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LONDON MARKET CLOSE: Stocks mostly higher as Evergrande dodges default

Fri, 22nd Oct 2021 17:04

(Alliance News) - Stocks on London ended mostly higher on Friday as fears of contagion from troubled Chinese property firm Evergrande Property Group eased.

Evergrande made a key offshore interest payment a day ahead of a weekend deadline, state media said, averting a default for now.

The crisis at one of the nation's biggest property developers, which is drowning in USD300 billion of debt, has hammered investor sentiment and fuelled fears of a spillover into the wider economy. Evergrande is reported to have missed at least USD150 million in offshore bond payments but agreed a deal in September to pay interest on a domestic bond.

But on Friday, the state-backed Securities Times said the embattled developer had wired an USD83.5 million offshore payment first due on September 23, citing "relevant channels". It said bondholders would receive the payout before Saturday - the end of a 30-day grace period.

The FTSE 100 index closed up 14.25 points, or 0.2%, at 7,204.55 on Friday - but lost 0.4% for the week overall.

The FTSE 250 ended up 14.61 points, or 0.1%, at 22,931.66 ending the week down 0.2%. The AIM All-Share closed down 7.18 points, or 0.6%, at 1,234.19, ending the week up 0.4%.

The Cboe UK 100 ended up 0.4% at 715.50, the Cboe UK 250 closed down 0.2% at 20,639.30, and the Cboe Small Companies ended down 0.2% at 15,506.40

In Paris, the CAC 40 stock index ended up 0.7%, while the DAX 40 in Frankfurt ended up 0.5%.

"The imminent prospect of an Evergrande default appears to have been deferred for another day, after this morning's report out of Asia, that it had paid the USD83.5m interest payment, which was due for payment by tomorrow," said CMC Markets analyst Michael Hewson.

"As a consequence, we look set to finish the week in a much better place than when we started it, when we saw some sharp falls, with the FTSE 100 and DAX looking set to consolidate the gains that we saw after last week's strong gains" Hewson added.

In the FTSE 100, precious metals miners Polymetal and Fresnillo closed up 2.9% and 2.0% respectively, tracking spot gold prices higher.

Gold stood at USD1,809.80 an ounce at the London equities close, higher against USD1,780.15 late Thursday.

JD Sports Fashion closed up 1.9% after the athletic apparel retailer bought a majority stake in Crete-based Cosmos Sport.

Cosmos operates 57 stores in Greece and three in Cyprus. Its principal brands are Cosmos fascia - its core offering which has an elevated sporting goods and lifestyle proposition - and Sneaker 10, a premium footwear offering. It generated revenue of around EUR52 million in 2020.

In addition, UBS upgraded the stock to Buy from Neutral.

At the other end of the large-caps, London Stock Exchange Group ended the worst performer, down 6.0%. The stock exchange operator noted fourth quarter income will not grow as fast as the third quarter due to strong comparators, as it delivered upbeat earnings.

In the three months to September 30, total income surged to GBP1.78 billion from GBP498 million. Gross profit tripled to GBP1.56 billion from GBP454 million.

Looking ahead, LSEG is guiding for total income to grow between 4% to 5% in 2021, but noted fourth quarter income will not grow as fast as the third quarter due to strong comparators.

Turning to its Refinitiv deal, LSEG said it is making "excellent progress on the integration" of the data and trading systems provider. It noted it is "comfortably on-track" to achieve GBP125 million of cost synergies in 2021, ahead of its original phasing.

Steve Clayton, Hargreaves Lansdown Select fund manager said: "The acquisition of Refinitiv was an enormous step for the LSE. Full year revenues and profits are expected to be around 3 times their pre-deal level, so a successful integration of Refinitiv is critical for LSE investors. With that in mind, today's news is broadly encouraging. Lower Treasury income took the shine off what would otherwise have been a very strong underlying performance, but was hardly unexpected. News that capital investment rates could be impacted by supply shortages show that no-one is immune to post-pandemic disruption, but should not hold revenues back in the short term.

