LONDON MARKET MIDDAY: Biden spends big; Deliveroo dives on debut

Wed, 31st Mar 2021 12:17

(Alliance News) -Â Trade was muted at midday on Wednesday as investors look ahead to the unveiling of US President Joe Biden's bumper infrastructure spending plan.

In London, attention in the morning was on food delivery platform Deliveroo's stomach-churning share price dive as it started life as a listed company.

The FTSE 100 index was down 22.96 points, or 0.3%, at 6,749.16 midday Wednesday. The mid-cap FTSE 250 index was up just 2.63 points at 21,577.07. The AIM All-Share index was up 0.2% at 1,196.95.

The Cboe UK 100 index was down 0.5% at 673.18. The Cboe 250 was up 0.1% at 19,305.06, and the Cboe Small Companies down 0.3% at 13,841.07.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 0.2% and flat, respectively, in early afternoon trade.

"After a weak handover from Wall Street and Asia, European bourses are heading south, giving back some of yesterday's gains," said Sophie Griffiths, market analyst at Oanda.

"A combination of surging US treasury yields overnight and risk-off trade-on concerns over further fallout from the Archegos margin default are dragging on stocks," said Griffiths. "While Tuesday's session in Europe was notably strong with several European bourses hitting key milestone levels or fresh all-time highs, the optimism was unlikely to last given the old continent's deteriorating Covid picture."

Yield rose in the US ahead of President Joe Biden proposing a USD2 trillion infrastructure plan aimed at modernising the US's crumbling transport network, creating millions of jobs, and enabling the country to "out-compete" China.

The first phase of Biden's "Build Back Better" program, which he will unveil in a speech in Pittsburgh, will detail massive investment spread over eight years.

It plans to inject USD620 billion into transport, including upgrading 20,000 miles of roads and highways, repairing thousands of bridges, and doubling federal funding for public transit.

The investment would be partly paid for by raising corporate tax from 21% to 28%.

"Yields will be very much in focus following the unveiling and are likely to dictate the markets' direction," said Oanda's Griffiths.

Ahead of the bell, futures trading is pointing to a mixed start for Wall Street. The Dow Jones Industrial Average is called down 0.1%, the S&P 500 flat and the Nasdaq 100 up 0.4%.

Also in focus in the US on Wednesday is ADP's latest employment report, due out at 1315 BST. The ADP report - a key precursor to Friday's monthly jobs report - is expected to show 550,000 jobs added in March, according to FXStreet consensus, up from 117,000 in February.

Ahead of the data, the dollar was mixed. The pound gained, while the yen and euro fell.

Sterling was quoted at USD1.3777 on Wednesday, strengthening from USD1.3722 late Tuesday after figures showed the UK's economic slump for 2020 was revised to 9.8% from a first estimate of 9.9%. However, this still marks the largest annual fall in the country's output on record.

The euro traded at USD1.1727, softening on USD1.1730 late Tuesday as March's core inflation data disappointed.

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.

However, 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 of a 1.2% uptick.

Against the yen, the dollar climbed to JPY110.66 on Wednesday from JPY110.27 at the London equities close on Tuesday.

In London, Hikma Pharmaceuticals remained the top performer, rising 3.3% after Jefferies upgraded the drugmaker to Buy from Hold.

Oil majors dragged on the blue-chip index, with Royal Dutch Shell 'A' and 'B' shares down 1.7% and 1.8% respectively, while BP dipped 1.4%.

The stocks were tracking oil prices lower. Brent oil was trading at USD63.69 a barrel, down on USD64.21 late Tuesday ahead of Thursday's OPEC and non-OPEC meeting.

Gold fared better than oil amid Wednesday's cautious mood. Gold was quoted at USD1,688.02 an ounce, firm on USD1,685.50 on Tuesday.

Turning back to London equities, Genus shares fell after Stifel cut the company - which sells products made using biotechnology to cattle and pig farmers - to Hold from Buy.

The big news in London on Wednesday was Deliveroo's disappointing start to life as a listed company. Shares were trading at just 299p at midday, down 23% from its 390p IPO price.

The IPO price was already set at the bottom of a previously marketed range.

Earlier in March, Deliveroo set a price range of GBP3.90 to GBP4.60 per share, which would have valued the company at as much as GBP8.8 billion. Since then, institutional investors including Aviva, Standard Life Aberdeen and Legal & General Group said publicly that they won't take part in the IPO, citing concerns including shareholder voting rights and working conditions for couriers.

The IPO price of GBP3.90 gave the company a valuation of GBP7.59 billion on admission. At one point in the morning, Deliveroo's share price dropped to 271p - down 31% on the IPO price.

"In this next phase of our journey as a public company we will continue to invest in the innovations that help restaurants and grocers to grow their businesses, to bring customers more choice than ever before, and to provide riders with more work," Deliveroo Chief Executive Will Shu said.

Deliveroo offered 'A' shares in its IPO, while 'B' shares are held solely by Shu. Each of Shu's B shares will have 20 votes, while A shares each will have one.

Joshua Mahony at online trading platform IG commented: "Deliveroo firmly falls into the pandemic winners category, but at a time when traders are looking for value recovery plays, this doesn't look like the most attractive proposition."

By Lucy Heming;Â lucyheming@alliancenews.com