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LONDON MARKET OPEN: FTSE 100 drop 2% on inflation nerves; THG up 16%

Tue, 11th May 2021 08:49

(Alliance News) - London stocks dived at the open on Tuesday after inflationary fears saw New York, Tokyo, Hong Kong and Sydney doused in red overnight.

The blue-chip FTSE 100 index was down 133.00 points, or 1.9%, at 6,990.68 early Tuesday. The mid-cap FTSE 250 index was down 375.91 points, or 1.7%, at 22,321.28. The AIM All-Share index was 0.9% lower at 1,246.99.

The Cboe UK 100 index was down 1.9% at 697.17. The Cboe 250 was down 1.5% at 20,134.89 and the Cboe Small Companies down 0.5% at 15,073.04.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt both tumbled 1.6% early Tuesday.

Equities slumped as "pre-US CPI jitters" emerged, said Daiwa Capital Markets Europe. Fears dragged down stocks in New York on Monday and the mood persisted into Asia overnight.

The Dow Jones Industrial Average closed down 0.1% on Monday, and the S&P 500 fell 1.0%. The Nasdaq Composite lost 2.6% as growth stocks took a particular thumping.

In Asia on Tuesday, the Japanese Nikkei 225 index ended down 3.1%. In China, the Shanghai Composite ended up 0.4%, but the Hang Seng index in Hong Kong was down 2.1% in late trade. The S&P/ASX 200 in Sydney closed down 1.1%.

The US consumer price index is due on Wednesday at 1330 BST, and is expected to tick up sharply to 3.6% year-on-year in April, according to FXStreet, from 2.6% in March. However, the month-on-month rate is set to ease to 0.2% from 0.6%.

"What is most interesting about the price action overnight is how quickly the inflation theme has re-emerged. Precisely one day, in fact, after a very deflating US jobs number on Friday. A very dovish set of comments from Chicago Fed Evans were also ignored. Inflation nerves just won't go away," commented Jeffrey Halley, senior market analyst at Oanda.

Weighing on the FTSE 100 in early trade were International Consolidated Airlines, down 4.2%, and NatWest Group, down 3.7%.

British Airways-parent IAG fell after launching an offer worth EUR800.0 million of senior unsecured bonds convertible into shares.

"Given the continuing uncertainty in respect of air travel, the net proceeds from the offering will be used by IAG to (i) strengthen the group's balance sheet and increase the group's overall liquidity position and (ii) provide the group with increased operational and strategic flexibility to take advantage of a recovery in demand," the company said.

The offering comes after disappointment over the UK government's plans to reopen the travel industry. On Friday evening, Westminster revealed that Portugal, Gibraltar and Israel are among just 12 destinations on England's new 'green list' for travel, meaning visitors do not need to self-isolate on their return home.

Industry leaders said the government's approach represented an "excess of caution" and demanded greater clarity over the formation of the green list.

NatWest shares fell after the UK government raised GBP1.1 billion from the sale of 580.0 million shares in the lender.

The placing price was 190 pence, a 3.6% discount to Monday's closing price of 197.05p. NatWest shares have risen 18% since 2021 began, and are up 73% over the past 52 weeks.

The sale means the UK government now holds a 54.8% stake in NatWest, down from 59.8% previously. UK Government Investments - which was set up by former chancellor George Osborne to offload UK government-owned companies - first announced its intention to cut its NatWest stake below 55% after the market close on Monday.

In mid-March, the UK government sold 590.7 million shares at a price of GBP1.12 billion, reducing its stake to 59.8% from 61.7%.

The UK government first began building its majority stake in the bank from October 2008 during the financial crisis as it looked to inject funds into the banking system. As a result, the government ended up holding an 81% stake in the lender - called Royal Bank of Scotland Group at the time - after a hefty GBP45.5 billion taxpayer bailout.

Scottish Mortgage Investment Trust fell 3.5% amid the tech sell-off in New York overnight. Scottish Mortgage holds investments in tech stocks such as Amazon.com and Tesla - which closed down 3.1% and 6.4% respectively on Monday.

FTSE 250-listed Allianz Technology trust - an investor in Alphabet, Facebook and Microsoft amongst other, the bulk of them technology, stocks - fell 6.0%, the worst performer in the mid-cap index early Tuesday.

Levitating above the carnage early Tuesday, THG was up 16% at 690.00 pence. Better known as The Hut Group, THG raised USD1.05 billion from a share placing, plus a subscription by tech investor SoftBank, at 596p.

The dollar strengthened amid Tuesday's risk-off mood.

Sterling softened but was still trading around its best level in three months at USD1.4118 early Tuesday versus USD1.4130 at the London equities close on Monday.

The euro traded at USD1.2128 early Tuesday in London, down on USD1.2156 late Monday. Against the yen, the dollar rose to JPY108.91 versus JPY108.75.

Gold was quoted at USD1,833.55 an ounce early Tuesday, easing on USD1,837.81 on Monday. Brent oil was trading at USD67.87 a barrel, firm on USD67.71 late Monday.

The economic events calendar on Tuesday has the German ZEW economic sentiment indicator at 1000 BST. In addition, Bank of England Governor Andrew Bailey speaks at the Alternative Reference Rates Committee webinar at 1530 BST.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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