(Alliance News) - Stock prices in London were rebounding at midday on Tuesday against a backdrop of brewing crisis at Chinese property group Evergrande, while the US Federal Reserve's September policy meeting begins.
The FTSE 100 index was up 81.44 points, or 1.2%, at 6,985.35. The UK flagship index ended down 59.73 points, or 0.9%, at 6,903.91 Monday, its lowest close since July.
The mid-cap FTSE 250 index was up 159.48 points, 0.7%, at 23,561.24. The AIM All-Share index was up 4.70 points, 0.4%, at 1,259.70.
The Cboe UK 100 index was up 1.2% at 695.40. The Cboe 250 was up 0.8% at 21,351.30. The Cboe Small Companies was 0.8% higher at 15,471.69.
In mainland Europe, the CAC 40 stock index in Paris was up 1.4% and the DAX 40 index in Frankfurt was up 1.3%.
In Asia, the Japanese Nikkei 225 index closed down 2.2% on Tuesday, Tokyo reopening after being closed on Monday for a holiday. The Hang Seng index in Hong Kong ended up 0.5%. Markets in Shanghai remained closed for the Mid-Autumn Festival.
Evergrande Property Services Group, one of China's biggest developers, is on the brink of collapse as it wallows in debts of more than USD300 billion.
There are fears that Chinese authorities may not be able to contain the fallout of the firm's potentially disorderly collapse, which could affect many other companies and poses contagion risks, experts say.
Evergrande shares closed up 2.9% in Hong Kong, having closed down 11% on Monday.
"European benchmarks traded higher on Tuesday, paring some of yesterday's losses, as market sentiment improved. Even if the Evergrande case has sparked a wave of fear over the market, especially with traders worried that the consequences could spread to other countries, most investors now seem confident the PBoC will keep on providing support and inject cash to mitigate the global risk. With the Evergrande crisis no longer looking like the 'black swan' some were fearing, today's sentiment has been given a lift," analysts at ActivTrades explained.
In the FTSE 100, Pershing Square Holdings was the best performer, up 5.9%, following the successful stock market debut of Universal Music in Amsterdam, in which it holds a 10% stake.
UMG's float price was EUR18.50 per share, putting its value at EUR33.5 billion on admission. The stock was quoted at EUR25.00 on Tuesday afternoon, 35% above the reference price.
The world's biggest label, which boasts a roster featuring Kanye West, The Weeknd and Taylor Swift, is based in the US but owned by French media firm Vivendi, which offloaded a majority stake in the lucrative unit on Amsterdam's Euronext index on Tuesday.
Tuesday's operation involved Vivendi distributing 60% of Universal shares to its investors while the French company kept 10% and maintained a joint-management agreement with Tencent. Chinese tech firm Tencent owns a 20% stake in Universal and 10% is held by US financier Bill Ackman, who owns Pershing Square.
Shares in Vivendi were down 15% in Paris.
Royal Dutch Shell 'A' and 'B' shares were up 4.4% and 4.3% respectively. The oil major said on Monday it is selling its assets in the shale-oil rich Permian Basin of the US to rival ConocoPhillips for USD9.5 billion.
Shell plans to use the proceeds from the sale of the assets, which produce an average of 175,000 barrels per day, to fund a USD7 billion payout to its shareholders and strengthen its finances.
The assets sold by Shell's US unit include 225,000 acres of land in Texas with more than 600 miles of oil, gas and water transmission pipes, according to ConocoPhillips.
International Consolidated Airlines Group, parent of transatlantic carrier British Airways, was up 3.3% after the US government on Monday relaxed border restrictions for fully vaccinated travellers from the UK and European Union.
Air France-KLM was up 2.3% in Paris, while Deutsche Lufthansa was 3.5% higher in Frankfurt. US carriers American Airlines and United Airlines were both up 1.0% in pre-market trade in New York, having ended up 3.0% and 1.6% respectively on Monday.
Segro was up 2.1% after Goldman Sachs promoted the warehouse property investor to its Conviction Buy List.
