LONDON MARKET MIDDAY: Taylor Wimpey, L&G lift FTSE 100; ADP jobs ahead

(Alliance News) - Equities in London continued the week's steady climb higher on Wednesday, supported by some well-received corporate updates.

With the morning's European PMIs out the way, and the pound rising even as figures pointed to a slowdown in the UK service sector's rebound, focus now switches to jobs data out the US shortly.

The FTSE 100 index was up 29.02 points, or 0.4%, at 7,134.74 midday Wednesday. The mid-cap FTSE 250 index was up 54.82 points, or 0.2%, at 23,344.47, and the AIM All-Share index was up just 0.60 of a point at 1,259.29.

The Cboe UK 100 index was up 0.4% at 710.69. The Cboe 250 was up 0.1% at 21,086.28, and the Cboe Small Companies up 0.1% at 15,251.87.

In mainland Europe, the CAC 40 in Paris was up 0.5% while the DAX 30 in Frankfurt was 0.8% higher.

"Investors' risk appetite is on the rise as many welcomed the tempered tone from Beijing towards tech shares...Meanwhile, most companies continue to publish earning reports topping estimates which is also seen as a good sign of a robust recovery by investors around the world," said Pierre Veyret, technical analyst at ActivTrades.

While corporate results coming in strong, the market stance remains bullish, Veyret added. However, traders will "cautiously assess" US ADP jobs figures due later on Wednesday.

The ADP employment figures are due at 1315 BST, a precursor to the key US non-farm payrolls report on Friday. ADP is expected to report an increase of 695,000 jobs in July, according to FXStreet, level with the 692,000 added in June.

Ahead of the data, Wall Street is set for a cautious start. The Dow Jones is called down 0.1% and the S&P 500 down 0.1%, but the Nasdaq Composite is pointed 0.1% higher.

The dollar, meanwhile, was mixed.

Sterling was quoted at USD1.3925 midday Wednesday, higher than USD1.3895 at the London equities close on Tuesday. The euro traded at USD1.1859, flat on USD1.1860 late Tuesday. Against the yen, the dollar improved to JPY109.17 versus JPY109.02.

The pound was making headway after a report showed the UK's services sector held up better than expected in July, even if momentum did slow from June due to staffing shortages and Covid-19 isolation rules.

The IHS Markit/CIPS UK services purchasing managers' index registered 59.6 points in July, down from 62.4 in June. However, the score remained above the no-change mark of 50.0 and also came in ahead of the flash reading of 57.8.

Still, July's reading was the lowest since March's 56.8, as staff shortages and supply issues served as a "severe" constraint on business capacity.

Faring even better, the eurozone's service sector saw growth tick up, with a PMI of 59.8 points in July from 58.3 in June - marking the highest since June 2006. However, the euro was treading water as data also showed the pace of retail sales growth in the eurozone moderated in June, rising 1.5% on a monthly basis after a 4.1% gain in May.

Gold was quoted at USD1,813.83 an ounce on Wednesday, higher than USD1,809.00 on Tuesday. Brent oil was trading at USD72.17 a barrel, up from USD71.83 late Tuesday.

With strong corporate earnings helping to push markets higher on Wednesday, Taylor Wimpey was leading the way in the FTSE 100, shares advancing 3.7% as it lifted its outlook.

Revenue for the first half of 2021 surged to GBP2.20 billion from GBP754.6 million a year ago, while the construction company swung to a pretax profit of GBP287.5 million from a loss of GBP39.8 million. Forward indicators remain robust, it added, and build cost and supply chain pressure is being fully offset by "healthy" house price growth.

Taylor Wimpey now expects full-year operating profit to be GBP820 million, above the top end of consensus. This compares with just GBP300.3 million in 2020, and approaches the pre-pandemic level of GBP850.5 million in 2019.

Also higher on the back of strong earnings was insurer and asset manager Legal & General, up 2.3% as it posted interim earnings per share of 17.78 pence, up sharply on the 4.89p achieved a year ago and 21% higher than the 2019 level of 14.74p.

"We remain confident in achieving our five-year cumulative financial ambitions. In the first half of 2021, we continued to build on the good start we made in 2020. We expect to deliver double-digit growth in operating profit at the full year," the company said.

The FTSE 250 was trading around record levels even as Ferrexpo, sinking 4.9% in midday trade, weighed on the mid-cap index.

The London-based iron ore miner's revenue for the six months that ended June 30 nearly doubled to USD1.35 billion from USD775.8 million in the same period last year. Revenue for all of 2020 was USD1.70 billion.

However, looking ahead, it noted that the consensus forecast for iron ore prices in 2021 is USD170 per tonne for the full year, implying a decrease in the average iron ore price by around USD15 per tonne in second half from the level seen in the first. It expects demand for iron ore in the second half to decline from the record levels seen currently.

On AIM, shares in Keywords Studios fell 4.9% even as interim profit nearly doubled due to high customer demand in a buoyant video games market.

Pretax profit for the six months that ended June 30 is expected to be around EUR40 million, up 80% from EUR21.7 million a year previously. Expected revenue is EUR238 million, 37% higher than EUR173.5 million a year before.

Looking forward, the video game developer and services provider noted that it expected strong demand to continue across most service lines. The momentum underpinned its confidence in delivering an annual performance at least in line with market expectations, it added, albeit with growth rates and margins expected to moderate against stronger second half 2020 comparatives, and as some costs return with the easing of restrictions.

By Lucy Heming; lucyheming@alliancenews.com

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