LONDON MARKET MIDDAY: FTSE 100 set for weekly gain as extends recovery

Fri, 23rd Jul 2021 12:24

(Alliance News) -Â A start-of-the-week stock market slump was in the rear-view mirror on Friday, with London's FTSE 100 index on track to post a gain for the week overall.

While worries over the outlook for the global economic rebound faded, a weaker-than-expected UK purchasing managers' index reading for July, damped by rising Covid infections, showed the road to recovery is likely to have potholes.

The FTSE 100 was up 58.72 points, or 0.8%, at 7,027.02 midday Friday. At this level, the blue-chip index is up 0.3% on last Friday's closing price of 7,008.09, overcoming Monday's 2.3% tumble with ease.

The mid-cap FTSE 250 index was up 185.25 points, or 0.8%, at 22,862.53. The AIM All-Share index was up 0.3% at 1,231.41.

The Cboe UK 100 index was up 0.9% at 699.55. The Cboe 250 was up 0.8% at 20,556.33, and the Cboe Small Companies up 0.1% at 15,024.17.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were up 1.0% and 0.9% respectively.

Stocks were continuing to rally off lows hit on Monday, when investor sentiment was hurt by worries over the spread of the Delta coronavirus variant.

"European markets are continuing their ascent, with Monday's collapse becoming a distant memory as traders and investors buy the dip in style," said Joshua Mahony, chief market analyst at IG.

Markets also were given a boost by the European Central Bank, after on Thursday it promised to remain "persistently accommodative" until its 2% inflation target is consistently met. With the ECB previously forecasting inflation of 1.3% in 2023, IG's Mahony noted, it is not as concerned about excessive inflation as counterparts in the UK and the US.

"In the midst of a period dominated by earnings reports, today has seen a fixation on economic data thanks to UK retail sales and European PMI releases," Mahony added.

UK retail sales returned to growth in June, as supermarkets benefited from the Euro football championship. Retail sales by volume were up 0.5% month-on-month in June, ahead of the market forecast of 0.4%, according to FXStreet, and rebounding after a 1.3% decline in May.

Less positively, figures from IHS Markit showed momentum in UK business activity eased somewhat in July, even if it did remain around extremely elevated levels.

The IHS Markit-Chartered Institute of Procurement & Supply composite output index slipped to a four-month low of 57.7 points in July from June's reading of 62.2. Nonetheless, as the reading remained above the no-change mark of 50, it still signalled strong growth in UK private sector activity.

"July saw the UK economy's recent growth spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook," said Chris Williamson, chief business economist at IHS Markit.

By contrast, the eurozone economic recovery is going from strength to strength, with the composite index rising to 60.6 points in July from 59.5 in June.

Sterling remained soft against the dollar in the wake of the PMI release, trading at USD1.3741 from USD1.3754 at the London equities close on Thursday.

The euro also was weak, trading at USD1.1767 midday Friday from USD1.1775 late Thursday. Against the yen, the dollar rose to JPY110.45 versus JPY110.08.

Still to come is the US PMI for July, at 1445 BST. Ahead of this, Wall Street is called for a higher start with the Dow Jones Industrial Average pointed up 0.4%, the S&P 500 up 0.5% and the Nasdaq Composite also up 0.5%.

As equities in Europe rose, safe-haven gold fell to USD1,799.42 an ounce on Friday from USD1,806.52 late Thursday in London. Brent oil was trading at USD73.76 a barrel, up from USD72.84 late Thursday.

"Commodity producers helped to drive up the FTSE 100 on Friday, supported by several unloved stocks starting to regain favour with investors including BT and Rolls-Royce," said AJ Bell's Russ Mould.

BT, which reports first-quarter results on Thursday next week, was up 1.0% at midday, while jet engine maker Rolls-Royce rose 2.5%.

Topping the FTSE 100 index was Vodafone, up 2.7%.

The telecommunications firm said it is on track to hit full-year guidance. Total revenue for the quarter ended June 30 was up 5.7% to EUR11.10 billion, with service revenue of EUR9.39 billion, a 3.1% increase on a reported basis and 3.3% organically.

"I am pleased to report that we are back to service revenue growth in Europe, as well as Africa. This growth was broad-based within both Consumer and Business segments, with the vast majority of our markets contributing," commented Chief Executive Nick Read.

The telecommunications firm said it is on track to deliver full-year guidance with adjusted earnings before interest, tax, depreciation and amortisation to be between EUR15.0 billion and EUR15.4 billion. This would compare to adjusted Ebitda of EUR14.39 billion in financial 2021.

NatWest rose 2.6% on a pact to sell a chunk of Ulster Bank assets to Permanent TSB, amid its phased withdrawal from Ireland. As part of the deal, NatWest will receive a minority non-consolidating equity stake in Permanent TSB.

The Irish financial services firm noted NatWest could end up with a 20% stake, and Permanent TSB will pay the Edinburgh-headquartered lender an undisclosed additional cash consideration.

Powering the FTSE 250 index on Friday was Ultra Electronics, up 33% at 3,288.3 pence, after receiving a GBP2.58 billion takeover approach from former London listing Cobham.

The London-based aerospace and defence engineering company confirmed that on Wednesday it received the non-binding proposal, worth GBP35.00 per share in cash. Shareholders would be entitled also to its interim dividend of 16.2 pence announced at the start of the week, making the offer worth GBP35.16 per share.

The possible offer, together with the interim dividend, values Ultra at around GBP2.58 billion and represents a premium of 63% to its closing price on June 24, the day prior to the start of the offer period. It also marks a 42% premium to Thursday's closing share price of GBP24.70.

Ultra said its board would be "minded to recommend to Ultra shareholders" such an offer once made firm.

Beazley rallied 7.1% on a swing to interim profit and a re-emphasise of its commitment to a dividend payment, which it will mull at year-end.

The London-based insurer posted a pretax profit for the six months ended June 30 of USD167.3 million, after a USD13.8 million loss a year prior. It did not pay a dividend for the period, but remains "committed" to a dividend payment and will consider this at year end.

Elsewhere in London, Harworth Group rose 5.6% as it boosted its outlook following a strong half-year performance.

The land regeneration company expects EPRA net disposal value as at June 30 to be "materially ahead" of current analyst consensus for December 31, which it understands to be 167p.

"Reflecting progress year to date and also the continued strong demand for both serviced residential land and industrial and logistics sites we are increasing our 31 Dec 21 EPRA NDV by 6.8% from 167p to 179p," said broker Liberum in the wake of Harworth's update.

By Lucy Heming,Â lucyheming@alliancenews.com; and Amrit Sahota, newsroom@alliancenews.com