LONDON MARKET CLOSE: Stocks edge up as markets await Powell testimony

Tue, 22nd Jun 2021 17:02

(Alliance News) - Stocks in London ended higher on Tuesday as investors look ahead to an appearance by US Federal Reserve Chair Jerome Powell before Congress on the coronavirus crisis.

In prepared remarks ahead of the House hearing at 1900 BST on Tuesday, Powell reiterated that the central bank will continue its supportive stance to ensure that the "sustained improvement" since the depths of Covid-19 pandemic is extended.

Powell acknowledged that inflation has "increased notably in recent months" due in part to higher oil prices and the hit from supply chain disruptions. But he restated that higher prices are due to "transitory" factors, adding that "inflation is expected to drop back toward our longer-run goal."

Powell's appearance before the House Select Subcommittee on the Coronavirus Crisis comes less than a week after the US central bank moved up its timeframe for lifting interest rates to 2023.

The Fed's monetary policy committee said it will not begin to withdraw the stimulus measures implemented at the start of the pandemic until progress is made on reducing unemployment and keeping inflation above their 2.0% target.

The FTSE 100 index closed up 27.72 points, or 0.4%, at 7,090.01. The mid-cap FTSE 250 index ended up 222.56 points, or 1.0%, at 22,679.64. The AIM All-Share index rose 1.60 points, or 0.1%, to close at 1,222.61.

The Cboe UK 100 index closed up 0.5% at 706.80. The Cboe 250 ended up 0.9% at 20,361.40, but the Cboe Small Companies gained 0.8% at 15,285.80.

In Paris the CAC 40 ended up 0.1%, while the DAX 30 in Frankfurt ended up 0.2%.

"The market continues to stand or fall by what Fed members say, and today will be no different. Yesterday's exuberance has cooled off ahead of Powell's testimony tonight, but since this week appears to be mainly about walking back some of the views expressed in the FOMC it is likely a supportive atmosphere for risk assets will remain in place," said IG Group's Chris Beauchamp.

In the FTSE 100, British Land and Land Securities ended the best performers, up 4.7% and 3.2% respectively, after JPMorgan upgraded the property companies to Overweight from Neutral.

Shares in Royal Dutch Shell 'A' and 'B' shares and BP closed up 2.0%, 2.8% and 1.9% respectively, as the oil majors tracked spot oil prices higher.

Brent oil was quoted at USD74.91 a barrel at the equities close, up from USD74.21 at the close Monday. The North Sea benchmark touched an intraday high of USD75.30 in early trade - its highest level since late 2018.

Melrose Industries finished up 2.5% after the industrial turnaround specialist pledged to return GBP730 million to shareholders after completing the GBP2.62 billion disposal of its Nortek Air Management division to Chicago-based Madison Industries.

As well as the capital return, Melrose intends to use the sale proceeds to reduce net debt, and also confirmed plans mentioned in April to contribute around GBP100 million to the GKN Ltd UK defined-benefit pension schemes.

At the other end of the large-caps, DS Smith closed 1.7% lower after the recycled packaging firm reported declines in revenue and profit in the 2021 financial year, as the cardboard box boom was not enough to offset weak prices for paper.

DS Smith saw sales fall 1.1% in the year ended April 30, to GBP5.98 billion from GBP6.04 billion. Pretax profit dropped 37% to GBP231 million from GBP368 million.

The company will pay a final dividend per share of 8.1 pence, bringing the total for the year to 12.1p. DS Smith had suspended its dividends in financial 2020, after paying out 16.2p in financial 2019.

The FTSE 100 company said profitability was hit by the pandemic, particularly in the first quarter as packaging volumes fell and raw material costs were volatile.

In the FTSE 250, Sirius Real Estate ended as the best performer, up 7.2%, after Jefferies started coverage on the German business parks operator with a Buy rating.

Travis Perkins was just behind, up 6.7%, after the builders merchant said it expects full-year earnings to beat market expectations following a strong recent trading performance.

Travis Perkins raised its guidance for full-year adjusted operating profit of at least GBP300 million, significantly ahead of market expectations at around GBP259 million.

The pound was quoted at USD1.3927 at the London equities close, up from USD1.3915 at the close Monday.

The euro stood at USD1.1905 at the European equities close, down from USD1.1915 late Monday. Against the yen, the dollar was trading at JPY110.73, up from JPY110.15 late Monday.

Stocks in New York were slightly higher at the London equities close as markets anticipate the hearing with the Fed chief, amid the ongoing debate on inflation and infrastructure spending.

The DJIA was up 0.1%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.3%.

US President Joe Biden expects to meet with members of Congress this week as Democrats try to win support for the bipartisan infrastructure plan, according to White House officials on Monday.

Gold was trading at USD1,780.60 an ounce at the London equities close, slightly lower against USD1,786.00 late Monday.

The economic events calendar on Wednesday has manufacturing and services PMI readings from Germany, the eurozone, the UK and US at 0855 BST, 0900 BST, 0930 BST and 1445 BST respectively.

The UK corporate calendar on Wednesday has annual results from housebuilder Berkeley Group and money manager Liontrust Asset Management.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com