LONDON MARKET MIDDAY: FTSE 100 higher as pound breaks through USD1.42

(Alliance News) - Soothed inflation worries and some stronger-than-expected UK jobs data helped to boost London stocks on Tuesday, though the dollar earner-heavy FTSE 100 trimmed morning gains as the pound advanced.

The FTSE 100 index was up 31.46 points, or 0.5%, at 7,064.31 midday Tuesday. The mid-cap FTSE 250 index was up 112.36 points, or 0.5%, at 22,326.50. The AIM All-Share index was up 0.3% at 1,237.57.

The Cboe UK 100 index was up 0.4% at 704.58. The Cboe 250 was up 0.4% at 20,068.73, but the Cboe Small Companies was down 0.1% at 14,913.17.

In mainland Europe, the CAC 40 in Paris was up 0.2%, while the DAX 30 in Frankfurt rose 0.3% on Tuesday.

"European bourses have powered higher out of the starting blocks on Tuesday, boosted by the Fed's promise of low rates for longer and upbeat UK jobs data," said Sophie Griffiths, market analyst at Oanda.

A top Federal Reserve official on Monday said bringing the US economy back from the brutal downturn caused by Covid-19 will take time, and hiccups like last month's weak hiring data will happen.

The comments from Fed Vice Chair Richard Clarida came after a weaker-than-expected US nonfarm payrolls reading for April of 266,000. Some market participants had anticipated more than a million jobs being added last month.

"We're still more than eight million jobs short of where we were 14 months ago, so there's still a deep hole in the labor market. But I also believe that it may take more time to reopen a USD20 trillion economy than it did to shut it down," Clarida said in a conversation with Atlanta Federal Reserve President Raphael Bostic.

This helped to soothe market worries after figures last week showed the annual US inflation rate surged to 4.2% in April from March's consumer price growth of 2.6%. Markets had expected an April rate of 3.6%.

"Inflation concerns dominated the markets last week, but they're starting to ebb after softer-than-expected US consumer spending and further reassurance from the Fed," said Oanda's Griffiths.

Wall Street was on track for a higher start on Tuesday, with the Dow Jones called up 0.3%, the S&P 500 also up 0.3%, and the Nasdaq Composite set for a 0.7% gain.

Bolstering the good mood, Griffiths added, was some better-than-expected UK jobs data.

The UK unemployment rate was 4.8% for the three months to March, easing from 4.9% in the three months to February. Consensus, according to FXStreet, had seen the March reading holding steady at 4.9%.

"The latest figures suggest that the jobs market has been broadly stable in recent months, with some early signs of recovery," the ONS said.

This coincides with the easing of lockdown restrictions in the UK. In March, schools in England reopened, followed by the lifting of shutters in April for outdoor hospitality, such as beer gardens, alongside non-essential retail and hairdressers.

Sterling was trading around the USD1.42 mark for the first time since February. The pound was quoted at USD1.4202 by midday, higher compared to USD1.4119 at the London equities close on Monday.

The pound's level in February this year, peaking just above the USD1.42 mark, had marked the highest price since April 2018's post-Brexit high of USD1.43.

Amid Tuesday's risk-on mood, the US dollar was lower against other major currency pairings.

"The current dollar weakness contrasts with the gains of last week, with the greenback more than 1% down in relation to where it was on Wednesday, when the publication of higher-than-expected US inflation numbers opened up the possibility of an earlier tapering by the central bank. However, Fed officials have since embarked on something of a public relations campaign, never missing an opportunity to dismiss inflation as a mere short-term issue," said Ricardo Evangelista, senior analyst at ActivTrades.

Against the yen, the dollar slipped to JPY108.97 midday Tuesday versus JPY109.20 late Monday in London. The euro changed hands at USD1.2212, higher than USD1.2146.

The lower dollar also boosted the price of gold, the precious metal trading at USD1,868.59 an ounce on Tuesday, up from USD1,865.60 on Monday.

Brent oil also rose, trading at USD70.12 a barrel, up from USD69.24 late Monday. Oil majors were higher at midday, with BP up 1.5% and Royal Dutch Shell 'A' and 'B' shares up 0.8% and 0.9%, respectively.

At the bottom of the FTSE 100 was Vodafone, falling 5.4% after annual revenue declined and earnings missed consensus.

Revenue for the financial year to March 31 was EUR43.81 billion, down 2.6% from EUR44.97 billion the year before but beat market expectations of EUR43.64 billion. Vodafone cited the impact of the Covid-19 pandemic on roaming charges, amid foreign travel restrictions, for the decline in revenue.

Vodafone's pretax profit jumped to EUR4.40 billion in the recent year from just EUR795 million the year before, after financing costs fell to EUR1.03 billion from EUR3.55 billion.

However, adjusted earnings before interest, tax, depreciation and amortisation fell 3.3% - or 1.2% on an organic basis - to EUR14.39 billion from EUR14.88 billion. Adjusted Ebitda was expected by market consensus at EUR14.54 billion, so this was missed slightly.

DCC fell 1.4% even after posting swelling profits in its full-year results, boosted by Covid-19 driven demand for its personal protective equipment.

The sales, marketing and support services company reported a "very strong performance" for the year ended March 31, with pretax profit up 17% year-on-year to GBP365.1 million from GBP311.5 million. Dublin-based DCC noted profit growth was ahead of market expectations, with all its divisions recording growth in operating profit.

Oxford BioMedica surged to the top of London's mid-cap index, rising 12%, as it raised guidance after pharmaceutical firm AstraZeneca committed to an increase in the number of Covid-19 vaccines needed from the gene and cell therapy company in the second half of 2021.

The two signed an 18-month supply agreement in September under a three-year master supply and development agreement for the large-scale commercial manufacture of the Oxford-AstraZeneca vaccine.

As a result of Astra's commitment, Oxford Biomedica raised its revenue guidance for expected cumulative revenue from Astra by the end of 2021 to in excess of GBP100 million, from in excess of GBP50 million previously, and as such expects "significant growth" in operating Ebitda this year.

4imprint rose 5.4% on "very encouraging progress" in the recovery of the business from the effects of the pandemic.

In a statement ahead of its annual general meeting, the London-based firm said that since March momentum had built substantially, with order intake in the month of April above 80% of 2019 levels. In the most recent three week period, order counts had averaged 85% against the same 2019 comparative.

HomeServe declined 2.9% despite posting a rise in full-year revenue and expecting accelerated growth in the coming year.

The West Midlands-based firm posted revenue for the year ended March 31 of GBP1.30 billion, rising 15% from GBP1.13 billion the previous year. Despite revenue growth, profit before tax fell 66% to GBP47.2 million, although this was mainly due to an exceptional charge of GBP84.8 million linked to halting the use of eServe, its customer relationship management system.

By Lucy Heming; lucyheming@alliancenews.com

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