LONDON MARKET MIDDAY: Stocks Rise; JPMorgan Chase net income surges

(Alliance News) - Stock prices in London were mostly higher at midday on Wednesday as earning season gets underway on the other side of the Atlantic, with JPMorgan Chase kicking off proceedings.

The FTSE 100 index was up 15.75 points, or 0.2%, at 6,906.24. The mid-cap FTSE 250 was up 53.37 points, or 0.2%, at 22,322.39. The AIM All-Share index was down 0.8% at 1,244.56.

The Cboe UK 100 index was up 0.2% at 687.50. The Cboe 250 was up 0.4% at 19,949.30. The Cboe Small Companies was up 0.1% at 14,305.75.

In mainland Europe, the CAC 40 index in Paris was up 0.5% and the DAX 30 was 0.1% lower.

"European shares mostly traded higher, despite an uneven performance across the continent with mixed earning reports in different areas. While most benchmarks remain close to their record highs, some technical indicators suggest that the price action is losing directionality. Indeed, investors seem to be keen to drive stock prices higher but will desperately need further market catalysts for that," said analysts at ActivTrades.

New York stock market futures were pointed mostly higher as banks get the US earnings season gets underway.

The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index up 0.1% and the Nasdaq Composite up 0.2%.

JPMorgan Chase & Co, Wells Fargo and Goldman Sachs all report first-quarter results before the market open in New York. The stocks were down 1.3%, down 0.3% and up 1.0% respectively in pre-market trade.

"The US economic recovery should help boost banks over the coming year, with the sectors pro-cyclical nature meaning that they outperform when monetary policy is tightening. Meanwhile, the apparent one-way direction for US indices will help investment banks in their bid to increase profitability. However, today's big headline could easily be centred around Goldman Sachs and just how much of a hit they suffered in the fallout of the Archegos Capital Management collapse last month," said IG Group's Josh Mahony.

JPMorgan Chase said it delivered a strong underlying performance across its businesses, partially driven by a rapidly improving economy.

For the first quarter to March 31, net revenue as up USD32.3 billion from USD29.01 billion in the first quarter of 2020 and net income surged to USD14.3 billion from USD2.87 billion. Earnings per share was USD4.50, multiplied from USD0.78.

"With all of the stimulus spending, potential infrastructure spending, continued quantitative easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth. This growth can benefit all Americans, particularly those who suffered the most during this pandemic. If all of the

government programs are spent wisely and efficiently, focusing on actual outcomes, the benefits will be more widely shared, economic growth will be more sustainable and future problems, like inflation and too much debt, will be reduced," said CEO Jamie Dimon.

In the FTSE 100, Glencore was still the best performer at midday up 2.9%, after Goldman Sachs upgraded the miner and commodities trader to Buy from Neutral.

UK fashion house Burberry was up 1.7% in a positive read-across from continental peer LVMH Moet Hennessey Louis Vuitton.

The French luxury goods company late Tuesday said it kicked off the new year with a sales surge and added that its first-quarter revenue even topped 2019's levels.

LVMH shares were up 2.7% in Paris on Wednesday, while Gucci-owner Kering was up 1.7% and Hermes International was 1.0% higher.

AstraZeneca was up 1.2% after the Anglo-Swedish drugmaker said its Tagrisso drug has been approved in China for early-stage lung cancer.

At the other end of the large-caps, Tesco was still the worst performer, down 3.5%, after the UK's largest supermarket chain reported a drop in annual profit despite "exceptionally strong" sales growth during the Covid-19 pandemic.

For the year that ended February 27, revenue including fuel was GBP57.9 billion, down 0.4% from GBP58.1 billion in financial 2020 and pretax profit was GBP825 million, down 20% from GBP1.03 billion.

Revenue excluding VAT and fuel on a comparable 52-week basis was GBP53.45 billion, up 7.1% on GBP49.95 billion the year before but missing the company-compiled consensus forecast of GBP58.41 billion, while pretax profit missed the estimate of GBP891 million.

Tesco held its annual dividend at 9.15 pence by declaring a 5.59 final payout.

Blue-chip peer J Sainsbury was 1.7% lower and midcap rival Wm Morrison Supermarkets was off 0.9% in a negative read-across.

Hargreaves Lansdown's Nick Hyett said: "Tesco reported solid revenue growth for the year, growing market share and gaining customers from all its key competitors. However, servicing extra demand during a pandemic has come at significant cost as the group took on extra staff and expanded its online offering. The good news is that those costs should be temporary, and while some of the extra sales will slip away when the end of lockdown allows customers to shop elsewhere, the stage is set for a strong earnings recovery once the pandemic passes.

"We suspect the longer term impact will be a permanent uplift in online shopping, and Tesco has used the last year to dramatically increase its delivery capacity. Weekly slots have more than doubled to 1.5m a week and new fulfilment centres are under construction and due online shortly. With the recent sale of the group's Asian businesses fortifying the balance sheet, Tesco is in pretty good shape."

BT Group was 1.5% lower. The UK Competition & Markets Authority said it has provisionally cleared the proposed merger of BT rivals Virgin Media and Virgin Mobile with O2.

O2 is a cellular network operator and the commercial brand of Telefonica UK, which is part of the telecommunications company Telefonica. Virgin Media, meanwhile, is a subsidiary of Liberty Global, a television & telecommunications company.

Liberty Global and Telefonica announced the tie-up last May, which is expected to create GBP11 billion in revenue. Back in December 2020, an in-depth investigation into the GBP31 billion mega-merger was launched by the competition watchdog.

The CMA previously had blocked a merger between O2 and rival network Three, although it had approved BT's deal with EE.

In the FTSE 250, QinetiQ was the best performer, up 7.5%, after the defence engineering company said it expects to post annual results above previous guidance and above market consensus expectations.

QinetiQ expects full-year underlying operating profit margin percentage to be "modestly ahead" of that delivered in the first half, resulting in underlying operating profit for the full year of at least GBP147 million. In January, it had guided for annual operating profit of GBP130 million.

easyJet was up 3.0%. The budget airline said its interim results for the financial year that ended March 31 were slightly better than expectations, and it maintains significant liquidity, while also saying second-quarter cash burn was better than guidance.

easyJet said it has operated a "disciplined" flying programme over the winter months whilst continuing to deliver a major restructuring and cost reduction programme. It posted a headline pretax loss of GBP193 million last year.

As a result, the carrier expects to report a first half headline pretax loss in the range of GBP690 million to GBP730 million, which is slightly better than expectations.

Commenting on the outlook for overseas travel, easyJet Chief Executive Johan Lundgren said he "would expect almost all major European countries" to be put in the low-risk category when holidays from the UK are allowed to resume.

At the other end of the midcaps, Airtel Africa was the worst performer, down 10% at 76.00p. JPMorgan Securities said an institutional investor sold 50 million shares in Airtel at 75.0p each for GBP37.5 million in total.

The pound was quoted at USD1.3767 at midday Wednesday, up from USD1.3738 at the London equities close on Tuesday.

The euro was priced at USD1.1954, up from USD1.1930. Against the Japanese yen, the dollar was quoted at JPY108.98, down from JPY109.25.

Brent oil was trading at USD64.66 a barrel Wednesday at midday, higher against USD63.84 at the London equities close on Tuesday. Gold was trading at USD1,743.28 an ounce, up slightly from USD1,742.96.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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