LONDON MARKET CLOSE: Oil and retailers propel FTSE into new quarter

Thu, 01st Jul 2021 16:58

(Alliance News) -Â London's blue-chip FTSE 100 index burst into the third quarter, adding nearly 90 points on Thursday due to a weaker pound, higher oil prices, and share price gains for retailers.

The FTSE 100 index surged 87.69 points, or 1.3%, to 7,125.16. The FTSE 250 ended up 246.52 points, or 1.1%, at 22,622.54, and the AIM All-Share closed up 11.40 points, or 0.9%, at 1,259.71.

The Cboe UK 100 ended up 1.0% at 708.86, the Cboe UK 250 closed up 1.0% at 20,327.90, and the Cboe Small Companies ended up 0.4% at 15,416.13.

In European equities on Thursday, the CAC 40 in Paris ended up 0.7% and the DAX 30 in Frankfurt ended 0.5% higher.

"The FTSE 100 has outperformed its peers today, as dovish tones from the Bank of England helped to drive the pound lower," said Joshua Mahony, senior market analyst at IG.

The pound slipped after BoE Governor Andrew Bailey said he expects recent inflation strength to prove temporary.

Bailey, giving his annual Mansion House speech in the City of London, said he expected the rises in inflation to be temporary, but warned that it could be a longer-term problem unless pent-up demand reduces and supply chains can keep up.

He said inflationary pressures have come from prices returning to pre-Covid levels and demand outstripping supply.

"It is important not to over-react to temporarily strong growth and inflation, to ensure that the recovery is not undermined by a premature tightening in monetary conditions," said Bailey.

A downwards revision to the UK's manufacturing PMI for June also put pressure on sterling.

The IHS Markit-CIPS UK manufacturing purchasing managers' index reading was revised lower to 63.9 points in June from a preliminary estimate of 64.2 and down from May's record level of 65.6. Still, the latest score remained well above the 50.0 mark that separates expansion from contraction.

The pound was quoted at USD1.3775 at the London equities close Thursday, down compared to USD1.3812 at the close on Wednesday.

The euro stood at USD1.1851 at the European equities close Thursday, soft against USD1.1856 at the same time on Wednesday as the eurozone's own manufacturing monitor improved to 63.4 in June from 63.1 in May, beating the flash reading of 63.1.

IG's Mahony added: "Energy prices also helped bolster sentiment in the commodity-heavy UK market, with OPEC+ plans to raise production doing little to dent confidence as Brent hit a 32-month high."

Brent oil was quoted at USD75.52 a barrel at the London equities close Thursday, up from USD75.02 late Wednesday. This lifted oil majors, with BP ending up 3.0% and Royal Dutch Shell 'A' and 'B' shares gaining 2.9% and 2.8% respectively.

OPEC members led by Saudi Arabia began to confer Thursday via a teleconference, with 10 allied oil producing countries led by Russia joining talks in the afternoon.

Angolan Oil Minister Diamantino Azevedo, who currently holds the OPEC presidency, said that although oil demand was expected to rebound strongly in the second half of the year, it was "no time to lower our guard".

Oil traders expect OPEC+ to maintain its overall strategy, and many look for a modest increase in output of around 500,000 barrels per day starting in August.

Safe haven assets gold and the Japanese yen were mixed. Against the yen, the dollar rose to JPY111.59 on Thursday, compared to JPY110.94 late Wednesday.

Gold was quoted at USD1,769.16 an ounce at the London equities close Thursday, however, nudging up from USD1,764.86. Precious metals miner Fresnillo rose 3.2%.

The top gainer in the FTSE 100 on Thursday was JD Sports, rallying 5.4% on plans to separate its executive chair and chief executive roles, whilst reporting "encouraging" trade since retail reopened.

The Manchester-based athletic apparel retailer bowed to shareholder pressure over its corporate governance, agreeing to split its chair and CEO roles. Peter Cowgill has served as both executive chair and CEO of JD Sports, since taking up the latter position in 2014.

Turning to recent trading, JD Sports said sales in the immediate period after the reopening of non-essential shops in England was encouraging in the UK as both existing and new consumers to the company's product ranges. However, consistent with other retailers, it said, store footfall remains fragile with online traffic at elevated levels.

Fellow retailer Associated British Foods finished in second place, up 4.8%, as it reported a sales boom at clothing retailer Primark.

Revenue at the fast-fashion chain reached GBP1.6 billion in the third quarter ended June 19, the company said. That's up from GBP600 million in the same period last year, when stores were closed for most of the quarter, and a 3% like-for-like increase over the same period in 2019.

Primark sales beat the company's expectations and the performance was "much improved" on earlier periods in the pandemic, reflecting an increase in consumer confidence and willingness to spend, AB Foods said.

Compass Group ended up 3.9%, extending gains on Wednesday on hopes for a strong global recovery from the pandemic.

GlaxoSmithKline rose 1.3% after Elliott Management confirmed it has built a stake in the pharmaceutical firm and called for the "right leadership" to realise its value after years of underperformance.

The activist investor said in an open letter that it has built a "significant position" in GSK without specifying the size. The Financial Times first reported in April that Elliott built a multi-billion-pound stake in GSK.

In the letter, Elliott said it supported GSK's decision to spin off consumer health. But the company must be careful in choosing the right leadership for each business after years of underperformance, Elliott added, putting pressure on Chief Executive Emma Walmsley.

At the bottom of the FTSE 250 was Micro Focus International, finishing 14% lower as it reported a fall in interim revenue.

In the six months that ended April 30, the software and information technology firm saw its pretax loss narrow to USD280.0 million, from USD1.04 billion the year prior. First half revenue dropped 4.6% to USD1.43 billion, from USD1.49 billion.

Grafton Group gained 5.5% as it agreed to sell its traditional merchanting business in the UK for GBP520 million to builders merchants Huws Gray.

Stocks in New York were mostly higher at the London equities close, with the tech-heavy Nasdaq pulling back. The Dow Jones was up 0.3%, the S&P 500 index up 0.3%, and the Nasdaq Composite down 0.3%.

Two surveys showed the US manufacturing sector remained buoyant in June, though the rate of growth failed to pick up from May.

The IHS Markit manufacturing PMI posted 62.1 in June, unchanged on May but below the preliminary reading of 62.6. Nonetheless, any reading above the 50.0 indicates growth - signalling that the US manufacturing sector remained in rude health last month.

New order growth remained strong in June, even as the rate of expansion eased from May's historic high, and new export orders rose "solidly". However, output growth was bogged down by severe supply-chain disruptions as well as reports of labour shortages.

Meanwhile, the Institute for Supply Management's manufacturing PMI registered 60.6 in June, down from May's reading of 61.2.

ING commented: "Supply disruptions and labour shortages means both US manufacturing and construction sectors are struggling to keep pace with demand. Corporate pricing power is on the rise and the case for earlier Federal Reserve rate hikes is building."

Ahead of Friday's nonfarm payrolls data, the Department of Labor showed US initial jobless claims fell last week as companies held on to workers amid shortages. In the week to June 26, US initial jobless claims were 364,000, down sharply from 415,000 claims in the week prior. The latest figure was better than market expectations, cited by FXStreet, of 390,000 and was a new pandemic low.

The economic calendar on Friday is headlined by the monthly US jobs report for June due out at 1330 BST, which includes the closely-watched nonfarm payrolls figure as well as the unemployment rate. Elsewhere, is the eurozone producer price index at 1000 BST.

By Lucy Heming;Â lucyheming@alliancenews.com