LONDON MARKET MIDDAY: China data boosts sentiment before central banks

(Alliance News) - Stock markets in Europe started a busy week with investors in a positive frame of mine, encouraged by some strong industrial data for China - offering a glimpse of the economic recovery many feel is right around the corner for the rest of the world as well.

"At the start of a central bank-heavy week, some better than forecast figures out of China helped lift Europe after the bell," SpreadEx analyst Connor Campbell said.

China's industrial output and retail sales surged in the first two months of the year, official data showed Monday, underscoring the country's quick recovery from the coronavirus pandemic.

Industrial production spiked a forecast-busting 35% year-on-year, the biggest bounce in decades, while retail sales also beat expectations with 34% growth.

Campbell continued: "That has helped markets continue to weather the recent movements in bond yields, which saw the yield on 10-year Treasuries hit its highest level in more than a year last Friday. Whether the markets can continue to show this newfound resilience is in part going to be determined by what the Federal Reserve and Bank of England say on the matter this Wednesday and Thursday, respectively."

The Fed's latest rate decision comes on Wednesday, followed by the Bank of England's on Thursday, with the Bank of Japan rounding out a busy week for central bank's on Friday. The European Central Bank issued its own policy decision last week.

The FTSE 100 index was up 18.96 points, or 0.3%, at 6,780.15 midday Monday. The mid-cap FTSE 250 index was up 63.68 points, or 0.3%, at 21,570.15. The AIM All-Share index was 0.5% higher at 1,197.34.

The Cboe UK 100 index was up 0.3% at 675.47. The Cboe 250 was up 0.4% at 19,219.32, and the Cboe Small Companies was 0.4% higher at 13,927.06.

In mainland Europe, the CAC 40 in Paris was up 0.3% while the DAX 30 in Frankfurt was 0.1% higher midday Monday.

AJ Bell Investment Director Russ Mould said: "It is like the markets have remembered to be happy about economic recovery again. For a time the focus was so fixed on accompanying inflation risks, the upside from a rebound in the economy as countries reopen was lost.

"The scale of China's recovery from the pandemic, which beat analysts' expectations, offers an imperfect trailer for what might happen when there is a full reopening in the West," Mould continued. "Those concerns over rising prices haven't disappeared entirely though, with bond yields still elevated and sentiment remains fragile."

Stocks in New York, in step with Europe, are on course for an upbeat start to the week. The Dow Jones Industrial Average is set to open 0.4% higher, with both the S&P 500 and the Nasdaq indices called up 0.2%.

IG Senior Market Analyst Joshua Mahony said: "Last week's passing of [US President] Joe Biden's USD1.9 trillion stimulus package has helped bolster growth expectations for the year ahead, with Goldman Sachs expecting a 7.0% rebound in US GDP for 2021. That economic recovery should provide the basis for a strong recovery in pro-cyclical stocks, driven by yields. With Goldman Sachs expecting to see yields rise to 2.1% in 2022, a long-term outperformance in value could be on the cards."

AstraZeneca's troubles in Europe continued over the weekend after concern about blood clots prompted Ireland to become the latest European country to suspend use of the jabs.

The Anglo-Swedish drugmaker insisted its coronavirus vaccine is safe, and the director of the Oxford Vaccine Group on Monday said there was no link between the jab and blood clotting.

Andrew Pollard said there was "very reassuring evidence that there is no increase in a blood clot phenomenon here in the UK, where most of the doses in Europe been given so far".

"It's absolutely critical that we don't have a problem of not vaccinating people and have the balance of a huge risk, a known risk of Covid, against what appears so far from the data that we've got from the regulators – no signal of a problem," he told BBC Radio.

Ireland and the Netherlands on Sunday became the latest countries to suspend their use of the Oxford-AstraZeneca vaccine out of precaution. Denmark, Norway and Iceland have also paused their rollout of the jab.

AstraZeneca said on Sunday there was no evidence of increased blood clots from the jab after outcomes from 17 million doses were analysed.

The pharmaceutical company said the 15 incidences of deep vein thrombosis and 22 events of pulmonary embolism reported among those given the vaccine was "much lower than would be expected to occur naturally in a general population".

