LONDON MARKET CLOSE: Stocks mixed as markets eye Biden US budget

Thu, 27th May 2021 17:04

(Alliance News) - Stocks in London ended mixed on Thursday as investors look ahead to the first budget under the Biden administration.

US President Joe Biden will propose a USD6 trillion budget on Friday that would take the US to its highest sustained levels of federal spending since World War II, according to The New York Times.

The FTSE 100 index closed down 7.26 points at 7,019.67. The mid-cap FTSE 250 index ended up 18.96 points, or 0.1%, at 22,659.04.

The AIM All-Share index closed down 2.04 points, or 0.2%, at 1,250.48.

The Cboe UK 100 index closed down 0.2% at 698.90. The Cboe 250 ended 0.1% higher at 20,420.10. The Cboe Small Companies gained 0.6% at 14,977.90.

In Paris the CAC 40 ended up 0.7%, while the DAX 30 in Frankfurt ended down 0.3%.

"Another largely uninspiring day on the markets today, with European markets stuck in neutral gear waiting for a fresh driver of sentiment," said IG Group's Josh Mahony.

In the FTSE 100, miners Glencore, Antofagasta and Anglo American ended among the best performers, up 4.6%, 4.9% and 2.3% respectively amid higher metal prices.

In base metals, spot copper advanced to USD9,978.50 a tonne from USD9,961.00, and spot aluminium jumped to USD2,393.00 a tonne from USD2,372.50.

Mahony explained: "A sharp pop in commodity prices have helped lift the FTSE miners, with copper in particular sparking into life after a fortnight of losses. Tomorrow is expected to bring the unveiling of a whopping USD6 trillion budget from Joe Biden, including huge provisions for infrastructure projects. The past year has seen infrastructure spending in China drive sharp gains for commodities, yet Biden's plans highlight how that role could be progressively shared with Western nations as green infrastructure spending takes hold.

"Recent declines in commodities such as copper and iron ore have been borne out of fears that China will clamp down on speculative practices which have driven up prices. However, today's sharp rise in commodities does serve to highlight that the demand outlook is unlikely to weaken anytime soon."

Rolls-Royce closed up 3.9% in a positive read-across from aerospace firm Airbus, which closed up 9.5% in Paris. Melrose Industries, which also provides aftermarket services to the aviation industry, finished up 3.6%.

Airbus is currently producing 40 planes of the A320 single-aisle family per month, but the company said it would increase the average rate to 45 during the last three months of this year.

Aviva closed up 3.2% after the insurer promised a "substantial return of capital to shareholders" after it receives the GBP7.5 billion in proceeds this year from the sale of eight businesses.

In a trading update, Aviva also reported "very good progress" in the first quarter of 2021, with record quarterly net flows to its Savings & Retirement arm. Net flows in Savings & Retirement were up 31% year-on-year to GBP2.98 billion. Sales grew 23% to GBP6.17 billion.

In Aviva's Life unit, the insurer reported core present value of new business premiums of GBP8.3 billion, steady on a year ago.

At the other end of the large-caps, Johnson Matthey ended the worst performer, down 3.6%, after the speciality chemicals company posted mixed results for the year to March 31.

Revenue rose 7.5% to GBP15.67 billion from GBP14.58 billion, though pretax profit dropped 22% to GBP238 million from GBP305 million. Major impairment and restructuring costs amounted to GBP171 million, rising 22%.

"Following a challenging first half, we recovered strongly in the second half helped by a strong recovery in our end markets and higher precious metal prices," CEO Robert MacLeod said.

Looking ahead, Johnson Matthey said that should precious metals remain at their "current high level", the company will see a net benefit of GBP120 million for the current financial year. It also said capital expenditure will amount to up to GBP600 million, and it expects a GBP25 million profit hit due to foreign exchange movements.

Imperial Brands ended 3.4% lower after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.

In the FTSE 250, Ferrexpo ended the best performer, up 5.7%. The iron ore pellet producer at its annual general meeting laid out its corporate governance priorities, with an emphasis on reducing emissions, increasing employee engagement, and enhancing board independence.

Ferrexpo signalled its committent to employee health and well-being into 2021 by issuing a third survey of employee engagement and appointing Vitalii Lisovenko as non-executive director with a focus on workforce engagement. With many employees working from home, Ferrexpo noted plans to improve its cybersecurity standards in the coming year.

Changes to Ferrexpo's corporate governance in 2020 included the addition of several new appointments to the board including Fiona MacAulay and Ann-Christin Andersen as independent non-executive directors. This brings the company's total number of independent directors up to four, with plans to add another. The company said it is committed to a diverse and independent board and a workforce free of discrimination.

At the other end of the midcaps, Tate & Lyle closed down 6.1% after the food ingredients maker warned that earnings will take a hit in the year ahead.

Revenue for the year ended March 31 rose fell 2.6% to GBP2.81 billion from GBP2.88 billion the year before, and pretax profit fell 4.4% to GBP283 million from GBP296 million.

For the year ahead, Tate & Lyle expects growth in adjusted operating profit before Commodities to be in the mid-single digit range in constant currency.

However, reflecting "significantly lower Commodities profits" and an increase in the adjusted effective tax rate, adjusted diluted earnings per share are expected to fall at constant currency. For the recently ended year, adjusted diluted EPS rose 12% at constant currency to 61.2p.

The pound was on the front foot against the dollar after a prominent policymaker from the Bank of England indicated a UK interest rate hike could happen next year.

Sterling was quoted at USD1.4181 at the London equities close, up from USD1.4125 at the close Wednesday.

Speaking at the University of Bath, Monetary Policy Committee member Gertjan Vlieghe said an early interest rate hike is possible if there is smooth transition of workers from furlough into employment.

"My central scenario is that the economy evolves similarly to the MPC's central projection in May, but with somewhat more slack than in the central projection. Relative to the MPC's central projection, I worry that the transition out of furlough does involve a modest rise in the unemployment rate, while the economy's supply potential is somewhat less adversely affected, so that there is still some excess supply around the turn of the year. In that scenario, the first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter," Vlieghe said.

Vlieghe, who is set to leave the MPC in August, is one of a few rate-setters to speak publicly about tightening policy.

Stocks in New York were slightly higher at the London equities close after US jobless claims fell to a new pandemic low.

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

In the week ending May 22, the number of US workers filing new claims for unemployment benefits dropped by 38,000 to 406,000, a new pandemic low. According to consensus cited by FXStreet, the number of first-time claimants for unemployment benefits was expected to come in at 425,000, so the actual figure beat expectations.

It was the lowest since 256,000 for the week ended March 14, 2020, just before the worst of the pandemic struck.

Elsewhere, according to the Department of Commerce, the US economy grew 6.4% annually in the first quarter, in line with the first estimate, but down on market expectations of 6.5% growth. This compares to 4.3% growth in the fourth quarter of 2020.

The dollar was higher after the upbeat jobless claims numbers. The euro stood at USD1.2200 at the European equities close, down from USD1.2214 late Wednesday. Against the yen, the dollar was trading at JPY109.71, up from JPY109.01 late Wednesday.

Brent oil was trading at USD68.93 a barrel at the equities close, up from USD68.64 at the close Wednesday.

Gold was quoted at USD1,891.30 an ounce at the London equities close, lower against USD1,904.70 late Wednesday.

The economic events calendar on Friday has France inflation readings at 0745 BST, eurozone consumer confidence at 1000 BST and US personal consumption expenditure figures for April at 1330 BST. The core PCE reading is the Federal Reserve's preferred gauge of inflation.

The UK corporate calendar on Friday has interim results from Premier Miton Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com