LONDON MARKET CLOSE: Stocks Edge Lower As US Bond Yields Rise

(Alliance News) - Stocks in London finished mostly lower on Thursday as US bond yields continue to rise amid the expectation of higher inflation as investors digested a busy day of company news.

The FTSE 100 index closed down 7.01 points, or 0.1%, at 6,651.96. The FTSE 250 ended down 114.53 points, or 0.5%, at 21,198.12 and the AIM All-Share closed up 3.09 points, or 0.3%, at 1,191.35.

The Cboe UK 100 ended 0.1% lower at 662.90, the Cboe UK 250 closed down 0.2% at 18,891.40, and the Cboe Small Companies ended up 0.9% at 13,205.59.

In Paris the CAC 40 ended 0.1% lower, while the DAX 30 in Frankfurt ended down 0.7%.

Stocks in New York were lower at the London equities close as rising bond yields and falling prices of technology companies continued to weigh on trading.

The yield on the 10-year US Treasury note rose to 1.48% on Thursday afternoon, up from 1.38% at the same time on Wednesday and was at a level not seen in more than a year.

The DJIA was down 0.4%, the S&P 500 index down 0.7% and the Nasdaq Composite down 1.2%.

"European markets have once again flattered to deceive today, starting off in promising fashion, before slipping back into the close, with US markets, and rising bond yields acting as a little bit of a drag. While rising US yields have been attracting the most attention, we’re also seeing some evidence of a tightening of financial conditions here in Europe, with sharp rises in government borrowing costs from Germany to Greece," said CMC Markets analyst Michael Hewson.

In the FTSE 100, Evraz ended the best performer up 6.0% after the Russian steelmaker posted a higher annual profit as it swung to a net gain on foreign exchange, though lower prices hurt revenue.

For 2020, the company reported a USD1.30 billion pretax profit, up 44% from USD902 million the year before. This was despite an 18% revenue decline to USD9.75 billion from USD11.91 billion on lower sales prices for steel, vanadium and coal products amid gloomier market trends.

Evraz's higher profit resulted from various factors, including a swing to a USD408 million net gain on foreign exchange from a USD341 million loss.

The firm - which counts billionaire Roman Abramovich as a major shareholder - has declared a USD0.30 per share interim dividend, which it says reflects "confidence in the group's financial position and outlook". This was down from USD0.40 per share the year before.

DS Smith ended the second best performer, up 5.7%, after Bloomberg late Wednesday reported Mondi is considering a potential takeover of fellow London-listed packaging firm.

Citing people familiar with the matter, Bloomberg reported that Mondi has been speaking with advisers as it weighs up such a deal. However, the people said deliberations are at an early stage and there is no certainty they will lead to a transaction.

Mondi closed flat after the company reported a fall in annual profit but showed its confidence going forward by upping its shareholder payout for 2020.

Mondi declared a final dividend of 41.0 euro cents per share, bringing the annual total payout to 60.0 cents per share, up 5.3% from the prior year's 57.0 cents per share.

The Addlestone, England-based paper and packaging firm posted a pretax profit for 2020 of EUR770 million, falling 30% from EUR1.10 billion the year prior. Underlying earnings before interest, tax, depreciation and amortisation dropped 18% to EUR1.35 billion from EUR1.66 billion, but came in above consensus expectations of GBP1.32 billion.

Anglo American closed up 3.9% after the diversified miner announced a solid shareholder payout for 2020 despite seeing a dip in earnings, which were boosted by terrific iron ore performance.

Anglo posted underlying earnings before interest, tax, depreciation and amortisation for 2020 of USD9.80 billion, slipping 2.1% from USD10.01 billion a year prior.

Revenue was up 3.4% to USD30.90 billion from USD29.87 billion, beating the company-compiled analyst consensus which saw revenue at USD29.96 billion.

The miner declared a final dividend of USD0.72 per share, up 53% from USD0.47 per share, beating the analyst consensus prediction of USD0.65 per share. This brings the company's total annual payout to USD1.00 per share, a touch lower from USD1.09 per share the year before.

BAE Systems ended up 1.1% after the defence giant rewarded shareholders with an increased dividend as it outperformed market expectations in 2020.

