LONDON MARKET OPEN: FTSE 100 trails behind as pound trades at USD1.35

(Alliance News) - It was looking like another session of FTSE 100 underperformance on Thursday as the pound bobbed above the USD1.35 level.

This was despite Royal Mail rallying on shareholder return plans. Meanwhile, the mid-cap FTSE 250 nudged up on gains for Playtech, Crest Nicholson and Rank.

The FTSE 100 index was down 12.67 points, or 0.2%, at 7,278.53 early Thursday. The FTSE 250 index was up 50.21 points, or 0.2%, at 23,484.28. The AIM All-Share index was down 2.80 points, or 0.2%, at 1,244.08.

The Cboe UK 100 index was down 0.2% at 720.94. The Cboe 250 was up 0.1% at 20,939.16, and the Cboe Small Companies down 0.6% at 15,493.93.

In mainland Europe, the CAC 40 in Paris was up 0.1%, while the DAX 40 in Frankfurt was up 0.2% early Thursday.

Stocks in London were continuing to underperform the rest of Europe on account of a stronger pound.

Sterling was quoted at USD1.3500 early Thursday, retaking the USD1.35 level and higher than USD1.3465 at the London equities close on Wednesday.

The pound has climbed steadily this week after an upbeat UK labour market update on Tuesday and stronger-than-expected inflation on Wednesday. However, it still remains below the levels reached just before the Bank of England at the start of the month decided to keep interest rates unchanged.

Nonetheless, the British currency is currently trading around its best levels for a week.

Both the euro and yen were higher against the dollar early Thursday, but both have lagged the pound's week-to-date performance.

The euro traded at USD1.1334, up on USD1.1309 late Wednesday. Against the yen, the dollar was quoted at JPY114.15, down from JPY114.51.

The FTSE 100 struggled early Thursday despite Royal Mail rallying 6.2% on news of a special dividend and share buyback.

Revenue for the half-year to September 26 rose 7.1% to GBP6.07 billion and pretax profit multiplied to GBP315 million from just GBP17 million year-on-year. Adjusted operating profit jumped to GBP404 million from GBP37 million.

The parcels and letters delivery firm saw a recovery in profitability in its domestic unit and continued to benefit from a structural shift in parcel volumes from the Covid-19 pandemic.

The company declared an interim dividend of 6.7p, having paid none last year. It also will pay a special dividend worth GBP200 million in total and also will start a GBP200 million share buyback immediately. It didn't provide the per-share amount of the special dividend.

In the FTSE 250, Crest Nicholson shares traded 3.1% higher. The housebuilder said full-year adjusted pretax profit is expected to be slightly ahead of consensus of GBP101.2 million due to a bigger-than-expected contribution from the Longcross Film Studio.

Playtech advanced 3.0% after receiving a preliminary takeover approach from JKO Play, further complicating an existing deal with Aristocrat Leisure.

In mid-October, Playtech agreed to be bought by Sydney-listed Aristocrat in a deal worth 680 pence per share. Then earlier this month, Playtech revealed that it also had received an initial approach from Gopher Investments. It said on Thursday that talks with Gopher continue.

Rank Group, a gambling operator that owns Grosvenor Casinos and Mecca Bingo, trimmed opening gains in excess of 10% to trade 2.5% higher, in a positive read-across after blue-chip Flutter Entertainment agreed to buy online bingo operator Tombola for GBP402 million.

Flutter shares were up 0.5%.

Rotork shares slid 8.1%. The FTSE 250 constituent said order intake has remained strong, but supply chain disruption is set to continue at least in the near-term.

Order intake in the four months to October 31 was up a "high single digit percentage" year-on-year on an organic constant currency basis. However, Rotork said component sourcing over the past few months has become difficult, resulting in revenue over the four-month period being down year-on-year and hitting margins.

"The growth in order intake seen in the second quarter has continued over the summer and through October, in-line with our expectations. However, we anticipate the supply chain disruption currently being experienced will continue at least in the near term," said Rotork.

The maker of flow-control products for energy, water and chemical industries expects second half revenue similar to the first half with adjusted operating margins "slightly ahead" of the first half.

Metro Bank shares slumped 17% after agreeing to end talks over a possible takeover offer by private equity firm Carlyle Group for the retail bank. Both parties announced the decision but neither gave a reason.

"The board continues to strongly believe in the standalone strategy and future prospects of Metro Bank," the lender said.

In Asia on Thursday, the Japanese Nikkei 225 index ended down 0.3%. In China, the Shanghai Composite ended down 0.5%, while the Hang Seng index in Hong Kong tumbled 1.3%. The S&P/ASX 200 in Sydney edged up 0.1%.

Gold was quoted at USD1,866.16 an ounce early Thursday, flat on USD1,864.44 on Wednesday. Brent oil was trading at USD79.51 a barrel, falling from USD81.58 late Wednesday.

The economic events calendar on Thursday has the latest US jobless claims numbers at 1330 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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