LONDON MARKET CLOSE: FTSE 100 hindered by pound as rate hike bets rise

(Alliance News) - Stocks in London ended slightly higher on Tuesday as the FTSE 100 was stifled ...

Alliance News 19 October, 2021 | 4:05PM
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(Alliance News) - Stocks in London ended slightly higher on Tuesday as the FTSE 100 was stifled by a stronger pound, while earnings season in the US continued.

The FTSE 100 index closed up 13.70 points, or 0.2%, at 7,217.53. The FTSE 250 closed up 85.35 points, or 0.4%, at 23,054.09 and the AIM All-Share closed up 1.57 point, or 0.1%, at 1,239.03.

The Cboe UK 100 ended up 1.6% at 716.30, the Cboe UK 250 closed up 0.5% at 20,825.70 and the Cboe Small Companies ended up 0.1% at 15,610.50.

The CAC 40 stock index in Paris ended down 0.1% and the DAX 40 in Frankfurt ended up 0.3%.

"European markets have had a steadier and pretty uneventful day, trading quietly with little in the way of direction, with the FTSE 100, trading around the flat line, and FTSE 250 edging higher. The continued resilience in oil prices is continuing to act as a drag on the travel and leisure sector, with IAG the biggest faller, slipping to four-week lows, after Heathrow Airport said it would be hiking passenger charges for airlines using the hub," said CMC Markets analyst Michael Hewson.

In the FTSE 100, Entain ended up 2.2% after suitor DraftKings deadline to make firm offer for the Ladbrokes owner has been extended to November 16.

The Boston, Massachusetts-based sports betting firm said it will continue to engage in discussions with Entain and to conduct more substantive due diligence regarding its GBP16 billion offer.

Draftkings was up 0.5% in New York.

Pearson closed up 2.5% after the educational publisher was upgraded to Hold from Sell by Berenberg and to Neutral from Underperform by Credit Suisse.

Precious metals miners tracked the price of gold higher. Gold stood at USD1,772.17 an ounce at the London equities close, firm against USD1,768.25 late Monday.

Fresnillo gained 2.9% - the top blue-chip stock, while Polymetal International advanced 2.1%.

Tesco closed up 1.8% after the supermarket chain said it was launching its first checkout-free high street store where shoppers can pick up their groceries and leave without the need for a till.

It is the latest large retailer to open a store where checkouts are replaced by high-tech cameras designed to track the items shoppers place in their baskets.

The firm's high street store trial, which it has called GetGo, launches in High Holborn in London on Tuesday. Amazon launched its first Amazon Go grocery shop in the UK in February, before expanding to five more sites, while Aldi opened its own till-free shop last month.

At the other end of the large-caps, International Consolidated Airlines ended the worst performer, down 5.8%, after Berenberg downgraded the British Airways parent to Hold from Buy.

In travel sector news, Heathrow will be allowed to raise passenger charges by up to 56% under plans announced by the UK aviation regulator.

The Civil Aviation Authority is consulting on increasing the cap on the west London airport's price per passenger from GBP22 last year to between GBP24.50 and GBP34.40. It is proposing that the exact figure will depend on factors such as passenger demand and commercial revenue, with prices higher if Heathrow continues to struggle in those areas.

The range is planned to come in effect from summer 2022, with an interim cap of GBP30 being introduced at the beginning of the year. The charges are ultimately paid by passengers as airlines add the cost to the price of tickets.

Tui ended the worst FTSE 250 stock, down 5.5%.

In the FTSE 250, Moneysupermarket.com ended the best performer, up 8.6%, after the price comparison site said revenue in the third quarter slipped but it continued to see strong gross margins.

Revenue in the three months to September 30 dropped 10% on a year before to GBP76.4 million. Insurance revenue fell 10% to GBP41.3 million, while Home Services slumped 46% to GBP13.9 million. This was partially offset by 58% growth in the Money division to GBP19.7 million and 29% growth in Travel to GBP1.5 million.

As a result, Moneysupermarket said it delivered a "slightly higher quantum" of gross profit than in third quarter of 2020. Looking ahead, the price comparison website said it expects full-year earnings before interest, tax, depreciation and amortization in line with current market expectations.

Meggitt shares ended flat after the UK government on Monday ordered a probe into the defence firm's GBP6.3 billion takeover offer by Parker-Hannifin Corp, on the grounds of national security concerns.

