London close: Energy, travel plays see FTSE finish firmer

London stocks finished comfortably above the waterline on Wednesday, boosted by a strong performance from the travel sector, as investors held their breath ahead of the latest policy announcement from the US Federal Reserve.

The FTSE 100 ended the session up 1.33% at 7,469.78, and the FTSE 250 was 1.05% firmer at 21,873.08.

Sterling was also moving in a positive direction, last trading 0.1% stronger on the dollar at $1.3514, and gaining 0.28% against the euro to €1.1981.

“European markets have continued their recovery from yesterday, with the FTSE 100 managing to temporarily recover its losses for the week, moving back above its 200-day moving average as it briefly pushed back above 7,500, although we have started to slip back into the close,” said CMC Markets chief market analyst Michael Hewson.

“The DAX and the rest of Europe has lagged with sentiment still feeling incredibly febrile, and with the [Jerome] Powell press conference due to start at 1930 GMT, it’s probably even money as to whether we’ll open higher or lower tomorrow.”

Hewson noted that a “decent performance” from energy and financials was underpinning London’s top-flight index, with firmer energy prices and yields seeing Shell hit its highest levels since February 2020, and BP also in the black.

“We’ve also seen a belated bounce in travel shares after the uncertainty at the beginning of this week, as the imminent dropping of testing for fully vaccinated passengers sees a sharp rally in the likes of IAG, easyJet and Holiday Inn owner IHG.”

There were no economic data points of note in the UK on Wednesday, but market participants were patiently awaiting the outcome of the latest Federal Reserve policy meeting in the US, later in the global day.

The Fed is widely expected to adjust its language on rate hikes to imply one could be coming as soon as March, as well as lay the foundations for other tightening measures in a bid to control spiralling consumer inflation.

In data out stateside, mortgage applications fell 7.1% in the week ended 21 January - the sharpest decline in two months - with the Mortgage Bankers Association’s refinancing index plunging 12.6% and the purchase index slipping 1.8%.

The fall came as the average fixed 30-year mortgage rate increased to 3.72% from 3.64% - a level not seen since March 2020 - as Treasury yields continued to march towards two-year highs.

“After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance,” said MBA economist Joel Kan.

“Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them.”

In Europe, Germany’s government cut its economic growth forecast earlier, after restrictions introduced to curb the spread of Omicron weighed heavily.

The federal economy ministry said the start of the year would "still be subdued due to the coronavirus pandemic, especially in the service sectors".

It said it now expected the economy to grow by 3.6% in 2022, down from its earlier guidance for growth of 4.1%.

In contrast, the Bundesbank central bank was forecasting 4.2% growth for 2022.

However, the economic ministry said it expected the economy to pick up again as the infection rates eased in the spring, which would allow authorities to lift restrictions on hospitality and retail.

“Industry should also be able to expand its production noticeably again as soon as the supply bottlenecks gradually resolve over the course of the year,” it added.

In equity action back on British shores, travel-related shares were in the green after the government confirmed that Covid-19 testing would soon be scrapped for double-jabbed travellers arriving in England.

British Airways and Iberia owner IAG ascended 7.39%, InterContinental Hotels Group added 2.8%, Premier Inn proprietor Whitbread grew 2.36% and engine maker Rolls-Royce rose 2.57%.

Cruise operator Carnival was 5.55% above the waterline, and travel organiser TUI was up 5.41%.

Budget airline easyJet gained 5.23% by the end of trading, with the added benefit of an upgrade to ‘buy’ from ‘hold’ at Stifel.

The brokerage said it expected the company’s targeted growth strategy to make the most of the unfolding pent-up leisure demand this summer.

"We also see continued solid ancillary revenue and ‘easyJet Holidays’ supporting the profit recovery," Stifel said.

Pets at Home advanced 3.28% after it upgraded its full-year profit expectations following "continued growth momentum" in the third quarter.

The retailer now expected 2022 group underlying pre-tax profit to be at least £140m, compared to analyst expectations of £134m to £137m.

