LONDON MARKET MIDDAY: Stocks drift lower with eyes on ECB

(Alliance News) - European equities had a lacklustre morning on Tuesday, with mixed data from the eurozone doing little to lift the mood as traders return to desks in New York following the Labor Day break.

Blue-chip financial stocks were among those to struggle amid the cautious mood on Tuesday, while housebuilder Vistry and interdealer broker TP ICAP bookended the mid-cap index on contrasting earnings updates.

The FTSE 100 index was down 23.68 points, 0.3%, at 7,163.50. The mid-cap FTSE 250 index was down 49.77 points, 0.2%, at 24,198.58. The AIM All-Share index was down 0.86 of a point, 0.1%, at 1,313.20.

The Cboe UK 100 index was down 0.3% at 712.31. The Cboe 250 was down 0.3% at 21,976.44, and the Cboe Small Companies was up 0.1% at 15,586.69.

In mainland Europe, the CAC 40 stock index in Paris was marginally lower and the DAX 30 in Frankfurt was down 0.3%.

The eurozone economy expanded faster than previously estimated in the second quarter, Eurostat said on Tuesday.

Gross domestic product in the euro area grew by 14.3% year-on-year in the second quarter, revised up from the flash reading of 13.6%. On a quarter-on-quarter basis, seasonally adjusted GDP increased 2.2%, revised up from 2.0%.

"Today's data will add to the ECB's conviction that the economic shock from the pandemic is now fading. We still look for the central bank to announce this week a slight slowdown in the pace of the pandemic emergency purchase programme through Q4," Pantheon Macroeconomics analyst Claus Vistesen commented.

However, the ZEW Survey of economic sentiment in the euro area for September missed estimates by a long way. The index dropped to 31.1 from last month's 42.7, versus FXStreet-cited consensus for a rise to 52.2. The current situation index rose to 22.5 from 14.6.

Pantheon analyst Melanie Debono commented that data offers "more evidence that activity peaked midway through Q3".

The euro was higher at USD1.1873 on Tuesday afternoon, up from USD1.1860 late Monday, but off intraday highs of USD1.1885.

Among London-listed blue chips, lender HSBC and Lloyds fell 1.2% and 0.5%, while insurer Admiral gave back 0.8% in a tough session so far for financials.

TP ICAP was the worst performing mid-cap, dropping 8.1%, with the interdealer broker reporting "subdued" market conditions.

In the six months to June 30, revenue fell 5.4% to GBP936 million from GBP990 million. Its average broker headcount rose to 2,760 from 2,746, though revenue per broker dropped 12% to GBP289,000 from GBP330,000.

Pretax profit dropped 64% to GBP28 million from GBP78 million a year earlier.

The decline reflects quieter markets compared with the extraordinary volumes seen in March 2020, the London-based company said. TP ICAP provides broking and other services to markets including stocks, commodities and currencies, and benefits from high trading volume and volatility.

Vistry topped the mid-caps, rising 3.5%. The housebuilder lifted its full-year profit outlook.

Vistry's revenue in the six months to June 30 jumped 82% to GBP1.10 billion from GBP606.4 million. It swung to a pretax profit of GBP156.2 million from a GBP12.2 million loss a year earlier.

Completions leapt 76% to 5,351 during the half, from 3,034 a year ago, with the 2020 comparison period lapping a time which saw the UK housing sector shuttered due to Covid-19 containment measures.

It proposed a 20 pence dividend, having not declared one this time a year earlier.

It raised its annual outlook. It now expects adjusted pretax profit of GBP345 million, ahead of consensus estimates.

Marks & Spencer rose 4.5% after UBS raised the retailer to Buy from Neutral.

Ted Baker was up 1.4% as it noted "encouraging progress" in what was a mixed second quarter update by the luxury retailer. Revenue in the quarter to August 14 rose 50% annually.

Reported retail sales were 30% higher than a year earlier, though also down 30% from pre-pandemic times.

Although full price sales improved, meaning Ted Baker has not needed as much promotional activity to flog stock, e-commerce sales declined 25%.

"We have made encouraging progress, with trading over the second quarter in line with expectations, albeit the speed of recovery is different across store locations and regions. Full price sales mix has significantly improved across all our retail channels as we continue to re-establish our premium lifestyle brand positioning," Chief Executive Rachel Osborne said.

Burberry rose 1.8% in a positive read-across.

Elsewhere in London, cleaning and hygiene products firm McBride fell 2.7%, after seeing a year of "two halves".

The second half ended June 30 saw a constant currency revenue decline of 9.5%, signalling that Covid-19-induced demand normalised. McBride's revenue rose 1.7% at constant currency in the first half.

Group revenue for the year fell 3.4% to GBP682.3 million from GBP706.2 million. Pretax profit fell 2.8% to GBP10.6 million from GBP10.9 million.

The pound was quoted at USD1.3793 midday Tuesday in London, down from USD1.3820 at the London equities close on Monday. Against the yen, the dollar was trading at JPY109.95, up from JPY109.85.

UK Prime Minister Boris Johnson won cabinet backing for plans to reform health and social care funding, even though they are expected to involve a manifesto commitment-busting tax rise.

The PM will set out in the Commons later how he aims to tackle the social care crisis in England, with the risk of a Tory backlash if he raises national insurance to pay for the reforms.

The tax hike, thought to be about 1.25 percentage points, will raise around GBP10 billion, which will be spent on the NHS as it recovers from the Covid-19 pandemic as well as to help people avoid crippling adult social care costs.

In New York, stock market futures were mixed following the Labor Day break. The Dow Jones Industrial Average was called marginally higher, though the S&P 500 and the Nasdaq Composite are seen down 0.1%.

Brent oil was quoted at USD71.84 a barrel midday Tuesday, down from USD72.20 late Monday. Gold fetched USD1,810.56 an ounce, down from USD1,822.55.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.