The Farnborough, England-based company said sales for 2020 rose 3.7% to GBP20.86 billion from GBP20.11 billion reported a year earlier. IFRS revenue rose to GBP19.28 billion from GBP18.31 billion year-on-year.

BAE Systems proposed a final dividend of 14.3 pence per share, taking the total payout for 2020 to 23.7p, up 2.2% year-on-year when including in the 2019 total the 13.8p final dividend that was deferred due to Covid-19. BAE said on Thursday it now will pay that 13.8p as an interim dividend in June.

At the other end of the large-caps, Standard Chartered ended the worst performer, down 6.2%, after the Asia-focused bank reported a sharp drop in profit for 2020, with both profit and income unable to match market consensus.

For 2020, the London-headquartered bank recorded pretax profit of USD1.61 billion, down 57% from the USD3.71 billion reported in 2019.

StanChart's profit mark came in below market consensus of USD1.85 billion.

The bank upped its credit impairments in 2020 to USD2.29 billion from USD906 million, but was able to come under the consensus mark of USD2.40 billion. Operating income slipped 4% year on year to USD14.75 billion from USD15.42 billion, as net interest income dropped 11% to USD6.88 billion from USD7.70 billion.

In the FTSE 250, Morgan Sindall ended the standout performer, up 13%, after the construction company boosted its dividend substantially, despite profit falling by almost a third in 2020.

The London-based company said revenue slipped in 2020 to GBP3.03 billion from GBP3.07 billion reported for 2019. Pretax profit fell by 31% year-on-year to GBP60.8 million.

Despite the worsened results, the company said it will be paying a dividend of 61.0 pence a share for the year, up sharply from 21.0p paid the year before.

Aston Martin Lagonda closed up 6.8% after the luxury carmaker hailed the successful launch of its first SUV, the DBX.

Revenue for 2020 fell 38% to GBP611.8 million. Total retail sales, being dealers sales to customers, were down 32% to 4,150 units, and total wholesales, being company sales to dealers, down 42% to 3,394 from 5,862. Aston Martin's pretax loss deepened to GBP466.0 million from GBP119.6 million in 2019.

Aston Martin described customer response to the DBX as "very positive", with strong demand and the orderbook in line with expectations. The first new variant is planned for the third quarter of this year.

At the other end of the midcaps, Genus ended the worst performer, down 5.5%. The animal genetics firm reported a "very strong" performance" and made "good" strategic progress in the first half of its 2021 financial year.

The Basingstoke, Hampshire-based company sells products made using biotechnology to cattle and pig farmers. It recorded revenue for the six moths ended December 31 of GBP285.7 million, a rise of 6% from GBP270.7 million in 2019. Pretax profit for the period was GBP38.7 million, a substantial increase of 27% from GBP30.4 million in 2019.

The dollar was lower against major counterparts, grounded by the dovish tone of the Federal Reserve this week.

During his two-day Congressional testimony, Federal Reserve Chair Jerome Powell reiterated on Wednesday that the US central bank would not adjust ultra-loose monetary policy until the economy shows signs of improving.

Addressing fears that inflation could jump too sharply, Powell said that rising prices are "a different thing from persistent high inflation, which we do not expect and if we do get, then we have the tools to deal with it".

The pound was quoted at USD1.4130 at the London equities close, up from USD1.4100 at the close Wednesday.

The euro stood at USD1.2230 at the European equities close, sharply higher from USD1.2127 late Wednesday. Against the yen, the dollar was trading at JPY106.22, up from JPY106.00 late Wednesday.

"By maintaining a clearly dovish tone, Powell dismissed any near-term change of direction, with monetary policy and asset purchases set to remain unaltered even in the face of a potential spike in inflation. As things stand, dollar softness looks set to remain one of the dominant narratives in foreign exchange for the foreseeable future," said analysts at ActivTrades.

Brent oil was quoted at USD66.90 a barrel at the equities close, down from USD67.02 at the close Wednesday.

Gold was quoted at USD1,778.65 an ounce at the London equities close, lower against USD1,796.20 late Wednesday.

The economic events calendar on Friday has UK Nationwide house price index figures at 0700 GMT and France and Spain inflation figures at 0745 GMT and 0800 GMT respectively.

The UK corporate calendar on Friday has annual results from property portal Rightmove, fund manager Jupiter Fund Management and from RSA Insurance.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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