LONDON MARKET PRE-OPEN: Taylor Wimpey buoyed by strong property market

(Alliance News) - London's positive week is poised to continue into Wednesday as markets eye a raft of service sector PMIs.

In early UK company news, Taylor Wimpey lifted its outlook on a buoyant UK property market, Rolls-Royce struck a fresh Bergen sale deal after the Norwegian government blocked a previous attempt, THG confirmed the purchase of Cult Beauty, and Ryanair saw passenger numbers double in July.

IG says futures indicate the FTSE 100 index of large-caps to open up 31.78 points, or 0.4%, at 7,137.50 on Wednesday. The FTSE 100 closed up 24.00 points, or 0.3%, at 7,105.72 on Tuesday.

CMC Markets Chief Market Analyst Michael Hewson said: "Concerns that rising infection rates across Asia, and in China especially, appear to be causing anxiety that the rebound story in that part of the world is about to become the weakest link in the global recovery story."

However, he added, there seem to be fewer concerns about economies in Europe due to higher vaccination rates - though some signs that economy activity may have peaked in the short-term will keep Wednesday's data in sharp focus.

The economic events calendar on Wednesday has services purchasing managers' index readings from Germany, the eurozone and UK at 0855 BST, 0900 BST and 0930 BST respectively, with the US Markit PMI print at 1445 BST and the ISM report at 1500 BST.

Ahead of the economic surveys, sterling was quoted at USD1.3927 early Wednesday, higher than USD1.3895 at the London equities close on Tuesday. The euro traded at USD1.1873, firm on USD1.1860 late Tuesday. Against the yen, the dollar edged up to JPY109.11 versus JPY109.02.

Data out of Asia overnight was mixed, with the Chinese service sector rebounding in July but Japan's contracting faster.

The Chinese Caixin headline seasonally adjusted services purchasing managers' index came in at 54.9 points in July, rebounding from June's 14-month low of 50.3. Underpinning the sharper upturn in activity was a further rise in new business.

The seasonally adjusted Japan services PMI dipped in July to 47.4 points from 48.0 in June, where a reading above 50 indicates an overall increase compared to the previous month, and below 50 an overall decrease.

In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.2%. In China, the Shanghai Composite was up 0.8%, while the Hang Seng index in Hong Kong was up 1.1%. The S&P/ASX 200 in Sydney closed up 0.4%.

In early UK company news, housebuilder Taylor Wimpey raised full-year guidance as the UK property market continues to boom.

Revenue for the first half of 2021 surged to GBP2.20 billion from GBP754.6 million a year ago, while the construction company swung to a pretax profit of GBP287.5 million from a loss of GBP39.8 million.

It highlighted positive momentum in the half-year, with the net private sales rate improving to 0.97 per week, up from 0.70 a year ago, and the opening of 37 new outlets in the period.

"The UK housing market has continued to perform strongly across all our geographies in the first half of the year. Having entered 2021 with an excellent order book, we have delivered a strong first half performance, benefiting, as anticipated, from delayed Q4 2020 completions and the continuing strength in the housing market," said Taylor Wimpey.

Forward indicators remain robust, it added, and build cost and supply chain pressure is being fully offset by "healthy" house price growth.

Taylor Wimpey now expects full-year operating profit to be GBP820 million, above the top end of consensus. This compares with just GBP300.3 million in 2020, and approaches the pre-pandemic level of GBP850.5 million in 2019.

The FTSE 100 constituent declared an interim dividend of 4.14p.

Legal & General flagged earnings "well above" pre-virus levels in a strong first half.

The 185-year old insurer posted operating profit of GBP1.08 billion for the first half of 2021, up 14% on a year ago, and earnings per share of 17.78p, up sharply on the 4.89p achieved a year ago and 21% higher than 2019.

"We remain confident in achieving our five-year cumulative financial ambitions. In the first half of 2021, we continued to build on the good start we made in 2020. We expect to deliver double-digit growth in operating profit at the full year," the company said.

L&G lifted its interim payout by 5% to 5.18p.

Jet engine maker Rolls-Royce said it has agreed to sell its Bergen Engines medium speed liquid fuel and gas engines business to Langley Holdings for an enterprise value of EUR63 million.

"Sale proceeds of EUR70m from the transaction together with EUR40m of cash currently held within Bergen Engines which is to be retained by Rolls-Royce, will be used to help rebuild the Rolls-Royce balance sheet," it said.

This follows an aborted deal earlier in the year after the Norwegian government put the brakes on the proposed sale of the Bergen unit to TMH Group, a privately owned company headquartered in Russia that makes locomotives and rail equipment. Rolls-Royce had planned to sell Bergen to TMH for EUR150 million.

The Norwegian government blocked the sale on national security concerns, as Norway's army is among Bergen's customers.

Rolls-Royce on Wednesday said it has notified the Norwegian government of the agreed sale. Bergen Engines will be operated by Langley Group as a stand-alone business.

Ryanair said air traffic doubled in July as travel restrictions eased.

The Irish budget airline flew 9.3 million passengers in July, up sharply from 5.3 million in June and more than double the 4.4 million reported for July 2020. This was at a load factor of 80%, improved from 72% in June.

Ryanair could be poised for an even better month ahead if the UK government decides to relax travel rules further on Thursday.

It has already ruled out plans for an "amber watchlist" as ministers prepare to review the traffic light system.

New rules allowing fully-vaccinated passengers from the US and amber-list European countries to avoid self-isolation on arrival in the UK came into force on Monday. The relaxation of rules allows passengers who have been double-jabbed with a vaccine approved by regulators in the US, the EU or Switzerland to avoid 10 days in self-isolation.

THG, which trades as The Hut Group, confirmed a Sky News report that is buying online retailer Cult Beauty for GBP275 million. THG also said it is trading ahead of management expectations on a constant-currency basis. It expects annual sales growth of between 35% and 38%.

In the US on Tuesday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.8%, the S&P 500 up 0.8% and the Nasdaq Composite up 0.6%.

Outside of PMIs on Wednesday, US ADP employment is due at 1315 BST.

"In the US, the ADP employment report will give some early hints about the jobs market situation during July, ahead of Friday's non-farm payroll report. The employment index in the ISM non-manufacturing index will also be worth watching for clues on the prevalence of labour shortages," said Danske Bank.

Gold was quoted at USD1,814.23 an ounce early Wednesday, higher than USD1,809.00 on Tuesday. Brent oil was trading at USD72.45 a barrel, up from USD71.83 late Tuesday.

By Lucy Heming; lucyheming@alliancenews.com

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