"The group have told the market to expect lower growth for Q4, reflecting a tough comparative from the year before, but with cost synergies coming in strongly, we expect that the market will take this in its stride. Treasury income should be at its nadir by now, so when interest rates do finally start edging higher, the LSE should be a beneficiary. What we have not seen to date however are significant revenue synergies coming from the integration of Refinitiv. The group's recent Investor Education Event laid out their stall here and LSE's challenge now is to deliver on those growth ambitions."

InterContinental Hotels Group lost 2.9% even after the Holiday Inn and Crowne Plaza owner said its trading continues to improve significantly, with its revenue per available room creeping closer towards pre-pandemic levels.

IHG reported third-quarter RevPAR, a key hospitality metric, growth of 66% on a year ago, though it remained down 21% on 2019. In its half-year results, IHG reported RevPAR up 20% on 2020 and down 43% on 2019.

IHG didn't provide its actual RevPAR figures, only percentage changes.

J Sainsbury closed down 1.0% after the supermarket chain decided to retain its banking arm after having spoken with possible buyers.

The grocer said it believed it was in the best interests of shareholders to explore expressions of interest for Sainsbury's Bank, but has decided that these do not offer better value than will be realised through keeping the unit. As such, talks over the bank have ended.

Elsewhere, SIG closed up 5.7% after the building materials firm lifted its full-year outlook, weathering inflationary and supply chain pressures.

In the third quarter of 2021, sales rose 17% year-on-year on a like-for-like basis. Although the annual climb slowed from 33% in first half, SIG noted like-for-like sales growth accelerated when compared to pre-Covid times.

SIG expects its full-year underlying operating profit to top market current market forecasts.

The pound was quoted at USD1.3773 at the London equities close, down from USD1.3808 at the close Thursday, following mixed UK economic data.

Data on Friday showed UK retail sales slid for a fifth straight month in September, down 0.2% month-on-month after August's 0.6% contraction.

While this was an improvement on August's result, markets had been expecting a rebound in September, cited by FXStreet, as analysts had forecast growth of 0.5%.

Meanwhile, purchasing managers' index data from IHS Markit showed the UK's economic recovery gathered speed in October, though well-documented supply chain issues constrained growth in manufacturing.

The flash UK composite output index for October rose to a three-month high of 56.8 points, versus September's 54.9. Any reading over the no-change mark of 50.0 denotes expansion, meaning economic activity in the UK accelerated in October.

Firms widely reported "buoyant" business and consumer spending due to a lack of pandemic restrictions.

Service providers led the recovery, with the flash services business activity index jumping to 58.0 in October from September's 55.4.

The manufacturing purchasing managers' index edged up to 57.7 in October from 57.1 in September, and the manufacturing output index fell to an eight-month low of 50.6.

The euro stood at USD1.1650 at the European equities close, firm from USD1.1640 late Thursday.

On the economic front, eurozone business activity growth slowed in October amid increasing supply bottlenecks and ongoing Covid-19 concerns, survey results from Markit showed.

The flash eurozone purchasing managers' composite output index recorded 54.3 points in October, down from 56.2 in September.

Although the October expansion was the weakest since April, the latest reading remains above the survey's pre-pandemic long run average of 53.0 points to signal above-trend growth.

Growth slowed especially sharply in Germany, down to the lowest since February, Markit highlighted, and slipped to the weakest since April in France.

Against the yen, the dollar was trading at JP113.68, down from JPY113.85 late Thursday.

Stocks in New York were mixed at the London equities close as social media firms bore the brunt of disappointing results from Snap.

The DJIA was up 0.2%, the S&P 500 index flat and the Nasdaq Composite down 0.5%.

The Snapchat owner warned of slowing growth due to the recent changes in Apple's iOS privacy rules causing the stock to tank 24% in New York. Peers Twitter and Facebook were down 4.1% and 5.5% respectively in a negative read-across.

Brent oil was quoted at USD84.77 a barrel at the equities close, up from USD84.12 at the close Thursday.

The economic events calendar on Monday has Germany Ifo business climate index readings at 0900 BST.

The UK corporate calendar on Monday has third-quarter results from global lender HSBC Holdings and online trading firm Plus500.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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