LONDON MARKET OPEN: Miners rise; FTSE 250 shakes off QinetiQ tumble

(Alliance News) - London stocks gained at the market open on Wednesday, building on a higher finish in the US overnight.

The blue-chip FTSE 100 index was being led by miners, while the FTSE 250 charged ahead despite a drag from QinetiQ after it warned on margins.

The FTSE 100 was up 35.64 points, or 0.5%, at 7,177.46 early Thursday. The mid-cap FTSE 250 index was up 144.91 points, or 0.6%, at 22,780.18. The AIM All-Share index was up 5.12 points, or 0.4%, at 1,217.22.

The Cboe UK 100 index was up 0.5% at 712.15. The Cboe 250 was up 0.5% at 20,567.80, and the Cboe Small Companies up 0.3% at 15,532.42.

In mainland Europe, the CAC 40 in Paris was up 0.4% while the DAX 40 in Frankfurt was up 0.5% early Thursday.

"Today, investors will be looking at the [US] Bureau of Labor Statistics' producer price index to see how rising input costs are likely to affect manufacturers and, eventually, how much of the inflation will be passed on to final consumers in coming months," said Naeem Aslam, chief market analyst at AvaTrade.

The factory price data comes a day after figures showed US consumer price inflation ticked up to 5.4% in September from 5.3% in August. The release held no major surprises, however, with the core measure rising 0.2% month-on-month in September, in line with expectations after a rise of 0.1% in August.

Wall Street ended mostly higher on Wednesday, with the Dow Jones Industrial Average closing flat, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.7%

The US dollar was mostly weaker ahead of Thursday's data. Sterling was quoted at USD1.3699 early Thursday, higher than USD1.3565 at the London equities close on Wednesday. The euro traded at USD1.1609 early Thursday, up on USD1.1575 late Wednesday.

Against the yen, however, the dollar rose to JPY113.44 versus JPY113.35.

Gold was treading water at USD1,792.10 an ounce, compared to USD1,792.11 on Wednesday.

China on Thursday followed the US inflation report by reporting surging factory gate inflation, but fears over runaway cost pressures were soothed as consumer price growth eased.

The producer price index, which measures the cost of goods at the factory gate, rose 10.7% year-on-year in September, the National Bureau of Statistics said, marking the biggest jump in its data going back to October 1996. This marked an uptick from 9.5% growth in August.

More reassuringly, consumer price growth was flat month-on-month, undershooting forecasts for a rise of 0.3% and following on from 0.1% growth last month. The annual measure also was lower than expected, rising just 0.7% against forecasts of 0.9%.

In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite closed down 0.1%, while the Hong Kong market was shut for a holiday. The S&P/ASX 200 in Sydney ended up 0.5%.

It was a higher start in London as miners topped the FTSE 100, with Anglo American up 3.1%, Glencore up 2.4% and Antofagasta up 2.2%.

Shares in oil majors edged higher on improved commodity prices. Brent oil was trading at USD83.99 a barrel early Thursday, up from USD83.11 late Wednesday.

As a result, shares in BP were up 1.2% in early trade and Royal Dutch Shell 'A' and 'B' shares were both up 0.9%. Mid-cap oil and gas firm Harbour Energy topped the FTSE 250, up 6.1%.

Dragging on the mid-cap index was QinetiQ, down 9.3% after warning its full-year margin will be at the lower end of guidance.

The defence technology firm said its half-year performance was in line with market consensus forecasts, with "excellent" order intake of GBP700 million, up 25% year-on-year.

For the full-year, QinetiQ expects mid-single-digit organic revenue growth at around 5% but warned its underlying operating profit margin will be at the lower end of its 11% to 12% expected range.

"This expectation includes short-term effects of the customer's mission shifting from Afghanistan and Covid-related delivery and supply chain challenges in the US," the firm said.

QinetiQ also cautioned that it is experiencing supply issues on a "large complex programme", which it didn't name, that could result in the need for a one-off write down. It is working to cap the risk at below GBP15 million.

Dunelm rose 2.6% on a jump in first quarter sales. Total sales in the first quarter ended September 24 rose 8.3% year-on-year to GBP388.8 million, and this was up 48% on two years ago.

Sabre dipped 1.5% after warning full-year profit will be "moderately" below analyst forecasts. It said a recovery in motor insurance pricing during the third quarter has been "slightly slower" than expected as Covid-related restrictions unwind. It has maintained pricing discipline trough extended soft market conditions.

It expects pretax profit for 2021 will be "moderately below" the analyst forecast range of GBP41 million to GBP46 million "but with dividend levels supported by the strength of our capital position". For 2020, Sabre recorded pretax profit of GBP49.1 million, down from GBP56.5 million in 2019.

By Lucy Heming; lucyheming@alliancenews.com

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