LONDON MARKET MIDDAY: Stocks rise buoyed by robust PMI readings

(Alliance News) - Stock prices in London were easing from morning highs at midday on Thursday, though still supported by a string of positive PMI readings, as investors await the outcome of an OPEC meeting and the US jobs report on Friday.

The FTSE 100 index was up 35.02 points, or 0.5%, at 7,071.91. The mid-cap FTSE 250 index was up 111.20 points, or 0.5%, at 22,487.22. The AIM All-Share index was up 4.69 points, or 0.4%, at 1,253.00.

The Cboe UK 100 index was up 0.4% at 704.50. The Cboe 250 was up 0.4% at 20,215.73, and the Cboe Small Companies was up 0.4% at 15,418.10.

In Paris, the CAC 40 was up 0.7%, while Frankfurt's DAX 30 was up 0.6%.

"European stocks are charging higher, boosted by optimism surrounding the economic recovery in the region," said Oanda Market analyst Sophie Griffiths.

"Data revealed that Eurozone manufacturing activity expanded at its fastest pace on record in June as the economy continued to recover from the third wave of Covid. The region's recovery has clearly ramped up a gear, despite price pressure also increasing."

In the FTSE 100, Mexican previous metals miner Fresnillo was the best performer, up 4.9%, tracking spot gold prices higher, quoted at USD1,777.40 an ounce, up from USD1,764.86 late Wednesday in London.

Associated British Foods was up 3.5% after the company reported a rise in third-quarter revenue, driven by growth from its Primark clothing chain.

For the three months that ended June 19, total revenue at constant currency was up 47% to GBP3.65 billion from the same time last year. Third-quarter revenue in the Grocery division was up 2% to GBP2.71 billion, up 10% in the Agriculture arm to GBP391 million, and up 21% in the Sugar unit to GBP406 million.

AB Foods said like-for-like sales for the quarter at Primark were 3% ahead of the comparable period two years ago when sales were at pre-Covid levels.

The Ingredients unit saw revenue edge up 3% from a year ago in the third quarter to GBP376 million, while revenue in the Retail arm, which houses Primark, tripled from a year ago to GBP1.6 billion in with the reopening of all stores and the opening of seven new stores.

AB Foods said its forecast for full year sales at Primark has "increased accordingly" and adjusted operating profit is now expected to be broadly in line with last year.

"Primark is back with a bang after restrictions were eased and has taken over the heavy lifting which other parts of the group had assumed during the various lockdowns," said interactive investor's Richard Hunter. "Optimism surrounding the stock continues unabated, driven by recovery and growth prospects in both the UK and overseas retail businesses and with the insurance of a diverse overall offering. As such, the market consensus still points to a strong buy."

Aveva was up 2.9%, after the industrial software provider, which is holding its capital markets day event Thursday, outlined new financial targets.

Aveva said it has had a good start to financial 2022, achieving 10% revenue growth in the first two months of the financial year on an organic constant currency basis.

In addition, Aveva set new five-year financial targets to the year ending March 31, 2026. Aveva is targeting a revenue compound annual growth rate of around 10% over the period.

The company said its revenue growth will be supported by revenue synergies relating to its OSIsoft acquisition, which are expected to be at least USD100 million in 2026. Aveva also targets an adjusted operating profit margin of at least 35% in 2026.

JD Sports Fashion was up 2.7% after the athletic apparel retailer bowed to shareholder pressure over its corporate governance, splitting its chair and CEO roles.

JD Sports said trading in the immediate period after the reopening of non-essential shops in England was encouraging in the UK as both existing and new consumers to the company's product ranges. Consistent with other retailers, it said, store footfall remains fragile with online traffic at elevated levels.

Looking ahead, JD said it is on track to deliver pretax profit before exceptional items for the financial year ending in January 2022 at an increased level of "no less than" GBP550 million. It posted pretax profit before exceptional items of GBP421.3 million in financial 2021.

