FTSE 100 briefly breaches 7000 level, with oil companies boosted by demand forecasts

• FTSE 100 up 38 points
• Spirax and Diageo move higher
• UK GDP growth beats forecasts

10.56am: Demand for oil expected to outstrip supply

Crude prices are edging higher, with Brent up 0.53% to $68.91 a barrel after the International Energy Agency predicted demand for oil will outstrip supply as economies emerge from the pandemic.

It said: “The anticipated supply growth through the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond the second quarter.”

But it warned that given the crisis in India, market volatility was likely to continue until the pandemic was brought completely under control.

Joshua Mahony, senior market analyst at IG, said: “With Europe and the US expected to gradually loosen restrictions on domestic and international travel, demand for crude products will likely surge to the benefit of prices. Nonetheless, with crude prices currently back at pre-pandemic levels, there are fears that perhaps much of that supply-demand realignment has already been priced in.”

Even so, the news has helped push () 1.53% or 4.65p higher to 309.25p and PLC () up 0.78% or 10.6p to 1378.2p.

This has helped support the FTSE 100, although it is currently off its best levels of the day, up 38.37 points or 0.55% at 6986.36 having briefly flirted with 7000.

Helping sentiment is the better than expected UK growth figures.

Rupert Thompson, chief investment officer at wealth management firm Kingswood said: “The UK economy held up better than expected during lockdown in the first quarter. GDP posted a 1.5% drop over the quarter as a whole but encouragingly grew a larger than expected 2.1% in March as the economy started to reopen.

“These numbers will bolster hopes that the economy will achieve the 7.25% growth forecast by the – the fastest growth in seventy years.”

 

9.59am: Leading shares hold on to gains

It’s not all positive news.

NV () is down 242p or 3.55% at 6572p ahead of its annual meeting in Amsterdam later.

Investors will be keen to hear what it says about the prospects for the takeaway market now that lockdowns are beginning to ease (in the UK at least).

() has fallen 2.28% or 305p to 13,050p after the group said that Matt King was leaving as chief executive of its US onlins sports betting group FanDuel.

It is considering whether to list a small stake in FanDuel in the US, but said King’s departure would affect the timing of any move.

Engineering group () is continuing this week’s decline, down another 1.24% or 70p to 5555p on uncertainty over any sale of the business.

But overall the FTSE 100 is holding on to most of its gains, up 41.31 points or 0.59% to 6989.3.

AJ Bell investment director Russ Mould said: “The next move for the markets could be determined by US inflation figures out this afternoon. If these come in ahead of expectations then investors may need to prepare themselves for more pain but a lower than forecast reading could help calm tensions over rising prices.”

9.14am: Miners help support market

Leading shares are continuing to recover as investors take the positives from the UK growth figures rather than worrying about inflationary pressures.

The FTSE 100 is within a whisker of 7000 again, up 51.15 points or 0.74% at 6999.14.

The 1.5% decline in GDP in the first quarter was less than economists had been expecting, while the 2.1% growth in March was the best performance since August even though the country was mostly still in lockdown.

Danni Hewson, AJ Bell financial analyst, said: “Despite the reopening of schools, the lockdown for many sectors was still very much in place and yet the economy was blossoming. Buoyed by the vaccine rollout houses were being built, cars and motorcycles repaired, and goods being produced in COVID-19-secure facilities…This growth has particular significance because it shows how the economy can function if future lockdowns arise.

“There is still a lot of ground to be made up, but March’s figures suggest a quick recovery is within reach.”

Rising commodity prices are of course one of the reasons the market had a spate of inflationary jitters this week, but they also provide support for mining companies, and so it is proving now.

() is up 3.07% or 10.05p at 337.95p while () has added 1.78% or 60.5p to 3455p.

Also heading higher is PLC (), up 2.12% or 245p to 11,800p after it said in its annual meeting statement that it had seen a positive performance in the four months to April.

It said: “Watson-Marlow continued to experience exceptional COVID-19 vaccine related demand from its customers in the Pharmaceutical and Biotechnology sector. In the first four months of the year, organic growth of Watson-Marlow’s sales [to the sector] outperformed our anticipated growth of 35% for 2021. Across the group’s other revenue streams in Steam Specialties, Electric Thermal Solutions and Watson-Marlow’s Process Industries sectors, organic sales growth was ahead of [global industrial production] over the same period.”

It was fairly upbeat about the immediate outlook but warned there was still uncertainty given the difficulties still being caused by the pandemic around the world.

Analyst at Shore Capital said they expected to upgrade their profit forecast for 2021 by around 10% and by 6% for 2022.

They said: “We expect the initial global rollout of COVID-19 vaccine programmes to continue into 2022. Beyond then, we think there is a possibility of vaccine-related sales continuing if booster jabs are necessary. Oxford Economics currently forecasts 4% industrial production growth for 2022. Spirax has historically grown at double the rate of global IP…

“We believe strong margin progression and a positive outlook for industrial production provide short-term positivity…

“However, we think the risks the company faces may be greater than the market perceives with only around half of its revenue driven by defensive markets…its growth is still largely dependent on increased industrial production and whilst near-term forecasts indicate positivity, there is still a degree of uncertainty. Additionally, the group’s average order book is seven weeks, so there is very limited visibility.”

