LONDON MARKET EARLY CALL: Higher Call As Investors Cheer China Data

(Alliance News) - Stock prices in London are seen opening slightly higher on Tuesday after ...

Alliance News 30 June, 2020 | 6:59AM
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(Alliance News) - Stock prices in London are seen opening slightly higher on Tuesday after positive economic data from China took the sting out of a rise in Covid-19 infections and the reimposition of containment measures in some countries around the world.

IG futures indicate the FTSE 100 index is to open 10.83 points higher at 6,236.60. The blue-chip index closed up 66.47 points, or 1.1%, at 6,225.77 on Monday.

The Japanese Nikkei 225 index is up 1.9%. In China, the Shanghai Composite is up 0.7%, while the Hang Seng index in Hong Kong is up 1.0%.

China's factory activity picked up pace in June, official data showed, although analysts warned weak global demand and a potential coronavirus resurgence are weighing on its longer-term recovery.

China's purchasing managers' index, a key gauge of activity in factories, came in at 50.9 points in June, better than the 50.5 forecast in a Bloomberg News poll of analysts and up 0.3 points from May. Anything above 50 indicates expansion. The non-manufacturing PMI came in at 54.4 points, up from 53.6, according to the National Bureau of Statistics.

Meanwhile, China passed a sweeping national security law for Hong Kong, a historic move that critics and many western governments fear will smother the finance hub's freedoms and hollow out its autonomy. The legislation was unanimously approved by China's rubber-stamp parliament on Tuesday morning.

In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 2.3%, S&P 500 up 1.5% and Nasdaq Composite up 1.2%.

CMC Markets analyst Michael Hewson said: "As we look towards today's European open, we look set to take our cues from last night's positive US finish, even if the sentiment took a brief knock after the US Commerce Secretary Wilbur Ross announced that Hong Kong's special trading status was set to be revoked, thus putting the territory on the same setting as China, in terms of being subject to all of the same tariffs and trade restrictions. This action was a pre-emptive response to this morning's passing of the new China security law, which the US says poses risks to US sensitive technology.

"This appears to have been widely expected with Asia markets finishing the month higher on the back of this morning's latest China manufacturing and non-manufacturing PMI's for June which showed another fairly decent month of economic activity, following on from decent readings in May."

The pound was quoted at USD1.2292 early Tuesday, firm from USD1.2271 at the London equities close Monday.

UK Prime Minister Boris Johnson is promising a "New Deal" with billions of pounds of investment to ease the UK through the aftermath of the coronavirus pandemic.

The prime minister will use a keynote speech in the West Midlands on Tuesday to say he wants to follow in the footsteps of President Franklin Roosevelt, who led the US out of the Great Depression in the 1930s.

Johnson will say his message is "build, build, build" as the UK comes out of lockdown after the Covid-19 pandemic. The PM will say the government intends to spend GBP5 billion "to accelerate infrastructure projects".

The euro was quoted at USD1.1231, lower from USD1.1243 late Monday in London. Against the yen, the dollar was trading at JPY107.73 in London, flat on JPY107.71.

Brent oil was quoted at USD41.46 a barrel Tuesday morning, up from USD41.24 a barrel at the London equities close Monday. Gold was quoted at USD1,771.88 an ounce, up from USD1,760.70.

In the UK corporate calendar for Tuesday, there is a trading statement from building materials supplier SIG and half-year results from holiday firm On the Beach.

In Tuesday's economic calendar, UK GDP is at 0700 BST. Eurozone inflation is due at 1000 BST and US Federal Reserve Chair Jerome Powell testifies before Congress at 1730 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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