London open: Stocks rally after Monday's losses; IAG, Shell pace the advance

London stocks rose in early trade on Tuesday following heavy losses in the previous session, with a strong showing from oil giant Shell and IAG providing a boost.

At 0905 BST, the FTSE 100 was up 0.9% at 6,964.07.

Neil Wilson, chief market analyst at Markets.com, said: "A battling close lifted the spirits on a very tough day for equity markets on Monday. European markets are taking that bounce at the death on Wall Street - and a firmer close for Europe - and rallying this morning after a drubbing in yesterday’s session.

"Basic resources leading the way - what went down furthest yesterday is bouncing the most today. Shell rallied 3% in early trade, whilst IAG continued to catch bid on the reopening of the lucrative transatlantic trade.

"The question now is whether this rally has enough puff or if there is a tendency - as I suggested last Wednesday - to sell into rallies rather than buy the dip."

On the macroeconomic front, figures released earlier by the Office for National Statistics showed that UK public borrowing fell in August as the economy recovered but 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 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.

Interest paid on public debt rose to £6.3bn from £2.9bn a year earlier, outstripping the OBR's £1.6bn forecast. That result will fuel warnings that the government may not be able to borrow cheaply in future.

The figures give Chancellor Rishi Sunak extra fiscal room as he prepares his autumn statement for 27 October but the Treasury has said it is concerned about the potential effect of higher inflation on the cost of repaying public debt. Sunak says he wants to get the public finances under control, suggesting a return to more austere policy as the worst effects of the pandemic recede.

In equity markets, British Airways and Iberia parent IAG enjoyed healthy gains for the second day running after it emerged on Monday that double-jabbed UK and EU passengers would be allowed into the US again from November.

Shell was also a high riser after announcing late on Monday that it is selling the entirety of its Permian Basin assets to ConocoPhillips for $9.5bn in cash.

Transport operators National Express and Stagecoach both rallied after confirming they’re 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 after it said trading for the full year was set to be "slightly" ahead of expectations amid a healthy pipeline.

On the downside, DIY retail group Kingfisher fell after it said third quarter like-for-like sales to September 18 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 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.

Market Movers

FTSE 100 (UKX) 6,964.07 0.87%
FTSE 250 (MCX) 23,582.80 0.77%
techMARK (TASX) 4,688.14 0.60%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 176.38p 6.14%
Pershing Square Holdings Ltd NPV (PSH) 2,720.00p 4.82%
Royal Dutch Shell 'B' (RDSB) 1,485.20p 3.82%
Royal Dutch Shell 'A' (RDSA) 1,491.00p 3.77%
WPP (WPP) 977.80p 2.60%
Antofagasta (ANTO) 1,385.50p 2.29%
InterContinental Hotels Group (IHG) 4,700.00p 2.26%
Rolls-Royce Holdings (RR.) 118.24p 2.20%
BP (BP.) 310.20p 2.14%
Ashtead Group (AHT) 5,832.00p 2.14%

FTSE 100 - Fallers

Kingfisher (KGF) 349.20p -5.11%
Reckitt Benckiser Group (RKT) 5,885.00p -0.68%
Polymetal International (POLY) 1,337.00p -0.63%
Compass Group (CPG) 1,479.00p -0.47%
Hargreaves Lansdown (HL.) 1,415.50p -0.42%
AstraZeneca (AZN) 8,541.00p -0.21%
Avast (AVST) 570.80p -0.17%
GlaxoSmithKline (GSK) 1,401.60p -0.17%
Hikma Pharmaceuticals (HIK) 2,384.00p -0.13%
Ocado Group (OCDO) 1,672.00p -0.09%

FTSE 250 - Risers

Oxford Instruments (OXIG) 2,475.00p 4.65%
National Express Group (NEX) 231.80p 3.95%
XP Power Ltd. (DI) (XPP) 5,360.00p 3.88%
Computacenter (CCC) 2,908.00p 3.86%
WH Smith (SMWH) 1,730.00p 3.44%
Carnival (CCL) 1,587.60p 3.18%
FirstGroup (FGP) 88.75p 3.02%
Harbour Energy (HBR) 372.00p 2.93%
Energean (ENOG) 815.50p 2.90%
Moneysupermarket.com Group (MONY) 224.60p 2.65%

FTSE 250 - Fallers

Petropavlovsk (POG) 21.04p -2.77%
Capita (CPI) 48.45p -1.86%
Fidelity China Special Situations (FCSS) 312.50p -1.73%
Softcat (SCT) 2,176.00p -1.72%
BH Macro Ltd. GBP Shares (BHMG) 3,610.00p -1.63%
Endeavour Mining (EDV) 1,660.00p -1.48%
Darktrace (DARK) 853.00p -1.39%
Greencore Group (CDI) (GNC) 130.60p -1.28%
PureTech Health (PRTC) 355.50p -1.25%
SSP Group (SSPG) 278.90p -1.13%