LONDON MARKET OPEN: Stocks recover into end of week as airlines rise

(Alliance News) - London stocks were heading for a smoother end to a rocky week, with M&A activity and rising travel stocks helping to lift the mood in early dealings on Friday.

The FTSE 100 index was up 25.67 points, or 0.4%, at 7,056.33 early Friday. The mid-cap FTSE 250 index was up 100.13 points, or 0.4%, at 22,752.85. The AIM All-Share index was 0.1% higher at 1,249.30.

The Cboe UK 100 index was up 0.4% at 702.30. The Cboe 250 was 0.4% higher at 20,461.88, and the Cboe Small Companies up 0.1% at 15,414.13.

In mainland Europe, the CAC 40 in Paris was up 0.9% while the DAX 30 in Frankfurt gained 0.6% early Friday.

European markets were rebounding after sell-offs on Thursday, which saw the FTSE 100 plummet 1.7%.

"With increasing concern that the Delta variant (or indeed other variants) of the coronavirus will delay the forecast strengthening of economies over the second half of this year – a concern flagged yesterday by the San Francisco Fed's Mary Daly – risk aversion dominated yesterday's trading," said Daiwa Capital Markets.

The mood was largely downbeat in Asia on Friday. The Japanese Nikkei 225 index closed down 0.6%. In China, the Shanghai Composite closed flat, while the Hang Seng index in Hong Kong was up 0.9%, after diving 2.9% on Thursday. The S&P/ASX 200 in Sydney ended down 0.9%.

However, London stocks opened on the front foot, lifted by airline stocks.

Travel firms rose as people rushed to book summer getaways following the government's announcement that UK holidaymakers who have received two jabs from the NHS will no longer be required to self-isolate for 10 days on their return to England from destinations on the amber list.

Tourist hotspots such as Greece, France and Italy are currently on the UK government's amber list.

Travel firm Skyscanner said 30 minutes after the announcement, the agency saw a 53% increase in traffic from the UK compared to the same time on Wednesday. Thomas Cook said web traffic doubled in the moments after the announcement, and has only grown since.

British Airways parent International Consolidated Airlines rose 2.0% and mid-cap easyJet advanced 2.7%.

Bunzl was up 3.0%, sat atop the FTSE 100, after Berenberg raised the distribution and services stock to Buy from Hold.

Luxury fashion retailer Burberry rose 2.4% as it also got a boost from a ratings upgrade, with Goldman Sachs raising the trenchcoat maker to Buy from Neutral.

Vectura topped the FTSE 250, up 12% at 152.40 pence after agreeing to be taken over Marlboro cigarette maker Philip Morris International.

Philip Morris will pay 150p per share in cash for Vectura, a Wiltshire, England-based inhaled drug delivery devices maker. Including a 19p interim dividend, the deal values the FTSE 250 constituent at GBP1.04 billion.

Following the PMI offer, Vectura's directors withdrew their recommendation for a GBP958 million takeover by funds managed by private equity firm Carlyle Group. PMI's offer is a 10% premium to Carlyle's 136p per share bid.

However, with Vectura trading above PMI's offer price early Friday, investors could be anticipating a bidding war.

"PMI is expanding into products beyond tobacco and nicotine, as part of a natural evolution into a broader healthcare and wellness company," the New York-based company said.

Victrex edged up 1.0% as it saw upside risk to current full-year expectations, but warned of headwinds for the 2022 financial year.

The polymer supplier said it is seeing continued momentum in most end markets and posted 37% growth in third quarter revenue to GBP80.7 million, with sales volumes of 1,202 tonnes up 49% year-on-year.

On a year-to-date basis, being the nine months to June 30, revenue was up 10% year-on-year at GBP231.6 million.

"Reflecting the volume strength on a year to date basis, we now see the potential for some upside to current full year expectations, with our internal assumptions being closer to the upper end of market expectations," said Chief Executive Jakob Sigurdsson.

However, he noted that for the 2022 financial year, Victrex will have to contend with foreign currency headwinds, increasing raw material inflation, an anticipated uplift in innovation spend to support the long-term growth pipeline, and some costs associated with commissioning its China manufacturing facility.

"These effects will weigh on our 2022 prospects, although we remain focused on growth," said Sigurdsson.

In currency markets, the pound was clawing back some gains after a weaker-than-expected UK gross domestic product reading.

UK GDP grew 0.8% in May from April, missing forecasts for a stronger monthly gain of 1.7%, according to FXStreet, and below April's growth of 2.0%, which itself was revised down from 2.3%. The economy remains 3.1% below its pre-virus levels, the ONS said.

Sterling was trading at USD1.3773, up from USD1.3763 at the London equities close on Thursday.

The euro traded at USD1.1835 early Friday, down from USD1.1842 late Thursday. Against the yen, the dollar rose to JPY110.06 versus JPY109.79.

Gold was quoted at USD1,804.17 an ounce early Friday, higher than USD1,796.50 on Thursday. Brent oil was trading at USD74.50 a barrel, up from USD73.70 late Thursday.

By Lucy Heming; lucyheming@alliancenews.com

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