LONDON MARKET CLOSE: Stocks stabilise led by banks; oil prices surge

(Alliance News) - Stocks in London rebounded on Tuesday following losses on Monday as fears of higher inflation and tapering from the US Federal Reserve were put on the back burner by investors.

The FTSE 100 index closed up 66.09 points, or 0.9%, at 7,077.10. The FTSE 250 ended up 75.73 points, or 0.3%, at 22,730.65. The AIM All-Share closed down 3.01 points, or 0.3%, at 1,218.20.

The Cboe UK 100 ended up 0.9% at703.20, the Cboe UK 250 closed up 0.5% at 20,626.70 and the Cboe Small Companies ended up 0.3% at 15,640.20.

In Paris the CAC 40 stock index ended up 1.5%, while the DAX 40 in Frankfurt ended up 1.1%.

"With markets on the rise today, we are seeing traders focus back onto the economic outlook ahead. While there are understandable concerns over how supply and logistic constraints could impact trade over the coming months, recent gains in treasury yields serve to highlight confidence in the pathway towards higher growth and rates," said IG Group's Josh Mahony.

In the FTSE 100, banks were among the best performers, with Barclays up 3.9%, Lloyds Banking up 3.8%, Standard Chartered up 3.1%, NatWest up 3.1% and HSBC up 2.3%.

"Banks are an outperformer in UK markets, with rising yields highlighting the path towards higher rates and thus margins. While many will be concerned that rising yields will push investors away from stocks, bank stocks do provide a key hedge in an environment of rising yields," Mahony explained.

Shares in oil majors BP, Royal Dutch Shell 'A' and 'B' closed up 1.8%, 1.6% and 2.2% respectively, tracking spot oil prices higher.

Brent oil was trading at three-year highs, quoted at USD82.87 a barrel at the equities close, up sharply from USD81.85 at the close Monday.

At the other end of the large-caps, Melrose Industries closed down 1.1% after the industrial turnaround specialist warned supply constraints in the automotive industry is hurting trading, as the problem of semiconductor chip shortages rumbles on.

Melrose said its Automotive and Powder Metallurgy divisions were particularly badly hit by supply issues; however they will both still be able to deliver a full year margin of around twice that achieved last year.

While underlying demand is strong, the global semiconductor shortage has led to 'in month cancellations' from customers rising from a normal rate of around 1% to a current rate of 20% to 25%. The duration of supply constraints is uncertain, Melrose noted, but recent consensus is that the timeline of problems has lengthened with possible scenarios likely to be below previous expectations.

In the FTSE 250, Greggs ended the standout performer, up 11%, after the bakery chain lifted guidance, optimistically set a target to double revenue over the next five years and said it is in the process of re-establishing dividend payments.

The sausage roll maker, a common fixture on UK high streets, said it has faced staffing and supply chain problems. However, like-for-like sales in its third quarter ended October 2 were 3.5% higher than they were two years earlier, so before the onset of the pandemic.

Further, Greggs said its strong performance in the third quarter lends confidence for the full-year and expects its annual result to be ahead of previous internal expectations.

In addition, the Newcastle-based firm said it is in the process of re-establishing an ordinary dividend policy and sees potential for additional distributions in the near term, the company explained.

On AIM, Hotel Chocolat closed up 11% after the chocolate retailer reported a double-digit annual revenue increase and swing to profit.

The Royston, Hertfordshire-based firm's revenue grew 21% to GBP164.6 million in the financial year that ended June 27 from GBP136.3 million the year before. It swung to a pretax profit of GBP7.8 million from a loss of GBP7.5 million.

It added that trading has been in line with management expectations since the period end.

The pound was quoted at USD1.3630 at the London equities close, up from USD1.3605 at the close Monday, following robust UK economic data.

The UK service sector saw growth strengthen in September despite supply chain issues and rising costs, a survey showed on Tuesday.

The IHS Markit/CIPS business activity index registered 55.4 points in September, up from August's six-month low of 55.0 and remaining well above the no-change mark of 50. September's reading meant that the UK's service sector recovery accelerated from August.

The euro stood at USD1.1600 at the European equities close, down from USD1.1621 late Monday, following disappointing PMI readings from the continent.

The eurozone private sector saw growth slow in September, as input prices surged at record-equalling pace, survey results on Tuesday showed.

The rate of expansion moderated in both the manufacturing and services sector, though for the latter, growth was a touch sharper than initially forecast.

The eurozone final services purchasing managers' index fell to 56.4 points in September from 59.0 in August. The services PMI was dragged closer to the 50 no change mark, suggesting growth slowed. It did, however, beat the earlier flash estimate of 56.1.

September's services PMI was the lowest since April.

The eurozone final composite PMI, a weighted average of the services and manufacturing readings, fell to 56.2 points in September from 59.0 in August. The index hit a 15-year peak in July.

Against the yen, the dollar was trading at JPY111.50, up from JPY110.96 late Monday.

Stocks in New York were rebounding at the London equities close following steep losses on Monday.

The DJIA was up 1.2%, the S&P 500 index up 1.3% and the Nasdaq Composite up 1.4%.

US equities had fallen sharply over concerns about higher energy prices on economic growth and the ongoing standoff in Washington over raising the country's borrowing limit, which has fuelled fears of a catastrophic US debt default.

Gold was quoted at USD1,753.55 an ounce at the London equities close, lower against USD1,764.50 late Monday.

The economic events calendar on Wednesday has a UK construction PMI reading at 0930 BST, eurozone retail sales at 1000 BST and US ADP jobs print at 1315 BST.

Financial markets in Shanghai remain closed for National Day Golden Week.

The UK corporate calendar on Wednesday has interim results from supermarket chain Tesco and a trading statement from tobacco firm Imperial Brands.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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