LONDON MARKET OPEN: Stocks Rise; Imperial Brands Down After Payout Cut

(Alliance News) - Stock prices in London opened higher on Tuesday as hopes for a coronavirus ...

Alliance News 19 May, 2020 | 8:54AM
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(Alliance News) - Stock prices in London opened higher on Tuesday as hopes for a coronavirus vaccine gained traction, while Imperial Brands restricted gains in the FTSE 100 after slashing its dividend.

On Monday, US biotech firm Moderna reported "positive interim" results in early testing of a vaccine candidate, with some experts suggesting that if all goes well it could be in use by the end of the year.

The large-cap index was up 40.03 points, or 0.7%, at 6,088.62. The mid-cap FTSE 250 index was up 198.31 points, or 1.3%, at 16,428.34. The AIM All-Share index was up 0.4% at 829.13.

The Cboe UK 100 index was up 0.7% at 10,292.40. The Cboe 250 was up 0.9% at 13,890.25, and the Cboe Small Companies was up 0.1% at 8,750.68.

In mainland Europe, the CAC 40 in Paris was up 0.8%, while the DAX 30 in Frankfurt was up 1.1%.

In the FTSE 100, airlines rose to the top of the index, continuing positive momentum from Monday, with International Consolidated Airlines up 8.5% and easyJet up 4.5%, amid hopes a coronavirus vaccine is in sight. The two stocks closed up 11% and 10% respectively on Monday.

Elsewhere in the sector, Ryanair was up 4.8% and Wizz Air up 3.8%.

DCC was up 3.7% after the Irish support services firm raised its dividend despite the uncertainty created by the Covid-19 pandemic.

For the financial year ended March 31, revenue slipped 3.1% to GBP14.76 billion from GBP15.23 billion in financial 2019 and pretax profit by 4.9% to GBP311.5 million from GBP327.4 million the year before. However, adjusted operating profit rose 7.3% to GBP494.3 million from GBP460.5 million.

The Dublin-based firm said it performed "robustly in April and the early weeks of May".

DCC said it will be affected by the coronavirus pandemic in the near-term, but also noted that it is well-positioned to continue growing in the future due to its business model, leading market position, and strong balance sheet.

At the other end of the large-cap index, Imperial Brands was the worst performer, down 5.5%. The Davidoff, West, Gauloises Blondes cigarettes maker slashed its dividend after reporting a drop in profit.

For the half-year ended March 31, revenue rose to GBP14.67 billion from GBP14.39 billion last year, but pretax profit fell 23% to GBP785 million from GBP1.02 billion. Operating profit fell 20% to GBP925 million.

Imperial Brands cut its interim dividend by 33% to 41.70 pence from 62.56p last year.

Looking ahead, Imperial expects coronavirus-related factors to have a low single-digit impact on earnings per share and warned of a bigger Covid-19 hit in the second half of financial 2021.

"By its own admission, it has been a disappointing time of late for Imperial and the renewed focus of concentrating on its strengths is possibly overdue. Its products give its stock a strong defensive quality, including the generous dividend yield, market share has been nudging higher in its main lines and margins remain strong given lower production costs, now entrenched after some years of focus," commented Interactive Investor's Richard Hunter.

Compass Group was down 3.0% after the contract caterer launched a GBP2.0 billion share placing, subscription and retail offer after reporting a double-digit profit decline in the first half of its current financial year.

The Chertsey, England-headquartered company reported revenue of GBP12.5 billion for the six months to the end of March, up 1.2% from GBP12.3 billion reported a year earlier. Organic revenue increased by 1.6% in the first half.

For the five months to the end of February, organic revenue growth was around 6%, the company noted, before a 20% fall in March and a 46% slump in April.

Compass said it recognises the importance of a dividend to its shareholders. However, it explained it needs to balance this with the impact that the Covid-19 pandemic has had on its business. As a result, Compass decided not to declare an interim or a final dividend for the year to the end of September.

Looking ahead, Compass said the duration of the pandemic, and the pace at which containment measures are relaxed in different countries is unknown, making it a challenge to reliably assess the impact across markets the company operates in.

Therefore, Compass said it is withdrawing its previous growth and margin outlook for 2020.

The Japanese Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite ended up 0.7%, while the Hang Seng index in Hong Kong is up 1.9%.

The pound was quoted at USD1.2257 early Tuesday, higher than USD1.2221 at the London close Monday.

The UK unemployment rate edged lower in the three months to March, the Office for National Statistics said.

The unemployment rate in the UK decreased to 3.9% in three months to March, as the lockdown in the UK came into effect, down from the three months to 4.0% in February. Market consensus estimates had expected the latest jobless rate to rise to 4.4%.

Suggesting worse ahead, however, the number of people in the UK claiming jobless benefits jumped by 69% in April from March.

The euro was quoted at USD1.0941, up from USD1.0892 after France and Germany proposed Monday a EUR500 billion fund to finance the recovery of the EU's economy from the devastation wrought by the coronavirus crisis.

Putting aside past differences and seeking to prove that the Franco-German core of Europe remains intact, President Emmanuel Macron and Chancellor Angela Merkel announced the unprecedented package after talks by video conference.

Against the yen, the dollar was quoted at JPY107.38, flat from JPY107.39.

Brent oil was quoted at USD35.38 a barrel Tuesday morning, marginally lower than USD35.48 late Monday. Gold was quoted at USD1,731.01 an ounce, firm from USD1,729.70.

The economic calendar has eurozone construction output at 1000 BST with the German ZEW survey due at the same time. US Federal Reserve Chair Jerome Powell will testify before Congress at 1500 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Wizz Air Holdings PLC 3,412.00 GBX 1.67 -
easyJet PLC 575.00 GBX -2.71 -
Imperial Brands PLC 1,249.00 GBX -1.07
Ryanair Holdings PLC 11.50 EUR -0.48 -
DCC PLC 6,974.00 GBX 0.69 -
Compass Group PLC 1,176.50 GBX 0.60
International Consolidated Airlines Group SA 185.65 GBX -0.24 -

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