LONDON MARKET OPEN: FTSE 100 edges up despite Unilever, NatWest drag

(Alliance News) - The FTSE 100's rebound extended into early trade on Thursday, but with Unilever and NatWest weighing on the index.

Boosting the more domestically-focused FTSE 250 index was Morgan Sindall, as it lifted its full-year outlook again.

The FTSE 100 index was up 5.58 points, or 0.1%, at 7,003.86 early Thursday. The mid-cap FTSE 250 index jumped 190.04 points, or 0.8%, to 22,732.01. The AIM All-Share index was up 0.7% at 1,221.07.

The Cboe UK 100 index was flat at 697.48. The Cboe 250 was up 0.8% at 20,417.42, and the Cboe Small Companies up 0.1% at 14,940.30.

"Concerns about the Delta variant rising and wreaking havoc on economies around the world have been outweighed by optimism about corporate earnings," said Naeem Aslam at AvaTrade.

London's blue-chip index slumped 2.3% at the start of the week as worries mounted over a resurgence in coronavirus cases across the globe, driven by the more infectious Delta variant.

However, the mood brightened as the week progressed and the FTSE 100 is now on track for a third consecutive sessions of gains, closing in on the 7,008 level that it closed on Friday.

The FTSE 100 advanced even as Unilever weighed on the index, falling 4.4% as it reported interim sales growth, though noted input cost inflation.

Revenue for the first half of 2021 rose 0.3% to EUR25.79 billion, while pretax profit dipped 3.6% to EUR4.37 billion.

Underlying sales growth for the half-year was 5.4%, driven by volumes, though the consumer goods company noted price growth stepped up in the second quarter. Unilever's underlying operating margin slipped 100 basis points to 18.8% due to investment into its brands and input cost inflation.

"Competitive growth is our priority, and we are confident that we will deliver underlying sales growth in 2021 well within our multi-year framework of 3-5%, despite more challenging comparators in the second half," said Chief Executive Alan Jope.

"We have seen further cost inflation emerge through the second quarter," Jope said. "Cost volatility and the timing of landing price actions create a higher than normal range of likely year end margin outcomes. We are managing this dynamically and expect to maintain underlying operating margin for 2021 around flat."

Unilever added that the operational separation of the tea business is "substantially complete" and due to conclude in October. It is focused on the next phase for the business, which would include an initial public offering, sale or partnership.

Unilever declared a quarterly dividend of EUR0.4268 per share, in line with what was declared for the first quarter.

NatWest fell 1.6% as the UK government unveiled plans to sell a large part of its stake in the lender, in a trading plan managed by Morgan Stanley.

The Treasury currently owns 6.34 billion shares in NatWest, via UK Government Investments, representing a 54.7% stake.

"HMT has instructed Morgan Stanley that (a) its intention is that up to, but no more than, 15% of the aggregate total trading volume in the company will be sold over the scheduled duration of the trading plan, and (b) shares may not be sold under the trading plan below a price per share that UKGI and HMT determine represents fair value and delivers value for money for the taxpayer," the government said.

Towards the top end of the index was Royal Mail, rising 3.3% after Bernstein raised the stock to Outperform from Market Perform. Royal Mail on Wednesday fell 2.7% as it registered quarterly revenue growth but warned on "fluctuations" in volumes as lockdown restrictions start to ease.

Morgan Sindall shares surged 12% as it bumped up its outlook.

The construction and property regeneration group said all divisions have performed well and its results for the first half of 2021 are expected to show pretax profit around GBP53 million, reflecting growth of more than three-fold on a year ago and up 46% on 2019's pre-pandemic levels.

The Construction & Infrastructure division's margin and profit growth was growth in the half, while Fit Out continued its "high level" of performance.

"As a result, the group now anticipates that its full year results for 2021 will be significantly ahead of its previous expectations," said Morgan Sindall.

Back in February, Morgan Sindall said it was on track to deliver a result for 2021 ahead of previous expectations and slightly above 2019, and then raised expectations again in April on positive momentum. This latest outlook boost marks the third so far for 2021.

In mainland Europe, the CAC 40 in Paris was up 0.4% while the DAX 30 in Frankfurt was up 0.7% early Thursday.

In focus on Thursday is the European Central Bank's interest rate decision at 1245 BST, followed by a press conference with President Christine Lagarde at 1330 BST.

The meeting, initially regarded as likely to be uneventful by analysts, is now being closely watched following the results of the ECB's strategy review a fortnight ago.

The headline change from the review was the ECB's decision to adopt a new symmetric 2% inflation target, which allows more room for inflation overshoots than the previous target of 'below, but close' to 2% did.

The euro traded at USD1.1799 early Thursday ahead of the ECB announcement, flat against USD1.1800 late Wednesday.

Elsewhere, the dollar was on the back foot. Sterling was quoted at USD1.3755 early Thursday, up from USD1.3684 at the London equities close on Wednesday. Against the yen, the dollar softened to JPY110.13 versus JPY110.25.

Gold was quoted at USD1,801.85 an ounce early Thursday, lower than USD1,805.13 on Wednesday. Brent oil was trading at USD72.07 a barrel, up against USD71.86 late Wednesday.

In China, the Shanghai Composite ended up 0.3%, while the Hang Seng index in Hong Kong jumped 1.7%. The S&P/ASX 200 in Sydney rose 1.1%. Financial markets in Japan were shut for the Marine Day holiday.

Alongside the ECB decision, Thursday's economic calendar has US weekly jobless claims figures at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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