LONDON MARKET CLOSE: Stocks edge higher as inflation fears ease

(Alliance News) - Stocks in London ended higher on Monday with investors cautiously optimistic in the face of rising inflation worries.

The FTSE 100 index closed up 33.54 points, or 0.5%, at 7,051.59. The mid-cap FTSE 250 index ended up 84.31 points, or 0.4%, at 22,483.73. The AIM All-Share index closed flat at 1,249.55.

The Cboe UK 100 index closed up 0.5% at 703.3. The Cboe 250 ended 0.4% higher at 20,231.70. The Cboe Small Companies gained 0.1% at 14,880.30.

In Paris the CAC 40 ended up 0.4%. Financial markets in Frankfurt were closed for a holiday.

"Stocks have resumed their march higher it seems, adding to the gains made in the second half of last week as inflation concerns appear to recede. Risk assets are moving higher on a broad front, with almost all major indices in positive territory and oil prices marching upwards as well. After the initial fears about inflation and a complacent Fed, last week's Fed minutes seem to have provided the reassurance that the Fed will take a more nuanced approach than might have seemed the case based on recent speeches," said IG Group's Chris Beauchamp.

"Instead of letting inflation run away from them, it looks like a careful policy of trimming policy here and there to avoid sharp price rises or drops in monetary support will prevail, perhaps the best outlook for equities overall," Beauchamp added.

In the FTSE 100, miners were lower after China warned about "excessive speculation" in raw materials including iron ore and copper, amid mounting concerns over rapid growth in inflation.

Antofagasta, BHP Group and Rio Tinto ended 0.9%, 0.7% and 0.1% lower respectively.

In the FTSE 250, Cineworld Group closed up 3.2% after the multiplex operator said it enjoyed a strong opening weekend in the UK, following the easing of virus restrictions in England.

The chain of cinemas in the UK, US and parts of Europe also has received a USD203 million tax refund from the US government.

At the other end of the mid-caps, Trainline ended the worst performer, down 5.5%, after the online ticketing platform continued to be hurt by UK government railway reform fears. The stock is down 32% over the past week.

Elsewhere, the burst of new listings in London since the start of 2021 continued, as two new companies started trading on AIM on Monday,

Kitwave, which delivers frozen and chilled food, and digital advertising services firm Dianomi made their debut on AIM on Monday with market capitalisations of GBP105.0 million and GBP82.0 million, respectively.

Kitwave closed at 152.00p, up 1.3% from its IPO price of 150 pence and Dianomi closed at 313.50p, up 15% from the 273p IPO price.

The pound was quoted at USD1.4157 at the London equities close, down from USD1.4169 at the close Friday.

Appearing before the UK government Treasury Select Committee, Bank of England Governor Andrew Bailey said he does not see long-term implications from an expected rise in inflation as the economy reopens from the coronavirus pandemic.

The euro stood at USD1.2222 at the European equities close, up from USD1.2186 late Friday. Against the yen, the dollar was trading at JPY108.75, down from JPY108.94 late Friday.

Stocks in New York were sharply higher at the London equities close as Covid-19 cases in the US drop and the economy continues to reopen.

The DJIA was up 0.7%, the S&P 500 index up 1.1% and the Nasdaq Composite up 1.4%.

With expectations that the global recovery will pick up pace this year, the main focus is now on US personal consumption data due on Friday. The core PCE index is the Federal Reserve's preferred gauge of inflation.

Many economists warn that a long period of high inflation would force central banks to wind back the ultra-loose monetary policies that have helped fire a long-running market rally.

Adding to upward pressure on inflation is US President Joe Biden's massive stimulus package passed earlier this year, along with others worth trillions more for infrastructure and help for families.

Brent oil was quoted at USD68.00 a barrel at the equities close, up sharply from USD66.64 at the close Friday.

Gold was quoted at USD1,884.66 an ounce at the London equities close, higher against USD1,875.10 late Friday.

The economic events calendar on Tuesday has UK public sector finance figures and Germany GDP readings at 0700 BST.

The UK corporate calendar on Tuesday has annual results from industrial software maker Aveva Group and from self-storage provider Big Yellow Group. London West-end landlord Shaftesbury reports interim results.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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