LONDON MARKET MIDDAY: Virus fears hit miners as investors await US CPI

Tue, 14th Sep 2021 12:18

(Alliance News) - European equities largely drifted lower by midday Tuesday, as trepidation set in ahead of a US inflation report, while London's blue-chip index was dragged down by miners amid Covid-19 induced concerns about economic growth in Asia.

IG Markets analyst Chris Beauchamp commented: "2021 has been consistent in its trends, and mid-month weakness is an established fact, so in one sense we should not be surprised to see stocks make heavy going of it. Of course, with US CPI on the calendar today, some hesitation is not very surprising either."

The latest US consumer price index reading is released at 1330 BST. According to consensus cited by FXStreet, figures are expected to show inflation accelerate to 5.3% in August from a year before, slowing from a 5.4% annual rate in July.

The FTSE 100 index was down 16.98 points, or 0.2%, at 7,051.45 at midday on Tuesday. The mid-cap FTSE 250 index was down just 10.54 points at 23,765.19. The AIM All-Share index was down 5.16 points, 0.4%, at 1,280.57.

The Cboe UK 100 index was down 0.3% at 701.61. The Cboe 250 was up marginally at 21,543.40, and the Cboe Small Companies was down 0.2% at 15,501.30.

In mainland Europe, the CAC 40 stock index in Paris was down 0.4%, though the DAX 30 in Frankfurt was 0.1% higher.

Among the worst performers in London on Tuesday were miners, with Rio Tinto down 1.3%, BHP down 1.2% and Anglo American down 1.7%.

"If mining stocks are a bellwether for the global economy, then investors need to sit up and take notice that the sector has been one of the worst performers in the past month," AJ Bell analyst Russ Mould commented.

Mould noted worries about the spread of Covid-19 in Asia hurt the mining sector.

Southern Chinese cities closed schools and ordered testing for millions on Tuesday in a race to curb a new Covid-19 outbreak which has sparked concerns over infections among unvaccinated schoolchildren.

China has now been hit by multiple outbreaks of the highly contagious Delta variant after initially vanquishing the first wave of the coronavirus last year.

The Fujian cluster is the biggest rebound in weeks and comes after the country declared the Covid outbreak spurred by the Delta variant under control, in a test of China's "zero case" approach to the pandemic.

"That worry was also behind share price weakness in luxury goods companies including Kering and LVMH," Mould noted.

China is a key market for the luxury goods sector and mobility curbs also close off travel retail, another crucial revenue generator. Kering and LVMH were down 3.6% and 2.1% in Paris, while London-listed peer Burberry dropped 2.4%, the worst large-cap performer.

Ocado was down 2.1%. The online grocer said revenue in its retail joint venture with Marks & Spencer fell in the third quarter after the fire at one of its distribution centres. It also warned of rising labour costs.

Revenue at Ocado Retail dropped 11% year-on-year to GBP517.5 million from GBP578.8 million in the 12 weeks to August 29.

"Over the first 6 weeks of the quarter, the business was performing in line with expectations, with revenue marginally down 1.8%," Ocado said.

The firm was up against strong comparatives from a year earlier, when more virus restrictions were in force, benefiting the online-only grocer. But revenue was then hit by a fire at a customer fulfilment centre in London on July 16, which disrupted orders.

CMC Markets analyst Michael Hewson commented: "At the start of this year Ocado's share price almost put it within touching distance of Tesco, the UK's number one food retailer, despite full-year revenues that were a mere fraction of Tesco's GBP58 billion, at GBP2.3 billion.

"Whether this comparison prompted a reassessment is a moot point; however like most companies that have done well from the pandemic, the declines are probably down on expectation that an easing of restrictions and reopening of the UK economy would prompt a slowdown in revenues, and that certainly appears to be the case as far as this morning's Q3 numbers are concerned."

At the other end of the large-caps was fellow retailer JD Sports, its stock jumping 8.2%.

Revenue in its first half to July 31 jumped 53% to GBP3.89 billion from GBP2.54 billion a year earlier, as bumper demand for sports apparel continued. Pretax profit surged to GBP364.6 million from GBP41.5 million.

Pretax profit before exceptional items multiplied to a record GBP439.5 million from GBP61.9 million a year earlier and GBP158.6 million two years prior.

Executive Chair Peter Cowgill said: "Assuming a prudent but realistic set of assumptions for the peak trading period ahead which take into account the absence of stimulus in the United States for the second half of the year, in addition to current industry-wide supply chain challenges, we presently anticipate delivering a headline profit before tax for the full year of at least GBP750 million."

Back in April, JD Sports had predicted headline pretax profit, meaning before exceptional items, to be GBP475 million to GBP500 million in the year to January 2022. Pretax profit by the same measure was GBP421.3 million in the year that ended this past January 30. This was down 4.0% from GBP438.8 million the year before.

There was no interim payout declared on Tuesday, but a "larger final dividend" could come, depending on JD's fortunes in the remainder of its financial year.

Recently listed Made.com, a stay-at-home winner, posted record interim results, but shares still fell further below their float price. Made shares were down 0.8% at 153.80 pence on Tuesday.

Made priced its initial public offering at 200p per share, so shares are down 23% since its June listing.

Made posted a 61% revenue hike in the six months to June 2021, a record half for the online furniture retailer. Revenue rose to GBP171.0 million from GBP106.3 million. Its pretax loss slimmed to GBP10.1 million from GBP15.2 million a year earlier.

The pound rose to USD1.3871 midday Tuesday, from USD1.3840 at the London equities close on Monday, supported by a reduction in unemployment in the UK. The jobless rate was reduced to 4.6% in the three months to July from 4.9% in the previous three-month period, according to the Office for National Statistics.

On the political front, UK Prime Minister Boris Johnson will put his trust in a "massive" booster vaccination campaign as he seeks to avoid further lockdowns amid fears of a tough winter for the NHS.

The government will set out its blueprint for "living with the virus" through the winter, with a third jab on offer for all over-50s as part of the package.

But there are concerns in Whitehall about an increase in coronavirus cases hitting at the same time as a flu outbreak, with experts cautioning the UK is not yet out of the woods.

The euro stood at USD1.1807 on Tuesday afternoon, unchanged from the European equities close on Monday. Against the yen, the dollar was trading at JPY110.10, up from JPY109.95.

Brent oil was quoted at USD74.07 a barrel midday Tuesday, up from USD73.57 late Monday. Gold was priced at USD1,786.63 an ounce, down slightly from USD1,795.77.

By Eric Cunha; ericcunha@alliancenews.com