LONDON MARKET MIDDAY: Stocks rise as Omicron virus fears recede

(Alliance News) - Stock prices in London were sharply higher at midday on Tuesday amid easing fears over the Omicron variant of Covid-19.

Sentiment was buoyed as China's central bank set out to limit the economic fallout from debt crises in the country's property sector.

Chinese property developer Evergrande has for the first time missed a deadline to repay some of its overseas creditors, raising the prospect of it defaulting as it prepares for a government-backed mega-restructure.

As a 30-day grace period on USD82.5 million in overdue coupon payments ended Tuesday, Bloomberg News reported some bondholders had yet to receive payment, citing sources.

The coupons were initially due on November 6 with a one-month grace period with Evergrande's initial default exacerbating already swirling concerns over its future and the wider Chinese property market.

In response to the crisis, China's central bank said Monday it would cut the reserve requirement ratio by 0.5 percentage point for most banks, effective December 15.

The FTSE 100 was up 87.54 points, or 1.2%, at 7,319.82 at midday in London on Tuesday. The mid-cap FTSE 250 index was up 292.66 points, or 1.3%, at 23,173.66. The AIM All-Share index was up 12.24 points, or 1.0%, at 1,192.27.

The Cboe UK 100 index was up 1.0% at 725.16. The Cboe 250 was up 1.2% at 20,622.84 and the Cboe Small Companies was up 0.5% at 14,983.77.

In mainland Europe, the CAC 40 stock index in Paris was up 2.3%, while the DAX 40 in Frankfurt was up 2.2%.

"European shares continue to trade higher on Tuesday, alongside US futures, following on from gains registered in Asia overnight. Benchmarks of the Old Continent have now erased almost half of the losses from the end of November as Omicron concerns have eased. In addition, even if a lot of uncertainty remains around the next policy move from the Federal Reserve, doveish monetary measures taken by China overnight have helped to sustain today's market sentiment," said ActivTrades analyst Pierre Veyret.

In the FTSE 100, Ferguson was up 4.2%. The plumbing and heating products supplier said supportive end-markets and continued market share gains drove substantial sales growth during the first quarter of its financial year.

For the three months to October 31, net sales were USD6.80 billion, up from USD5.37 billion in the first quarter last year, and pretax profit rose to USD711 million from USD422 million. Ferguson's US business grew net sales by 27%, which comprised 25% organic growth and a further 1.9% from acquisitions. Price inflation was in the low teens during the quarter, it noted.

"We continue to expect a tapering of growth in the second half on tougher prior-year comparatives, and we remain mindful that the recent tailwinds from inflation on gross margins will likely moderate, although the timing and extent remain uncertain. Given the strong momentum in the business and the agility of our business model, our full-year expectations have increased," the company said, without providing details.

Aveva Group was up 3.8% after Bernstein started coverage on the industrial software provider at Outperform.

Ashtead Group was up 3.0%. The equipment rental firm raised its dividend following robust interim results.

For the six months to October 31, revenue increased by 19% to USD3.88 billion from USD3.26 billion last year, and pretax profit jumped by 38% to USD889.8 million from USD645.8 million. In the US alone, revenue rose by 13% to USD3.12 billion from USD2.75 billion a year ago.

Ashtead declared an interim dividend of 12.5 US cents, up 28% from 9.76 cents paid last year.

Following its robust interim performance, Ashtead said it now expects full-year group rental revenue to grow by between 17% and 20%. Previous guidance was for growth of between 13% and 16%.

British American Tobacco was up 2.3%. The Dunhill and Lucky Strike cigarette maker said its performance was benefiting from strong momentum in New Categories which is now a "sizeable" contributor to revenue growth.

BAT highlighted it was making "excellent progress" towards its GBP5 billion revenue target for New Categories by 2025, supported by a clear focus on tobacco heating products.

Further, BAT maintained its 2021 guidance at mid-single-figure constant currency adjusted diluted earnings per share growth. BAT said this will allow it to absorb a GBP260 million profit hit from excise changes and competitive pricing in Australia and New Zealand, an increase from the GBP170 million profit hit guided at the interim results.

BAT said it expects annual revenue growth at constant currency to be above 5% and is confident in delivering on 2021 financial guidance.

NatWest was up 1.5% after Deutsche Bank upgraded the state-backed lender to Buy from Hold.

At the other end of the large-caps, AstraZeneca was the worst performer, down 1.5%, after Jefferies downgraded the Anglo-Swedish drugmaker to Hold from Buy.

In the FTSE 250, PageGroup was up 4.1%. The recruiter raised its full-year operating profit expectations after experiencing "positive momentum and trends" at both a regional and global level throughout 2021.

PageGroup said it saw particular momentum in October and November and now expects 2021 operating profit to be in the region of GBP165 million. Back in October, PageGroup had said it expected full-year operating profit in the region of GBP155 million. Operating profit had plunged to GBP17.0 million in 2020 from 146.7 million 2019.

Conversely, Liontrust Asset Management was down 0.3%, surrendering earlier gains after the fund manager said it has agreed to buy peer Majedie Asset Management for up to GBP120 million in cash and shares.

Liontrust said the acquisition of Majedie will add GBP5.8 billion in assets under management and advice, raising its total to more than GBP42.3 billion. It said the purchase will be earnings enhancing for adjusted diluted earnings per share, starting from the financial year ending March 2023.

Majedie Chief Executive Officer Rob Harris will join Liontrust as head of Global Institutional Business.

Liontrust will issue up to GBP97.0 million in new shares, plus pay up to GBP23.0 million in cash, to buy Majedie.

Majedie Investments, which was up 4.9%, noted the acquisition of its investment manager, in which it holds a big stake. Majedie Investments said the deal values its 17.6% stake in Majedie AM at GBP22.4 million, plus up to GBP5.7 million in deferred consideration in 2025. It will reflect this in an update to its net asset value.

The pound was quoted at USD1.3255 at midday Tuesday, flat from USD1.3253 at the London equities close Monday.

The euro was priced at USD1.1262, lower against USD1.1278. Against the Japanese yen, the dollar was trading at JPY113.50, marginally higher from JPY113.46.

Brent oil was quoted at USD74.25 a barrel Tuesday at midday, up sharply from USD71.92 late Monday. Gold stood at USD1,782.75 an ounce, up from USD1,780.00.

US stock market futures were pointed mostly higher on hopes that Omicron variant of Covid-19 will prove less damaging to the economy than feared.

The Dow Jones Industrial Average was called up 1.0%, the S&P 500 up 1.3% and the Nasdaq Composite up 1.8%.

On the corporate front, Intel was up 8.8% in pre-market trade in New York after the chipmaker unveiled plans to take Mobileye, its driver-assistance and autonomous driving business, public in the US next year.

Mobileye went public in 2014 before being bought by Intel in 2017. Intel will remain the majority owner of Mobileye after the IPO, and the two will continue to co-develop technologies.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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