8.38am: Diageo boosted by buyback plans

After Tuesday’s sell-off, the FTSE 100 made a positive start to proceedings.

Inflation fears saw traders flick the panic switch amid worries that the ultra-accommodative monetary policy underpinning stock buying activity would be reversed to tamp down prices.

Early Wednesday it looked like a reality check had been taken – or least the price setters in London had stopped drinking the Kool-Aid.

The economic facts of life were outlined in the latest gross domestic product (GDP) data.

They revealed a nation some distance from over-heating into an inflationary mess as the UK economy shrank by 1.5% in three months ended March 31, leaving it 8.7% smaller than it was before the pandemic.

The latest stats from the Office for National Statistics showed Britain is emerging from the lengthy winter lockdown with the economy growing by a better than expected 2.1% in March.

“The strong recovery seen in March, led by retail and the return of schools, was not enough to prevent the UK economy contracting over the first quarter as a whole, with the lockdown affecting much of the services sector,” said Darren Morgan, ONS director of economic statistics.

On the market, Diageo () led the Footsie with a 3% rise after the drinks maker unveiled plans to return up to £4.5bn by 2024.

Perhaps reflecting fears that business may be dented as diners return to restaurants post-lockdown (rather than scoffing takeaways), JustEat Takeaway () was an early casualty as it fell 3%.

Aston Martin Lagonda () rose 2.2% after a upgrade from ‘sell’ to ‘neutral’.

6.50 am: Back foot start predicted 

The FTSE 100 is expected to open on the back foot on Wednesday ahead of the latest UK GDP reading and inflation data from the US.

Spread-betters IG expect the blue-chip index to open around 14 points lower after ending Tuesday’s session down 176 points at 6,948.

The predictions of continued weakness followed a bleak performance on Wall Street overnight, which saw the Dow Jones Industrial Average close down 1.36% at 34,269 while the S&P 500 dropped 0.87% to 4,152 and the Nasdaq fell 0.09% to 13,389.

The pullback has been attributed to broad profit-taking activity following last week’s record run for equities, while sentiment has also been knocked by worries over inflation as the global economy recovers from the COVID-19 pandemic.

The declines have continued in parts of Asia this morning, with Japan’s Nikkei 225 down 1.97% while Hong Kong’s Hang Seng was up 0.08%

On currency markets, the pound was down 0.16% against the dollar at US$1.412, although the UK GDP data could provide some catalyst for movement later today alongside US inflation numbers.

Around the markets:

Sterling: US$1.412, down 0.16%

Brent crude: US$68.65 a barrel, up 0.15%

Gold: US$1,830 an ounce, down 0.25%

Bitcoin: US$57,428, up 3.8%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly lower on Wednesday as investors remained cautious over growing inflation worries and rising COVID-19 cases.

The Taiwan Stock Exchange fell 4.3% after the territory experienced an unusual outbreak of six new cases with no clear infection source.

Taiwan had kept the pandemic well under control before this cluster.

In Japan, the Nikkei 225 declined 1.45% and South Korea’s Kospi dipped 1.32%.

The Hang Seng index in Hong Kong gained 0.25% while the Shanghai Composite in China rose 0.10%.

Shares in Australia fell, with the S&P/ASX 200 trading 0.78% lower.

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Proactive Australia news:

() (FRA:N6D) has raised A$6.4 million in tranche one of a staged placement that will enable it to advance construction of the flagship Lindi Jumbo Graphite Mine in Tanzania.

() has achieved class IIa ‘Software as a Medical Device’ registration in Australia for its unique smartphone-based, medical-grade, heart rate, heart rate variability  and atrial fibrillation monitoring application using only a smartphone camera.

Resources Ltd () has intersected high-grade gold with results of up to 3 metres at 17.2 g/t at Redback deposit within the Wattle Dam Project in Western Australia.

() subsidiary ATCOR has been granted a new patent by the US Patent and Trademark Office (USPTO) for the intellectual property (IP) surrounding its patented SphygmoCor® technology.

() has fully enrolled Part 2 of the NOXCOVID study looking into the potential of Veyonda® to block the cytokine release syndrome (CRS) or ‘cytokine storm’ and improve the outcomes in patients hospitalised with COVID-19.

() () () (FRA:SO3) has completed a A$20.3 million placement to support the early works program at its Colluli Potash Project in Eritrea, East Africa.

() (FRA:N9F) (OTCMKTS:EEYMF) is higher after discovering a new, very high-grade zone 250 metres south of K3 prospect within its 100%-owned Finkola permit – part of the Massigui Project which adjoins the Morila Gold Mine tenure in Mali.

() (OTCMKTS:MZZMF) (FRA:MA3) has had early success in its 2021 power-auger drilling program at the 100%-owned Cape Ray Gold Project in Newfoundland, Canada, with sulphide-bearing quartz veins observed.

Limited () is acquiring Hammerhead Exploration Pty Ltd and Pty Ltd who collectively own six tenement applications in the Earaheedy Basin of Western Australia.

Ltd () has intersected semi-massive sulphide skarn mineralisation with visual chalcopyrite in the second hole drilled at Stone Lake target within the Greater Falun Copper-Gold Project in Sweden.