(Alliance News) - Stock prices in London were mixed at midday on Tuesday as investors weighed positive corporate earnings against a resurgence in Covid-19 cases, ahead of key US inflation data on Wednesday.
While vaccinations are being rolled out, infection rates continue to climb around the world, forcing some governments - particularly China and Australia - to impose fresh lockdowns and other containment measures.
China's coronavirus cases hit a seven-month high on Tuesday, after a cluster at a test site helped drive up numbers as the Delta variant challenges Beijing's grip on the pandemic. State media has described the current outbreak – which has sparked local lockdowns, mass testing and travel restrictions – as the most severe since the virus emerged in the central city of Wuhan.
Meanwhile, in Australia, Sydney posted a new record of infections on Tuesday as the city struggles to control an outbreak that is sending other regions into lockdown. New South Wales state announced 356 new cases, a fresh record for a Delta-variant outbreak that began in mid-June and continues to grow in a population with low vaccination rates.
The FTSE 100 index was down 6.08 points, or 0.1%, at 7,126.13 at midday in London. The mid-cap FTSE 250 index was up 97.29 points, or 0.4%, at 23,550.73. The AIM All-Share index was up 0.2% at 1,263.93.
The Cboe UK 100 index was down 0.2% at 709.30. The Cboe 250 was up 0.4% at 21,329.35, and the Cboe Small Companies flat at 15,406.70.
In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were both up 0.1%.
In New York, the Dow Jones Industrial Average was called down 0.1% and the S&P 500 flat, but the Nasdaq Composite was called up 0.1%.
"This mixed international picture could be explained by a decreasing appetite for stocks in the US as investors are digesting the prospect of a hawkish shift to come from the Federal Reserve, while the situation remains dovish on the old continent," analysts at ActivTrades said. "Market sentiment in Europe is being lifted today by tech and cyclical values which suggest investors remain confident about the current economic recovery despite rising virus numbers in some hotspots.
"The strength of the US labour market, which previously had been cited by Fed officials as a reason for concern and therefore making it necessary to hold back on any tapering, surprised to the upside and made it more likely for the American central bank to start tapering its asset purchases sooner than previously expected. This dynamic, which triggered an immediate rise in Treasury yields, is likely to continue to support the dollar, especially if Wednesday's inflation numbers also surprise to the upside by reading above last month's rate of 5.4%."
In London, Flutter Entertainment was the best performer in the FTSE 100 index, up 5.2%, after the gambling firm said it enjoyed a very strong first half with revenue growth driven by increased average monthly players.
For the six months to June 30, revenue was up 99% at GBP3.05 billion from GBP1.54 billion in the prior year and pretax profit more than tripled to GBP77 million from GBP24 million. Adjusted earnings before interest, tax, depreciation and amortisation - excluding the US business - doubled to GBP684 million from GBP339 million.
Looking ahead, Flutter expects second half adjusted Ebitda of between GBP1.27 billion to GBP1.37 billion.
Hargreaves Lansdown was up 1.2% after Exane BNP upgraded the fund supermarket to Neutral from Outperform. The stock shed 9.0% on Monday after the company warned of higher costs and that a Covid-19 surge in trading volumes had slowed.
Phoenix Group was up 1.1% after Peel Hunt upgraded the life insurer to Hold from Reduce.
At the other end of the large-caps, M&G was the worst performer, down 3.6%. The investment manager reported an increase in assets under management that missed expectations in the first half of 2021.
Assets under management and administration rose 9.2% to GBP370.0 billion from GBP338.7 billion a year ago. The institutional business saw net inflows of GBP2.2 billion, down from GBP2.8 billion a year ago. Outflows at the retail business were GBP3.4 billion, narrowing from GBP7.7 billion.
Revenue jumped to GBP9.21 billion from GBP1.47 billion a year ago. Pretax profit fell 89% to GBP74 million from GBP665 million, after M&G recorded high charges.
The company's assets under management and administration rose to GBP370 billion from GBP338.7 billion.
"Assets under management came in at GBP370 billion, 1.5% behind consensus expectations primarily due to a miss at Heritage, the run-off annuity business," explained Shore Capital analyst Abid Hussain.
