LONDON MARKET OPEN: Equity Rebound Strengthens Ahead Of PMI Read-Outs

(Alliance News) - London stocks shot up at the open on Wednesday, with blue-chip stocks helped by a weaker pound and with focus on a string of European and UK PMI readings due in the morning.

The FTSE 100 index was up 56.41 points, or 1.0%, at 5,885.87 early Wednesday. The mid-cap FTSE 250 index also was up 1.0%, or 161.69 points, at 16,983.35. The AIM All-Share index was 0.5% higher at 949.05.

The Cboe UK 100 index was 0.7% higher at 585.58. The Cboe 250 was up 0.4% at 14,381.03, and the Cboe Small Companies flat at 8,990.55.

"European markets opened higher as they continue the recovery from Monday's sharp sell off. The risk tone in the market is showing some signs of improving, although pressure remains," said Fiona Cincotta at City Index.

"Attention will now turn to September's preliminary PMI readings for both the service and manufacturing sectors, for further clues over the health of the economic recovery in the UK," she said. "Expectations are for both sectors to show a slight slowing in expansion this month after solid performances in August."

In mainland Europe, the CAC 40 in Paris was up 0.8% while the DAX 30 in Frankfurt was 0.9% higher early Wednesday.

A slew of PMI readings on Wednesday will round out the third quarter, which has seen a recovery in economic activity after the damage caused by the lockdowns of March and April. However, the rate of rebound slowed in August, so Wednesday's flash readings for September will be closely watched.

There are PMIs from the eurozone, UK and the US at 0900 BST, 0930 BST and 1445 BST respectively.

Already out, Germany's composite reading slipped back to 53.7 points for September from 54.4 in August, hurt by a swing back to contraction for services, with a reading of 49.1 versus 52.5 in August. Scores above 50 indicate expansion and below contraction. The German manufacturing index showed improvement, however, up to 56.6 in September from 52.2 in August.

The dollar was stronger Wednesday morning against the pound and the euro, though the US currency slipped back slightly against the Japanese yen.

Sterling was quoted at USD1.2690 early Wednesday, down on USD1.2717 at the London equities close on Tuesday. The euro traded at USD1.1691, lower than USD1.1702 late Tuesday.

Against the yen, the dollar was quoted at JPY104.96, versus JPY105.00 on Tuesday afternoon in London.

In Asia on Wednesday, the Nikkei 225 index ended down 0.1% as Japanese financial markets resumed trading after holidays on Monday and Tuesday. In China, the Shanghai Composite ended up 0.2%, while the Hang Seng index in Hong Kong is down 0.1%.

Fresnillo was the worst performer in the FTSE 100 early Wednesday, tracking the price of gold lower.

The safe haven metal edged back as equity markets stormed ahead and the dollar rose. Gold was quoted at USD1,880.80 an ounce early Wednesday, lower than USD1,904.86 late Tuesday in London.

Brent oil was trading at USD41.48 a barrel early Wednesday, soft on USD41.60 late Tuesday.

RELX rose 1.8% after poaching Halma's chair, Paul Walker.

Walker intends to give up the chair of Halma and step down from the board by 2021. Halma's search for a replacement has started. Walker will be moving to RELX to take up the same role.

Halma separately said it delivered a "resilient" performance in the year-to-date.

The life-saving technologies company said revenue trends have gradually improved from the end of the first quarter. Halma continues to expect adjusted pretax profit for the current financial year to be 5% to 10% below the year before that.

"There has continued to be a significant variation in demand in individual end-markets and geographic regions. The USA and Mainland Europe regions have delivered the most resilient overall trading performances. The UK and Asia Pacific have remained more challenging, although the latter has benefited from prior year acquisitions and a gradual recovery in China," said Halma.

Halma was up 1.5%.

Diploma was the top performing mid-cap stock, rallying 17% to 2,008 pence after raising GBP194 million to fund its proposed acquisition of Windy City Wire Cable & Technology Products.

The technical products supplier said it raised GBP190 million via a share placing to institutional investors at a price of 1,711p each, while directors of the company subscribed for GBP265,000 worth of shares in total. Finally, retail investors subscribed via the PrimaryBid platform for a total of 222,200 shares, raising GBP4 million.

Diploma late Tuesday said it agreed a deal to buy US low-voltage wire and cable supplier Windy City Wire for GBP357 million. Diploma said Chicago-based WCW is a highly attractive business in a "core Diploma market" and expands its presence in the US.

SSP rose 4.5% despite guiding to a sharp fall in sales for the second half of the year.

Current weekly sales are running at approximately 76% below last year, the travel concessions owner said, representing an improvement from the third quarter, when sales were 95% lower in April and May and 90% lower in June.

This improvement has been driven by continental Europe, where weekly sales are 66% lower, while in the UK, North America and Rest of the World, sales remain around 80% to 85% down.

SSP has reopened just over a third of its units, ahead of previous expectations.

Overall sales in the second half of the year are expected to be down 86%, resulting in a reduction in revenue of around GBP1.3 billion compared to the second half of 2019.

"Encouragingly, the extensive management action to reduce the cost base, notably rent, overhead and labour, means that despite the weaker sales the underlying Ebitda and operating loss (on an IAS 17 basis) are expected to fall broadly in the middle of the ranges set out in the Interim results in June," said SSP.

While the decision to cut jobs across the group is "extremely regrettable", the company added, it has been a "necessary step" to protect the business.

AA shares crashed 15%. Neither Platinum Equity nor Centerbridge Partners Europe intend to make a takeover offer for roadside rescue firm AA, the two said in separate statements.

Both said talks between them and AA were mutually terminated.

In early August, AA confirmed that several parties had made takeover proposals. Each of the three parties had until September 1 to lodge a firm intention to buy AA or make it known it was no longer interested in pursing a deal. The date was then extended to September 29.

The three parties were Centerbridge Partners and TowerBrook Capital Partners UK, acting jointly, and Platinum Equity Advisors and Warburg Pincus International, acting individually.

However, Centerbridge Partners on Wednesday confirmed that TowerBrook Capital is continuing to mull making an offer for AA.

By Lucy Heming; lucyheming@alliancenews.com

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