(Alliance News) - Stocks in London started the new week on the front foot Monday, with focus turning to the US Federal Reserve policy meeting, which comes as investors fret that economic recovery will fan inflation and force an interest rate hike earlier than thought.
"Investors continue to anticipate speedy economic recoveries as the powerful forces of accelerating vaccine rollouts and significant financial assistance combine," interactive investor's Richard Hunter said.
"A better than expected [UK] GDP number last week, a levelling of sterling and an increasingly positive external view of UK prospects has tempted some international investors to test the waters. The current thoughts from the Monetary Policy Committee later in the week should also provide further colour to immediate prospects."
The FTSE 100 index was up 27.44 points, or 0.4%, at 6,788.91 early Monday. The mid-cap FTSE 250 index was up 84.80 points, or 0.4%, at 21,591.27. The AIM All-Share index was 0.5% higher at 1,197.34.
The Cboe UK 100 index was up 0.4% at 676.32. The Cboe 250 was up 0.5% at 19,249.66, and the Cboe Small Companies up 0.4% at 13,928.44.
In mainland Europe, the CAC 40 in Paris was up 0.6% while the DAX 30 in Frankfurt was 0.3% higher early Monday.
The positive sentiment stems from US President Joe Biden signing off on his USD1.9 trillion stimulus, which included big cash handouts for struggling Americans.
The president's pledge to ramp up the US inoculation programme with an aim for herd immunity around the summer also provided cheer to traders.
However, the government stimulus, combined with an expected boost in consumer spending, also has ramped up inflation expectations.
That is reflected in the spike in government debt yields, particularly benchmark 10-year Treasury notes, fanning worries the US Federal Reserve will be forced to hike borrowing costs.
The Fed's latest rate decision comes on Wednesday, followed by the Bank of England's meeting on Thursday, with the Bank of Japan's rate decision rounding out a busy week for central bank's on Friday.
In London, Flutter Entertainment jumped to the top of the blue-chip index, advancing 7.5%, after it responded to a press report regarding the potential initial public offering of its US business FanDuel.
Flutter noted it "regularly evaluates" its organisational and capital structure in an attempt to best position itself.
A CNBC report late Friday said the betting giant is considering spinning out US sports betting subsidiary FanDuel as a separately traded company on a US stock exchange.
"Options including the listing in the US of a small shareholding in FanDuel are being considered but no decision has been made at this time. Should a decision be made to proceed with a listing in due course, an announcement will be made as appropriate," the Paddy Power owner said.
AstraZeneca shares were unaffected - trading slightly higher - after it insisted its coronavirus vaccine is safe, after concern around blood clots prompted Ireland to become the latest European country to suspend use of the jabs.
A review of available safety data in more than 17 million people who have been vaccinated across the UK and EU has shown no evidence of an increased risk, the pharmaceutical giant said. People across the UK are still being urged to get their vaccine.
The decision followed reports of serious clotting in adults in Norway which left four people in hospital.
The number of cases of blood clots reported is lower than the hundreds of cases that would be expected among the general population, AstraZeneca Chief Medical Officer Ann Taylor said.
Among London midcaps, Provident Financial's shares sunk 29% as the sub-prime lender warned its Consumer Credit Division faces liquidation unless a scheme of arrangement can be agreed to pay off increasing customer complaints.
"When combined with the impact of Covid-19 on its profitability, customer complaints can no longer be treated as part of operating costs," Provident explained.
"If approved, a scheme will bring certainty for stakeholders and ensure that customers with a legitimate claim get fair access to redress payments. The group will fund legitimate scheme claims with GBP50 million and will cover further scheme related costs estimated at approximately GBP15 million. The total commitment would be met out of PFG's existing resources."
Provident said customer complaint payments were about GBP25 million in the second half of 2020. On top of this, the unit processed balance reductions for home credit customers of about GBP11 million during the same period.
"If the scheme is not approved, it is likely that CCD will be placed into administration or liquidation. If this were to happen, CCD customers would not be expected to receive any redress payment. Whilst the financial repercussions for CCD would be expected to be substantial, the direct financial or operational repercussions for Vanquis Bank and Moneybarn of an administration or liquidation of CCD would not be significant," Provident added.