AUMA reduction of GBP3.6 billion in the Heritage business was GBP130.1 billion at June 30, down from GBP133.7 billion at December 31 and was driven by net client outflows of GBP3.3 billion.
"The retail asset management net flows suffered from one-off negative flows due to repatriation of funds by Prudential and property fund redemptions," Hussain added.
InterContinental Hotels Group was down 2.5%. The hotel operator said trading improved significantly during the first half of 2021, as travel demand returning strongly as vaccines were roll out, restrictions eased and economic activity began to rebuild.
For the six months to June 30, total revenue was USD1.18 billion, down 5.6% from USD1.25 billion a year before, but IHG swung to an operating profit of USD138 million from a loss of USD233 million.
Revenue per available room - a key metric in the hotel industry - was 20% higher than at the same time in 2020.
IHG noted the Covid-19 pandemic continued to hurt its financial performance through the first half, as government travel restrictions introduced in 2020 were maintained in most markets to varying degrees.
abrdn was down 2.5%. The asset manager reaffirmed its full-year outlook following a steady first-half performance that saw it swing to a pretax profit.
Formerly known as Standard Life Aberdeen before its recent rebrand, abrdn reported a swing to pretax profit of GBP113 million in the first half of 2021 from a GBP498 million loss a year ago, amid higher adjusted operating profit and lower impairments.
Assets under management and administration was mostly unchanged at GBP532 billion, compared to GBP535 billion a year prior, as net outflows were staunched, reduced to GBP5.6 billion from GBP24.8 billion. Revenue for the period fell 21% to GBP1.08 billion from GBP1.36 billion a year before.
In the FTSE 250, Watches of Switzerland was the best performer, up 4.5%. The luxury timepiece retailer said an "extremely strong" first quarter has underpinned its existing full year guidance.
Watches of Switzerland booked revenue growth of 96%, rising to GBP297.5 million for the three months ended August 1. Revenue for the same period last year was GBP151.6 million.
The company, which is one of a handful of official dealers for Rolex in the UK, said strong domestic sales boosted revenue despite subdued store traffic, instilling confidence in its full year outlook.
Vectura Group was up 0.5%. Suitor Philip Morris International said it has switched its bid for the asthma treatment firm to a takeover offer from a scheme of arrangement.
Philip Morris noted its takeover offer for Vectura now has the consent of the UK Takeover Panel and the offer is conditional on more than 50% acceptances. No other changes have been made to the takeover offer ahead of a Panel-set auction which will start on Wednesday and run for five days, ending on Tuesday next week.
The battle to acquire Vectura has been rumbling on for months, with the Marlboro cigarette maker and private equity firm Carlyle Group set to square off in the auction.
The pound was quoted at USD1.3860 at midday on Tuesday, marginally higher from USD1.3856 at the London equities close Monday.
"Sterling remains on the front foot in part due to ongoing confidence in the UK economy and the vaccination programme. This is also due to comments from the Bank of England last Wednesday during their latest rate announcement that 'some modest tightening of monetary policy is likely to be necessary' over the next two years to keep inflation under control," explained analysts at OFX.
The euro was priced at USD1.1722, lower from USD1.1748 late Monday. Against the Japanese yen, the dollar was trading at JPY110.50, up from JPY110.24.
Brent oil was quoted at USD69.61 Tuesday at midday, up sharply from USD68.80 late Monday. Gold was trading at USD1,728.63 an ounce, marginally lower against USD1,730.32.
US stock market futures were pointed to their mixed start after US lawmakers laid out a USD3.5 trillion budget framework, calling it the "most consequential" social spending plan since the 1930s.
The 10-year budget blueprint pushes Congress towards the next step in President Joe Biden's ambitious vision for his first term in office, following on the heels of the USD1.2 trillion infrastructure plan, which the Senate is expected to approve Tuesday in vote at 1100 Washington time before the measure is sent to the House of Representatives.
The dollar amount is staggering, almost matching the size of Germany's economy in 2020. The spending plan published Monday includes funding for climate measures, new investments in infrastructure including items left out of the targeted Senate package, residency status for millions of migrant workers, and two years paid tuition at public universities.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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