LONDON MARKET OPEN: Stocks fall; FirstGroup surges on US bus unit sale

(Alliance News) - Stock prices in London opened lower on Friday after US tax hike reports sent Wall Street lower overnight, while FirstGroup shares rose sharply after it agreed to sell its US bus operations.

According to Bloomberg, US President Joe Biden is developing a plan to slap new levies on wealthy investors, including a near doubling of the tax on stock transaction profits to 39.6% for people earning more than USD1 million.

Any tax plan faces a long process on Capitol Hill before becoming a reality, but analysts said the reports indicate hikes are very much in the mix in Washington.

Biden also called for an increase in corporate taxes to finance his USD2 trillion infrastructure package.

The FTSE 100 index was down 23.20 points, or 0.3%, at 6,915.04. The mid-cap FTSE 250 was down 79.99 points, or 0.4%, at 22,283.74. The AIM All-Share index was down 0.3% at 1,260.35.

The Cboe UK 100 index was down 0.4% at 687.91. The Cboe 250 was down 0.3% at 19,917.59. The Cboe Small Companies was flat at 14,424.64.

In mainland Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt were down 0.1% and 0.2% respectively.

"In the US, the reportedly sharp rises in both capital gains and income taxes being proposed by the White House are in addition to a possible hike in corporation tax. While any monies raised would be used to fund projects such as childcare and paid leave for workers, as well as offsetting some of the cost of the American Rescue Plan, the implications for both equities and wealthier individuals were enough to halt the market’s recent run in its tracks," said interactive investor's Richard Hunter.

"Further clues on the current stage of the economic recovery will be provided in a bumper set of company reports on both sides of the pond next week," Hunter added.

In the FTSE 100, Informa was the worst performer, down 1.7%, extending Thursday's losses. The exhibitions and business information publisher swung to an annual loss due to event cancellations, but pointed to a recovery as the global vaccination rollout continues. The stock closed down 2.1% on Thursday.

In the FTSE 250, FirstGroup was the standout performer, up 14%. The transport operator confirmed a Sky News report that it has agreed to sell its US bus operations to EQT AB for a GBP3.3 billion headline enterprise value.

FirstGroup will sell the First Student and First Transit units to EQT Infrastructure, affiliated with Swedish private equity firm EQT. Of the proceeds, FirstGroup said it will return GBP365 million to shareholders during calendar 2021.

Fellow transport companies National Express and Stagecoach were up 3.4% and 2.1% respectively, in a positive read-across.

Clarkson was up 3.0% after JPMorgan upgraded the shipping services provider to Overweight from Neutral.

At the other end of the midcaps, Workspace Group was the worst performer, down 5.5%, after Barclays double downgraded the office space provider to Underweight from Overweight.

Elsewhere in London, Senior was 0.7% lower. The aerospace parts maker said trading in the three months to March 31 has been in line with expectations. In the Aerospace unit, sales were down 25% for the the first quarter last year, but up 2% from the fourth quarter. In the Flexonic unit, sales were down 4% from the first quarter last year but up 10% from the fourth quarter.

Senior said net debt at end of March GBP220.8 million, giving GBP140.6 million headroom on its facilities.

In addition, Senior said its 2021 market assumptions remain unchanged, and defence markets are anticipated to remain stable. However, civil aircraft production volumes look set to recover to pre-Covid level only by 2024-25, it said.

"Production volumes for civil aerospace will be lower in 2021 than 2020 based on the production rates that the aircraft and engine OE have announced. We also recognise that there are varying levels of inventory in different tiers of the supply chain," the company said.

The Japanese Nikkei 225 index closed down 0.6% on Friday. In China, the Shanghai Composite was closed up 0.2%, while the Hang Seng index in Hong Kong was up 0.7%. The S&P/ASX 200 in Sydney closed 0.1% lower.

The dollar was lower against major counterparts. The pound was quoted at USD1.3885 early Friday, up from USD1.3838 at the London equities close Thursday.

The euro was priced at USD1.2040, up from USD1.2014. Against the yen, the dollar was quoted at JPY107.88, down from JPY108.11.

Brent oil was trading at USD65.80 a barrel Friday morning, up from USD65.58 at the London equities close Thursday. Gold was quoted at USD1,783.11 an ounce, little changed against USD1,782.29.

The economic calendar on Friday has a raft of purchasing managers' index readings, with the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.