LONDON MARKET OPEN: Green start to week as US data boost continues

(Alliance News) - London stocks early Monday were getting a modest lift from last week's US jobs data, even as airlines dragged on disappointment over brevity of the UK government's travel green list.

The FTSE 100 index was up 6.17 points, or 0.1%, at 7,135.88 early Monday. The mid-cap FTSE 250 index was up 28.39 points, or 0.1%, 22,803.67. The AIM All-Share index was down 0.1% at 1,261.22.

The Cboe UK 100 index was up 0.1% at 710.96. The Cboe 250 was up 0.2% at 20492.59, and the Cboe Small Companies up 0.4% at 15089.41.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both a touch higher early Monday.

Friday's uplift from a weaker-than-expected US jobs read-out continued into the new week.

The US economy added 266,000 new jobs in April, slowing sharply from a downwardly revised 770,000 rise in March. The latest figure was well below market consensus, cited by FXStreet, of 978,000, though many forecasts were for one million jobs or more being added. March's figure was first reported as 916,000.

"In an example of bad news being good news, the lower figure calmed the inflation and interest rate fears which had been overshadowing the markets' recent progress. Indeed, there may be evidence of a labour supply shortage in addition to blocks in the supply chain, both of which indicate that the strength of the recovery is encountering pressure points as it may be outpacing the availability of materials and workers," said Richard Hunter, head of markets at Interactive Investor.

The dollar weakened on Friday after the jobs data, but was more mixed at the start of a new week - though the pound continued to climb after the Scottish National Party fell one seat short of an overall majority in the Scottish parliament elections.

The SNP secured 64 seats, though the final result still leaves Holyrood with a pro-independence majority.

UK Prime Minister Boris Johnson has invited SNP leader Nicola Sturgeon for crisis talks on the Union after the Scottish first minister warned he would be standing in the way of democracy if he denies Scotland a second independence referendum.

Sterling was quoted at USD1.4061 early Monday, higher than USD1.3995 at the London equities close on Friday.

The euro traded at USD1.2150 early Monday, flat on USD1.2156 late Friday. Against the yen, the dollar was quoted at JPY108.96, rising from JPY108.52.

Towards the bottom of the FTSE 100 was British Airways-parent International Consolidated Airlines, down 1.9%, while easyJet in the FTSE 250 fell 3.3% and Wizz Air declined 2.0%.

On Friday evening, the UK government revealed Portugal, Gibraltar and Israel are among just 12 destinations on England's new green list for travel.

Transport Secretary Grant Shapps said the removal of the ban on international leisure travel was "necessarily cautious" as he announced the destinations that holidaymakers will be able to visit from May 17 without having to self-isolate on their return to England.

But while Portugal, Gibraltar and Israel are planning to welcome UK tourists, the green list also features several remote British Overseas Territories and destinations where visits are heavily restricted, such as Australia, New Zealand, Singapore, Brunei and the Faroe Islands.

Industry bosses have urged further clarity on when other holiday destinations could be added to the quarantine-free green list. Airlines UK, an industry body which represents UK carriers, said the government must make "major additions" to the green list at the next review point in three weeks.

At the top of the FTSE 250 in early trade was Greggs, up 9.3% after the baker said full-year profit could reach pre-pandemic levels.

The baker said it has seen a strong recovery in sales since restrictions began to ease across the UK, with like-for-like sales in the 18 weeks to May 8 down 14% on the same period in 2019. In the ten weeks to March 13, sales were down 23% on two years ago, but this narrowed to a decline of just 3.9% in the eight weeks to May 8.

Since non-essential retail shops were allowed to reopen in England on April 12, two-year like-for-like sales have been positive, Greggs said.

"Sales have recovered well in recent weeks as out-of-home activity levels have increased, albeit in the absence of competition from indoor seated catering operators. If restrictions continue to ease in line with current plans, then we now expect our overall sales performance for the year to be stronger than we had previously anticipated," the sausage roll maker said.

While there is still uncertainty over trading conditions, Greggs believes that 2021 profit is likely to be materially higher than previous expectations and could be around 2019 levels in the absence of further restrictions.

Victrex rose 5.3% as it reported a decline in interim profit but recommended a dividend.

Revenue for the half-year to March 31 edged down 0.4% to GBP150.9 million, but pretax profit declined 7% to GBP46.6 million. The gross margin nudged down to 53.9% versus 57.3% a year ago.

Despite the profit fall, Victrex declared an interim dividend of 13.42p, versus nothing a year prior. The interim dividend for the 2020 financial year was deferred and subsequently cancelled as part of cash conservation measures. The payout just declared is at the same level as the interim dividend for 2019.

"Whilst there may yet be upside to our anticipated full-year performance, with the continued impact of post-Brexit inventory unwind on fixed cost recovery, and accrual for our all-employee-bonus scheme, at this stage we remain comfortable with current full year expectations," said Chief Executive Jakob Sigurdsson.

Centrica fell 1.2%. The British Gas-owner said trading conditions have remained tough but cost savings are on track.

The energy utility said its restructuring is on track, with year-on-year operating cost savings of more than GBP100 million expected in 2021.

Less positively, the pandemic has seen electricity demand from UK business customers hit by around 15% in the first quarter, residential boiler installations were down 11% and non-essential service visits were postponed.

"As expected, trading conditions have remained tough in the year to date. However, the modernisation of our group remains on track and the difficult, but necessary process to move colleagues onto new terms and conditions is now complete," said Chief Executive Chris O'Shea.

"Although the external environment remains uncertain, our tight focus on cash and on fixing the basics across the group leaves us well placed as we continue the turnaround of our company."

The worst performer in the FTSE 250 was Provident Financial, falling 5.9% as the subprime lender reported a revenue slump in 2020 and swung to a loss.

Total revenue for the year amounted to GBP807.8 million, down sharply on GBP996.1 million the year before as both interest income and fee income fell. Provident turned to a pretax loss of GBP113.5 million from a profit of GBP119.0 million.

Covid-19 had an "immediate impact" on customer demand for credit, said Provident, which tightened underwriting standards in April in response to a "changing consumer landscape". As a result, new bookings for 2020 fell and so did receivables.

Provident also confirmed it has decided to withdraw from the home credit market "entirely" and is considering a sale of the Consumer Credit Division.

"The home credit business will be placed into a managed run-off, which would be expected to conclude by December 2021. We expect to manage the IT infrastructure and support service expenditure lower as the receivables book falls. At the end of March 2021, CCD had approximately 2,100 employees and an internal consultation for these employees has started today. It is anticipated that the cost to the group of placing the business into managed run-off or disposing of CCD will be up to circa GBP100 million," the company said.

In Asia on Monday, the Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite ended up 0.3%, while the Hang Seng index in Hong Kong was down 0.3% in late trade. The S&P/ASX 200 in Sydney closed up 1.3%.

Gold was quoted at USD1,836.03 an ounce early Monday, edging up from USD1,834.71 on Friday.

Brent oil was trading at USD68.83 a barrel, up on USD68.20 late Friday. The US government declared a regional emergency Sunday as the largest fuel pipeline system in the US remained largely shut down, two days after a major ransomware attack was detected.

The Colonial Pipeline Co ships gasoline and jet fuel from the Gulf Coast of Texas to the populous East Coast through 5,500 miles of pipeline, serving 50 million consumers. The company said it was the victim of a cybersecurity attack involving ransomware – attacks that encrypt computer systems and seek to extract payments from operators.

The economic calendar on Monday has eurozone Sentix investor confidence at 0930 BST.

By Lucy Heming; lucyheming@alliancenews.com

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