LONDON MARKET CLOSE: Stocks end lower; investors shun Deliveroo

Wed, 31st Mar 2021 17:04

(Alliance News) - Stocks in London ended the quarter mostly lower against a backdrop of rising coronavirus cases on the continent and interest rate fears in the US, while Deliveroo's high-profile stock market debut disappointed.

The FTSE 100 index closed down 58.49 points, or 0.9%, at 6,713.63. The FTSE 250 ended down 55.73 points, or 0.3%, at 21,518.71. The AIM All-Share closed up 3.70 points, or 0.3%, at 1,197.87.

The Cboe UK 100 ended down 0.8% at 670.90, the Cboe UK 250 closed down 0.1% at 19,266.45, and the Cboe Small Companies ended up 0.1% at 13,886.21.

In Paris the CAC 40 ended 0.3%, while the DAX 30 in Frankfurt ended flat.

"It's been a somewhat subdued end of the month and the quarter for European shares in today's session, as we look back on a quarter that has seen some fairly decent gains across the board, despite the various lockdowns and restrictions," said CMC Markets analyst Michael Hewson.

"The markets main focus has been directed towards the prospects for an economic reopening and while that prospect is much closer in the US and the UK, there is some anticipation that Europe will get there eventually, though that optimism could well dissipate if we don't get some progress on vaccinations, as well as evidence of a slowdown in infections," Hewson added.

In the FTSE 100, Scottish Mortgage Investment Trust ended the best performer, up 3.8%, tracking a rise in Tesla and Amazon, in which it owns shares. 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 3.9% and 1.6% in New York respectively.

Hikma Pharmaceuticals closed up 3.5% after Jefferies upgraded the drugmaker to Buy from Hold driven by its ramp-up of key US generics products Advair and Vascepa and the ongoing success of the injectable medicines offering.

At the other end of the large-caps, BP ended 1.9% lower after Morgan Stanley downgraded the oil major to Underweight from Equal Weight.

Meanwhile, Deliveroo made its stock market debut on Wednesday in the most high-profile initial public offering in a decade.

American Will Shu founded the company in 2013 and made Deliveroo's first delivery in London. Shu got the idea to start his own business after struggling to find restaurants that would deliver food to the London office where he often stayed late to work as a financial analyst.

As well as being based in the UK and Ireland, Deliveroo is present in Australia, Belgium, France, Hong Kong, Kuwait, the Netherlands, Singapore, Spain and the United Arab Emirates.

Deliveroo and its rivals have enjoyed soaring sales during the coronavirus pandemic as lockdowns triggered surging demand for takeaway food.

However, its shares quickly tumbled in initial trading as investors question Deliveroo's treatment of its self-employed riders, questions over its business model and how much control Shu has over the company.

In the run up to the listing, prominent fund managers Aberdeen Standard and Legal & General said they would not be investing in Deliveroo amid concerns over employment rights and the dual-class share structure.

The share structure sees founder Shu have 20 votes per share, compared with one per share for other investors, giving him a majority position at shareholder votes.

The Amazon-backed company priced its IPO at 390 pence, giving it a valuation of GBP7.59 billion on admission. However, Class 'A' shares in Deliveroo closed at 287.45p, down 26% from the listing price.

"Deliveroo has gone from hero to zero as the much-hyped stock market debut falls flat on its face. It had better get used to the nickname 'Flopperoo'," commented AJ Bell's Russ Mould. "Sadly, the narrative took a turn for the worst when multiple fund managers came out and said they wouldn't back the business due to concerns about working practices. This is likely to have spooked a lot of people who applied for shares in the IPO offer, meaning they are racing to dump them."

The pound was quoted at USD1.3785 at the London equities close, rising from USD1.3722 at the close Tuesday, as investors took heart from the latest UK economic growth figures, with restrictions starting to ease.

The UK's economic slump for 2020 was revised to 9.8% from a first estimate of 9.9%, according to figures from the Office for National Statistics on Wednesday, though this is still the largest annual fall in the country's output on record.

The ONS made larger revisions to quarterly growth numbers.

Gross domestic product is estimated to have risen 1.3% quarter-on-quarter in the final three months of 2020, revised up from 1.0%. Year-on-year, the decline was 7.3%, also improved on revision from 7.8%.

The euro stood at USD1.1742 at the European equities close, higher from USD1.1730 late Tuesday, following inflation figures from the eurozone.

Eurozone consumer prices grew as expected in March, according to preliminary figures from Eurostat on Wednesday, though core inflation slowed.

Eurostat's flash estimate showed annual inflation quickened to 1.3% in March, from 0.9% in February. The figure was in-line with consensus cited by FXStreet.

Core inflation, which excludes food, energy, alcohol and tobacco, slowed to 0.9% according to the Eurostat estimate, from 1.1% in February. The flash figure was below consensus estimates for a 1.2% uptick.

Against the yen, the dollar was trading at JPY110.50, up from JPY110.27 late Tuesday.

Stocks in New York were higher at the London equities close following strong employment data as markets awaited the official unveiling of President Joe Biden's infrastructure plan.

The DJIA was up 0.1%, the S&P 500 index up 0.6% and the Nasdaq Composite up 1.7%.

Data from payroll services firm ADP showed private US employment jumped by 517,000 in March, slightly less than economists had expected but much better than the 176,000 gain in February and a welcome rebound after several tepid results in the pandemic recovery.

Meanwhile, investors were assessing early reports on Biden's USD2 trillion infrastructure plan, due to be released in Pittsburgh, Pennsylvania later in the day.

The plan includes some USD620 billion in transport, with Biden targeting a hike in the corporate tax rate to finance the spending.

"The big risk tonight is not that [Biden's] list disappoints, but that the market doesn't like the methods used to pay for the package. For now they seem unperturbed by potential rises in corporate taxes, perhaps reasoning that this is a small price to pay if economic growth rebounds and profit margins remain strong," IG Group's Chris Beauchamp said. "A solid ADP report helped to firm up risk appetite as well, providing further evidence of the rebound in the US economy and putting investors on watch for a similarly strong NFP reading on Friday."

Brent oil was quoted at USD64.00 a barrel at the equities close, lower against USD64.21 at the close Tuesday.

Gold was quoted at USD1,704.21 an ounce at the London equities close, higher from USD1,685.50 late Tuesday.

The economic events calendar on Thursday has manufacturing PMI readings from Germany, the eurozone, the UK and US at 0855 BST, 0900 BST, 0930 BST and 1445 BST respectively. In the afternoon, the latest jobless claims figures are due at 1330 BST.

The UK corporate calendar on Thursday has annual results from clothing and homewares retailer Next, financial services administration outsourcer Equiniti Group and online gambling company Sportech.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com