LONDON MARKET CLOSE: Stocks continue to rally as US bond yields fall

(Alliance News) - Stocks in London ended higher on Tuesday as US bond yields retreated from yearly highs and as a leading international agency provided upbeat news on the world economic outlook.

The Organisation for Economic Co-operation on Tuesday sharply raised its 2021 global growth forecast as the deployment of vaccines and a huge US financial aid prospects have greatly improved the outlook for the global economy.

Investor are placing high hopes that the recovery will be led largely by the US, thanks to President Joe Biden's massive USD1.9 trillion stimulus programme.

Concerning inflation, the organisation said underlying price pressures generally remain mild and are being held in check by ample spare capacity around the world.

A rise in US Treasury yields in recent weeks has been fuelled by investors moving out of the haven assets, betting that a rise in inflation will eat into their returns. That has sparked fears the US Federal Reserve will be forced to hike borrowing costs sooner than it initially thought, removing a cornerstone of the equity markets surge.

The yield on the benchmark 10-year US Treasury note stood at 1.55% on Tuesday afternoon, lower from 1.59% at the same time on Monday.

The FTSE 100 index closed up 11.21 points, or 0.2%, at 6,730.34. The FTSE 250 ended up 172.25 points, or 0.8%, at 21,382.00. The AIM All-Share ended up 20.06 points, or 1.7%, at 1,183.04.

The Cboe UK 100 ended up 0.2% at 671.80, the Cboe UK 250 closed up 1.1%, at 19,119.36, the Cboe Small Companies ended 1.0% higher at 13,764.57.

In Paris the CAC 40 ended up 0.5%, while the DAX 30 in Frankfurt ended up 0.6%.

"European stock markets are extending yesterday's stellar rally but the gains registered today are far more modest. The dip in government bond yields has acted as the green light for the equity bulls and lately, spikes in yields have sent tremors through stock markets. The positive mood is being fuelled by the hopes the US government will implement the USD1.9 trillion relief package soon. Hopes connected to the economic recovery story have lifted sentiment too," said CMC Markets analyst David Madden.

Fears of higher rates has in particular hit US tech stocks hard, with the Nasdaq Composite having entered correction territory by falling more than 10% from the record high it set last month.

Stocks in New York were sharply higher at the London equities close, with the tech-heavy Nasdaq roaring back after the drop in bond yields helped the beaten-down technology companies recover.

The DJIA was up 0.8%, the S&P 500 index up 1.7% and the Nasdaq Composite 3.3%.

On the London Stock Exchange, Avast ended the best blue-chip performer, up 5.9%, after the cybersecurity provider said it has agreed to sell its Family Safety Mobile business to mobile software developer Smith Micro Software for USD66 million.

Scottish Mortgage Trust ended the second best blue-chip performer, up 5.8%, tracking a rise in high profile tech names within its portfolio. The trust has a 5.1% stake in Elon Musk's Tesla and a 5.9% holding in Jeff Bezos's Amazon. Shares in Tesla and Amazon were up 13% and 3.3% respectively. In addition, FTSE 250-listed Baillie Gifford US Growth Trust - which also a 4.4% stake in Tesla - closed up 8.4% - the best mid-cap performer.

Entain closed up 4.1% after the gambling firm confirmed it has received all the necessary approvals from competition and gaming authorities to acquire Enlabs.

M&G closed up 4.0% after the investment manager said it is on track for its medium-term targets as its performance improved in 2020.

M&G, which was demerged from Prudential in 2019, reported assets under management & administration up 4% to GBP367.2 billion, principally reflecting the acquisition of Ascentric in September 2020.

At the other end of the large-caps, Standard Life Aberdeen was the worst performer, down 7.2%. The Edinburgh-based firm reported an improvement in net outflows as it unveiled details of its new strategy, in preparation for life without its iconic, nearly 200-year-old, 'Standard Life' brand.

The investment and asset management firm reported fee-based income of GBP1.43 billion for 2020, down from GBP1.63 billion in 2019 and largely reflecting 2019 outflows. Pretax profit more than trebled, however, to GBP838 million from GBP243 million.

This was due to lower impairments of goodwill and intangibles, as well as increased profit on disposal of interests in associates. This included a GBP1.05 billion one-off accounting gain amid a change in the classification of its investment in HDFC Life.

However, on an adjusted basis, pretax profit dropped 17% to GBP487 million from GBP584 million.

The company also unveiled details of a "refreshed" focus on Asia.

Standard Life said it is seeking to deliver client-led growth through Investments, Adviser and Personal, and it has a "clear growth strategy" for each of these areas. Growth in Asia, UK adviser and consumer markets, Solutions and Responsible investing have all been identified as "strategic priorities".

The new focus comes in the wake of the company in February announcing it will sell the 'Standard Life' brand to Phoenix Group Holdings in 2021. Phoenix Group ended 1.6% lower.

Standard Life Aberdeen said the sale of its iconic brand was part of an agreement to simplify and extend its strategic partnership with Phoenix Group.

SLA recommended a final payout of 7.3 pence to bring the total for the year to 14.6p, down by a third from 21.6p for 2019.

FTSE 250-listed Domino's Pizza closed up 8.6% after the pizza delivery chain expressed confidence going forward as lower expenses helped pretax profit in 2020.

Domino's said system sales in the 52 weeks ending December 27 were GBP1.35 billion, up from GBP1.21 billion the year before. Like-for-like system sales growth was 10%. Pretax profit was GBP98.9 million, up from GBP75.1 million the year before, despite revenue slipping to GBP505.1 million from GBP508.3 million. The company said profit was helped by reduction in 'other expenses' to GBP4.6 million from GBP20.8 million year-on-year.

The dollar was lower against major counterparts as bond yields stabilised. The pound was quoted at USD1.3900 at the London equities close, up sharply from USD1.3810 at the London equities close on Monday.

The euro stood at USD1.1888 at the European equities close, up from USD1.1862 late Monday. Against the yen, the dollar was trading at JPY108.70, down from JPY108.82 late Monday.

Brent oil was quoted at USD68.20 a barrel at the equities close, lower from USD68.55 at the close Monday.

Gold was quoted at USD1,713.01 an ounce at the London close, higher against USD1,682.85 late Monday.

The economic events calendar on Wednesday has China inflation data overnight and US inflation figures at 1330 GMT.

The UK corporate calendar on Wednesday has annual results from Just Eat Takeaway and from Legal & General.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.