The doorstep lender also noted the UK Financial Conduct Authority has opened an enforcement investigation into its CCD unit - focusing on the consideration of affordability and sustainability of lending to customers for the period between February 2020 and February 2021.
In better news for Provident, it said its fourth quarter performance was ahead of internal expectations, and, as a result, for the year as a whole.
Business-to-business media firm Ascential lost 7.7% in early trade as it reported a widened loss in 2020 as its Marketing and Retail & Financial Services units saw a severe drop in revenue.
Ascential reported a pretax loss of GBP184.3 million in 2020 compared to a loss of GBP7.9 million in 2019.
Total revenue fell 31% to GBP263.7 million from GBP380.3 million. The firm's Marketing unit revenue fell 60% and Retail & Financial Services revenue dropped 78%. It Digital Commerce unit, however, saw revenue grow 32% to GBP103.1 million.
Chief Executive Duncan Painter said: "Digital Commerce is now our largest and fastest growing segment and is well placed to benefit from the structural gains arising from the acceleration in e-commerce adoption. While our two marquee events are ready for a recovery as conditions allow, the Covid-19 pandemic restrictions continue to influence the timing of a return to maximum participation at venues.
"Nevertheless, the resilience and underlying momentum within the business model, combined with our strong balance sheet and strong trading in the first two months of the year, give us confidence of further good progress in the year ahead."
Ascential decided against dividends in 2020, versus the 1.8 pence payout in 2019, but said it will keep shareholder payouts under review.
Sterling was quoted at USD1.3942 early Monday, down from USD1.3985 at the London equities close on Friday.
The euro traded at USD1.1936 early Monday, lower than USD1.1940 late Friday. Against the yen, the dollar was a hair higher at JPY109.06 versus JPY109.00.
CMC Market analyst Michael Hewson said: "The euro appears to have shrugged off the stunning defeats suffered by German Chancellor Angela Merkel's CDU in regional elections at the weekend.
"The Greens saw big gains in Baden-Wuerttemberg, and also did well in the Rhineland, as voters gave their verdicts on the German government's bungled vaccine rollout response. It also calls into question as to what type of government Germany will be left with in the upcoming autumn elections, given that Chancellor Merkel is stepping down and isn't running. The CDU is still likely to be the largest party, however they still don't have a clear front runner in the race to replace her, and this result is only likely to increase party wrangling."
The Japanese Nikkei 225 index closed 0.2% higher Monday. In China, the Shanghai Composite closed down 1.0%, while the Hang Seng index in Hong Kong advanced 0.3%. The S&P/ASX 200 in Sydney ended slightly higher.
China's industrial output and retail sales surged in the first two months of the year, official data showed Monday, underscoring the country's recovery from the coronavirus pandemic.
Industrial production spiked a forecast-busting 35% on-year, the biggest bounce in decades, while retail sales also beat expectations with 34% growth.
But the National Bureau of Statistics said the latest surge was in part due to distortions from last year's "low base in the same period".
"After removing the base effect, the growth of main indicators is stable and macro indicators are in a reasonable range," said the NBS.
Data for January and February were released together to eliminate the influence of uncertainties brought about by China's Lunar New Year holiday, which typically falls within this period.
Industrial output in the first two months rose 17%.
Industrial activity was likely boosted by the fact that many migrant workers were discouraged from returning to their hometowns because of Covid-19 restrictions, meaning some factories remained open through the holiday or reopened sooner.
"We expect activity to remain strong in the near-term, as the easing of virus restrictions boosts consumption and fiscal stimulus among key trading partners should keep exports strong," said Capital Economics senior China economist Julian Evans-Pritchard.
Gold was quoted at USD1,728.60 an ounce early Monday, higher than USD1,710.65 on Friday. Brent oil was slightly higher at USD69.84 versus USD69.63 late Friday.
By Paul McGowan; paulmcgowan@alliancenews.com
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