Astra's shares were unaffected by the debate. They were 0.2% higher in London on Monday in midday trade.

Flutter Entertainment remained atop London's blue-chip index - advancing 6.6% and setting a new 12-month high - after it responded to a press report regarding the potential initial public offering of its US business FanDuel.

Flutter noted it "regularly evaluates" its organisational and capital structure in an attempt to best position itself.

A CNBC report late Friday said the betting giant is considering spinning out US sports betting subsidiary FanDuel as a separately traded company on a US stock exchange.

"Options including the listing in the US of a small shareholding in FanDuel are being considered but no decision has been made at this time. Should a decision be made to proceed with a listing in due course, an announcement will be made as appropriate," the Paddy Power owner said.

AJ Bell's Mould said: "Flutter potentially listing its sportsbook and daily fantasy sports betting business FanDuel in the US makes perfect sense for two reasons.

"First, it is likely to get a much higher valuation than is currently attributed to the operation as part of the Flutter group. Second, this is arguably the most exciting part of its group, and it seems logical to want to capitalise on positive momentum and give investors an opportunity to invest purely in this bit. It also helps there is already a listed peer in the form of DraftKings."

In the FTSE 250, Provident Financial's shares sunk 27% as the sub-prime lender warned that its Consumer Credit Division faces liquidation unless a scheme of arrangement can be agreed to pay off increasing customer complaints.

"When combined with the impact of Covid-19 on its profitability, customer complaints can no longer be treated as part of operating costs," Provident explained.

"If approved, a scheme will bring certainty for stakeholders and ensure that customers with a legitimate claim get fair access to redress payments. The group will fund legitimate scheme claims with GBP50 million and will cover further scheme related costs estimated at approximately GBP15 million. The total commitment would be met out of PFG's existing resources."

Provident said customer complaint payments were about GBP25 million in the second half of 2020. On top of this, the unit processed balance reductions for home credit customers of about GBP11 million during the same period.

"If the scheme is not approved, it is likely that CCD will be placed into administration or liquidation. If this were to happen, CCD customers would not be expected to receive any redress payment. Whilst the financial repercussions for CCD would be expected to be substantial, the direct financial or operational repercussions for Vanquis Bank and Moneybarn of an administration or liquidation of CCD would not be significant," Provident added.

The doorstep lender also noted the UK Financial Conduct Authority has opened an enforcement investigation into its CCD unit - focusing on the consideration of affordability and sustainability of lending to customers for the period between February 2020 and February 2021.

In better news for Provident, it said its fourth quarter performance was ahead of internal expectations, and, as a result, for the year as a whole.

Business-to-business media and events firm Ascential fell 4.7% as it decided against dividends payments in 2020. It said it will keep shareholder payouts under review.

Ascential said its 2020 performance demonstrated "resilience" in a "challenging" backdrop as a result of the Covid-19 pandemic, though its pretax loss still widened and revenue fell.

The company reported a pretax loss of GBP184.3 million in 2020 compared to a loss of GBP7.9 million in 2019.

Total revenue for 2020 fell 31% to GBP301.1 million from GBP416.2 million including discontinued operations. This was in line with expectations of between GBP298 million and GBP302 million, Ascential said, and above market consensus of GBP297 million.

These decreases were partially driven by Ascential's Marketing unit revenue falling by 60% and Retail & Financial Services revenue dropping by 78%. Its Digital Commerce unit, however, saw revenue grow 32% to GBP103.1 million.

Moonpig was 4.0% higher after Citi and Jefferies initiated the online card retailer with a Buy rating and JPMorgan initiated the firm with Overweight.

Sterling was quoted at USD1.3918 midday Monday, down from USD1.3985 at the London equities close on Friday.

The euro traded at USD1.1928 midday Monday, lower than USD1.1940 late Friday. Against the yen, the dollar was higher at JPY109.12 versus JPY109.00.

Gold was quoted at USD1,730.60 an ounce midday Monday, higher than USD1,710.65 on Friday. Brent oil was lower at USD69.18 versus USD69.63 late Friday.

By Paul McGowan; paulmcgowan@alliancenews.com

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