LONDON MARKET CLOSE: FTSE 100 takes breather after stellar rebound

Thu, 22nd Jul 2021 16:51

(Alliance News) - Equity prices in London ended mixed on Thursday, with the blue-chip FTSE 100 losing gains from earlier in the session and succumbing to share price falls for Unilever, snapping a strong bounce for the index after a tough start to the week.

Gains for Morgan Sindall helped lift the mid-cap FTSE 250 index, while equities in mainland Europe extended their win streak to three days.

The FTSE 100 index closed down 29.98 points, or 0.4%, at 6,968.30. The mid-cap FTSE 250 index climbed 135.31 points, or 0.6%, at 22,677.28. The AIM All-Share index closed 15.58 points higher, or 1.3%, at 1,228.09.

The Cboe UK 100 index closed down 0.6% at 693.25. The Cboe 250 rose 0.7% to 20,403.63, and the Cboe Small Companies rose 0.6% to 15,010.99.

The CAC 40 in Paris rose 0.3%, while the DAX 30 in Frankfurt climbed 0.6%.

CMC Markets analyst Michael Hewson noted the FTSE 100 "underperformed" during what was a largely positive session for European equities. London's large-cap benchmark was dragged down by share price declines from some of its larger stocks, Hewson explained.

Hewson commented: "If this week's price action has shown us anything it's that markets appear to be caught in a pincer movement between concerns over rising inflation, and slowing growth, and that looks set to continue.

"This is no better reflected in the latest numbers from Unilever, which have weighed on the FTSE 100, as steep rises in costs hit its operating margins, although some of the effect has been mitigated by the company raising prices."

Consumer goods firm Unilever shares slumped 5.9% after the firm saw cost inflation in the second quarter.

Unilever's underlying operating margin in the first half of 2021 slipped 100 basis points to 18.8% due to investment into its brands and input cost inflation. Revenue for the half edged up 0.3% to EUR25.79 billion from EUR25.71 billion, while pretax profit slipped 3.6% to EUR4.37 billion from EUR4.53 billion.

Reckitt Benckiser fell 2.4% in a negative read-across.

NatWest lost 2.6%, as the UK government said it plans to sell a large part of its stake in the lender.

The Treasury currently owns 6.34 billion shares in the bank, via UK Government Investments, representing a 54.7% stake. It has entered into a trading plan managed by US investment bank Morgan Stanley to sell the shares.

The Treasury has, however, put a cap on how many shares Morgan can sell on any given day. The investment bank is limited to selling no more than 15% of NatWest's daily traded volume, in an attempt to avoid flooding the market with NatWest shares. As a result, the government is unable to say how many shares in total will be sold over the 12-month period.

At the other end of the FTSE 100, Just Eat Takeaway rose 3.7%, following Frankfurt-listed peer Delivery Hero higher. Delivery Hero rose 5.3% after receiving approval from Korean regulators to extend the period to sell Delivery Hero Korea, better known as Yogiyo, for another five months.

Regulators had told Delivery Hero that it must sell Yogiyo as a result of its takeover of South Korean competitor Woowa.

Back in London, Morgan Sindall rose 13%, the best performing mid-cap stock. It forecasts annual results to beat previous expectations following a strong first-half performance.

The six months ended June 30 are expected to show pretax profit around GBP53 million, more than tripled from GBP15.7 million a year prior and up 46% on 2019's pre-pandemic levels, the construction and property regeneration group said.

The euro traded at USD1.1775 late Thursday, down from USD1.1800 on Wednesday, and off intraday highs of USD1.1830.

The European Central Bank on Thursday affirmed the decisions reached in its recent strategy review as it tweaked forward guidance to see no rate hikes until inflation stabilises at 2%.

At a following press conference, ECB President Christine Lagarde noted the euro area's strong recovery, but cautioned that the path ahead depends on how the pandemic develops.

The Frankfurt-based central bank kept the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and negative 0.50%, respectively.

IG analyst Chris Beauchamp commented: "Central bank hawkishness, premature or otherwise, has been a bit of a go-to for market weakness, and investors will be pleased to see that one of the 'big four' is still committed to its loose monetary policy stance, even if the actual benefits from such a continued stance are limited."

Sterling was quoted at USD1.3754 at the London equities close on Thursday, up from USD1.3684 on Wednesday. Against the yen, the dollar slipped to JPY110.08 versus JPY110.25.

Gold was quoted at USD1,806.52 an ounce late Thursday, up slightly from USD1,805.13 late on Wednesday. A barrel of Brent oil fetched USD72.84, up against USD71.86.

Stocks in New York were mixed at the time of the London equity market close. The Dow Jones Industrial Average was down 0.1%, the S&P 500 was marginally higher and the Nasdaq Composite was up 0.2%.

US jobless claims unexpectedly rose last week, data from the Department of Labor showed.

Initial claims rose to 419,000 for the week to July 17 from 368,000 the week before. Markets, according to FXStreet, had anticipated a fall to 350,000.

The US corporate calendar will continue to be in focus, with results due from computer chip maker Intel and social networking site Twitter later on Thursday.

Friday's local corporate calendar has trading statements from telecommunications firm Vodafone Group, wealth manager Brewin Dolphin and Mr Kipling cakes maker Premier Foods. Insurer Beazley releases interim results.

The economic calendar has a slew of flash PMIs, including the UK at 0930 BST, after the eurozone at 0900 BST. Financial markets in Tokyo will be closed for Sports Day.

By Eric Cunha; ericcunha@alliancenews.com