LONDON MARKET CLOSE: FTSE 100 back above 7,000 as oil majors rally

Wed, 12th May 2021 17:03

(Alliance News) - Stocks in London ended mixed on Wednesday, with the FTSE 100 staging a small rebound after Tuesdays sharp losses, while US equity markets fell on inflation fears.

The FTSE 100 index closed up 56.64 points, or 0.8%, at 7,004.63. The FTSE 250 ended down 59.30 points, or 0.3%, at 22,107.84, and the AIM All-Share closed down 3.10 points, or 0.3%, at 1,232.56.

The Cboe UK 100 ended up 1.0% at 699.30, the Cboe UK 250 closed down 0.2% at 19,925.00, and the Cboe Small Companies ended up 0.2% at 15,006.30.

In Paris the CAC 40 and DAX 30 in Frankfurt both ended up 0.2%.

"After getting body slammed yesterday, European markets have enjoyed a fairly decent rebound today, with the FTSE 100 leading the way higher, moving back above 7,000, although we still have some way to go to reverse yesterday's losses," said CMC Markets analyst Michael Hewson.

In the FTSE 100, oil majors ended among the best performers, with BP and Royal Dutch Shell 'A' and 'B' shares up 3.5%, 3.3% and 3.0% respectively, tracking spot oil prices higher.

Brent oil was quoted at USD69.77 a barrel at the equities close, up sharply from USD68.08 at the close Tuesday.

"The price of oil is proving resilient to current market drivers. Investors are betting on further recovery in demand and are still seeing some inflation risks. The combination of these two factors, along with the US data regarding oil inventories released by the American Petroleum Institute, showing a decline of supply, are supporting the price," said analysts at ActivTrades.

Diageo ended the second best performer, up 3.4%, after the distiller said it is recommencing its return-of-capital programme to shareholders following a strong trading performance.

The Johnnie Walker scotch maker said its performance in North America has remained "particularly strong", while Europe has benefited from robust off-trade sales. Diageo said it now expects organic operating profit growth to be at least 14% in the current financial year, slightly ahead of organic net sales growth.

As a result of its trading performance, Diageo said it will restart the return-of-capital programme of up to GBP4.5 billion to shareholders that was first announced back in July 2019. It is initiating the second phase of the programme of up to GBP1.0 billion to be completed by the end of the 2022 financial year.

As such, Diageo has entered into an agreement with UBS to buyback shares worth up to GBP500 million until November 12.

At the other end of the large caps, food delivery platform Just Eat Takeaway.com ended the worst performer, down 8.3%, after rival Delivery Hero said it was relaunching in Germany.

The move comes two years after Delivery Hero exited its operations in its home country, but now has returned to take on Just Eat and Uber Eats.

Delivery Hero closed down 6.4% in Frankfurt, while Uber Technologies was off 5.5% in New York. London-listed Deliveroo ended 0.2% higher.

Flutter Entertainment ended down 4.5% after the gambling firm said Matt King has resigned as CEO of US arm FanDuel.

King, in post for the past four years, will remain while a search is made for his successor, but this is expected to delay the US listing of FanDuel.

"As previously announced, the Flutter board has been assessing the potential merits of listing a small stake in FanDuel in the US. Whilst Matt's departure will affect the timing of any potential US listing, the board will continue to keep this option under review," Flutter said.

In the FTSE 250, UDG Healthcare ended the standout performer, up 21% at 1,015.51p. The healthcare services provider has agreed to be taken over in a deal worth GBP2.78 billion.

Nenelite, an affiliate of private equity manager Clayton, Dubilier & Rice, offered to buy Leicestershire-based UDG for 1,023 pence per share, representing a premium of 22% to Tuesday's closing price of 842.0p. This values FTSE 250-listed firm's share capital at GBP2.61 billion and implies an enterprise value of GBP2.78 billion.

It also implies a 17.2 times enterprise value multiple to UDG's adjusted earnings before interest, tax, depreciation and amortisation. UDG directors unanimously recommended the offer to shareholders. Kabouter Management, with a 5.5% stake, has provided a letter of intent to vote in favour of it.

Stocks in New York were firmly in the red at the London equities close again on growing inflation fears.

The DJIA was down 0.8%, the S&P 500 index down 1.2% and the Nasdaq Composite down 2.0%.

The US annual inflation rate jumped to 4.2% in April, figures from the Bureau of Labor Statistics showed, quickened from March's 2.6% rise. It also topped consensus estimates, cited by FXStreet, for an uptick to 3.6%.

Monthly, consumer prices rose 0.8% in April, not only topping March's 0.6% growth, but also ahead of forecasts of a smaller 0.2% hike.

Excluding food and energy, prices rose 0.9% monthly in April, beating forecasts of 0.3% growth, which would have been equal to the March hike. The yearly consumer price inflation hike was partly down to a rise in used vehicles.

The US Federal Reserve insists that while it sees a transitory spike in inflation owing to the recovery and the low base of comparison last year, officials will not make any policy adjustments such as lifting interest rates yet.

"With the economy roaring back, jobs returning and inflation likely to remain higher for longer we continue to see the risks skewed towards an earlier interest rate rise - 1Q23 - than the Federal Reserve is currently projecting - early 2024," said analysts at ING.

Meanwhile, the dollar was higher after data showed US consumer inflation spiked. The pound was quoted at USD1.4104 at the London equities close, down from USD1.4150 at the close Tuesday.

The euro stood at USD1.2075 at the European equities close, down from USD1.2165 late Tuesday. Against the yen, the dollar was trading at JPY109.45, up sharply from JPY108.50 late Tuesday.

On the economic front, the UK economy shrank at the start of 2021 as virus restrictions damped economic activity, particularly in the service sector.

Gross domestic product is estimated to have contracted 1.5% in the quarter to March on a sequential basis, reversing 1.3% growth in the final quarter of 2020. However, Wednesday's figure was slightly ahead of consensus, cited by FXStreet, for a 1.6% fall.

Positively, though, the UK economy is estimated to have grown 2.1% in March, the fastest monthly pace since August 2020 as lockdown measures started to ease. March's GDP was 5.9% below the pre-virus levels seen in February 2020, and 1.1% below the initial recovery peak in October 2020.

The EU sharply revised up its growth forecasts for this year and next, saying an accelerated vaccination drive and the bloc's landmark recovery plan would lift Europe out of recession.

According to the European Commission, growth in the 19 countries that use the euro currency will hit 4.3% in 2021 and 4.4% in 2022, compared with 3.8% for these years in its previous estimate given in February.

For the full 27 members of the EU, the commission said the economy will expand by 4.2% in 2021 and by 4.4% in 2022.

The pickup in growth confirms forecasts by the IMF and other data that showed a sudden increase in manufacturing and greatly improved confidence by consumers who see a happy end to the long winter of Covid-related restrictions.

Gold was quoted at USD1,825.25 an ounce at the London equities close, lower against USD1,829.77 late Tuesday.

The economic events calendar on Thursday has US producer prices and the latest jobless claims numbers at 1330 BST.

The UK corporate calendar on Thursday has annual results from private equity investor 3i Group, former state telephone monopoly BT Group and fashion house Burberry Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com