LONDON MARKET MIDDAY: Stocks lower amid Covid spread, inflation fears

(Alliance News) - Stock prices in London were lower at midday, reversing earlier gains, as ...

Alliance News 17 May, 2021 | 12:32PM
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(Alliance News) - Stock prices in London were lower at midday, reversing earlier gains, as investors mull the spread of the Indian variant of Covid-19, while global inflation fears remain prevalent ahead of the release of US Federal Reserve policy meeting minutes on Wednesday.

The FTSE 100 index was down 33.28 points, or 0.5%, at 7,011.15. The mid-cap FTSE 250 index was down 32.51 points, or 0.2%, 22,303.53. The AIM All-Share index was up 0.1% at 1,237.07.

The Cboe UK 100 index was down 0.5% at 699.60. The Cboe 250 was down 0.2% at 20,058.59, and the Cboe Small Companies down 0.3% at 14,958.41.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 0.1% and 0.2% respectively.

"After a rollercoaster ride, the markets finally bounced back on Thursday, leading to a positive close on Friday which trimmed the weekly losses sharply for the major indices. As we start the new week, we shall see how things will evolve in the days ahead as inflation worries haven't gone away completely, and many will be reluctant to step back in after a volatile week," said ThinkMarkets analyst Fawad Razaqzada.

"For many investors inflation concerns will remain the key risk in the weeks and months ahead. Investors will have to decide whether to lean decisively on the Federal Reserve's 'transitory' side of the argument or the more hawkish calls from a growing number of economists and analysts."

In the FTSE 100, housebuilders showed little reaction as UK house prices notched another record high in May, according to property portal Rightmove.

Persimmon, Taylor Wimpey, Barratt Developments and Berkeley were down 0.6%, 0.9%, 0.6% and 0.9% respectively.

UK house prices rose 1.8% monthly to an average of GBP333,564, a record high. Annually, prices are 6.7% higher. Rightmove noted that during housing market upturns in the UK, it is often London that leads the way. That is not the case this time, however, as house price growth in London since last year is just 0.2%. Both the North West of England and Yorkshire & the Humber have seen growth of 11%.

Vistry Group was up 1.5%. The midcap housebuilder raised annual profit guidance after making a positive start to the year.

Vistry said it has seen strong demand across all areas of the business and an average weekly private sales rate of 0.75, up 70% at the same time in 2020.

For the full year, Vistry said housebuilding is on track to deliver a significant step-up in completions to 6,500 units, up from 4,652 in 2020 and ahead of previous guidance. Vistry said its Partnerships unit expects to deliver significant growth in higher-margin mixed-tenure completions in 2021 and is on track to meet its 2022 targets of GBP1 billion revenue and an adjusted operating margin of 10%.

Looking ahead, Vistry said that, due to strong trading in the first half and increased expectations for 2021 house completions, it now expects adjusted pretax profit for 2021 to be GBP325 million, whilst maintaining its expectations for 2022. Vistry previously had guided to adjusted pretax profit of at least GBP310 million.

In the FTSE 250, Diploma was still the best performer, up 6.3%, after the technical products supplier said it saw a strong first-half performance and expects its full-year performance ahead of expectations.

For the six months to March 31, revenue at the London-based seals and cables maker was up 29% to GBP365.2 million from GBP283.6 million the year before, and pretax profit increased 2% to GBP42.5 million from GBP41.6 million.

Diploma declared an interim dividend of 12.5 pence per share, having skipped its interim payout last year. It said this reflects its "growth outlook and future prospects".

Turning to acquisitions, Diploma said it had an active "pipeline of opportunities".

Looking ahead, Diploma said: "As a result of the strong trading performance in the first half and positive momentum into the second half, we now expect full-year results significantly ahead of our previous expectations."

Elsewhere, Ryanair Holdings was up 0.8% after the Irish carrier said it expects an improvement to financial results as coronavirus restrictions ease and it introduces a more efficient airplane.

Ryanair said it swung to a loss in the financial year to the end of March of EUR1.11 billion from a EUR648.7 million profit recorded the year before.

Annual revenue fell 81% year-on-year to EUR1.64 billion from EUR8.49 billion, in line with the fall in traffic to just 27.5 million from 148.6 million the year prior. Load factor declined to 71% from 95% year-on-year.

Looking ahead, Ryanair expects first-quarter traffic to be between 5 million and 6 million passengers. It also believes that annual traffic is likely to be towards the lower end of its previously guided range of 80 million to 120 million passengers, which would represent a jump of up to four times year-on-year.

The airline said it thinks financial 2022 will be close to breakeven, assuming vaccine rollouts allow the lifting of intra-European travel restrictions in time for the July to September peak period.

Looking further ahead, Ryanair will benefit from introduction of the Boeing 737 "gamechanger" aircraft, which it said will improve revenue, with 4% more seats available, while reducing fuel costs.

Back in December, Ryanair ordered 75 extra Boeing 737 MAX-8200 jets, in the wake of the planes being approved by US regulators to take to the skies once again, following two crashes. The agreement takes the number of MAX-8200 aircraft in the carrier's fleet to 210, with a total value of over USD22 billion.

However, Ryanair's optimism failed to lift peers amid fears of the spread of the Indian variant of Covid-19. British Airways parent International Consolidated Airlines was down 1.2% and easyJet down 1.1%.

The dollar was lower against major counterparts. The pound was quoted at USD1.4107 at midday on Monday, up from USD1.4088 at the London equities close Friday.

The euro was priced at USD1.2160, up from USD1.2138. Against the yen, the dollar was trading at JPY109.23, lower from JPY109.40.

Brent oil was quoted at USD68.77 a barrel Monday at midday, up from USD68.30 late Friday. Gold was priced at USD1,850.12 an ounce, higher than USD1,837.50.

New York stock market futures were pointed lower as investors weighed the global inflation outlook and a spike in Covid-19 cases in parts of the world.

The Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite were all called down 0.3%.

The rise in infections has forced Taiwan to order stricter social distancing measures for the capital and surrounding areas, while Japan extended a state of emergency as calls grow for the Olympics to be scrapped.

Focus this week is on the release of minutes from the US Federal Reserve's latest policy meeting at the end of last month, which will be examined for an idea about the central bank's views on inflation in light of surging commodity prices, supply bottlenecks and economic reopenings.

On the corporate front, AT&T shares were up 3.1% in pre-market trade after US media reported the telecommunications firm could soon announce a merger between its WarnerMedia unit - which owns CNN and HBO - and Discovery media.

The new entity is expected to be owned by AT&T and Discovery, according to the CNBC report, but no details were immediately released. Bloomberg, citing people with knowledge of the matter, reported a deal "could be announced announced as soon as this week."

The transaction could create a video streaming provider able to compete with Netflix and Disney+, which have seen their number of subscribers surge during the pandemic.

A slowdown in the growth of the Walt Disney empire's streaming platform between January and March, however, caused the group's shares to slide last week.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Diploma PLC 2,924.00 -
Barratt Developments PLC 709.80 -
easyJet PLC 973.40
International Consolidated Airlines Group SA 197.80
Berkeley Group Holdings (The) PLC 4,602.00 -
Taylor Wimpey PLC 165.00 -
Persimmon PLC 3,038.00 -
Ryanair Holdings PLC 16.64
Vistry Group PLC 1,215.50 -
AT&T Inc 28.93

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