LONDON MARKET CLOSE: Equities calm after rout but virus fears remain

Tue, 20th Jul 2021 17:03

(Alliance News) - Stock prices in Europe ended higher on Tuesday, as global equities regained some poise after sizeable losses at the start of the week, though gains were capped as the surging Delta variant continued to weigh on the minds of traders.

The pound slipped to a five-month low as new virus cases in the UK continue to grow, just a day after most legal Covid-19 restrictions ended in England.

"European markets initially started the day higher, as some tentative buying emerged after yesterday's sharp sell-off. We did see a drift back into negative territory ahead of the US open, however we've since recovered off those lows," CMC Markets analyst Michael Hewson commented.

The FTSE 100 index closed up 36.74 points, or 0.5%, at 6,881.13. The mid-cap FTSE 250 index climbed 178.60 points, or 0.8%, at 22,119.48. The AIM All-Share index closed 3.45 points lower, or 0.3%, at 1,195.72.

The Cboe UK 100 index closed up 0.6% at 684.92. The Cboe 250 rose 0.7% to 19,782.27, and the Cboe Small Companies rose 0.3% at 14,687.37.

The CAC 40 in Paris rose 0.8%, while the DAX 30 in Frankfurt climbed 0.6%

In New York, stocks had a bright start to the day. The Dow Jones Industrial Average rose 1.5%. The S&P 500 climbed 1.3% and the Nasdaq Composite was up 1.1%.

IG analyst Joshua Mahony added: "US markets have followed their European counterparts higher today, with traders opting to buy the dip in the wake of yesterday's sharp decline. Fears around the rise of the Delta variant remain evident despite today's reprieve, with a five-month low for the US 10-year highlighting the lack of full conviction behind this move."

"We are also seeing that risk-off sentiment exhibited throughout the FX-markets, with GBPUSD hitting a five-month low thanks to rising UK Covid cases and haven dollar demand," Mahony added.

Sterling was quoted at USD1.3602 late Tuesday, pulling back further from USD1.3677 at the London equities close on Monday. Cable fell to an intraday low of USD1.3572, its worst level since February.

The highly transmissible Delta variant first detected in India is driving new outbreaks just as countries seek to relax restrictions in order to kickstart virus-battered economies.

In Britain, new infections have climbed, averaging more than 50,000 since last week, with Delta taking hold in many areas.

The euro traded at USD1.1764 on Tuesday, soft on USD1.1798 late Monday. Against the safe haven Japanese yen, the dollar rose to JPY109.91 from JPY109.51.

In London, travel, leisure and retail stocks recovered some of Monday's sharp losses.

Athleisure retailer JD Sports rose 2.9%, among the best FTSE 100 performers. Associated British Foods, which operates high street stalwart Primark, ended 1.7% higher. Primark does not operate online, relying only on its bricks and mortar units, meaning AB Foods was caught in the cross-hairs of virus worries on Monday.

Among mid-caps, Cineworld rose 3.1%, Carnival advanced 2.7% and easyJet ended up 0.9%.

easyJet voiced confidence over international travel demand this summer, with the budget airline planning to ramp-up to 60% of pre-pandemic capacity.

Revenue for the third quarter that ended June 30 rose to GBP212.9 million, in line with expectations and up significantly from GBP7.2 million during the prior-year period at the height of coronavirus restrictions in the UK.

The airline is now looking ahead to more relaxed travel rules and has been focusing on pivoting capacity to Europe, where customer demand is strongest. It expects capacity in the fourth quarter ending September 30 to be up to 60% of 2019 levels, improved from just 17% in the third quarter.

Gains for stocks which will largely benefit from the reopening of the economy highlights how they are at the "forefront of recent volatility", IG's Mahony added.

"Housebuilders have been one sector in favour today, with the fall in treasury yields highlighting how many perceive this recent rise in Covid cases as lessening the risk of inflation-led monetary tightening," Mahony added.

Berkeley Group ended up 3.2%, Persimmon rose 1.5% and Taylor Wimpey climbed 1.8%.

On AIM, mixer maker Fevertree tumbled 7.5%, after cautioning on squeezed margins as it faces logistics cost pressures.

Total sales in the half to June 30 amounted to GBP141.8 million, up 36% on a year ago. The UK segment delivered just 4.1% growth, but US sales surged 32% and Europe sales doubled.

However, gross margin in the half was "impacted by significantly elevated costs resulting from the disruption currently impacting global logistics".

Due to the strong start to the year, Fevertree raised its annual revenue guidance to a range of GBP295 million to GBP304 million. Revenue was GBP252.1 million in 2020, down from GBP260.5 million in 2019.

Over in New York, technology consultancy IBM rose 3.1%. It posted consensus-topping second quarter revenue growth late Monday.

Meanwhile, Philip Morris International dropped 3.3%, as the Marlboro cigarette maker's second quarter revenue fell short of consensus.

PMI reported net revenue of USD7.59 billion, up 14% from USD6.65 billion in the same period a year prior. According to consensus cited by CNN, the company was tipped to post revenue of USD7.7 billion for the quarter, so the real figure fell short of expectations.

Gold was quoted at USD1,808.34 an ounce late Tuesday, higher than USD1,807.03 on Monday. Brent oil was trading at USD69.14 a barrel, down from USD69.23 late Monday.

Wednesday's economic calendar has UK public sector borrowing figures at 0700 BST. Minutes from the latest Bank of Japan policy meeting are released overnight.

The local corporate calendar has half-year output results from miners Antofagasta and Hochschild Mining. Postal service firm Royal Mail updates on its first quarter and DIY retailer Wickes Group releases a trading statement.

By Eric Cunha; ericcunha@alliancenews.com