LONDON MARKET MIDDAY: FTSE dives 140 points as recovery jitters return

(Alliance News) - Losses for London stock prices accelerated as Thursday's session progressed, with the FTSE 100 shedding 140 points by midday as it heads towards its worst session since May.

Miners, banks and oil stocks were all weighing on London's FTSE 100 index. In fact, only three companies in the index were avoiding losses at midday - the second best performer being gambling firm Entain, up just 0.5% after a guidance boost.

The FTSE 100 index was down 140.35 points, or 2.0%, at 7,010.67 midday Thursday. The mid-cap FTSE 250 index was down 340.13 points, or 1.5%, at 22,630.11. The AIM All-Share index was down 1.3% at 1,249.09.

The Cboe UK 100 index was down 1.9% at 697.94. The Cboe 250 was down 1.4% at 20,380.09, and the Cboe Small Companies down 0.9% at 15,347.42.

AJ Bell's Russ Mould highlighted that miners and banks were acting as some of the biggest drags on the FTSE 100, suggesting that investors are starting to worry about the global economic recovery.

"Miners' fortunes are heavily tied to commodity prices and the cost of metals and minerals is typically determined by supply and demand for industrial projects around the world," he explained. "Banks are also heavily influenced by economic activity...If the economic outlook is not as strong, then investors start to go off banks for fear that it will be harder for them to push up earnings."

Miners Anglo American, Glencore and Antofagasta were down 3.7%, 3.6% and 3.5% respectively at midday. Lender Barclays was down 3.6%, while peer Lloyds fell 3.4% and NatWest by 3.1%.

Another group weighing on the FTSE 100 were oil majors as Brent prices pulled back. BP shares were down 1.3% at midday while Royal Dutch Shell 'A' and 'B' shares fell 1.3% and 1.2% respectively.

Brent oil prices fell to USD72.85 a barrel at midday from USD73.00 late Wednesday. It's been a rocky week for oil prices after the latest talks by OPEC+ crude producers fell apart.

US oil futures approached a seven-year peak after the talks between the 23 members of the petroleum producers group were called off, ending negotiations on a proposal to boost crude supply. The rally was soon reversed, however, as concerns crept in over a possible disintegration of any effort to rein in supply.

Gold was faring better. The safe-haven metal was quoted at USD1,805.64 an ounce midday Thursday, higher than USD1,801.50 on Wednesday.

The similarly safe-haven Japanese yen also advanced in Thursday's risk-off atmosphere. Against the yen, the dollar was quoted at JPY109.94, down versus JPY110.70.

Meanwhile, the pound fell against the dollar but the euro edged up as investors awaited the European Central Bank's strategy review.

Sterling was quoted at USD1.3759 midday Thursday, down from USD1.3770 at the London equities close on Wednesday.

The euro traded at USD1.1844, up from USD1.1793 late Wednesday.

The ECB confirmed it will adopt a new symmetric 2% inflation target, which allows room for price overshoots compared with the current aim of 'below, but close' to 2%.

"This target is symmetric, meaning negative and positive deviations of inflation from the target are equally undesirable. When the economy is operating close to the lower bound on nominal interest rates, it requires especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched," the ECB said.

The central bank also revealed plans to to include climate change considerations in its monetary policy.

In mainland Europe, the CAC 40 in Paris was down 2.3%, while the DAX 30 in Frankfurt was 1.8% lower on Thursday.

Wall Street is on course for a tumble at the opening bell, with the Dow Jones pointed down 1.5%, the S&P 500 down 1.5%, and the Nasdaq Composite down 1.4%.

Back in London, Persimmon shares fell 4.6% despite the housebuilder hailing a strong first half, with revenue beating pre-virus levels.

The company said revenue in the six months to June 30 rose 54% year-on-year to GBP1.84 billion from GBP1.19 billion. Revenue was up 5.1% from GBP1.75 billion two years earlier, before the onset of the pandemic.

The housebuilder said it intends to return 110p per share of surplus capital as a single additional interim dividend payment in relation to the 2020 financial year. Previously, it had intended to split up the dividend into two payments, one made in August this year and one in December.

Electrocomponents fell 4.4% as it noted industry supply chain constraints ahead.

For the three months to the end of June, the London-based electronic and industrial components maker's like-for-like revenue growth was 37% compared to the same period a year prior, driven by market share gains in all key markets, and strong ongoing availability.

Looking ahead, despite supply chain challenges set to slow industry growth for the rest of the financial year, Electrocomponents said it remains confident and is on-track to achieve low double-digit to mid-teens like-for-like revenue growth for the financial year ending March 31, 2022.

Watches of Switzerland fell 3.4% despite a "strong" full-year performance. The Leicester-based retailer of Swiss watches said its pretax profit shot up to GBP63.7 million in its financial year that ended May 2, compared to only GBP1.5 million the year prior.

Despite 26 weeks of store closures, the retailer's revenue jumped to GBP905.1 million, up 12% from GBP810.5 million, as strong domestic and online sales offset lower tourist and airport trade.

Wise was trading at 889.3 pence, continuing to climb further from its 800p opening price after Wednesday's direct listing in London, so up 11%.

Wise, which has recently been rebranded from TransferWise, provides money transfer services. It chose to conduct a direct listing in London instead of a traditional initial public offering - a method which avoids underwriting fees and restrictions on stock sales by current owners.

By Lucy Heming; lucyheming@alliancenews.com

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