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London close: Stocks rebound from Monday blues

By Josh White

Date: Tuesday 21 Sep 2021

London close: Stocks rebound from Monday blues

(Sharecast News) - London stocks closed in the green on Tuesday, recovering from heavy losses in the previous session with solid performances from the likes of Pershing Square, IAG and Shell helping to underpin markets.
The FTSE 100 ended the session up 1.12% at 6,980.98, and the FTSE 250 was 0.9% firmer at 23,611.39.

Sterling was in a mixed state, last trading 0.01% weaker against the dollar at $1.3656, while gaining 0.02% on the euro to €1.1648.

"After yesterday's big falls, European markets have undergone a decent rebound today, as concerns over Evergrande's fate get shifted to this week's bond payments, and whether Chinese authorities will be able to manage any resulting fallout once the deadline has passed," said CMC Markets chief market analyst Michael Hewson.

"There appears to be an acceptance that an Evergrande failure is more a matter of when and not if, and the real question is how any fallout is managed.

"We've seen the FTSE 100 retest the 7,000 level, and seen similarly strong rebounds in the likes of the DAX and CAC 40."

On the economic front, fresh data showed UK manufacturing orders rising to their highest for at least 44 years in September, although factories struggled to meet demand because of supply problems.

Total order books improved further after a strong result in August to post the highest result since the Confederation of British Industry's survey started in 1977.

Export orders improved to their strongest since March 2019, the survey of 273 firms found.

But output growth in the three months to September slowed for the second month in a row while remaining firm by historical standards.

Out of 17 sectors, 11 showed growth with production led by food, drink and tobacco.

"Today's survey highlights how amidst a variety of supply challenges, companies are beginning to struggle to meet high demand," said Anna Leach, the CBI's deputy chief economist.

"Despite close to half of manufacturers surveyed reporting order books above normal, output growth has slowed sharply, albeit remaining relatively robust.

"As well as skill and labour shortages, sharply increasing material costs and shortages of key components, producers now face rocketing energy prices."

UK public borrowing, meanwhile, fell in August as the economy recovered, but official figures showed higher inflation pushed up the cost of public debt.

Public sector net borrowing was £20.5bn, down by £5.5bn from a year earlier, the Office for National Statistics said.

The reading was slightly lower than the £21.6bn forecast by the Office for Budget Responsibility but it was well ahead of economists' average £15.6bn estimate in a Reuters poll.

"While both revenues and spending have performed better than the OBR anticipated, receipts are responsible for the bulk of the borrowing undershoot," commented Martin Beck, senior adviser to the EY Item Club.

"This reflects the recovery in activity being much stronger than the OBR's very cautious near-term forecast."

In gas shortage developments, the UK government confirmed it was considering offering state-backed loans to energy companies as the sector battled soaring wholesale gas prices.

A range of factors had recently conspired to push up benchmark European gas prices by around 250% for the year to date.

Some smaller suppliers, who unlike larger rivals were unable or unwilling to hedge against price fluctuations, had already collapsed and more were expected to cease trading.

Asked by Sky News on Tuesday if loans were an option, Kwasi Kwarteng said: "There are lots of options.

"It costs a company to absorb up to hundreds of thousands of customers from another company that's failed, that cost's money, and there may well be a provision for some sort of loan, and that's been discussed."

Additionally, Downing Street said it had struck an agreement with CF Industries to restart production of carbon dioxide across its UK sites after talks between the company and the business secretary.

The Illinois-based firm stated last week that it had halted work at its fertiliser plants in Billingham-on-Teesside and Ince on the back of the surge in gas prices, shortly after Norwegian company Yara also moved to reduce production at ammonia factories across Europe - including one based in Hull.

Internationally, the International Energy Agency called on Russia to boost gas supplies to Europe ahead of the coming winter heating season.

The Paris-based body - which operates within the framework of the OECD - acknowledged that Russia was fulfilling long-term contracts with its European customers.

But it also noted that the country's exports to Europe were below those in 2019.

Looking at the global economy, the OECD's latest Interim Economic Outlook showed that, with the vaccine roll-out now continuing and a gradual resumption of economic activity underway, it projected "strong" global growth of 5.7% this year and 4.5% in 2022.

That was little changed from its May outlook of 5.8% and 4.4%, respectively.

In equity markets, Pershing Square jumped 5.01% after a successful Amsterdam stock market debut for Universal Music Group, which it has a 10% stake in.

