LONDON MARKET CLOSE: Stocks Rally As US Nears Virus Stimulus Agreement

(Alliance News) - London stocks soared on Tuesday despite a nasty set of PMI readings, with ...

Alliance News 24 March, 2020 | 5:00PM
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(Alliance News) - London stocks soared on Tuesday despite a nasty set of PMI readings, with investors taking comfort from signs that Italy's Covid-19 outbreak is improving and US lawmakers edging nearer to a massive stimulus package.

The FTSE 100 index closed up 452.12 points, or 9.1%, at 5,446.01. The FTSE 250 ended up 1,094.72 points, or 8.4%, at 14,172.73, and the AIM All-Share closed up 35.43 points, or 5.9%, at 631.79.

The Cboe UK 100 ended up 8.0% at 9,094.44, the Cboe UK 250 closed up 6.7% at 12,172.97, and the Cboe Small Companies ended up 2.4% at 7,687.45.

In European equities on Tuesday, the CAC 40 in Paris ended up 7.6%, while the DAX 30 in Frankfurt ended up 10%.

"Equities have been in the green since the European open, holding strong in the face of a series of far worse than forecast flash services PMIs, the blow cushioned by a run of consistently higher than expected manufacturing readings. The Dow Jones – which could still be derailed by intransigence regarding the USA's own stimulus plan – galloped ahead," said Connor Campbell at Spreadex.

Stocks in New York were surging at the London equities close, with the Dow Jones up 9.3%, the S&P 500 index up 8.4%, and the Nasdaq Composite up 7.3%.

In the first set of data releases since Covid-19 began to spread rapidly outside of Asia, IHS Markit's flash US services business activity index came in at 39.1 in March, down sharply from 49.4 in February, which was a record low.

The UK's flash composite output index for March slumped to a record low for the survey of 37.1, a sharp drop from February's 53.0. Any reading above 50 indicates expansion and one below, contraction. The UK data followed IHS Markit earlier in the morning showing the eurozone's own composite PMI registered just 31.4 in March, down from 51.6 in February and the lowest level since February 2009.

"The European flash PMI readings confirmed the disastrous outlook that confirms it will be a bad recession. Everyone fell into contraction territory with most of the PMI services and composite readings falling to record lows. Germany's recession might be worse than initially feared, which could provide added incentive for German lawmakers to expedite their fiscal push," said Edward Moya, senior market analyst at Oanda.

"The US PMI reading likely raises the bar for steeper job losses," Moya added. "The data is bad in March and it will only get worse over the next couple months."

European currencies traded higher, however, taking the PMI readings in their stride.

The pound was quoted at USD1.1743 at the London equities close Tuesday, compared to USD1.1471 at the close on Monday. The euro stood at USD1.0792 at the European equities close Tuesday, against USD1.0741 at the same time on Monday.

Against the yen, the dollar was trading at JPY111.49, flat compared to JPY111.47 late Monday.

Focus on Tuesday will remain on whether US lawmakers can come to an agreement over a package to soothe the virus-stricken economy.

With the Senate failing on multiple occasions in recent days to advance a massive but controversial Republican-led package, the pressure has soared to swiftly reach a compromise agreement that provides relief for hundreds of millions of Americans.

US President Donald Trump called for an immediate resolution to the stalemate.

"Congress must approve the deal, without all of the nonsense, today," he said on Twitter.

Democrats rejected the original Republican package, arguing it put the priorities of corporations ahead of workers, including health professionals on the front lines of the battle against a pandemic that has killed nearly 600 Americans. But a sense of optimism mixed with urgency in the halls of the Senate and House of Representatives Tuesday after days of intense negotiations between Republicans, Democrats and Trump administration officials.

Against this backdrop, G7 finance ministers and central bank chiefs on Tuesday vowed to "do whatever is necessary" to safeguard jobs and the economy from disruptions caused by the coronavirus pandemic.

The officials said they are working cooperatively with "substantial and complementary packages" to help companies weather the impact.

In a sign that the situation in Italy may be improving, the country has now seen its daily coronavirus fatalities come down from a world record 793 on Saturday to 651 on Sunday and 601 on Monday. The number of new declared infections fell from 6,557 on Saturday to 4,789 on Monday.

In London, firms that have been hardest hit by Covid-19 worries in recent sessions were among the best performers on Tuesday.

Carnival, which has paused its cruise operations and expects to report an annual loss amid Covid-19 disruption, ended up 28%. Other travel firms rose on Tuesday, such as easyJet, rising 11%, and TUI, up 6.8%.

Cineworld ended up 31% on Tuesday, though still remains around 70% lower compared to this time a month ago.

Oil majors also got some respite on Tuesday as oil prices stemmed recent declines.

Brent oil was quoted at USD27.55 a barrel at the London equities close Tuesday, up from USD25.30 late Monday, having been slammed in recent weeks over demand worries stemming weaker global activity due to Covid-19 as well as a Saudi-led price war.

Royal Dutch Shell 'A' shares closed up 20% and 'B' shares up 23%. BP ended up 22%.

It was also a good session for gold, which surged to be quoted at USD1,623.30 an ounce at the London equities close Tuesday against USD1,543.08 at the close on Monday. This saw precious metals miner Polymetal International rise 16%.

Elsewhere in the FTSE 100, JD Sports Fashion closed up 19% despite warning on a hit from Covid-19 amid the closure of sores in the UK, US and Europe.

The athleisurewear retailer noted that while its websites continues to accept and fulfil orders, it believes the closure of its stores will hurt profit for financial 2021. It added that it is looking into measures to conserve cash across the business, welcoming public sector initiatives to support businesses.

The FTSE 100-listed company said that it believes its strong balance sheet, net cash resources and substantial working capital facilities will be adequate to meet any cash deficiencies during the period of disruption.

Prudential finished 15% higher as the life insurer reported "resilient" operations across all of its geographies.

Prudential said its operations in Asia have been providing "outstanding" service to customers in a challenging environment. Teams in the US, the UK and Africa are learning from the experience of their colleagues in Asia, with business continuity plans executed smoothly.

At Prudential's 2019 results, announced earlier this month, the company said it is planning a minority initial public offering for Jackson, subject to market conditions. In light of continued turmoil in public equity markets, Prudential on Tuesday said it is ensuring that, alongside preparations for the proposed IPO, it continues to actively evaluate other options for Jackson, driven by the focus and objectives that underline our strategic priorities.

The UK corporate calendar for Wednesday has trading statements from United Utilities and technical products and services supplier Diploma, as well as interim results from housebuilder Bellway.

In Wednesday's economic calendar, there is Germany's Ifo business climate survey due at 0900 GMT UK inflation at 0930 GMT, with US durable goods orders at 1230 GMT.

By Lucy Heming;

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
JD Sports Fashion PLC 782.20 GBX -3.29 -
Cineworld Group PLC 46.53 GBX -3.82 -
TUI AG 295.40 GBX -4.09 -
BP PLC 245.75 GBX -2.54
easyJet PLC 539.60 GBX -9.19 -
Polymetal International PLC 1,763.50 GBX -6.25 -
Royal Dutch Shell PLC B 990.20 GBX -2.10
Royal Dutch Shell PLC Class A 1,034.60 GBX -1.69 -
Carnival PLC 947.60 GBX -7.91
Prudential PLC 1,170.00 GBX -0.93

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