UK Secretary of State for Business, Energy & Industrial Strategy Kwasi Kwarteng on Monday issued a public interest intervention notice to intervene in the proposed transaction.

As a result, the UK Competition & Markets Authority is required to investigate the proposed transaction and submit a report by March 18, 2022.

Meggitt on Tuesday said it looks forward to "engaging constructively" with the CMA and still expects the deal to complete in the third quarter of 2022.

Elsewhere, Wise lost 6.9% after the international money transfer provider posted a hike in both revenue and transaction volumes, though the newly listed fintech firm saw its recent share price weakness continue.

In its financial second quarter ended September, revenue increased 25% annually to GBP132.8 million from GBP105.9 million. Quarter-on-quarter, revenue was 7.5% higher from GBP123.5 million. The revenue figure was in line with expectations, Wise said, and the fintech put growth down to "higher levels of volume seen in the quarter".

Looking ahead, Wise expects its take rate to be "slightly lower" in the second half of its financial year, which runs until March. It puts this down to price reductions. Take rate is a fee charged by the platform where a transaction is performed.

Sterling was in the green against the dollar and euro as investors grew increasingly confident that the Bank of England will lift UK interest rates from historic lows, as early as November.

The pound was quoted at USD1.3800 at the London equities close, up sharply from USD1.3711 at the close Monday. Versus the single currency, sterling hit an intraday high of EUR1.1873 - its highest level since February 2020.

The move came after BoE Governor Andrew Bailey cautioned the central bank will have to act to ease inflationary pressures, the Financial Times reported.

The governor spoke virtually on Sunday to a meeting of the G30 group of current and former central bankers. Bailey affirmed his view that recent spikes in inflation will be temporary. However, he warned that price increases could last until next year, citing the energy sector in particular.

"That's why we, at the Bank of England, have signalled, and this is another such signal, that we will have to act," Bailey said, according to the FT. "But of course that action comes in our monetary policy meetings."

The next BoE meeting is on November 4.

Alex Kuptsikevich, senior analyst at FxPro explained; "The pound is benefitting in recent days as markets are pricing in the higher chances of a Bank of England rate hike as early as November. In recent weeks, there has been increasing hints on rising inflation risks from the BoE... The rush to turn the page as quickly as possible on hydrocarbon use and reduced investment in oil, coal and gas production is mainly behind the latest price spike, overlaid with disruptions to energy production and the reluctance of exporting countries such as Russia and OPEC to increase oil and gas supplies in line with increased demand.

"As a result, inflation in the UK and in Europe is becoming increasingly protracted as the increased price of petrol moves further down to the products and services costs. Without a quick solution to the energy problem and without a significant reduction in prices, the Bank of England will be required to raise rates several more times during 2022. These changes in expectations are significant and support a rise in GBP against USD or EUR as the Fed or ECB are not expected to make such a quick policy reversal from stimulus to tightening."

The euro stood at USD1.1640 at the European equities close, up from USD1.1595 late Monday. Against the yen, the dollar was trading at JPY114.23, soft from JPY114.28 late Monday.

Stocks in New York were higher at the London equities close as earnings season enters its second week.

The DJIA was up 0.4%, the S&P 500 index up 0.5% and the Nasdaq Composite up 0.4%.

On Wall Street, Travelers Cos was the best Dow performer, up 3.5%, after the insurance firm reported record net earned premiums but saw income drop.

Brent oil was quoted at USD84.64 a barrel at the equities close, lower from USD84.86 at the close Monday.

The economic events calendar on Wednesday has inflation readings from the UK and eurozone at 0700 BST and 1000 BST respectively.

The UK corporate calendar on Wednesday has third-quarter results from warehouse property investor Segro and cybersecurity provider Avast. Chilean copper miner Antofagasta posts production results.

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
Wise PLC Class A 311.70 GBX 4.81 -
Fresnillo PLC 757.40 GBX -1.23 -
Pearson PLC 743.20 GBX -0.88
Moneysupermarket.com Group PLC 174.60 GBX 0.29 -
Entain PLC 1,252.50 GBX 0.60 -
Tesco PLC 254.80 GBX -0.27
Polymetal International PLC 187.00 GBX 3.31 -
Meggitt PLC 788.40 GBX -0.08
International Consolidated Airlines Group SA 108.84 GBX 1.13
The Travelers Companies Inc 171.18 USD 1.21

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