Ladbrokes owner Entain surged 18.04% after confirming it had received a takeover proposal from DraftKings, the consideration for which would include a combination of stock and cash.

Responding to press speculation, the company said there can be no certainty that any offer will be made nor as to the terms on which any such offer may be made.

The statement followed a report by CNBC suggesting that DraftKings was making a $20bn offer for the online sports betting company.

IAG racked up gains of 3.098% on US travel news, while Shell advanced 3.77% after announcing late on Monday that it was selling the entirety of its Permian Basin assets to ConocoPhillips for $9.5bn in cash.

Transport operators National Express and Stagecoach both rallied, by 7.62% and 26.97%, after confirming they were in talks about a possible merger.

Under the terms of the potential combination, Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each of their ordinary shares, resulting in them owning around 25% of the combined group.

Oxford Instruments gained 3.17% after it said trading for the full year was set to be "slightly" ahead of expectations amid a healthy pipeline.

Computacenter pushed 4.86% higher after an upgrade to 'buy' from 'neutral' at UBS, which hiked its price target on the shares to 3,290p from 2,520p.

On the downside, DIY retail group Kingfisher fell 4.92% after it said third quarter like-for-like sales to 18 September were down 0.6% year-on-year as it reported a surge in interim profits and revenue along with a £300m share buyback.

Compass was also weaker, losing 2.22%, even as the catering group said its fourth-quarter performance was ahead of guidance as diners returned to sports and leisure venues and schools and colleges reopened.

Imperial Leather maker PZ Cussons was on the back foot by 1.28%, ahead of full-year results on Wednesday.

Market Movers

FTSE 100 (UKX) 6,980.98 1.12%
FTSE 250 (MCX) 23,611.39 0.90%
techMARK (TASX) 4,721.92 1.33%

FTSE 100 - Risers

Entain (ENT) 2,261.00p 18.04%
Pershing Square Holdings Ltd NPV (PSH) 2,705.00p 5.01%
Royal Dutch Shell 'B' (RDSB) 1,484.60p 3.77%
Royal Dutch Shell 'A' (RDSA) 1,489.00p 3.63%
Flutter Entertainment (CDI) (FLTR) 15,270.00p 3.46%
Rolls-Royce Holdings (RR.) 119.58p 3.35%
SEGRO (SGRO) 1,290.50p 3.20%
International Consolidated Airlines Group SA (CDI) (IAG) 171.30p 3.08%
Prudential (PRU) 1,360.00p 2.94%
Ocado Group (OCDO) 1,718.50p 2.72%

FTSE 100 - Fallers

Kingfisher (KGF) 349.90p -4.92%
Compass Group (CPG) 1,453.00p -2.22%
Antofagasta (ANTO) 1,329.00p -1.88%
Lloyds Banking Group (LLOY) 42.40p -1.55%
Polymetal International (POLY) 1,333.50p -0.89%
Glencore (GLEN) 312.00p -0.89%
Evraz (EVR) 562.40p -0.74%
HSBC Holdings (HSBA) 359.75p -0.54%
Meggitt (MGGT) 736.60p -0.46%
NATWEST GROUP PLC ORD 100P (NWG) 206.80p -0.34%

FTSE 250 - Risers

National Express Group (NEX) 240.00p 7.62%
888 Holdings (888) 448.00p 6.36%
Reach (RCH) 367.50p 5.09%
Computacenter (CCC) 2,936.00p 4.86%
Oxford Biomedica (OXB) 1,478.00p 4.82%
XP Power Ltd. (DI) (XPP) 5,320.00p 4.65%
Airtel Africa (AAF) 98.50p 4.42%
Chrysalis Investments Limited NPV (CHRY) 269.00p 4.26%
Cineworld Group (CINE) 66.62p 4.22%
Darktrace (DARK) 901.50p 4.22%

FTSE 250 - Fallers

Discoverie Group (DSCV) 1,136.00p -2.60%
Spire Healthcare Group (SPI) 232.50p -2.11%
BH Macro Ltd. GBP Shares (BHMG) 3,600.00p -1.91%
Micro Focus International (MCRO) 372.20p -1.87%
Coats Group (COA) 72.00p -1.77%
Watches of Switzerland Group (WOSG) 988.00p -1.39%
Close Brothers Group (CBG) 1,515.00p -1.37%
PZ Cussons (PZC) 230.50p -1.28%
SSP Group (SSPG) 278.50p -1.28%
Capita (CPI) 48.27p -1.24%

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