Online trading platform CMC Markets was 3.04% higher after it backed its full-year guidance as it said its performance in the third quarter was in line with expectations.

FTSE 250 passenger transport operator National Express rose 1.4% even after the Competition and Markets Authority announced it would investigate its planned £445m all-share acquisition of rival Stagecoach.

Stagecoach Group, which dropped out of the FTSE 250 in the wake of the industry-wide collapse of passenger numbers amid the first Covid-19 lockdown in 2020, ended the session 0.93% weaker.

On the downside, gambling software maker Playtech slid 6.86% after it again urged shareholders to accept a £2.7bn takeover offer from Australia’s Aristocrat Leisure following reports that it is planning a breakup and sale of the group if the bid was blocked by a group of Asia-based investors.

Sky News said Playtech's directors and its investment banking advisers were discussing dismantling the group, citing unnamed sources.

Precious metals miner Fresnillo tumbled 14.56% after it cut its production guidance, citing operational challenges and new labour laws.

Software company Sage was 6.48% weaker, even after it backed its 2022 guidance and reported a strong start to the year, while Quilter lost 9.39% after the release of a fourth-quarter trading statement.

Market Movers

FTSE 100 (UKX) 7,469.78 1.33%
FTSE 250 (MCX) 21,873.08 1.05%
techMARK (TASX) 4,384.41 0.75%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 158.96p 7.43%
Ocado Group (OCDO) 1,511.00p 5.85%
Shell 'A' (RDSA) 1,912.20p 5.60%
Shell 'B' (RDSB) 1,909.80p 5.40%
Aveva Group (AVV) 2,861.00p 4.04%
Prudential (PRU) 1,266.50p 3.94%
BP (BP.) 394.10p 3.81%
ITV (ITV) 112.35p 3.69%
Scottish Mortgage Inv Trust (SMT) 1,077.50p 3.46%
Pershing Square Holdings Ltd NPV (PSH) 2,735.00p 3.21%

FTSE 100 - Fallers

Fresnillo (FRES) 695.20p -13.64%
Sage Group (SGE) 713.00p -6.48%
Unilever (ULVR) 3,831.00p -2.67%
Royal Mail (RMG) 430.80p -2.60%
London Stock Exchange Group (LSEG) 7,224.00p -2.51%
Reckitt Benckiser Group (RKT) 6,216.00p -2.16%
Polymetal International (POLY) 1,156.00p -1.20%
Pearson (PSON) 611.60p -1.20%
Coca-Cola HBC AG (CDI) (CCH) 2,422.00p -1.14%
Vodafone Group (VOD) 124.22p -1.04%

FTSE 250 - Risers

4Imprint Group (FOUR) 2,695.00p 7.80%
Future (FUTR) 3,170.00p 6.09%
Baillie Gifford US Growth Trust (USA) 233.50p 5.90%
Dr. Martens (DOCS) 323.20p 5.62%
Syncona Limited NPV (SYNC) 185.00p 5.47%
Carnival (CCL) 1,401.00p 5.43%
TUI AG Reg Shs (DI) (TUI) 258.10p 5.41%
easyJet (EZJ) 635.40p 5.23%
Hammerson (HMSO) 37.51p 5.22%
Virgin Money UK (VMUK) 192.75p 5.20%

FTSE 250 - Fallers

Quilter (QLT) 130.40p -9.29%
Playtech (PTEC) 597.50p -6.86%
Centamin (DI) (CEY) 90.20p -3.84%
Hochschild Mining (HOC) 108.70p -3.72%
PZ Cussons (PZC) 189.20p -3.57%
Baltic Classifieds Group (BCG) 173.50p -2.53%
Mediclinic International (MDC) 315.40p -2.35%
Auction Technology Group (ATG) 1,086.00p -2.16%
3i Infrastructure (3IN) 344.00p -2.13%
Premier Foods (PFD) 116.60p -2.02%