At the other end of the large-caps, Kingfisher was the worst performer, down 6.0%, despite the DIY retailer saying it delivered a strong financial performance in the first half of its financial year and declaring a share buyback.
For the six months to July 31, revenue was GBP7.10 billion, up 20% from GBP5.92 billion last year, and pretax profit was GBP677 million, up 71% from GBP398 million. Kingfisher posted like-for-like sales growth of 23% from a year before, with strong performances in the UK & Ireland, France, Iberia and Romania.
The B&Q and Screwfix owner declared an interim dividend of 3.80 pence, up from the 2.75p paid last year. In addition, the board announced the return of GBP300 million of surplus capital via a share buyback programme. The programme will commence soon, it said.
Kingfisher said it has seen a good start to the second half of the year with resilient demand across all markets.
Looking ahead, Kingfisher expects financial 2022 adjusted pretax profit in the range of GBP910 million to GBP950 million. It posted adjusted pretax profit of GBP786 million in financial 2021, so results will be up at least 16%.
"Strong first half numbers offer some encouragement on this front but the second half of its financial year is when Kingfisher really has a tough act to follow," said AJ Bell's Russ Mould.
"In the latter part of lockdown it was one of the few retailers able to operate which gave it an obvious advantage which no longer exists, with consumers now able to spend on things like going out and socialising," Mould added.
Compass Group was down 2.5%. The contract caterer said its full-year revenue performance is set to come within reaching distance of pre-pandemic levels after a better-than-expected fourth quarter.
Compass, ahead of the end of its financial year on September 30, said revenue in the fourth quarter is expected to improve to 86% of 2019 levels, which is slightly ahead of previous guidance of 80% to 85%.
For the full-year, underlying operating margin is expected to be 4.4%. This would mark a sharp improvement on the 2.9% posted for the 2020 financial year, but below the 2019 level of 7.4%.
Looking ahead to the start of the new financial year, Compass said most of its sectors are expected to continue performing well. However, it remains cautious about Business & Industry, given continued uncertainty over the pace of office reopening in major markets.
For the full-year, the FTSE 100-listed firm said revenue is expected to be 76% of 2019, being pre-pandemic, levels.
In the FTSE 250, National Express was the best performer, up 8.2% after the transport company confirmed it is in discussions with peer Stagecoach over a possible all-share combination.
The statement confirmed a report by Bloomberg News that National Express, which has a market capitalisation of GBP1.47 billion, was looking to make a takeover bid for Stagecoach.
Under the deal terms, it is expected that Stagecoach shareholders would receive 0.36 of a new National Express share for each Stagecoach share, resulting in them owning around 25% of the combined group. The formula represents an 18% premium on Stagecoach shares.
Stagecoach shares were up 22% at 83.21 pence, giving it a market value of GBP453.65 million.
US stock markets on Tuesday were looking to bounce back from Monday's hefty losses, as the Federal Reserve's two-day policy meeting gets underway.
The Dow Jones Industrial Average was called up 1.2%, the S&P 500 up 1.0%, and the Nasdaq Composite up 1.1%.
"The FOMC is expected to provide some confirmation that QE will be tapered in the coming months. How the dollar - and in turn - gold will react to this will be determined by the size and the speed of the reduction. It is possible we could see renewed weakness for stocks if Chair Jerome Powell suggests QE will be tapered quicker than expected amid surging inflationary pressures around the world," said ThinkMarkets analyst Fawad Razaqzada.
Currency markets were subdued ahead of the Fed's interest rate decision at 1900 BST on Wednesday.
The pound was quoted at USD1.3677 at midday on Tuesday, little changed from USD1.3678 at the London equities close Monday.
The euro was priced at USD1.1733, from USD1.1734. Against the Japanese yen, the dollar was trading at JPY109.53, up from JPY109.46.
Brent was quoted at USD74.73 a barrel Tuesday at midday, up from USD74.58 late Monday. Gold stood at USD1,766.65 an ounce, marginally higher from USD1,764.07.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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