LONDON MARKET CLOSE: Stocks up; airlines fly higher on sector optimism

(Alliance News) - Stocks in London ended mostly higher on Thursday with airlines among the best performers amid an expected shake-up of England's travel rules.

The FTSE 100 index ended up 14.29 points, or 0.2%, at 7,030.78. The mid-cap FTSE 250 index closed up 200.03 points, or 0.9%, at 23,632.84. The AIM All-Share index lost 2.41 points, or 0.2%, to 1,271.15.

The Cboe UK 100 index ended down 0.1% at 699.40. The Cboe 250 ended up 0.7% at 21,376.50, and the Cboe Small Companies gained 0.2% to 15,508.70.

In Paris, the CAC 40 stock index ended up 0.6%, while the DAX 30 in Frankfurt ended up 0.2%.

CMC Markets analyst Michael Hewson commented: "It's been a slightly better day for markets in Europe, shrugging off a weak Asia handoff, with some decent gains for travel and leisure, which has enjoyed a respite after Ryanair announced it was increasing its 5-year growth target for passengers to 225 million, a 50% increase on 2019 levels. That said progress has been difficult with weakness in US markets pulling the FTSE 100 and DAX both off their highest levels of the day."

In the FTSE 100, Ashtead Group ended the best performer, up 5.3%, after the equipment rentals firm posted a first-quarter earnings rise and upped its annual outlook.

In the financial first quarter ended July 31, revenue rose 21% to USD1.85 billion from USD1.51 billion a year earlier. In comparison, during the first quarter of 2019 the company reported revenue of GBP1.28 billion - or around USD1.77 billion at current exchange rates.

Pretax profit, meanwhile, surged to USD415.8 million, up 74% from USD240.6 million the year before. The company reported profit before tax of GBP304.7 million - or around USD421.5 million - during the same period in 2019, prior to the pandemic.

Looking to the full financial year, Ashtead raised group rental revenue guidance. It now expects rental revenue climb of 13% to 16%, up markedly from the previously expected growth of 6% to 9%.

Blue-chip defence names Rolls-Royce and BAE Systems closed up 3.4% and 1.0% respectively following the announcement of a nuclear submarine deal between the UK, US and Australia.

A major contract between Australia and a French developer to build a fleet of 12 submarines was scrapped after Canberra joined a trilateral partnership with London and Washington.

Australian Prime Minister Scott Morrison, US President Joe Biden and UK Prime Minister Boris Johnson on Thursday announced a new partnership, known by its acronym Aukus, which will allow the countries to share technology covering cyber security, artificial intelligence, underwater systems and long-range strike capabilities.

The first initiative part of the landmark security pact will see a trilateral effort of 18 months to "identify the optimal pathway" to get Australia nuclear-powered submarines, the leaders said.

The plan will see a controversial contract to build 12 French-designed submarines scrapped. According to Australian media the deal was worth some AUD90 billion, about USD66 billion.

British Airways parent International Consolidated Airlines Group ended up 3.9% on the back of upbeat comments from peer Ryanair Holdings.

The Irish carrier raised its five-year traffic growth outlook, and is now targeting over 225 million passengers by 2026. As part of this expected growth, Ryanair is expected to take delivery of 210 B737 Gamechanger aircraft over the next 5 years.

Ryanair now expects to deliver "more rapid traffic growth" over the next 5 years, and has raised its 5-year growth forecast to 50% from 33%. The stock closed up 8.3%.

Midcap peers easyJet and Wizz Air ended among the best performer, up 7.1% and 5.0% respectively.

The sector was also supported as an overhaul of the rules for international travel is expected to be announced on Friday, according to the PA news agency.

It has been reported that the green and amber lists will be merged to form one category of low-risk countries, while the number of destinations on the red list will be reduced. There is also speculation that fully vaccinated arrivals will no longer need to take a pre-departure lateral flow test or a post-arrival PCR test.

This would save travellers around GBP100 per trip.

According to reports, travellers could be required to quarantine at home and be required to take two tests when arriving from a low-risk location under the new system. The changes would come into force ahead of the October half-term break.

At the other end of the large-caps, precious metals miners Fresnillo and Polymetal International ended down 3.7% and 1.4% respectively, tracking spot gold prices lower. Hochschild Mining was the worst midcap performer, down 4.7%.

Gold was quoted at USD1,756.55 an ounce at the London equities close, lower against USD1,792.85 late Wednesday.

In the FTSE 250, Drax Group ended the best performer, up 8.8%, after Barclays hiked its price target on the energy generator by 75% to 960p from 550p. It retained its Overweight rating. The investment bank drew particular attention to Drax's bioenergy carbon capture and storage, or BECCS, negative emissions offering.

Meanwhile, Oxford Nanopore Technologies confirmed its intention to float on the London Stock Exchange and said it has agreed a strategic partnership with Oracle Corp, which will be a cornerstone investor.

Oxford Nanopore makes sensors that perform precise molecular analyses, such as DNA and RNA sequencing. It plans to raise GBP300 million in the initial public offering, and expects to list on the main market in early October.

Database software firm Oracle will invest GBP150 million in the offering. The two companies also signed a memorandum of understanding to explore opportunities in the "applied and clinical markets, and related go-to-market strategies". Oxford Nanopore will move its EPI2ME data analysis platform to Oracle's cloud infrastructure as part of the deal.

The IPO will be made up of new and existing shares. Oxford Nanopore is looking to build on the GBP2.48 billion valuation it achieved in a funding round in May, Reuters reported earlier this month, citing sources familiar.

The flotation is a win for FTSE 250-listed IP Group, a founding investor in Oxford Nanopore with a 14% stake. The stock ended up 3.2%.

Stocks in New York were lower at the London equities close despite upbeat data showing a rebound in US retail sales.

The DJIA was down 0.7%, the S&P 500 index down 0.8% and the Nasdaq Composite down 0.9%.

US retail sales posted a surprise 0.7% rebound in August, though car sales dropped. Auto production has been hard hit by a lack of semiconductors.

"This report should prompt a belief that spending activity will be stronger (or remain strong) in coming months when fears related to the Delta variant dissipate," said Patrick O'Hare at Briefing.com.

US markets have been pulled in recent weeks between confidence in the economic recovery versus the impact of the Delta variant of the coronavirus, which has further complicated already difficult supply chain situations in some sectors.

The dollar was higher across the board after the robust US retail sales figures. The pound was quoted at USD1.3765 at the London equities close, down from USD1.3840 at the close Wednesday.

The euro stood at USD1.1762 at the European equities close, down from USD1.1817 late Wednesday. Against the yen, the dollar was trading at JPY109.65, up from JPY109.38.

Brent oil was quoted at USD75.00 a barrel at the equities close, down from USD75.75 at the close Wednesday.

The economic events calendar on Friday has UK retail sales at 0700 BST and eurozone inflation readings at 1000 BST.

The UK corporate calendar on Friday has interim results from Linde and Midatech Pharma.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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