(Alliance News) - Stocks in London ended mostly higher on Monday with oil majors helping the FTSE 100, against a backdrop of rising global inflation and slowing economic growth.
The FTSE 100 index ended up 40.57 points, or 0.6%, at 7,069.77. The mid-cap FTSE 250 index closed up 42.17 points, or 0.2%, at 23,775.73. The AIM All-Share index lost 10.37 points, or 0.8%, to 1,284.77.
The Cboe UK 100 index ended up 0.6% at 703.50. The Cboe 250 ended flat at 21,535.10, and the Cboe Small Companies gained 0.5% to 15,533.60.
In Paris, the CAC 40 stock index ended up 0.2%, while the DAX 30 in Frankfurt ended up 0.6%.
"European markets have got off to a positive start to the week, with the energy sector helping to push the FTSE 100 back up towards the 7,100 level, with BP and Shell outperforming, as power prices surge across Europe, although it still remains some way short of reversing the losses of last week," said CMC Markets analyst Michael Hewson.
In the FTSE 100, Rolls-Royce closed up 2.5%. The jet engine maker and Babcock International Group said they have agreed to sell their stakes in AirTanker Holdings to London-based private equity firm Equitix Investment Management, while Airbus plans to maintain its holding in the venture.
AirTanker Holdings is a joint venture among Rolls-Royce, Babcock, Airbus and Thales that owns 14 Airbus A330 Voyager aircraft. Airbus and Thales now have the right to intervene and buy Rolls-Royce and Babcock's stakes on the same terms, instead of Equitix.
Rolls-Royce said it will receive GBP189 million for its 23% shareholding in AirTanker Holdings, of which GBP47 million will be used to repay shareholder loans. London-based Rolls-Royce will use the proceeds to cut debt. The deal is subject to regulatory approval and is expected to complete by the end of the first quarter of 2022.
Babcock will get GBP126 million, minus GBP31.1 million loan repayments, for its 15%. It also plans to use the money to pay down debt. Babcock shares closed up 4.5%.
Shares in oil majors were higher, with BP, Royal Dutch Shell 'A' and Shell 'B' up 2.3%, 2.4% and 2.2% respectively, tracking spot oil prices higher. Midcap peers Tullow Oil and Harbour Energy closed up 8.3% and 3.6% respectively.
Brent oil was quoted at USD73.57 a barrel at the equities close, up sharply from USD72.67 at the close Friday following upbeat comments from the Organization of the Petroleum Exporting Countries.
OPEC said it expects global oil demand to exceed its pre-pandemic level next year thanks to the roll out of vaccines and economic rebound.
"As vaccination rates rise, the Covid-19 pandemic is expected to be better managed and economic activities and mobility will firmly return to pre-Covid-19 levels," OPEC said in its monthly report on the oil market.
As economic activity ramps up OPEC expects global oil demand to grow by 4.2 million barrels per day on average next year.
That is around 900,000 barrels higher than its estimate last month, and takes global oil demand to 100.8 mbd on average next year, which is above the pre-pandemic levels.
The optimistic forecast comes as the cartel nations and their allies, together known as OPEC+, are beginning to raise output to meet recovering demand.
At the other end of the large-caps, Associated British Foods closed down 2.4% after it warned sales in its largest business unit Primark are set to fall this financial year after stores were hit by the 'pingdemic' in the final quarter.
Sales at the fast fashion retailer in the second half of the financial year ending September 18 are expected to come in at GBP3.4 billion, bringing the full-year total to around GBP5.6 billion. That's down 5.1% from the GBP5.90 billion revenue Primark made in financial 2020, and down 28% from the GBP7.80 billion in financial 2019.
It's also lower than AB Foods expected, as the so-called "pingdemic" in the summer forced staff and would-be customers to stay at home for ten days if they came into contact with any positive Covid cases.
In addition, the London-based company cautioned that virus restrictions have slowed its Primark store rollouts and a stronger pound will result in a currency exchange hit of around GBP35 million for the full year.
In the FTSE 250, easyJet ended the worst performer as the budget airline's new shares, issued as part of its GBP1.2 billion rights issue, started trading.
easyJet shares ended down 13% at 590.00 pence from their 680.80p closing price on Friday. However, the stock price was up 2.9% when accounting for the dilution from the rights issue, which implied a closing price on Friday of 573.17p, according to the company's website.
The rights offer, which saw shareholders offered 31 new shares for every 47 existing shares already owned, was announced on Thursday last week, sending the stock down 12% that day, as the company also said it had rejected a takeover offer. The rights issue was priced at 410p per share.
Sterling lost ground against the dollar as investors eye the UK government's Covid-19 plans heading into the winter, with infections expected to rise.
Guidance to work from home and the mandatory use of face masks are likely to be retained as options in the Covid winter plan due to be set out by UK Prime Minister Boris Johnson.
The PM will tell the nation on Tuesday how the country can learn to live with the virus, underlining how vaccinations will be a central part of the response to coronavirus in the coming months.
Covid laws that are no longer required will be ditched and plans for vaccine passports for nightclubs and other large crowd venues have been shelved. The travel traffic lights system is also expected to be scrapped and PCR tests will no longer be required for fully vaccinated travellers.
Elsewhere, Neil Ferguson, whose modelling was instrumental to the UK going into lockdown in March 2020, has said he is in favour of a booster programme.
Ferguson said vaccinating teenagers with a first shot was the priority as the UK looks at dealing with any autumn and winter surges in Covid. But he said evidence from Israel suggested booster shots for a wider population were "very effective at further driving down transmission and infection".
Asked whether a further lockdown could be ruled out, he said "I hope so" but added that "you can't rule out anything completely".
The pound was quoted at USD1.3840 at the London equities close, marginally lower from USD1.3845 at the close Friday.
Analysts at OFX commented: "Tomorrow Prime Minister Boris Johnson is scheduled to outline his response to the potential spike in Covid-19 during the winter months, in order to protect the NHS from being overrun. He is expected to reiterate that he currently sees no reason for further lockdowns, however there may be a period in which people are encouraged to work from home and that protective masks will once again become mandatory in certain areas.
"The pound could weaken on the back of this announcement as investors become nervous about the knock-on effect of Covid-19 on the UK economy."
The euro stood at USD1.1807 at the European equities close, down from USD1.1828 late Friday. Against the yen, the dollar was trading at JPY109.95, up from JPY109.85 late Friday.
Stocks in New York were mostly higher at the London equities close following last week's heavy losses.
The DJIA was up 0.3%, the S&P 500 index up 0.9% but the Nasdaq Composite was down 0.1%.
Gold was quoted at USD1,795.77 an ounce at the London equities close, little changed against USD1,795.25 late Friday.
The economic events calendar on Tuesday has UK unemployment figures at 0700 BST and US inflation readings at 1330 BST.
The UK corporate calendar on Tuesday has interim results from athletic apparel retailer JD Sports Fashion. fund administration services provider Sanne Group and furniture retailer Made.com. Online grocer Ocado Group issues a trading statement.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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