After plunging to multi-month lows on Monday, stock markets have recovered strongly.
The return of risk appetite lifted the FTSE 100 index by 1.5% to briefly above the 7,000 barrier, with other European markets also boosted by a strong session on Wall Street overnight.
The top flight tumbled by more than 2% on Monday, with the rapid spread of the Delta variant of Covid-19 and inflation fears contributing to the sell-off. The threat from stagflation certainly hasn't gone away, but investors clearly feel there are bargains to be had after seeing stocks dependent on the re-opening of the global economy fall sharply on Monday.
Rolls was one of the biggest casualties, leaving shares at their lowest level since November as investors worried that the slow recovery of international travel will mean it is unable to keep its promise to be cash generative later this year.
Shares rose 7% or 6.2p to 96.2p today, while British Airways owner International Consolidated Airlines Group (LSE:IAG) was also sharply higher with a gain of 6%. Catering group Compass improved 5% after an upgrade by Jefferies, while staycation optimism making Whitbread one of the leisure sector's top picks helped its shares to improve 116p to 2,955p.
There was similar momentum in the FTSE 250 index, with the second tier up 1.5% amid a squeeze on the short-sellers holding positions in a number of re-opening stocks. The biggest of them is Cineworld Group (LSE:CINE), which jumped 8% but is still significantly lower than where it was a couple of months ago. Upper Crust owner SSP Group (LSE:SSPG) and Trainline (LSE:TRN) were also 6% higher.
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Two popular FTSE 250 stocks also kept up momentum as they built on their reputation for delivering better-than-expected updates.
Shares in magazine publisher Future surged 8% to a new record of 3,482p as it revealed it is on track for full year profits materially ahead of current market expectations.
Computacenter (LSE:CCC) also rose 140p to 2,600p as adjusted profits for the first half of 2021 will be as much as 50% ahead of last year. The performance would have been even better had it not been for supply shortages in the industry caused by the shortage of key components.
The improvement for the IT services firm came after a record-breaking performance in 2020 and amid “some understandable scepticism” as to whether it could continue with its 16 years of uninterrupted earnings per share growth.
“While nothing in life is ever certain and we face a stronger comparative in the second half, it is highly likely that 2021 will be another year of substantial progress for the group,” Computacenter said today.
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Market debutant Wickes Group (LSE:WIX) has also been doing well after strong demand from trade customers and DIYers resulted in quarterly like-for-like sales growth of 47.6%, or 19.7% on a two-year basis.
Wickes left its guidance for half-year adjusted profits of £45 million unchanged, but shares still rose 3p to 250p. Analysts at Liberum have a target of 420p, arguing that the shares are far too cheap for the “high quality growth, upgrade momentum and strong cash generation on offer”.
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