LONDON MARKET CLOSE: Sterling strengthens after solid UK jobless data

Tue, 18th May 2021 17:00

(Alliance News) - It was another subdued day for stocks in London on Tuesday, but sterling was boosted by unemployment in the UK easing better-than-expected.

"For the most part we have seen a positive approach to risk today, with a weakening dollar, stronger commodities, and rising equity markets," IG Senior Market Analyst Joshua Mahony said.

The FTSE 100 index closed up 1.39 points at 7,034.24 Tuesday. The mid-cap FTSE 250 index ended up 118.42 points, or 0.5%, at 22,332.56 - winning back the losses from Monday. The AIM All-Share index gained 0.5% at 1,239.75.

The Cboe UK 100 index closed up 0.1% at 702.49. The Cboe 250 ended up 0.6% at 20,102.80, but the Cboe Small Companies was down 0.4% at 14,863.99.

In mainland Europe, the CAC 40 in Paris closed down 0.2%, while the DAX 30 in Frankfurt lost 0.1% on Tuesday.

"It's been another fairly subdued day of trading for markets in Europe, as an initially strong start and a new record high for the DAX soon gave way to some intraday profit taking, and a mixed finish to the day," CMC Markets Chief Market Analyst Michael Hewson said.

Hewson continued: The FTSE 100 briefly managed to push above the 7,100 level before retreating, with telecoms acting as the biggest drag, as Vodafone shares took a bit of a pummelling after falling a little short on expectations."

Vodafone ended Tuesday's session down 8.9% - at the bottom of the blue chip index - after annual revenue declined and earnings missed consensus.

Revenue for the financial year to March 31 was EUR43.81 billion, down 2.6% from EUR44.97 billion the year before but beat market expectations of EUR43.64 billion. Vodafone cited the impact of the Covid-19 pandemic on roaming charges, amid foreign travel restrictions, for the decline in revenue.

Vodafone's pretax profit jumped to EUR4.40 billion in the recent year from just EUR795 million the year before, after financing costs fell to EUR1.03 billion from EUR3.55 billion.

However, adjusted earnings before interest, tax, depreciation and amortisation fell 3.3% - or 1.2% on an organic basis - to EUR14.39 billion from EUR14.88 billion. Adjusted Ebitda was expected by market consensus at EUR14.54 billion, so this was missed slightly.

DCC gave back 1.7% despite posting swelling profits in its full-year results, boosted by Covid-19 driven demand for its personal protective equipment.

The sales, marketing and support services company also announced a new board chair. DCC also announced Mark Breuer's appointment as new chair, replacing John Moloney. Breuer joined the board in November 2018 and has over thirty years' experience in investment banking, most recently with JPMorgan Chase & Co, DCC said. He was vice-chair of Global M&A for JP Morgan before retiring in 2017.

DCC reported a "very strong performance" for the year ended March 31, with pretax profit up 17% year-on-year to GBP365.1 million from GBP311.5 million.

Dublin-based DCC noted profit growth was ahead of market expectations, with all its divisions recording growth in operating profit, despite the challenging trading environment.

As a result of the positive trading performance, DCC's board proposed a 13% rise in the final dividend payment to 107.85 pence per share, giving a total dividend of 159.80p or 10% growth for the year.

Revenue for the year saw a 9.1% year-on-year decline to GBP13.41 billion, attributed to lower activity levels in DCC Retail & Oil and lower oil prices during the year.

In the green, Imperial Brands added 1.5% after the tobacco company aid it was on track to meet its guidance for its financial year after a resilient first half of trading.

The Bristol-headquartered firm posted revenue for the six months to March 31 of GBP15.57 billion, up 6.1% from GBP14.67 billion a year previously. Organic adjusted net revenue was GBP3.57 billion, up 2.4% or 3.5% at constant currencies.

Pretax profit for the period jumped to GBP2.06 billion from just GBP785 million a year before, helped by "strong pricing" for tobacco. Imperial said organic tobacco volumes were down 3.3%, due to weaker duty-free sales, but next-generation product revenue bounced by 16% from a weak prior-year period.

"We have made a good start in implementing our new strategy to transform Imperial and remain on track to meet full year expectations," said Chief Executive Stefan Bomhard.

Land Securities was able to eke out 0.6% gains, after spending most of the session in the red.

The London-based commercial property developer reported a weak annual performance, reflecting the challenges brought on by the Covid-19 pandemic, but it said it remains upbeat as the UK comes to grips with the virus.

