LONDON MARKET MIDDAY: Stocks lack direction amid profit-taking

(Alliance News) - Stock prices in London were trading mixed on Friday midday with investors looking for fresh clues about where both the global economy and monetary policy are headed.

The large-cap FTSE 100 index was down 24.41 points, or 0.3%, at 7,359.77. The mid-cap FTSE 250 index was up 2.32 points at 23,576.37. The AIM All-Share index was up 0.1% at 1,248.87.

The Cboe UK 100 index was down 0.4% at 729.13. The Cboe 250 was broadly flat at 21,050.43 and the Cboe Small Companies down 0.2% at 15,554.24.

In mainland Europe, the CAC 40 stock index in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.2%.

"Profit-taking moves following recent records reached by most benchmarks has put a bit of pressure on stock markets," said Pierre Veyret, technical analyst at ActivTrades, adding that "there is still a high chance that investors will keep pushing for new highs before the year-end."

Industrial production in eurozone slipped in September when compared with August but still remain well above the prior year, figures from Eurostat showed.

Seasonally adjusted industrial production fell by 0.2% month-on-month in the euro area in September and by 0.5% in the EU. In August, industrial production had fallen by 1.7% in the euro area and by 1.5% in the EU when compared to July.

On an annual basis, industrial production in September increased by 5.2% in the euro area and by 5.0% in the EU.

The pound fell to its lowest level this year. After reaching a low of USD1.3351 early Friday, it recovered slightly to USD1.3392 at midday on Friday, and was trading higher than USD1.3381 at the London equities close Thursday.

The euro was priced at USD1.1449, soft from USD1.1462. Against the yen, the dollar was trading at JPY114.06 in London, firm from JPY114.02.

Brent oil was quoted at USD81.38 a barrel Friday midday, slipping from USD82.48 late Thursday. Gold stood at USD1,848.53 an ounce, down from USD1,861.20.

Ricardo Evangelista, senior analyst at ActivTrades, said gold was falling back from a fresh multi-month high hit earlier in the week, due to its inverted correlation with the dollar, which hit a new annual high.

AstraZeneca lost 4.5% The drug maker reported total revenue in the year to date - including Alexion Pharmaceuticals Inc - was USD25.41 billion, up 32% year-on-year. On a constant currency basis, revenue grew by 28% in the nine months to September 30. Total revenue in the third quarter alone increased by 50% to USD9.87 billion.

Astra noted that the Alexion integration is progressing well, creating new opportunities in rare diseases. Astra bought Alexion, a Boston, Massachusetts-based biotech firm, in July for USD13.3 billion in cash and 236.3 million new AstraZeneca shares. Revenue includes Alexion from July 21 onward.

"The acquisition of Alexion means Astra's sales numbers have soared. But impairments, additional operating costs post acquisition, new drug launches and the fact the groups still makes no profit on vaccine sales all mean profit margins are down substantially," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"It's far too early to make judgements about the Alexion deal, but it does mean AstraZeneca has its work cut out for the next couple of years. Major integrations are never easy and net debt has doubled year-on-year. Free cash flow is still running some way behind the dividend, meaning significant increases in sales or cost cutting will be required if debt is to be reduced again without jeopardising shareholder returns."

For all of 2021, Astra said it expects total revenue excluding the Covid-19 vaccine to grow by a low-twenties percentage. Including vaccine revenue in the final quarter of 2021, revenue is expected to grow by a mid-to-high-twenties percentage.

Annual guidance for core earnings per share was kept at USD5.05 to USD5.40. Core EPS was USD1.08 in the third quarter and USD3.59 in the first nine months.

Astra said it now expects to "progressively transition the vaccine to modest profitability as new orders are received". However, it said the profit contribution of this to the final quarter of 2021 will be offset by costs related to antibody combination AZD7442, so it left core earnings guidance unchanged for the full year.

Among the mid-caps, John Wood Group lost 5.2% after initiating a strategic review of the part of its Consulting business facing the built-environment end-market. The scope of the review will consider a range of options to unlock value from this part of the business for shareholders, the company said.

Turning to trading, John Wood said it expects to deliver improved revenue and earnings in the second half of 2021 relative to the first half.

The engineering and consulting company said it is seeing robust activity in Consulting and Operations, but the rate of recovery in Projects has been slower than anticipated, largely due to the deferral of activity and awards into 2022.

More positively, the Aberdeen, Scotland-based firm said it has maintained strength in the order book which was up 18% at the end of September compared to December 2020.

As a result, John Wood said it expects 2021 revenue to be USD6.4 billion. In 2020, the company recorded revenue of USD7.56 billion.

Redrow gained 2.1% as the housebuilder's trading has remained strong since its financial year end on June 27. The value of net private reservations in the 19 weeks to November 5 was 2.1% above the prior year at GBP672 million versus GBP658 million. The private revenue per outlet per week was GBP309,000 compared to GBP298,000 last year.

Average selling price of private reservations rose 14% on the equivalent period last year to GBP453,000 from GBP398,000.

During the period Redrow said it has added 1,400 plots to its current land holdings and 95 plots to its forward land holdings compared to 457 plots and 119 plots, respectively, last year.

Homes turnover for the 19 weeks to November 5 was 3.5% below the prior year's GBP690 million, at GBP666 million, but the total forward order book is a record GBP1.51 billion, up 2.0% from GBP1.48 billion a year ago.

The company warned on material shortages and supply interruptions facing the industry, but said it is working with long-term supply partners to ensure build output remains at normal levels. Redrow said it estimates that overall build cost inflation will be 5% for the current financial year.

Looking ahead, Redrow said it now expects its revenue for 2022 to be GBP2.1 billion, and its operating margin to be 19%. A year ago, it posted revenue of GBP1.94 billion.

"The recovery in margins appears to have happened faster than the company previously flagged," noted Davy Chief Financial Analyst Colin Sheridan.

Among the small-caps, Avon Protection lost 43% as it reported that its Vital Torso Protection Enhanced Small Arms Protective Inserts plates have encountered a failure in first article testing which will significantly delay the likely approval timetable for this product.

The protection equipment company said it also has suffered further delays in obtaining final product approvals for the US Defense Logistics Agency Enhanced Small Arms Protective Inserts body armour plates, with approvals for this product now expected in the second quarter of its current financial year ending September 2022.

In light of these issues, Avon Protection said it has initiated a strategic review of its body armour business.

Finally, the company said it will delay an announcement of its full-year results, planned for November 23, to allow for a review of the carrying value of the assets related to the body armour business.

In New York on Friday, the Dow Jones Industrial Average was called up 0.3%, while the S&P 500 and Nasdaq Composite were both seen opening 0.2% higher.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

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