JD Sports, which has been under fire over its corporate governance practices, said it will divide the current roles of executive chair and CEO before its next annual general meeting and a comprehensive process will commence shortly.

Standard Chartered was up 2.3% after Credit Suisse raised the emerging markets-focused bank to Neutral from Underperform.

Legal & General was up 1.5% after Credit Suisse double upgraded the 185-year old insurer to Outperform from Underperform.

Royal Dutch Shell 'A' and 'B' shares were both up 2.1%. Reuters reported the oil major is planning to leave Aera Energy, its oil and gas-producing joint venture in the US state of California with Exxon Mobil Corp.

Reuters noted Shell has divested numerous carbon-intensive assets this year, as it shifts to renewables. The news agency previously reported that Shell is considering a sale of its assets in the Permian Basin in Texas. Exxon Mobil was up 0.8% in pre-market trade in New York.

At the other end of the large-caps, B&M European Value Retail was the worst performer, down 2.8%, after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.

The pound was quoted at USD1.3780 at midday on Thursday, down from USD1.3812 at the London equities close Wednesday, after comments from Bank of England Governor Andrew Bailey.

Bailey, giving his annual Mansion House speech in the City of London, said he expected the rises in UK inflation to be temporary, but warned that it could be a longer-term problem unless pent-up demand reduces and supply chains can keep up.

"Andrew Bailey has returned to the tune of transitory inflation, warning that policymakers should not be too keen to overreact to higher prices. Such a policy sounds sensible, but of course is much harder to implement in practice, when monthly CPI data keeps erring on the hot side and markets and the media are full of people warning about uncontrolled inflation and the spectre of the 1970s," said IG Group's Chris Beauchamp.

"Unsurprisingly these headlines have not been great for the pound, which is moving below its mid-June low against the dollar as markets bet on a policy divergence between the BoE and the Fed," Beauchamp added.

On the economic front, UK manufacturing sector activity slowed slightly from its record-setting level in June, but the sector remained supported by new order growth.

The IHS Markit-CIPS UK manufacturing purchasing managers' index reading was revised lower to 63.9 points in June from a preliminary estimate of 64.2 and down from May's record level of 65.6.

Markit said UK manufacturing production increased at marked rates across the consumer, intermediate and investment goods industries during June. Growth was supported by strong intakes of new business, which rose at a rate close to May's record high.

The euro was priced at USD1.1850, lower from USD1.1856. Against the yen, the dollar was trading at JPY111.60, up sharply from JPY110.94 - its highest level in 15 months.

The manufacturing sector in the eurozone set a fresh record high in June, survey data from Markit showed, with particularly strong output from Germany and the Netherlands lifting the index to its fourth successive record high.

The final eurozone manufacturing purchasing managers' index improved to 63.4 in June, up from 63.1 in May and higher than the flash reading for June, which also was 63.1.

Brent oil was quoted at USD75.50 a barrel Thursday at midday, up from USD75.02 at the London equities close Wednesday.

The OPEC+ group of oil-producing countries are to meet Thursday via videoconference and are expected to agree to boost output in August to meet demand and limit recent price rises.

The cost of crude oil has surged back to levels last seen in October 2018, which would normally support arguments in favour of boosting production.

India, the world's third-largest consumer of crude, has urged OPEC+ to phase out its current regime of cuts and allow prices to fall as inflation pressure threatens to hobble economic recovery.

US stock market futures were pointed mostly higher ahead of the latest jobless claims numbers at 1330 BST and manufacturing PMI reading at 1445 BST.

The Dow Jones Industrial Average was called up 0.2%, the S&P 500 up 0.1% but the Nasdaq Composite was called down 0.2%.

Micron Technology shares will be in focus after the chipmaker late Wednesday reported a surge in quarterly earnings as it also unveiled the sale of its 300-millimetre semiconductor factory in Utah to Texas Instruments. Micron stock was 2.9% lower in pre-market trade in New York.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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