LONDON MARKET MIDDAY: Stocks mixed despite positive economic reports

(Alliance News) - Stock prices in London were mostly lower at midday on Wednesday as positive PMI readings from the UK and Europe failed to quell fears over rising Covid-19 infections on the continent.

The FTSE 100 index was down 8.51 points, or 0.1%, at 6,690.68. The mid-cap FTSE 250 index was up 20.71 points, or 0.1%, at 21,352.47. The AIM All-Share index was 0.3% lower at 1,196.31.

The Cboe UK 100 index was down 0.2% at 666.32. The Cboe 250 was up 0.1% at 19,016.66, and the Cboe Small Companies up 0.4% at 13,791.44.

In mainland Europe, the CAC 40 in Paris was 0.1% lower, while the DAX 30 in Frankfurt was down 0.4%.

Europe's two biggest economies, Germany and France, as well as a number of other countries, have been forced to reimpose more stringent restrictions to battle the spread of Covid-19, at the same time as they struggle to get their vaccination programmes off the ground.

IG Group's Josh Mahony said: "European markets are on the back foot in early trade despite the helping hand a weaker currency and impressive PMI numbers might provide. Instead, we are seeing a continued focus on the potential impact a third wave could have upon market sentiment, with the reflation trade coming into question as a result. Declines in [US] Treasury yields over the course of this week signal a shift in tactics, with confidence of a straight-forward recovery certainly on the wane.

"Instead, we have seen traders head for the havens on the prospect of fresh lockdowns and prolonged restrictions, driving assets such as the dollar, yen, gold, and bonds higher. Nevertheless, while markets are becoming increasingly hesitant, the ongoing vaccination push and economic recovery do still mean we could see buyers come in when markets provide discounts."

In the FTSE 100, British Airways-parent International Consolidated Airlines was the best performer, up 3.0%, rebounding after several days of losses. Midcap airlines easyJet and Wizz Air were up 2.8% and 1.8%. Larger budget peer Ryanair was up 3.2%.

Halma was up 1.9%, after the hazard detection and life protection firm raised its annual profit guidance.

Halma said it has made good progress in the second half of the financial year and now expects adjusted pretax profit for financial 2021 to be similar to levels in financial 2020, compared to prior guidance of around 5% below the prior year. It posted adjusted pretax profit of GBP267.0 million in financial 2020.

At the other end of the large-caps, BHP Group was 0.2% lower after Morgan Stanley downgraded the Anglo-Australian miner to Equal Weight from Overweight.

In the FTSE 250, Softcat was the standout performer, up 13%, after the IT infrastructure provider delivered a strong performance in the first half of the financial year.

For the six months to January 31, revenue was GBP577.0 million, up 10% from GBP524.1 million the same time the year before, pretax profit rose 41% to GBP57 million from GBP40.5 million.

Softcat declared an interim dividend 6.4 pence, up from 5.4p.

Looking ahead, Softcat said the second half has begun well and is confident it will deliver a full-year result significantly ahead of previous expectations. The stock set a record high of 821p in early trade.

At the other end of the midcaps, Bellway was down 2.2%. The housebuilder reported a decline in pretax profit in the first half of the financial year, and said house sales would slow down in the second half.

Profit before tax in the half-year ending January 31 fell 4.0% year-on-year, to GBP280.2 million from GBP291.8 million. Revenue rose 12% to GBP1.72 billion from GBP1.54 billion.

The Newcastle-based housebuilder expects sales volume to slow down in the second half, as it has a reduced level of work-in-progress and a higher proportion of houses in the early stage of construction. Bellway expects to sell a total of 10,000 houses this financial year, after selling 5,656 in the first half.

The pound was quoted at USD1.3717 at midday on Wednesday, down from USD1.3778 at the London equities close Tuesday, but recovering from an intraday low of USD1.3674 after positive PMI data.

Business activity across the UK private sector increased in March amid optimism over the national vaccine drive, according to the latest figures compiled by IHS Markit and CIPS.

The IHS Markit/CIPS UK flash services purchasing managers' index reading posted 56.8 points in March, up from 49.5 in February. The latest figure was back above the 50.0 mark which separates expansion from contraction and also beat the market forecast, cited by FXStreet, of 51.0 points.

The flash UK manufacturing PMI increased to 57.9 points in March, up from 55.1 in February, beating forecasts of 55.0. The reading pointed to the strongest growth in factory activity since November of 2017. The UK composite PMI print increased to 56.6 points in March from 49.60 in February.

On the continent, eurozone business activity returned to growth in March, fuelled by a survey record increase in manufacturing output as global demand continued to revive from the pandemic, data from IHS Markit showed.

The flash Eurozone purchasing managers' index composite output index rose to 52.5 points in March from February's final reading of 48.8 - which marks an eight-month high.

The flash services PMI activity index rose to 48.8 points from 45.7 - a seven-month high, while the manufacturing PMI hit a record high of 62.4 from 57.9 in February.

The euro was priced at USD1.1827 at midday in London, lower from USD1.1861 at the London equities close on Tuesday. Against the yen, the dollar was trading at JPY108.72, firm on JPY108.67.

US stock market futures were pointed higher as Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen are slated to testify before the Senate Banking Committee on Wednesday.

The Dow Jones Industrial Average was called up 0.4%, the S&P 500 was called up 0.3%, and the Nasdaq Composite was called up 0.7%.

Powell on Tuesday acknowledged that the US will see inflation rise this year, but the uptick in prices will not be substantial. Stock markets and some economists have grown nervous in recent weeks that the US economy's expected recovery this year as the Covid-19 pandemic recedes, coupled with trillions of dollars in government stimulus, could push prices upwards.

Speaking to the House Financial Services committee, Powell acknowledged that scenario could indeed play out, but the price increase would likely be temporary.

"Powell indicated that the US is experiencing a period of pent-up demand and made it clear that they see only a temporary rise in inflationary pressures. Both Powell and Yellen will appear before the committee later today, where more comments could fuel further gains for the dollar," said analysts at OFX.

Brent oil was quoted at USD62.06 a barrel Wednesday at midday, flat from USD62.09 at the London equities close Tuesday, recovering from earlier lows of USD60.47 in early trade, after a ship ran aground in the Suez Canal raising supply concerns.

Egypt's Suez Canal Authority said it was doing all it could to refloat the Taiwan-run but Panama-flagged MV Ever Given, a 400-metre long and 59-metre wide vessel, which was lodged at an angle across the waterway.

Historic sections of the canal have been reopened in a bid to ease the bottleneck of backed up marine traffic.

Gold was trading at USD1,739.15 an ounce, flat from USD1,727.16 late Tuesday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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