LONDON MARKET MIDDAY: Oil and travel firms drag stocks lower

Thu, 15th Jul 2021 12:39

(Alliance News) - London stock prices were trading lower on Thursday midday as new travel restrictions were imposed in the UK, while a truce between Saudi Arabia and the United Arab Emirates hit oil prices.

The FTSE 100 index was down 56.03 points, or 0.8%, at 7,035.16 midday Thursday. The mid-cap FTSE 250 index was down 177.54 points, or 0.8%, at 22,572.50. The AIM All-Share index was down 1.2% at 1,227.17.

The Cboe UK 100 index was down 0.8% at 700.75. The Cboe 250 was down 1.0% at 20,235.98, and the Cboe Small Companies down 0.3% at 15,193.26.

In mainland Europe, the CAC 40 in Paris was down 0.8%, while the DAX 30 in Frankfurt was down 1.0%.

"European stocks are heading lower for a second session, dragged down by oil majors and travel stocks as oil prices declined and Covid cases rose," said OANDA Market Analyst Sophie Griffiths.

BP was down 3.1% in London, while Royal Dutch Shell A shares were down 2.6% and B shares were 2.5% lower. Miner and commodities trader Glencore was trading down 1.1%. Among mid-caps, Tullow Oil lost 5.5%.

Brent oil was trading at USD73.56 a barrel, down from than USD76.16 late Wednesday. The move follows reports that Saudi Arabia and the United Arab Emirates have reached a compromise, which is expected to pave the way for an agreement on production increases across the second half of the year.

"The prospect of increasing oil supply at a time when Covid cases are on the rise again is unnerving the market," said Griffiths.

Gold, meanwhile, was quoted at USD1,824.81 an ounce early Thursday, slightly higher than USD1,822.70 on Wednesday.

The UK government has been accused of a "double standard" on international travel after it was announced that Ibiza, Mallorca and Menorca will be added to the amber travel list due to a surge in coronavirus cases, little more than a fortnight after they went green.

The change for those returning to England, Scotland and Wales from Spain's Balearic Islands will take place at 4 am on Monday, potentially sparking a rush for holidaymakers to return to avoid the need to quarantine.

Johan Lundgren, chief executive of easyJet, noted Covid-19 infection rates were rising in the UK but remained lower in much of Europe.

"So we cannot understand why the government is going to allow people to go to a nightclub â€“ without a mask or social distancing â€“ and yet is not comfortable with people going to the beaches of Europe, where the infection rates are lower than in the UK," Lundgren said.

Budget airlines easyJet and Wizz Air were down 1.4% and 1.3%, respectively, while British Airways-parent International Consolidated Airlines Group lost 1.7%. Holiday operator TUI was down 2.1%.

Just Eat Takeaway.com was the worst blue-chip performer on Thursday at midday, down 4.4%.

"Just Eat Takeaway.com's performance continues to disappoint, judging by the reaction of the share price this morning. A 733% gain in UK order growth just doesn't cut it any more, it appears, and in any case matching this for the next half is likely to prove impossible, given the expected return to pubs and restaurants and the concomitant decline in takeaway orders," said IG Chief market Analyst Chris Beauchamp.

Just Eat Takeaway posted growth in second-quarter orders, saying it has gained market share in the UK. It said that its losses peaked in the first half and margins will pick up from here on in.

The company boosted its annual guidance. It now expects order growth of "more than" 45% for 2021, excluding new US acquisition Grubhub, raised from its previous forecast of order growth of more than 42%.

Total orders excluding the US rose 47% year-on-year to 212.4 million in the second quarter of 2021, from 144.9 million.

At the other end of the FTSE 100 index was Avast, the best performer, up 15% at Thursday midday. NortonLifeLock and Avast confirmed they are in advanced talks regarding a possible combination.

A deal may be in the form of a cash and share takeover offer by Norton for Avast, the two companies said. Possible terms were not disclosed.

The talks were first reported by the Wall Street Journal late on Wednesday. A deal could value Avast at around USD8 billion, assuming a typical premium to its closing market capitalisation on Wednesday of GBP5.2 billion, the WSJ said.

Following its rise early Thursday, Avast has a market cap just under GBP6 billion compared to NortonLifeLock's almost USD16 billion. NortonLifeLock shares were down 2.5% in pre-market trading in New York at USD26.25.

Under UK takeover rules, Norton will have to make a firm offer by August 11, or announce it will not make an offer.

The second-best performer was Experian, up 3.7%. The credit checking firm reported a strong performance in the three months to June 30.

Total revenue growth was 31% at actual exchange rates and 28% at constant exchange rates in the first quarter. Organic revenue growth was 22%, and all regions and segments delivered growth for the quarter.

The company said its improved performance was driven by an innovation-led strategy and a faster-than-expected recovery as economies emerge from the Covid-19 pandemic.

Experian said it now expects total revenue growth for the full financial year to March 31, 2022 in the range of 13% to 15%.

Sterling was quoted at USD1.3872 on Thursday, flat on USD1.3870 at the London equities close on Wednesday.

The euro traded at USD1.1822 on Thursday midday, soft from USD1.1825 late Wednesday. Against the yen, the greenback was quoted at JPY109.97, essentially flat versus JPY110.02 late Wednesday.

Wall Street is on course for a mostly lower start on Wednesday, with the Dow Jones Industrial Average called down 0.5%, the S&P 500 seen down 0.2%, and the Nasdaq Composite pointed up 0.2%

The economic events calendar on Thursday has the latest US jobless claims numbers at 1330 BST. In addition, Federal Reserve Chair Jerome Powell's testimony on Capitol Hill continues.

US central bank will continue to provide stimulus until the economy has fully recovered, Powell said Wednesday.

Powell acknowledged that the inflation spike was stronger than the Fed was hoping to see, and will remain "elevated" in coming months, but he again expressed confidence the rate will decline once supply bottlenecks and other temporary issues are resolved.

By Evelina Grecenko; evelinagrecenko@alliancenews.com