"Stock markets were already driving higher this morning and the bullish move was given extra help by the IMF, who lifted their expectations for the world growth," said CMC Markets analyst David Madden.
In the FTSE 100, Compass Group closed up 4.5% after Exane BNP raised the contract caterer to Neutral from Underperform.
At the other end of the large caps, JD Sports Fashion closed down 3.0% after the sportswear retailer confirmed it is looking into the possibility of an equity raise to fund its expansion.
JD on Tuesday said it is exploring additional funding options with a view to "increasing its flexibility to invest in future strategic opportunities", which could potentially involve a non pre-emptive equity placing. The company didn't put a figure on the potential raise.
On Monday, Sky News reported JD was in talks over an around GBP400 million share sale to fund its expansion.
Rolls-Royce closed 1.7% lower after the jet engine maker said new coronavirus strains and the tighter travel restrictions introduced in their wake is creating short-term uncertainty.
Trading in December was broadly in line with expectations across all business units, Rolls-Royce said, and there was "good progress" on its restructuring programme. Full-year free cash outflow was in line with previous guidance, the firm added.
While continued progress on vaccine roll-outs is encouraging for the medium-term recovery of air traffic and economic activity, new virus variants are creating uncertainty in the near-term.
In the FTSE 250, Indivior ended the best performer, up 13% after the drugmaker late Monday said former parent Reckitt Benckiser has withdrawn a USD1.4 billion claim against the company.
Indivior said pursuant to the settlement, Reckitt has agreed to withdraw the USD1.4 billion claim and to release Indivior from any claim for indemnity under the demerger agreement relating to the US Department of Justice and Federal Trade Commission settlements which Reckitt entered into in July 2019, as well as other claims for indemnity.
Reckitt shares closed down 2.7%.
The pound was quoted at USD1.3737 at the London equities close on Tuesday, up from USD1.3655 at the close Monday, rebounding from intraday lows against the dollar despite a rise in the UK jobless rate.
Sterling recovered from an intraday low of USD1.3609 in early trade after data showed the UK unemployment rate for the three months to November came in at a 4-year high of 5.0%, up from 4.9% in the three months to October. However, the latest reading beat consensus, cited by FXStreet, for a steeper rise to 5.1%.
Early estimates for December indicate that the number of payrolled employees fell by 2.7% compared with a year ago, marking a fall of 793,000 employees, the ONS said. Since February - being the month before the coronavirus pandemic gripped the UK - 828,000 fewer people were in payrolled employment.
Growth in average total pay - which includes bonuses - for the three months to November was 3.6%, and growth in regular pay - which strips out bonuses - also was 3.6%.
The euro stood at USD1.2162 at the European equities close, up from USD1.2125 a day before. Against the yen, the dollar was trading at JPY103.65, down from JPY103.81 late Monday.
Stocks in New York were higher at the London equities close as markets digested a deluge of earnings reports.
The DJIA was up 0.1%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.3%.
Health and consumer goods firm Johnson & Johnson reported slight growth in sales for 2020, although earnings for the year declined.
For the fourth quarter ended December 31, sales increased 8.3% to USD22.48 billion from USD20.75 billion the year before. However, net earnings plunged by 57% year-on-year to USD1.74 billion from USD4.01 billion, as did diluted earnings per share to USD0.65 from USD1.50.
Looking ahead, J&J expects 2021 reported sales to rise by between 9.5% to 11% in the range of USD90.5 billion to USD91.7 billion. Meanwhile, adjusted earnings per share is set to be between USD9.25 and USD9.60, reflecting a 17% to 20% increase.
"We continue to progress our Covid-19 vaccine candidate and look forward to sharing details from our Phase 3 study soon. Johnson & Johnson was built for times like these, and I am extremely confident in our ability to deliver lasting value and continued innovation in 2021 and for years to come," said Chair & Chief Executive Officer Alex Gorsky.
The stock was up 3.0% in New York.
"After making the rounds on the major news networks, J&J's chief financial officer [Joseph Wolk] seemed optimistic about the vaccine and noted that we could finally get their late-stage trial data by early next week. The single dose easily stored Covid vaccine from J&J could be a game changer in the fight against Covid and would do wonders for the global growth outlook," OANDA analyst Edward Moya said.
American Express Co reported a drop in income in the fourth quarter of 2020 but noted the firm is starting to see improved spending trends.
In the three months to December 31, the New York-headquartered financial services firm recorded net income of USD1.44 billion, down from USD1.69 billion the year before.
Diluted earnings per share slipped to USD1.76 from USD2.03.
The stock was 2.7% lower on Wall Street.
Verizon Communications reported a sharp drop in income in the fourth quarter of 2020 but was pleased with its revenue performance.
In the three months to December 31, the New York-headquartered telecommunications provider reported net income of USD4.72 billion, down 9.6% from USD5.22 billion the year before.
Verizon noted it made a USD1.54 billion tax provision in the quarter, compared to a USD1.51 billion tax benefit the year before.
The stock was 2.9% lower in New York.
Brent oil was quoted at USD55.87 a barrel at the equities close, up from USD55.50 at the close Monday.
Gold was quoted at USD1,854.00 an ounce at the London equities close, higher against USD1,848.02 late Monday.
The economic events calendar on Wednesday has US durable goods orders at 1330 GMT and the Federal Reserve's interest rate decision at 1900 GMT. The World Economic Forum's Davos Agenda continues.
The UK corporate calendar on Wednesday has production results from gold miner Fresnillo and a trading statement from wealth manager Brewin Dolphin.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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