LONDON MARKET MIDDAY: Bumper day for earnings drives FTSE above 7,000

(Alliance News) - The US Federal Reserve and a strong set of corporate earnings kept the FTSE 100 well-supported on Thursday, with the blue-chip index back above the 7,000 mark.

The FTSE 100 was up 42.89 points, or 0.6%, at 7,006.56 at midday. The index of London large-caps was pushed below the 7,000 mark last week, having had surpassed the level in mid-April for the first time since the pandemic jolted markets in February 2020.

The mid-cap FTSE 250 index was up 32.94 points, or 0.2%, at 22,472.76. The AIM All-Share index was up 0.2% at 1,276.06.

The Cboe UK 100 index was up 0.6% at 697.28. The Cboe 250 was up 0.2% at 20,090.41, and the Cboe Small Companies up 0.4% at 14,591.25.

In mainland Europe, the CAC 40 in Paris was up 0.5%, while the DAX 30 in Frankfurt was 0.3% lower on Thursday.

"The broad mood in the market is upbeat after the Fed stuck to its dovish verse, insisting that it was still too early to discuss tapering support to the economy," said Sophie Griffiths, market analyst at Oanda, adding that Europe has been further boosted by strong oil & gas earnings.

Royal Dutch Shell 'A' and 'B' shares were both 1.4% higher at midday after posting a large-than-expected jump in quarterly earnings. The London-listed oil major's adjusted earnings in the first quarter jumped to USD3.23 billion from USD2.86 billion, which was ahead of company-compiled consensus at USD3.13 billion.

In Paris, meanwhile, Total shares rose 1.6% as it, like Shell benefited, from improved commodity prices. Adjusted net income came in at USD3 billion, above the pre-pandemic first quarter of 2019.

Brent oil was changing hands at USD68.15 a barrel on Thursday, up from USD67.65 late Wednesday and more than triple its price a year ago.

Oanda's Griffiths added: "The Dax is a noticeable laggard in Europe following disappointing labour market data."

Official data showed Germany's seasonally-adjusted jobless rate was stable at 6.0% in April, matching the prior four months. However, unemployment increased by 9,000 people, having been expected to fall by 10,000, according to FXStreet, after a decrease of 6,000 in March.

Due at 1300 BST is German inflation, which is expected to pick up to an annual rate of 1.9% in April from 1.7% in March.

The headline of Thursday's economic calendar, however, is US gross domestic product at 1330 BST, with jobless claims due at the same time. The US economy is expected to have grown 6.1% on an annualised basis in the first quarter of 2021, ticking up from the 4.3% increase posted for the fourth quarter.

Ahead of the GDP data, Wall Street was called for a bright open, and the dollar was clawing back some of the morning's losses.

The Dow Jones was called up 0.5%, the S&P 500 up 0.7% and the Nasdaq Composite up 1.0%. The Nasdaq was set to get a boost from Apple and Facebook, the two trading 2.7% higher and 7.1% higher pre-market following strong results late Wednesday.

As well as key data in the US on Thursday, earnings continued to roll in, with e-commerce heavyweight Amazon.com the day's headliner.

Sterling was quoted at USD1.3938 midday Thursday, firm on USD1.3912 at the London equities close on Wednesday. The euro traded at USD1.2119, rising from USD1.2100 late Wednesday.

Against the yen, the dollar nudged up to JPY109.04 from JPY108.85.

Gold was quoted at USD1,774.62 an ounce midday Thursday, a touch higher than USD1,772.08 late Wednesday as the morning's strong gains slipped away.

In London, Smith & Nephew and Standard Chartered were vying for top spot in the FTSE 100, up 5.9% and 5.9% respectively at midday.

Medical devices manufacturer Smith & Nephew said first-quarter revenue surged 12% to USD1.26 billion from USD1.13 billion a year earlier. The company reinstated guidance for the year ahead, expecting 2021 underlying revenue growth between 10% and 13%.

Emerging markets-focused bank Standard Chartered reported a "strong" start to 2021, with a sharp drop in credit impairments and a record quarter from its Wealth Management arm giving the bank confidence for the rest of 2021. In the three months to March 31, the lender reported a sharp jump in pretax profit to USD1.41 billion from USD886 million the year before.

Unilever took third place, shares rising 3.4% on plans for a EUR3 billion share buyback.

The consumer goods firm's revenue in the first three months of 2021 slipped 0.9% year-on-year to EUR12.33 billion from EUR12.44 billion a year earlier - though underlying sales growth was 5.7% for the quarter.

"We are confident that we will deliver underlying sales growth in 2021 within our multi-year framework of 3-5%, with the first half around the top of this range," Chief Executive Officer Alan Jope said.

This was all offsetting a 3.6% slide for NatWest.

The UK state-backed bank reported a jump in quarterly profit, but total income suffered from a poor performance in its investment banking unit, seeing a slowdown in transactional activity.

NatWest - rebranded from Royal Bank of Scotland last year - said operating pretax profit surged 82% to GBP946 million for the first quarter of 2021 from GBP519 million a year ago. Natwest recorded a net impairment release of GBP102 million in the first quarter, compared to a charge of GBP802 million a year ago.

More worryingly for the bank, total income fell 16% to GBP2.66 billion from GBP3.16 billion the year before. Net interest income was slightly lower at GBP1.93 billion compared to GBP1.94 billion, but non-interest income dropped to GBP728 million from GBP1.07 billion.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, commented: "While many banks are struggling against low interest rates, NatWest's net interest income is doing better than expected, despite customers paying down higher interest credit cards. That's thanks to very strong mortgage lending, where the bank added some GBP9.6 billion to the loan book. However, non-interest income is a different story, and less volatile markets and lockdowns restricting customer spending have seen the bank take a big hit here."

In the FTSE 250, Tullow Oil jumped 12% after launching USD1.80 billion bond offering and agreeing a new revolving credit facility as heavily indebted firm looks to extend its debt maturity profile.

The oil and gas exploration company said it will sell new senior secured notes that will mature in 2026. It will then use the funds to buy back USD300 million of 6.625% convertible bonds due this July and USD650 million of 6.25% senior secured notes due 2022.

In addition, Tullow agreed a USD500 million revolving credit facility and a USD100 million letter of credit facility, which mature in December 2024. The company will repay its existing reserves based lending facility.

Travis Perkins rose 7.7% as it completed its share consolidation following the spin-off of DIY retailing arm Wickes. Travis shares were consolidated at a ratio of 0.8925 of a new share for every one existing share.

Wickes shares were trading 1.8% higher on Thursday.

By Lucy Heming; lucyheming@alliancenews.com

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