LONDON MARKET CLOSE: Travel And Energy Stocks Gain On Reopening Hopes

(Alliance News) - Stocks in London ended higher on Wednesday as investors continued to buy up shares in travel and energy companies amid reopening optimism.

The FTSE 100 index closed up 33.03 points, or 0.5%, at 6,658.97. The FTSE 250 ended up 254.93 points, or 1.2%, at 21,312.65 and the AIM All-Share closed up 6.00 points, or 0.5%, at 1,189.88.

The Cboe UK 100 ended up 0.7% at 663.54, the Cboe UK 250 closed up 1.1% at 18,922.15, and the Cboe Small Companies ended up 1.2% at 13,094.82.

In Paris the CAC 40 ended up 0.3%, while the DAX 30 in Frankfurt ended up 0.8%.

CMC Markets analyst Michael Hewson said: "European markets have had a much better tone today after a rather mixed session yesterday. What hasn't changed is the underlying bid tone to travel and leisure stocks which are continuing to build on their recent gains with another strong session. Amongst the best performers on the FTSE 100 is British Airways owner International Consolidated Airlines, ahead of the release of its full year results this Friday, as demand for flights starts to pick up in anticipation of a much better second half for 2021.

"While all of these gains are very welcome, with EasyJet and Ryanair shares also doing well, the fact remains that while capacity is likely to increase over the course of the rest of the year, what airlines like IAG really want to see is a resumption of business travel, and it's hard to see how that can return to normal any time soon."

In the FTSE 100, oil major BP ended the best performer, up 5.4%, while peer Royal Dutch Shell 'A' and 'B' shares closed up 3.3% and 3.8% respectively, tracking spot oil prices higher.

Brent oil was quoted at USD67.02 a barrel at the equities close, up sharply from USD65.07 at the close Tuesday, trading around pre-pandemic levels.

Oanda Markets analyst Craig Erlam explained: "Prices continue to be supported by the global recovery trade but the trend is showing signs of exhaustion ahead of next week's OPEC+ meeting. The discussion is likely to be intense again, with Saudi Arabia once more likely to be among the more cautious and Russia at the other end of the scale. US shale remains an ever-present risk for the group of producers and current prices may be making them nervous."

Travel-related stocks were once again higher on reopening optimism, with British Airways parent International Consolidated Airlines up 4.0% and jet engine maker Rolls-Royce up 4.9%. Midcap peer easyJet ended 6.1% higher, while Irish carrier Ryanair gained 1.7%.

Lloyds Banking managed to close up 0.1%, reversing earlier losses after the high street bank reported a sharp drop in annual profit, but was able to beat market expectations, as the lender's banking margins took a hit from lower interest rates which, in turn, crushed its income.

For 2020, the blue chip high-street lender's pretax profit sunk 72% to GBP1.23 billion from GBP4.39 billion, but was able to outperform market expectations of profit of GBP905 million.

Driving the drop in profit was a sharp increase in impairments, rising to GBP4.25 billion from GBP1.29 billion in 2019. Market consensus had predicted the charge at GBP4.71 billion, however.

The lender also declared a final dividend of 0.57 pence, the maximum allowed under the current guidelines in the UK, and outlined its intention to resume progressive and sustainable ordinary dividend policy in 2021.

Domestic peers Barclays and NatWest closed up 3.4% and 0.3% respectively, having reported steep drops in annual profit and income of their own due to the pandemic.

At the other end of the large-caps, Vodafone ended the worst performer, down 3.4%. The Berkshire, England-based telecommunications company confirmed plans for an initial public offering of European mobile phone tower operator Vantage Towers.

Vodafone said the IPO will be in Frankfurt before the end of March and will consist entirely of existing shares held by Vodafone. The company said it is targetting a meaningful minority free float for Vantage Towers and has yet to state an IPO pricing.

Reckitt Benckiser closed 1.5% lower despite the household goods firm swinging to a profit for 2020. RB said it swung to profit in 2020 as its cleaning and disinfectant brands got a sales boost from the coronavirus pandemic.

The Slough, Berkshire-based consumer health and hygiene firm swung to a pretax profit of GBP1.87 billion from a loss of GBP2.11 billion in 2019.

Net revenue for 2020 increased 8.9% to GBP13.99 billion from GBP12.85 billion the year before, a hair below company-compiled consensus of GBP14.02 billion.

For 2021, Reckitt expects like-for-like revenue in the range of flat to 2% growth year-on-year, with adjusted operating margin expectations broadly unchanged. The company said it will keep investing in growth in 2021, so expects that margin to be between 40 and 90 basis points lower than the 23.6% recorded in 2020, which in turn was down from 26.2% in 2019.

The pound was quoted at USD1.4100 at the London equities close, flat from USD1.4103 at the close Tuesday. Sterling had touched an intraday high of USD1.4242 in early trade versus the greenback - its highest level since April 2018.

The euro stood at USD1.2127 at the European equities close, down from USD1.2160 late Tuesday. Against the yen, the dollar was trading at JPY106.00, up sharply from JPY105.11 late Tuesday.

Stocks in New York were mostly higher at the London equities close reacting favourably to the outlook for monetary policy following US Federal Reserve Chair Jerome Powell's remarks on Tuesday.

The DJIA was up 0.5%, the S&P 500 index up 0.3%, but the Nasdaq Composite was off 0.2%.

On his second day of Congressional testimony, Powell reiterated his view that the US labor market has a long way to go as it recovers from jobs lost in the pandemic and that the central bank is likely to maintain its ultra-easy monetary policy for the foreseeable future.

On the corporate front, the Johnson & Johnson Covid-19 vaccine is highly effective against severe Covid-19, including against the South African and Brazil variants, new documents released by the US Food and Drug Administration showed Wednesday. The stock was up 1.2% in New York.

Gold was quoted at USD1,975.20 an ounce at the London equities close, up against USD1,803.05 late Tuesday.

The economic events calendar on Thursday has eurozone consumer confidence figures at 1000 GMT. In the afternoon there are US GDP readings and the latest jobless claims numbers at 1330 GMT.

The UK corporate on Thursday has annual results from miner Anglo American, Asia-focused bank Standard Chartered, defence giant BAE Systems, packaging firm Mondi, drugmaker Hikma, Russian steelmaker Evraz and from luxury carmaker Aston Martin Lagonda.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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