London stocks managed a positive finish on Tuesday, as markets on both sides of the pond gained, with a strong showing from bakery chain Greggs after it lifted its outlook.
The FTSE 100 ended the session up 0.94% at 7,077.10, and the FTSE 250 was 0.33% firmer at 22,730.65.
Sterling was also in the green, last gaining 0.24% on the dollar at $1.3643, and strengthening 0.34% against the euro to €1.1750.
“Stock markets in Europe and the US are in positive territory after a few days of losses,” said Equiti Capital market analyst David Madden.
“In recent sessions, traders have been preoccupied by fears of higher inflation, but today equities have rebounded.
“The gains made today are small when compared with the ground lost in the past week.”
Madden noted that at the same time last month, the narrative was different, as bond yields were relatively low and inflation was not yet a major concern.
“Now there is chatter of persistently high inflation, concerns about lower growth in China and the UK, as well as the possibility of the Fed tapering in early 2022.”
During the afternoon, it emerged that the International Monetary Fund was preparing to take the clippers to its growth forecast for 2021 on Tuesday, with its head warning that the global economy was still being “hobbled” by the Covid-19 pandemic.
Kristalina Georgieva, the fund’s managing director, said in an address ahead of the organisation’s annual meeting next week that the ‘vaccine divide’ between rich and poor states was creating a two-speed recovery.
In July, the IMF predicted global economic growth of 6% for 2021, but Georgieva said that would be scaled down as part of the publication of the World Economic Outlook next week.
“We face a global recovery that remains hobbled by the pandemic and its impact,” Georgieva said.
“We are unable to walk forward properly – it is like walking with stones in our shoes.
“The most immediate obstacle is the ‘great vaccination divide’ – too many countries with too little access to vaccines, leaving too many people unprotected from Covid.”
Closer to home, the UK service sector continued to expand in September, according to a closely-watched survey, but rising costs meant prices surged.
The latest IHS Markit/CIPS UK Services PMI business activity index came in at 55.4 in September.
That was up slightly on August’s six-month low of 55.0 and above both consensus and the flash reading of 54.6.
“The supply chain crisis put a considerable brake on the recovery in the UK service sector,” said Tim Moore, economics director at IHS Markit.
“Survey respondents widely noted that shortages of staff, raw materials and transport had resulted in lost business opportunities.
“Consequently, new orders expanded at the slowest pace since the end of the winter lockdown.”
New car registrations, meanwhile, hit a 23-year low in September according to fresh industry data, as the global semiconductor shortage weighed heavily.
According to the Society of Motor Manufacturers and Traders, 215,312 new cars were registered last month, a 34.4% slump on September 2020, when pandemic restrictions were continuing to curtail sales.
It was the weakest figure since September 1998, when numbers fell ahead of changes to the number plate system coming into force.
“This is a desperately disappointing September and further evidence of the ongoing impact of the Covid pandemic on the sector,” said Mike Hawes, SMMT chief executive.
“Despite strong demand for new vehicles over the summer, three successive months have been stalled by supply due to reduced semiconductor availability, especially from Asia.”
In equity markets, Greggs surged 11.1% after it said the full-year outcome was set to be ahead of its previous expectations following a strong sales performance in the third quarter, although it also warned of inflationary pressures.
The company, known for its sausage rolls, said two-year like-for-like sales were up 3.5% in the third quarter despite staffing and supply chain disruption.
“Greggs’ no-nonsense, value approach has succeeded where others have struggled, despite broader pressures outside of its control,” said Richard Hunter, head of markets at Interactive Investor.
“Strategically, the company’s imaginative marketing ploys have also been successful, particularly the more recent vegan-friendly food and drink ranges, with themed offerings such as Halloween to follow.
“Greggs will also be outlining its plans for new stores at an upcoming Capital Markets Day, offering the fact in advance that pre-pandemic company-managed stores returned 42% on capital and franchised stores 33%.”
Sainsbury’s was in the black for the second day running, rising 1.9% amid speculation it could be the next takeover target in the supermarket sector after Morrisons.
On the downside, aerospace and motoring engineer Melrose slumped 1.08% after saying it expected the global shortage of semiconductors to hit its automotive division following a rise in customer cancellations in the first quarter.
Market Movers
FTSE 100 (UKX) 7,077.10 0.94%
FTSE 250 (MCX) 22,730.65 0.33%
techMARK (TASX) 4,569.76 0.71%
FTSE 100 – Risers
Barclays (BARC) 194.60p 3.91%
Lloyds Banking Group (LLOY) 46.52p 3.84%
Glencore (GLEN) 367.60p 3.55%
JD Sports Fashion (JD.) 1,069.00p 3.33%
Standard Chartered (STAN) 441.80p 3.06%
NATWEST GROUP PLC ORD 100P (NWG) 229.80p 3.05%
Ashtead Group (AHT) 5,638.00p 2.43%
Prudential (PRU) 1,473.50p 2.40%
Ferguson (FERG) 10,435.00p 2.30%
HSBC Holdings (HSBA) 393.00p 2.29%
FTSE 100 – Fallers
Hikma Pharmaceuticals (HIK) 2,318.00p -2.85%
Reckitt Benckiser Group (RKT) 5,571.00p -1.50%
ITV (ITV) 106.05p -1.30%
Melrose Industries (MRO) 168.00p -1.08%
Berkeley Group Holdings (The) (BKG) 4,235.00p -1.05%
Barratt Developments (BDEV) 643.40p -0.92%
CRH (CDI) (CRH) 3,380.00p -0.88%
International Consolidated Airlines Group SA (CDI) (IAG) 186.38p -0.81%
Unilever (ULVR) 3,918.50p -0.76%
British American Tobacco (BATS) 2,550.00p -0.66%
FTSE 250 – Risers
Greggs (GRG) 3,192.00p 11.10%
Darktrace (DARK) 837.00p 6.33%
Restaurant Group (RTN) 105.80p 5.40%
Virgin Money UK (VMUK) 198.90p 4.79%
Oxford Instruments (OXIG) 2,265.00p 3.42%
Dunelm Group (DNLM) 1,363.00p 3.41%
Reach (RCH) 355.00p 3.22%
Investec (INVP) 323.40p 3.19%
Trustpilot Group (TRST) 381.20p 3.08%
Bridgepoint Group (Reg S) (BPT) 497.00p 2.78%
FTSE 250 – Fallers
Elementis (ELM) 139.10p -4.00%
Endeavour Mining (EDV) 1,635.00p -3.55%
Babcock International Group (BAB) 355.00p -3.48%
Playtech (PTEC) 452.20p -3.09%
SSP Group (SSPG) 276.00p -2.90%
Mitie Group (MTO) 67.00p -2.76%
BH Macro Ltd. GBP Shares (BHMG) 3,560.00p -2.75%
IWG (IWG) 292.00p -2.47%
Vistry Group (VTY) 1,168.00p -2.42%
Network International Holdings (NETW) 342.60p -2.34%
