LONDON MARKET MIDDAY: Stocks "Monday motivation" amid macro fears

(Alliance News) - Stock prices in Europe made a healthy start to the week, with equities clawing back some of their losses from last week, despite worries about rising inflation and slowing economic growth hurting market sentiment.

In London, a mixed day for travel stocks prevented chunkier gains, as did a general lack of investor confidence, according to Hargreaves Lansdown.

"There was a dose of Monday motivation for the FTSE 100," HL analyst Susannah Streeter commented. "But overall worries about inflation persist, and are holding back more dramatic gains."

The FTSE 100 index was up 54.39 points, 0.8%, at 7,083.59 at midday on Monday. The blue-chip index lost 1.6% last week.

The mid-cap FTSE 250 index was up 86.34 points, 0.4%, at 23,819.90. The AIM All-Share index was down 7.72 points, 0.6%, at 1,287.42.

The Cboe UK 100 index was up 0.8% at 704.66. The Cboe 250 was up 0.2% at 21,571.23, and the Cboe Small Companies was up 0.2% at 15,496.50.

In mainland Europe, the CAC 40 stock index in Paris was up 0.8% and the DAX 30 in Frankfurt was 1.1% higher.

ActivTrades analyst Pierre Veyret commented: "More generally, the trading mood isn't really 'risk-on' as investors are cautiously monitoring the reopening of economies as the Delta variant continues to spread, while awaiting key macro data this week."

"The prospect of poor macro data this week as well as expectations of reduced monetary support from central banks is increasing the risk of a near-term correction on stock markets, particularly with most indices near record levels. Most market operators will have their eyes on a batch of CPI releases from the US, UK, Canada and the eurozone in an effort to assess the 'transitory' effect of inflation as well as a possible timeline for reduced stimulus."

The US consumer price index reading for August is on Tuesday, while the UK, France and Canada report CPI data on Wednesday.

The dollar was stronger across the board midday Monday in London. The pound was quoted at USD1.3826, down from USD1.3845 at the London equities close on Friday. The euro stood at USD1.1779, down from USD1.1828. Against the yen, the dollar was trading at JPY110.12, up from JPY109.85.

ActivTrades analyst Ricardo Evangelista explained: "The greenback's gains against the other major currencies occur in the run-up to the release of a batch of important American economic data later in the week, including inflation and retail sales. Positive readings would once again highlight the risk of inflation and be likely to strengthen the case for the Fed to bring forward the tightening of policies. This morning's dollar gains show that investors are on the whole expecting such an outcome."

Housebuilders, banks and oil majors were among the equities leading the way in London on Monday. Persimmon added 1.9%, Lloyds Banking rose 2.0% and BP was up 1.3%. BP peer TotalEnergies climbed 2.5% in Paris, one of the best blue-chip performers there.

Brent oil was quoted at USD73.81 a barrel midday Monday in London, up from USD72.67 late Friday.

"Oil prices have been on the rise because of supply-side constraints. Companies have still not been able to resume output which was paused as a result of Hurricane Ida. Nearly 1.4 million barrels of crude oil production have remained halted since the end of August," AvaTrade analyst Naeem Aslam commented.

Gold, meanwhile, fetched USD1,787.87 an ounce midday Monday, down slightly from USD1,795.25 late Friday.

Back among London-listed blue chips, Scottish Mortgage Investment Trust slipped 0.1%. The investment firm's shares suffered as investee Tencent declined 2.5% in Hong Kong amid regulatory worries in China.

"News that Beijing is looking to break up Ant Group's Alipay hit the wider Hang Seng index," AJ Bell analyst Russ Mould commented.

"It's hard to read the end-game as the regulatory pressure on Chinese firms continues to mount, and this uncertainty is proving extremely damaging to the valuation of the likes of Alibaba and Tencent. Further setbacks could see sentiment towards this part of the market turn decidedly toxic."

Scottish Mortgage was spared a bigger decline as US stock market futures, the tech-heavy Nasdaq Composite included, all were positive ahead of the New York open. Scottish Mortgage invests in US listings such as electric car maker Tesla, biotechnology firm Moderna and e-commerce platform Amazon.

The Dow Jones Industrial Average was called up 0.7%, the S&P 500 up 0.6% and the Nasdaq up 0.5%.

Back in London, AB Foods was down 2.3%, despite lifting profit guidance, as investors fretted over a sales decline and 'pingdemic' hit to its Primark fast fashion retail chain.

Sales at Primark in the second half of the financial year ending September 18 are expected to come in at GBP3.4 billion, bringing the full-year total to around GBP5.6 billion. That's down 5.1% from the GBP5.90 billion revenue Primark made in financial 2020, and down 28% from the GBP7.80 billion in financial 2019.

AB Foods said its profit outlook is brighter. Adjusted operating profit is expected to top last year's level of GBP1.02 billion, benefiting from an extra trading week.

Airline stocks had a mixed day on Monday, with UK Health Secretary Sajid Javid's aim to get rid of PCR tests for travel providing only limited support.

British Airways parent International Consolidated Airlines Group rose 0.6%, Ryanair climbed 2.6% and Wizz Air was up 1.0%. However, easyJet tumbled 14%.

Ryanair Chief Executive Michael O'Leary said Wizz and easyJet will need to merge or be "taken out", the Financial Times reported over the weekend. easyJet last week Thursday said it had rejected an unsolicited preliminary takeover approach. The FT had reported the identity of the bidder as Wizz.

"Both easyJet and Wizz will either need to be taken out or...coalesce together," O'Leary told the FT, adding that an industry consolidation is an "inevitability".

Monday's economic calendar is a light, though the pace picks up later this week with the series of inflation readings. In addition, China and US retail sales are on Wednesday and Thursday, respectively, after UK unemployment data on Tuesday.

By Eric Cunha; ericcunha@alliancenews.com

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