LONDON MARKET MIDDAY: Market rebound slows as variant worry lingers

(Alliance News) - Stock prices were rebounding at midday on Tuesday, even if buying enthusiasm had ebbed since the London open, as travel and leisure stocks clawed back some losses from the start-of-week sell-off.

The FTSE 100 was up 39.33 points, or 0.6%, at 6,883.72 at midday. The blue-chip index had moved as much as 1.2% higher in early trade before giving back gains as Tuesday morning progressed.

The mid-cap FTSE 250 index was up 167.86 points, or 0.8%, at 22,108.74. The AIM All-Share index was down 0.1% at 1,197.63.

The Cboe UK 100 index was up 0.7% at 685.81. The Cboe 250 was up 0.6% at 19,763.51, and the Cboe Small Companies up 0.2% at 14,764.70.

In mainland Europe, the CAC 40 in Paris was up 0.7%, while the DAX 30 in Frankfurt edged up 0.3%.

Stocks in Europe on Monday had been battered by worries over surging coronavirus infections across the globe.

As England celebrated so-called 'freedom day', Vietnam locked down much of its population, while Indonesia clocked daily record deaths and the French cabinet moved to toughen vaccine rules.

The highly transmissible Delta variant first detected in India is driving new outbreaks just as countries seek to relax restrictions in order to kickstart virus-battered economies.

In Britain, new infections have climbed, averaging more than 50,000 since last week, with Delta taking hold in many areas.

"Although bargain hunters will be sniffing around, nervousness is still largely the sentiment rippling through the markets, as concerns are growing that higher infection rates will bring about a fresh economic slowdown," said Susannah Streeter, senior investment & markets analyst at Hargreaves Lansdown.

Travel and leisure stocks saw some respite on Tuesday after Monday's sell-off, with jet engine maker Rolls-Royce topping the FTSE 100, up 3.7% at midday, and British Airways parent International Consolidated Airlines rising 1.7%.

This was despite American citizens being warned against travel to the UK over spiralling coronavirus cases. The UK was placed on the highest level of the US travel guidance – "Level 4: Very High" – on Monday, warning that even fully vaccinated travellers could be at risk.

Cineworld and Restaurant Group were amongst the top performers in the FTSE 250, up 3.8% and 3.1% respectively.

easyJet rose 1.8% as it voiced confidence over international travel demand this summer, with the budget airline planning to ramp-up to 60% of pre-pandemic capacity.

Revenue for the third quarter that ended June 30 rose to GBP212.9 million, in line with expectations and up significantly from GBP7.2 million during the prior-year period at the height of coronavirus restrictions in the UK.

The airline is now looking ahead to more relaxed travel rules and has been focusing on pivoting capacity to Europe, where customer demand is strongest. It expects capacity in the fourth quarter ending September 30 to be up to 60% of 2019 levels, improved from just 17% in the third quarter.

IG's Chris Beauchamp highlighted that housebuilders were a bargain hunting favourite as well on Tuesday. Berkeley Group was up 3.0% at midday, Persimmon up 2.0%, Taylor Wimpey up 1.0%, and Barratt Developments up 0.9%.

"Updates from the sector have been rosy over the past few months, providing a positive backdrop to the shares, and with the sector down some 13% from its peak in April it looks like the time is ripe to go shopping in the likes of Persimmon and Barratt Developments," said Beauchamp.

At the bottom of the index was lockdown winner Just Eat Takeaway.com, down 2.5%.

On AIM, Fevertree Drinks fell 6.6% as it warned over squeezed margins amid global logistics cost pressures.

Total sales in the half to June 30 amounted to GBP141.8 million, up 36% on a year ago. The UK segment delivered just 4.1% growth, but US sales surged 32% and Europe sales doubled.

However, gross margin in the half was "impacted by significantly elevated costs resulting from the disruption currently impacting global logistics".

Due to the strong start to the year, Fevertree raised its annual revenue guidance to a range of GBP295 million to GBP304 million. Revenue was GBP252.1 million in 2020, down from GBP260.5 million in 2019.

"However, as is being seen in other sectors, growing challenges from COVID-related logistics disruption and associated costs is putting pressure on the group's margins. Consequently, we anticipate gross margins of about 44% for FY21, or 43% inclusive of revenue from GDP's portfolio brands, delivering an Ebitda margin of about 20%," Fevertree said.

In New York, stocks were pointed to a bright start. The Dow Jones was called up 0.6%. The S&P 500 and Nasdaq Composite both were pointed up 0.5%.

The highlight of Tuesday's US corporate calendar is video streaming platform Netflix's second-quarter results, due after the New York market close. Netflix will be the first so-called FAANG stock to report on the second quarter of 2021.

Meanwhile, the dollar was mixed against major counterparts.

Sterling was quoted at USD1.3639 midday Tuesday, pulling back further from USD1.3677 at the London equities close on Monday. The euro traded at USD1.1790 on Tuesday, soft on USD1.1798 late Monday.

Against the safe haven Japanese yen, the dollar fell to JPY109.39 from JPY109.51.

Gold was quoted at USD1,817.29 an ounce on Tuesday, higher than USD1,807.03 on Monday. Brent oil was trading at USD68.83 a barrel, down from USD69.23 late Monday.

By Lucy Heming; lucyheming@alliancenews.com

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