LONDON MARKET MIDDAY: Stocks drift ahead of earnings and data drivers

(Alliance News) - The FTSE 100 edged into the green at midday on Tuesday, with European equity markets lacking meaningful direction ahead of some closely watched earnings and data due later this week.

The large-cap FTSE 100 index was up 4.72 points, or 0.1%, at 7,208.55 midday Tuesday. The mid-cap FTSE 250 index was up 66.26 points, or 0.3%, at 23,035.00. The AIM All-Share index was just 0.17 of a point lower at 1,237.29.

The Cboe UK 100 index was flat at 714.88. The Cboe 250 was up 0.2% at 20,779.53 and the Cboe Small Companies up 0.3% at 15,646.30.

In mainland Europe, the CAC 40 in Paris was flat and the DAX 40 in Frankfurt up 0.1% in early afternoon trade.

"The FTSE 100 was marking time on Tuesday morning as investors awaited the latest round of big corporate updates from the US," says AJ Bell financial analyst Danni Hewson.

After the big US banks last week, focus turns to technology. Netflix on Tuesday after the New York market close becomes the first of the 'Faangs' - Facebook, Amazon, Apple, Netflix and Alphabet's Google - to report on the third quarter of 2021. Also due this week are earnings from electric car maker Tesla and credit card firm American Express.

The banking earnings were broadly well received by investors, setting the bar for the US tech sector over the coming week.

Wall Street was pointed to a higher start on Tuesday. The Dow Jones, S&P 500 and Nasdaq Composite were all called up 0.3%.

"After a period of recovery for the markets last week it feels like they are still deciding which way to break this week. UK inflation numbers tomorrow are likely to be closely watched as expectations for earlier interest rate rises build," said AJ Bell's Hewson.

UK inflation for September, due at 0700 BST on Wednesday, is set to stay steady at an annual rate of 3.2% - remaining well above the Bank of England's 2% target.

The data will come just days after BoE Governor Andrew Bailey cautioned the central bank will have to act to ease inflationary pressures.

"That's why we, at the Bank of England, have signalled, and this is another such signal, that we will have to act," Bailey said, according to the FT. "But of course that action comes in our monetary policy meetings."

Sterling was quoted at USD1.3828 on Tuesday, higher than USD1.3711 at the London equities close on Monday.

The euro traded at USD1.1663, up from USD1.1595 late Monday even as data showed eurozone construction output snapped five straight months of year-on-year growth to slip in August. Eurostat said construction industry production fell by 1.6% year-on-year in the eurozone in August after growth of 3.5% in July.

Against the yen, the dollar eased to JPY114.14 versus JPY114.28.

In London, educational publisher Pearson topped the FTSE 100, up 3.7% after upgrades from Berenberg and Credit Suisse. The former raised Pearson to Hold from Sell and the latter to Neutral from Underperform.

Analysts at Berenberg said: "On our below-consensus numbers, Pearson is still not cheap, but at least expectations for 2022 should now be more moderate - even if they are not yet factoring in the need for additional investment."

Precious metals miners tracked the price of gold higher. Gold was quoted at USD1,778.60 an ounce on Tuesday, higher than USD1,768.25 on Monday.

Fresnillo rose 2.0% and Polymetal International advanced 1.9%.

Brent oil was trading at USD84.98 a barrel at midday, softening from USD84.86 late Monday.

BHP rose 1.7% after the miner retained full-year output guidance despite seeing a fall in production in the first quarter of its financial year.

Copper production fell 8.9% to 376,500 tonnes in the quarter from 413,200 tonnes last year, while iron ore output slipped 4.1% to 63.3 million tonnes from 66.0 million tonnes.

"BHP's operations delivered reliably during the first quarter, and we completed planned major maintenance activities across a number of our assets. We continue to skilfully navigate the ongoing challenges of Covid-19," asserted BHP Chief Executive Mike Henry.

At the bottom of the FTSE 100 was British Airways parent International Consolidated Airlines, falling 3.8% after Berenberg downgraded the travel stock to Hold from Buy.

Moneysupermarket.com rallied in the FTSE 250, up 8.5% at midday after the price comparison website said revenue in the third quarter slipped but it continued to see strong gross margins.

Looking ahead, Moneysupermarket said it expects full-year earnings before interest, tax, depreciation and amortization in line with current market expectations.

Separately, Moneysupermarket said it has acquired UK cashback business Maple Syrup Media, trading as Quidco, from Maple Syrup Group for up to GBP101 million, with GBP87 million in cash initially and a further GBP14 million in deferred payments.

RHI Magnesita rose 6.6% despite warning it will need a "strong" fourth quarter to meet its full-year earnings targets, as it faces increased costs due to supply chain issues.

The refractory products supplier also unveiled the acquisition of an 85% stake in Sormas Sogut Refrakter Malzemeleri Anonim Sirketi, a producer of refractories for the cement, steel, glass and other industries in Turkey, for EUR38.8 million in cash.

It would now take a "strong" fourth-quarter performance to hit its full-year earnings before interest, tax and amortisation guidance of EUR310 million, RHI Magnesita said. Given further price increases are currently being negotiated with customers, it expects full-year earnings between EUR280 million and EUR310 million.

However, the bulk of Tuesday's warning may have been priced in already. RHI Magnesita fell 8.7% over the course of last week - tumbling 6.9% in one day alone after RBC downgraded the stock on worries over inflationary pressures.

Elsewhere in London, McBride fell 4.7% after also warning on rising costs, driven by supply chain issues. The domestic household products manufacturer said raw material and packaging costs have "moved faster and to a higher level than previously expected", while a shortage of haulage capacity and higher fuel costs show no signs of abating soon.

By Lucy Heming; lucyheming@alliancenews.com

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