LandSec reported a sharply widened pretax loss in the financial year to March 31 of GBP1.39 billion from GBP837 million in the year prior. This was worse than market expectations. Jefferies had foreseen LandSec reporting a pretax loss of GBP1.06 billion.

Revenue dropped 14% to GBP635 million from GBP741 million.

Net deficit on revaluation of investment properties increased 45% to GBP1.45 billion from GBP1.00 billion.

EPRA net tangible assets per share fell 17% to 985p from 1,192p.

"Our results for the year to March 2021 clearly reflect the challenges caused by both the pandemic and the associated restrictions. However, from the very outset of the first lockdown we have been focused on supporting our customers and ensuring that the business emerges from the pandemic in as strong a position as possible. The positive effects of this decisive action will become clearer in the years ahead," said Chief Executive Mark Allan.

Oxford BioMedica ended Tuesday 10% higher, as it raised guidance after pharmaceutical firm AstraZeneca committed to an increase in the number of Covid-19 vaccines needed from the gene and cell therapy company in the second half of 2021.

The two signed an 18-month supply agreement in September under a three-year master supply and development agreement for the large-scale commercial manufacture of the Oxford-AstraZeneca vaccine.

As a result of Astra's commitment, Oxford Biomedica raised its revenue guidance for expected cumulative revenue from Astra by the end of 2021 to in excess of GBP100 million, from in excess of GBP50 million previously, and as such expects "significant growth" in operating Ebitda this year.

Britvic advanced 4.0% - hitting highs not seen since late 2019 - after the soft drinks maker brought back an interim dividend following renewed demand as Covid-19 restrictions are eased in the UK.

The FTSE 250-listed firm reported pretax profit of GBP42.7 million in the six months to end March, falling 20% from GBP53.6 million a year before.

Revenue decreased 12% to GBP617.1 million from GBP698.8 million.

Britvic reinstated an interim dividend of 6.5 pence per share, saying it has seen encouraging trading in the first weeks of the second half as lockdown measures begin to ease in the UK. It expects on-the-go consumption to regain momentum as socialising increases, while growth in at-home consumption will moderate.

The company also plans to ramp up investment in the second half "to capitalise on near-term market opportunities and drive long-term growth."

Turning to forex markets, sterling was having a stellar day after solid jobless figures in the UK.

The UK unemployment rate was 4.8% for the three months to March, easing from 4.9% in the three months to February. Consensus, according to FXStreet, had seen the March reading holding steady at 4.9%.

Sterling was trading around the USD1.42 mark for the first time since February. The pound was quoted at USD1.4189 by the equities close on Tuesday, higher compared to USD1.4119 at the London equities close on Monday.

The pound's level in February this year, peaking just above the USD1.42 mark, had marked the highest price since April 2018's post-Brexit high of USD1.43.

"However, the pound's surge today is not solely in connection with the UKâ€™s job bliss. Cable's surge is also down to a weak dollar," SpreadEx analyst Connor Campbell said.

He continued: "This is in light of rumours that, despite rising inflation rates, the US Federal Reserve plans to keep its stimulus programme. This, in conjunction with US housing starts coming in below forecasts at 1.569 million in April, suggest why the dollar is struggling to match against the pound."

Against the yen, the dollar slipped to JPY108.94 Tuesday evening versus JPY109.20 late Monday in London. The euro changed hands at USD1.2206, higher than USD1.2146.

The lower dollar also boosted the price of gold, the precious metal trading at USD1,868.50 an ounce on Tuesday evening, up from USD1,865.60 late Monday.

Brent oil also rose, trading at USD69.36 a barrel, up from USD69.24 late Monday.

New York equity markets were mixed at the London close. The DJIA was down 0.2%, with the S&P 500 index flat and the Nasdaq Composite up 0.5%.

In the international economics calendar on Wednesday, there is Japan industrial production print overnight, followed by UK consumer and producer prices at 0700 BST and eurozone consumer prices at 1000 BST. US MBA mortgage applications are at 1200 BST. In the evening, at 1900 BST, there is the minutes from the latest US Federal Open Market Committee meeting.

The local corporate calendar, BAE Systems will issue a trading statement, while full-year results are expected from Experian, Severn Trent and Ninety One. Mitchells & Butlers and Marston's will issue half-year results.

By Paul McGowan; paulmcgowan@alliancenews.com;