LONDON MARKET MIDDAY: Stocks make sunny start to June after PMIs

Tue, 01st Jun 2021 12:07

(Alliance News) - Stock prices in London continued to move higher at midday on Tuesday following the long bank holiday weekend, while attention turns to the upcoming FTSE Russell index review changes.

The FTSE 100 index was up 86.50 points, or 1.2%, at 7,108.96. The mid-cap FTSE 250 index was up 217.26 points, or 1.0%, at 22,901.21. The AIM All-Share index was up 6.40 points, or 0.5%, at 1,262.51.

The Cboe UK 100 index was up 1.1% at 708.70. The Cboe 250 was up 0.8% at 20,636.76, and the Cboe Small Companies was up 0.7% at 15,097.25.

In Paris the CAC 40 was up 0.8%, while the DAX 30 in Frankfurt was up 1.4%.

"European markets climbed significantly higher on Tuesday, carrying on the trend from another strong trading session in Asia overnight. Investors seem determined to send stock prices higher on the first day of the month amid a fresh boost to market sentiment provided by solid Chinese macro data as well as optimism about the prospect of restrictions being lifted in Europe this summer," said analysts at ActivTrades.

In the FTSE 100, miners Anglo American, Rio Tinto, BHP, Glencore and Antofagasta were up 4.1%, 4.1%, 3.7%, 3.2% and 2.7% respectively, following positive PMI data from China.

China's manufacturing sector continued to expand in May, with firms reporting the strongest increase in new work for five months, data from Caixin and IHS Markit showed.

China's general manufacturing purchasing managers' index - a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy - inched up to 52.0 in May from 51.9 in April. The figure rose further away from the 50.0 threshold, which separates expansion from contraction.

Postal operator Royal Mail was up 3.4%. The 505-year-old institution re-entered the flagship index with a market value of GBP5.92 billion after a two-year hiatus, following the takeover of RSA Insurance by Canada's Intact and Scandinavian insurer Tryg. RSA shares will be cancelled from trading on Wednesday.

As part of the FTSE Russell index review changes to be announced after the London market close on Wednesday, ITV is likely to be promoted to the FTSE 100 with a market value of GBP5.2 billion. Engineer Renishaw is set to be relegated from the index of large-caps with a market capitalisation of GBP4.1 billion.

In addition, newly-listed Moonpig, Dark Trace and Trustpilot are in contention to enter the FTSE 250, with market capitalisations of GBP1.6 billion, GBP2.4 billion and GBP1.3 billion respectively.

JD Sports Fashion was up 1.1%. The athletic apparel retailer noted a media report about the position of Executive Chair & Chief Executive Peter Cowgill. The Times reported that the blue-chip retailer has stepped up succession planning for Cowgill, after coming under pressure from institutional investors. Cowgill has been executive chair of JD since 2004 and assumed CEO responsibilities in 2014.

However, the Times reported that investors are becoming increasingly concerned about Cowgill's joint roles, which flout usual corporate governance standards.

"JD can confirm to both investors and to its international brand partners that the board is not engaged in a process to recruit a chief executive officer or chairman. JD can also confirm that it is continually reviewing the depth of its management team to ensure that the senior operational leadership team in the business has the necessary skills and experience to exploit the ongoing global development opportunities," the company said.

Meanwhile, Made.com confirmed its intention to proceed with its initial public offering saying it intends to apply for admission of its shares for trading on the London Stock Exchange's main market. The final IPO price will be determined following a book-building process, with admission currently expected to occur later in June.

The pound was quoted at USD1.4172 at midday Tuesday, marginally lower from USD1.4175 at the London equities close Friday, retreating from an intraday high of USD1.4249 in early trade, amid fears the final stage of the UK lockdown easing on June 21 could be delayed.

The continued spread of the Indian coronavirus variant has cast doubt on the ability to scrap restrictions, with ministers considering plans to keep some measures - such as the continued use of face masks and guidance on working from home - in place.

Analysts at OFX commented: "The pound started the week on the back-foot due to the notion that [prime minister] Boris Johnson may delay the next lifting of restrictions across the UK. The decision left traders questioning whether the strong UK economic rebound would continue. Analysts suggest that both consumer and business confidence would drop as a result, having a knock-on effect on the rest of the economy.

"The potential delay comes as the number of Indian variant cases continues to increase across the country, which is expected to climb further after the bank holiday. The decision is expected to be made in the next few weeks, which will likely keep the pound muted until then."

On the economic front, activity in the UK manufacturing sector saw record growth in May as Covid-19 restrictions eased, according to IHS Markit.

The UK manufacturing PMI print was 65.6 points in May, up sharply from 60.9 in April. The latest reading was revised slightly lower from the preliminary reading of 66.1, but easily beat July 1994's previous record high of 61.0.

The euro was still hovering at five-month highs against the greenback, quoted at USD1.2225, up from USD1.2185, after positive PMI data.

The manufacturing sector in the eurozone surged in May, data from IHS Markit showed, despite the bloc's largest economy Germany seeing a pull-back in growth on supply issues.

The eurozone manufacturing purchasing managers' index recorded 63.1 in May, compared to 62.9 in April - its highest reading in survey history, which has been running since June 1997. The headline index has now recorded readings above the 50 no-change mark that separates growth from contraction for 11 months in succession.

Elsewhere, inflation in the euro area is tipped to rise to 2.0% in May, according to flash data from Eurostat.

Annual inflation is expected to be 2.0% in May compared to 1.6% in April, driven by surging energy prices. Eurostat said energy prices are expected to see annual inflation of 13% in May, accelerating from 10% in April, while services inflation is seen at 1.1%, non-energy industrial goods at 0.7% and food, alcohol & tobacco at 0.6%.

Against the yen, the dollar was trading at JPY109.61, down from JPY110.00.

In commodities markets, the OPEC group of oil-producing countries and its allies look set to boost production further when they meet Tuesday, as pandemic-hit demand for crude recovers.

The OPEC+ alliance, consisting of 23 countries, implemented sharp output cuts to support prices after the coronavirus pandemic crushed the global economy last year.

But since early May the cartel has started implementing more generous production increases as oil prices have recovered and the health situation improves in developed economies.

Currently the production roadmap for OPEC+ members consists of a series of increases between May and July adding up to some 1.2 million barrels per day.

Brent oil was trading at USD70.73 a barrel Tuesday at midday, up sharply from USD69.77 late Friday.

On the agenda at Tuesday's meeting, expected to start at 1100 GMT, will be whether this can be extended into August.

Gold was quoted at USD1,905.60 an ounce, higher from USD1,895.00.

US stock market futures were pointed higher on Tuesday after being closed on Monday for Memorial Day.

The Dow Jones Industrial Average was called up 0.5%, the S&P 500 index up 0.6% and the Nasdaq Composite up 0.4%.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com