The FTSE 100 was enduring a bumpy ride on Wednesday, reversing morning declines to post modest gains at lunchtime.

Fears of a return of meaningful inflation pushing interest rates higher and the strong pound hitting exporters acting as a drag during the early session wore thin as optimism gathered on hopes that tourists may be able to head off on holidays if the lockdown restrictions are eased as planned.

At 12.30pm, London’s benchmark index had rallied 0.2% to 6,638.89 as UK technology, mining, aerospace and engineering sectors gained, with BA-owner International Consolidated Airlines (IAG) topping the FTSE leaderboard with a near-4% gain at 188.7p.

Primark-owner Associated British Foods (ABF) led the FTSE 100 loser board, down 2.7% at £23.88. Mid-caps were firm, the FTSE 250 up 1.2% at 21,314.57.

LLOYDS RESUMES SHAREHOLDER PAYOUTS

High street bank Lloyds (LLOY) reversed earlier gains to slip 1.2% lower to 38.78p early on after resuming its dividend, proposing a final ordinary payout of 0.57p for 2020, the maximum allowed under the regulator’s guidelines and down from the previous year’s 1.12p shareholder reward.

Although the bank reported a fall in annual profit as lower rates weighed on income and more money was set aside to cover bad debts amid a pandemic-led deterioration in the economic outlook, Lloyds forecast net interest margin for 2021 to be in excess of 240 basis points, and also confirmed that subject to regulatory approval, new chief executive Charlie Nunn will get started on 16 August.

Durex-to-Dettol maker Reckitt Benckiser (RB.) rose 0.4% to £59.96 after reporting 11.8% like-for-like sales growth for 2020 and swinging to an annual profit as impairment charges fell, though underlying earnings were pressured by weaker margins.

Reckitt Benckiser kept its annual divided steady at 174.6p and forecast modest like-for-like sales growth of flat-to-2% for 2021.

The Slough-headquartered consumer goods giant also announced the sale of its Scholl foot-care brand to Yellow Wood Partners, as well as the acquisition of the Biofreeze topical pain relief brand from Performance Health, for undisclosed sums.

Elsewhere, communications giant Vodafone (VOD) fell 2% to 126.98p after it announced plans to float its Vantage Towers infrastructure business in Germany before the end of March.

Vodafone had previously revealed plans to spin-out the business, which it will list on the Frankfurt Stock Exchange, targeting ‘a meaningful minority free float’.

FTSE RESHUFFLE

Elsewhere water company Pennon (PNN) dipped 0.7% to 893p ahead of its possible demotion from the leading index.

‘Pennon and Weir (WEIR) are the two firms that look most likely to swap places’, said AJ Bell investment director Russ Mould.

‘Grocer Morrison (MRW) could also head out of the UK’s premier index, opening the way for a FTSE 100 debut for specialist distributor Electrocomponents (ECM).’

Meanwhile, Metro Bank (MTRO) slumped 8% to 137.9p as the challenger lender posted a deeper annual loss for 2020 after racking up more credit impairments due to the pandemic. Pre-tax losses for the year to December widened from £130.8 million to £311.4 million.

Life insurer Aviva (AV.) shed 0.7% to 372p after agreeing to sell its entire 40% shareholding in a Turkey joint venture to Ageas Insurance for £122 million.

Plastics manufacturer Synthomer (SYNT) edged 0.7% higher to 468.6p despite revealing it is not in talks about a possible takeover bid for the company. This was in response to press speculation suggesting CVC Capital Partners was exploring a possible bid.

And photonic components & systems maker Gooch & Housego (GHH:AIM) rallied 5% to £12.92, having seen improved levels of demand across the industrial laser sector, led by Asia.

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Issue Date: 24 Feb 2021