LONDON MARKET CLOSE: Leisure stocks shake off extended lockdown

(Alliance News) - Stocks in London were mixed on Tuesday following England's extended lockdown, but travel and leisure stocks were snapped up after Monday's steep sell off.

UK Prime Minister Boris Johnson delayed the end of England's coronavirus restrictions by up to four weeks, having been warned that ending curbs could lead to thousands of deaths and unbearable pressure on the NHS. Johnson announced the setback to the final phase of his plan to end the lockdown on Monday, citing concerns over the rapidly spreading Delta variant first identified in India.

Experts feared going ahead with step four on June 21 as planned could lead to hospital admissions on the scale of the first wave of Covid-19 heaping unsustainable pressure on the health service. To avert this, Johnson said during a Downing Street press conference that the end of all legal limits on social contact would be put back to July 19.

The FTSE 100 index closed up 25.80 points, or 0.4%, at 7,172.48 on Tuesday. The mid-cap FTSE 250 index lost 112.79 points, or 0.5%, to close at 22,631.72. The AIM All-Share index ended down 6.78 points, or 0.5%, at 1,244.18.

The Cboe UK 100 index closed up 0.2% at 714.33. The Cboe 250 ended down 0.5% at 20,378.86, and the Cboe Small Companies up 0.4% at 15,268.77.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt both ended 0.4% higher.

CMC Markets analyst Michael Hewson said: "It's been another positive day for markets in Europe today with the FTSE100 eking out a new 16 month high, however the FTSE 250 has lagged behind somewhat, in the aftermath of yesterday's confirmation of an extension of restrictions to July 19.

"Shares in TUI have continued to fall as it becomes apparent that the window for a summer holiday boost from UK holidaymakers has got a whole lot smaller. The likes of Ryanair, easyJet and IAG have seen their shares tread water. On the flip side the likes of Restaurant Group, Cineworld and JD Wetherspoon have seen their share prices rebound a touch, as bargain hunters look to swoop in."

TUI closed 3.4% lower, Ryanair gained 0.5%, easyJet and IAG closed flat. In the midcaps, Restaurant Group added 1.8%, Cineworld 1.3% and Wetherspoons 0.9%.

Primark-owner Associated British Foods ended the best performer in the FTSE 100, up 3.3%, reversing Monday's 2.6% drop.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: "What a difference a day makes to the mood on the markets as far as the hospitality and travel industry is concerned. Whereas the Monday blues hit shares as investors fretted about the impact a four-week delay would have on the recovery plan, today optimism is the name of the game with July 19 circled as the new freedom target."

"So, although social distancing will be extended, a full stop is in sight and that's helped bring a big dollop of Tuesday motivation to companies worst hit by lockdowns. The glass half full attitude among investors has helped lift the FTSE 100 again to the highest level in just over 5 weeks," Streeter added.

Ashtead gained 2.4%. The equipment rental firm upped its annual payout, after more than doubling profit in the closing months of its financial year.

Ashtead reported a pretax profit of GBP220 million in the fourth quarter of the financial year that ended April 30. Revenue during the three-month period jumped 13% annually, or 23% at constant currency, to GBP1.27 billion.

The firm proposed a final dividend of 35 pence, taking the year's total to 42.15p, up 3.7% from 40.65p the year before.

Boohoo shares rose 1.1% on AIM as it reported a "strong start" to its financial year.

Revenue in three months to May 31 was GBP486 million, up 32% from GBP368 million in the same period the year before. Trading was significantly higher in the UK and US, increasing 50% and 43% respectively, the online fashion retailer said.

Sterling was quoted at USD1.4088 Tuesday evening, down on USD1.4112 at the London equities close on Monday.

The euro traded at USD1.2127, firm on USD1.2124 late Monday. Against the yen, the dollar rose to JPY110.08 versus JPY109.99.

Gold was quoted at USD1,860.80 an ounce on Tuesday evening, down from USD1,863.20 on Monday. Brent oil was trading at USD73.70 a barrel, firm on USD73.28 late Monday.

In the US, Wall Street was in reverse on Tuesday with little reaction to retail sales and producer price index data both coming in above estimates. The Dow Jones Industrial Average was down 0.6%, the S&P 500 down 0.2% but the Nasdaq Composite was up 0.3%.

The US producer price index surged 6.6% on an annual basis in May, the largest increase since 12-month data were first calculated in November 2010, the US Bureau of Labor Statistics said. April's factory price inflation was 6.2%, and analysts had expected May's reading to tick up only one notch to 6.3%, according to FXStreet.

A separate report from the Census Bureau on Tuesday showed US retail sales fall 1.3% month-on-month in May after revised growth of 0.9% in April. Analysts had expected May retail sales to slip just 0.8%, and April's reading was initially reported as flat.

TD Ameritrade's JJ Kinahan said: "Taken as a whole, the PPI and retail sales data seem to support the [US] Fed's 'transitory inflation' narrative. On the one hand, pandemic-related supply issues and stimulus-related release of pent-up demand have led to higher prices at both the consumer and now producer level. But as those dynamics have essentially run their course, retail sales look to be slipping."

Instead, all eyes are firmly on Jerome Powell and the US Federal Reserve's latest monetary policy decision.

The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.

"Going into the Fed meeting today, analysts mainly expect a reiteration of the Fed's previous statements about inflation being transitory and the job market still needing more support," Kinahan continued.

He added: "There's a growing consensus among many analysts that any announcement about a possible tapering of stimulus would be more of a late-summer or early-fall event. CME futures show only a 7% chance of any rate hike this year, down from 10% a month ago. Now the debate is whether the first hike is a late-2022 or an early-2023 event, but both are so far off it’s not really something you’d expect the market to trade on, yet."

Elsewhere in the international economic calendar on Wednesday, there is China industrial production overnight, followed by UK consumer and producer price indexes at 0700 BST and US MBA mortgage applications at 1200 BST.

In the local corporate calendar, car and lifestyle competition company Best of the Best, iron caster Castings and vehicle retailer Motorpoint will issue full-year results.

By Paul McGowan; paulmcgowan@alliancenews.com

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