(Alliance News) - The mood was brighter at the market open on Tuesday after a soft start to the week, stocks in London shrugging off a weak handover from the US and Asia.
Oil majors extended gains as the price of Brent crude continued to hold above the USD81 a barrel mark, offsetting in the FTSE 100 a decline by Melrose Industries shares. Greggs topped the FTSE 250 index after upgrading its outlook.
The FTSE 100 index was up 35.30 points, or 0.5%, at 7,046.31 early Tuesday. The mid-cap FTSE 250 index was up 109.99 points, or 0.5%, at 22,764.91. The AIM All-Share index was up just 0.50 of a point at 1,221.71.
The Cboe UK 100 index was up 0.5% at 700.06. The Cboe 250 was up 0.4% at 20610.39 and the Cboe Small Companies flat at 15,592.68.
In mainland Europe, the CAC 40 in Paris was up 0.4% while the DAX 40 in Frankfurt was up 0.3% early Tuesday.
Financial markets in Shanghai remain closed for National Day Golden Week, while the Hang Seng index in Hong Kong recovered into the afternoon to trade up up 0.5% on Tuesday. The S&P/ASX 200 in Sydney closed down 0.4%.
In Tokyo on Tuesday, the Nikkei 225 index fell 2.2%. Against the yen, the dollar strengthened to JPY111.16 from JPY110.96.
Japanese business conditions continued to be disrupted by the latest rise in Covid-19 cases and subsequent restrictions during September, according to au Jibun Bank and IHS Markit survey results. The au Jibun Bank Japan composite purchasing managers' output index - which measures combined output in the manufacturing and service sectors – rose to 47.9 points in September from 45.5 points in August, highlighting a softer, moderate fall in private output.
Still to come in the economic events calendar on Tuesday are services PMI readings from Germany at 0855 BST, the eurozone at 0900 BST, the UK at 0930 BST, and the US at 1445 BST.
Sterling was quoted at USD1.3613 ahead of the data, firming on USD1.3605 at the London equities close on Monday. The euro traded at USD1.1601 early Tuesday, down from USD1.1621 late Monday.
Gold was quoted at USD1,760.33 an ounce early Tuesday, lower than USD1,764.50 on Monday.
Brent oil was trading at USD81.63 a barrel early Tuesday, softening from USD81.85 late Monday but still trading around its best levels in three years after OPEC decided at a meeting on Monday to stick to planned moderate increases in output for November despite soaring crude prices.
A statement released after the brief videoconference meeting of the OPEC+ alliance said that participants had agreed to stick to the schedule agreed in July, namely to "adjust upward the monthly overall production by 0.4 million barrels per day for the month of November 2021".
London's oil majors edged up, reflecting Brent's resilience as it bobbed above USD81 a barrel. BP shares were up 0.8% while Royal Dutch Shell 'A' and 'B' stock rose 0.6% and 0.8% respectively. This extended gains on Monday, when BP rallied 1.9% and Shell 'A' and 'B' shares 1.5%.
This was helping the FTSE 100 index shake off Melrose Industries' 2.0% slide, after the industrial turnaround firm reported "frustrating" computer chip shortages.
Melrose said it is seeing improvement in its Aerospace end-markets, with revenue in the period up 16% on a year ago. Its performance is expected to improve further as the business continues restructuring.
However, Melrose did flag industry-wide supply problems hitting the Automotive and Powder Metallurgy divisions. While underlying demand is strong, the global semiconductor shortage has led to 'in month cancellations' from customers rising from a normal rate of around 1% to a current rate of 20% to 25%.
"Tightened supply of semi-conductors to the automotive industry are frustrating and difficult to plan for, but whilst they affect current trading, they don't impact long-term value, particularly as cash is well controlled and debt reduced," said Chief Executive Simon Peckham.
"We have made our businesses better, more flexible and resilient to deal with near term headwinds, and all our businesses are on track to achieve their margin targets assuming partial end market recoveries."
Also warning on supply shortages on Tuesday was UK baker Greggs, though the sausage roll maker still lifted its full-year outlook after strong quarterly trading.
Greggs was up 4.3% in early trade, topping the FTSE 250 index.
The baker reported like-for-like sales growth of 3.5% on a two-years basis for the third quarter. It noted that growth was particularly strong in August and remained in positive territory in September, with the two-year growth rate 3.0% in the four weeks to October 2.
And this growth was achieved despite staffing and supply chain disruption, the company noted.
"Greggs has not been immune to the well-publicised pressures on staffing and supply chains, and we have seen some disruption to the availability of labour and supply of ingredients and products in recent months," it said.
"Food input inflation pressures are also increasing; whilst we have short-term protection as a result of our forward buying positions we expect costs to increase towards the end of 2021 and into 2022."
Nonetheless, its strong performance in the third quarter lends confidence for the full-year, and Gregg expects its annual result to be ahead of previous internal expectations.
The baker is on Tuesday hosting a capital markets day, at which it will unveil plans for 500 of its shops to be open until 8pm by the end of next year as part of a bid to double revenue to around GBP2.4 billion by 2026. It is in the process of re-establishing an ordinary dividend policy and sees potential for additional distributions in the near term, the company added.
Shares in Virgin Money UK rose 2.0% after Investec raised the lender to Buy from Hold.
On AIM, shares in Hotel Chocolat rose 5.2%. The chocolate maker and retailer reported a double-digit annual revenue increase and swing to profit, with results ahead of expectations.
Revenue grew 21% to GBP164.6 million in the year to June 27 from GBP136.3 million the year before. It swung to a pretax profit of GBP7.8 million from a loss of GBP7.5 million.
"This pleasing set of results primarily reflects the strong performance of the group's multichannel proposition and the group's fast-growing active customer database," Hotel Chocolat said.
It opted not to pay a dividend given opportunities to invest fur further growth, and plans to recommence payouts "when it is appropriate to do so".
By Lucy Heming; lucyheming@alliancenews.com
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