LONDON MARKET MIDDAY: Stocks slip as inflation worries creep in again

(Alliance News) - Equities in London were on course to end a broadly positive week on a softer note, with inflation fears resurfacing again after US President Joe Biden signed off on his bumper USD1.9 trillion stimulus plan.

The FTSE 100 index was down 15.02 points, or 0.2%, at 6,721.94 on Friday at midday - at this level up 1.4% since the start of the week.

The mid-cap FTSE 250 index was down 124.86 points, or 0.6%, at 21,408.24. The AIM All-Share index was down 0.6% at 1,191.07.

The Cboe UK 100 index was down 0.2% at 669.55. The Cboe 250 was down 0.5% at 19,044.20, and the Cboe Small Companies up 0.1% at 13,808.63.

In mainland Europe, the CAC 40 in Paris was down 0.2% while the DAX 30 in Frankfurt was down 0.8% early Friday afternoon.

While Wall Street rallied on Thursday and the Asian session was broadly positive on Friday, Europe has struggled.

"The ink has barely dried on Joe Biden's signing of the USD1.9 trillion stimulus package and inflation expectations are ripping higher. Treasury yields are once again heading northwards with the 10 year yield returning above 1.60% boosting the US dollar and pulling stocks lower across the board," said Sophie Griffiths, market analyst at Oanda.

Biden called the American Rescue Plan "historic" as he signed the package into law in the Oval Office on Thursday. The bill, passed by Congress earlier this week, dishes out USD1,400 payments to most Americans, helps the unemployed, expands public health care and ramps up funds for vaccinations.

Oanda's Griffiths added: "Covid concerns in Europe are adding to the downbeat mood. Whilst in the US President Biden has now promised every American a Covid jab before 1st May, in Europe the vaccine shambles appears to be growing by the day."

The World Health Organization said Friday there was no reason to stop using AstraZeneca's Covid-19 vaccine after several European countries suspended the roll-out over blood clot fears.

"Yes, we should continue using the AstraZeneca vaccine," WHO spokeswoman Margaret Harris told reporters, adding: "There is no indication to not use it".

Bulgaria became the latest European country to suspend the use of AstraZeneca's Covid-19 vaccine, following similar steps in Denmark, Iceland and Norway over safety concerns.

The EMA announced on Thursday that countries can keep using AstraZeneca's vaccine while it probes cases of blood clots that prompted suspension of particular batches of the vaccine or all jabs with it in several countries.

"The information available so far indicates that the number of thromboembolic events in vaccinated people is no higher than that seen in the general population," the EMA told AFP by email.

AstraZeneca shares were down 0.7% at midday after falling 2.5% on Thursday.

Stocks in New York, in step with Europe, are on course for a downbeat end to the week. The Dow Jones is set for a slightly lower open, with the S&P 500 called down 0.5% and the Nasdaq seen 1.6% lower.

The dollar was higher ahead of US producer price data at 1330 GMT.

The pound fell to USD1.3916 from USD1.3970 at the London equities close on Thursday after figures showed the UK economy contracted 2.9% month-on-month in January.

However, this was a far better performance than market consensus, according to FXStreet, of a 4.9% decline. This followed 1.2% monthly growth in December.

UK Prime Minister Boris Johnson at the start of 2021 imposed the toughest national lockdown in England since March of last year, shutting schools, non-essential shops and restaurants.

Meanwhile, the euro traded at USD1.1910 on Friday, lower than USD1.1960 late Thursday, after German annual inflation for February was confirmed at 1.3%. The pace of inflation quickened from 1.0% in January.

Further, eurozone industrial production surprised with a 0.1% rise in January, beating forecasts of a more than 2% fall.

Against the yen, the dollar rose to JPY109.01 versus JPY108.51.

Gold was quoted at USD1,703.15 an ounce on Friday, lower than USD1,722.35 on Thursday. Brent oil firmed to USD69.42 versus USD69.32 late Thursday.

In London, Burberry and Berkeley continued to bookend the FTSE 100.

Burberry shares rallied 5.5% as it tipped full-year revenue and profit to beat market forecasts.

Burberry expects comparable store retail sales in the quarter ended March 27 to be between 28% and 32% higher annually. For the full-year, revenue is to decline between 10% and 11% from GBP2.63 billion.

"Since December, we have continued to see a strong rebound and now expect revenue and adjusted operating profit to be ahead of consensus expectations," Burberry said.

According to company-compiled consensus, Burberry is to post adjusted operating profit between GBP218 million and GBP352 million. The consensus average is GBP301 million, which is a quarter lower than the GBP404 million Burberry achieved last year.

Barclays shares rose 3.1% after Goldman Sachs upgraded the lender to Buy from Neutral.

At the bottom of the blue-chips was housebuilder Berkeley, slumping 6.7% as it cautioned that the value of reservations for the current financial year will be around 20% lower than last year.

The FTSE 100-listed property developer said it expects profit for the year to the end of April to be around GBP504 million, broadly flat year-on-year, and forward sales are anticipated to be above GBP1.7 billion at the year-end.

Berkeley noted that the market fundamentals remain strong, with low interest rates. Sales reservations have been "robust" where the company has had availability of stock.

The Cobham, England-based company, however, noted that it has decided to postpone the launch of new developments and phases into the market until the economy opens up post-lockdown, despite enquiry levels remaining "consistently strong". Berkeley said it anticipates the value of reservations for the current financial year to be around 20% lower than last year.

AJ Bell investment director Russ Mould commented: "While Berkeley still has strong levels of enquiry it is phasing developments to coincide with a reopening of the economy. This may look very clever in time if it sees Berkeley deliver a smoother flow of profit and cash flow than its peers, many of which seem to be operating at 100 miles an hour."

"On the flipside Berkeley could miss out on some of the demand created by the current stamp duty holiday which is due to end in September – even if the elevated average selling price on its high-end homes makes this a less relevant consideration than for some other housebuilders," he added.

Topping the FTSE 250 was Hammerson, up 4.1% even as the shopping centre owner said it saw its largest-ever fall in net rental income and UK asset values in 2020.

Hammerson posted EPRA net tangible assets per share of GBP0.82 at December 31, down 29% from GBP1.16 a year before. Net rental income halved to GBP157.6 million from GBP308.5 million.

Even with Friday's share price rise, the stock remains 57% lower compared to this time a year ago - though has had a strong 2021 thus far, rising 37%.

British Gas-parent Centrica rose 3.2% after Societe Generale raised the FTSE 250 stock to Buy from Hold.

By Lucy Heming; lucyheming@alliancenews.com

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