LONDON MARKET MIDDAY: Stocks Rise As Investors Look To US Earnings

(Alliance News) - Stocks in London were mostly higher at midday on Monday as investors took heart ...

Alliance News 13 July, 2020 | 12:09PM
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(Alliance News) - Stocks in London were mostly higher at midday on Monday as investors took heart from updates surrounding a coronavirus vaccine and as earnings season in the US gets underway.

Investors welcomed comments from the head of German biotech firm BioNTech who said a vaccine candidate would be ready for regulatory review by the end of the year, while Gilead Sciences said its drug Remdesivir had been relatively effective in clinical trials.

Equity markets have shrugged off grim infection news from the US amid ongoing optimism regarding the timeline for the discovery and roll-out of an effective vaccine.

The FTSE 100 index was up 52.64 points, or 0.9%, at 6,148.34. The mid-cap FTSE 250 index was 148.08 points higher, or 0.9% at 17,328.59. The AIM All-Share index was down 3.70 points, or 0.4% at 878.85.

The Cboe UK 100 index was up 0.9% at 612.66. The Cboe 250 was 0.9% higher at 14,658.26, and the Cboe Small Companies was down 0.4% at 9,201.23.

In Paris the CAC 40 was up 0.8%, while the DAX 30 in Frankfurt was up 1.0%.

"Equity markets in Europe are showing decent gains. Even though the pandemic is getting worse, stocks in Asia drove higher and the feel-good factor spilled over to this part of the world. At the back end of last week, it was reported that Gilead Sciences's Remdesivir - a potential treatment for Covid-19 - reduced the fatality rate in patients by 62%. BioNTech, who is working with Pfizer on a potential vaccine for the coronavirus, said they are hoping to get approval for the drug by Christmas," said CMC Markets analyst David Madden.

In the FTSE 100, gold miners Fresnillo and Polymetal International were up 3.8% and 2.0% respectively tracking spot gold prices higher. The precious metal was quoted at USD1,808.88 an ounce at midday close, higher against USD1,801.62 late Friday.

"The gold price is consolidating above USD1,800 with bullion holding onto this significant threshold despite stocks in green. This confirms investors' huge appetite for the yellow metal in this uncertain phase on markets. Technically, apart from the psychological level of USD1,800, we can see a first support at USD1,790. As long as the price remains above this level, the bullish movement will continue, pulling up the price to new highs," said analysts at ActivTrades.

Barclays was up 1.0% after the lender said its common equity tier 1 ratio has climbed ahead of market expectations, helped by regulatory changes and by risk-weighted assets being lower than first thought.

The UK bank said its CET1 ratio - a key measure of a bank's financial strength - stood at about 14% at the end of June, not only an improvement from 13.1% at the end of March, but also ahead of market forecasts.

On AIM, Boohoo Group was down another 15% after shareholder Aberdeen Standard Investments sold most of its shareholding in the online clothing retailer over allegations of poor working conditions in its supply chain, the Times reported late Friday.

According to the newspaper, the asset manager has sold 27 million shares, equivalent to two-thirds of its stake.

The Sunday Times previously had reported allegations that workers in Leicester's Jaswal Fashions factory making clothes for Boohoo brand Nasty Gal were being paid as little as GBP3.50 an hour and operating without social distancing measures in place. Boohoo, in response, on Wednesday last week had distanced itself from Jaswal Fashions and had said that while it has seen "non-compliance" with its code of conduct, it has not seen evidence of its suppliers paying workers GBP3.50 per hour.

Boohoo shares are down 42% since mid-June.

Boohoo peer Quiz was down 5.1% on Monday, after the fashion brand said it believes that one of its Leicester-based suppliers has used a subcontractor at the centre of allegations over breaches to the national living wage. The brand said it is "extremely concerned" by a report in the Times over the weekend that its clothes are being made in a factory where prospective staff are being paid as little as GBP3 an hour.

The pound was quoted at USD1.2612 at midday, down from USD1.2661 at the London equities close Friday, as Brexit negotiations return to the fore.

The UK on Sunday pledged GBP705 million to prepare its borders for cutting ties with the EU on December 31, amid concern within the government that it is not ready.

The money will fund new border posts, IT systems and 500 new staff to both ensure security and handle new customs controls after Britain leaves the EU's single market and customs union, the government said in a statement. Britain ended its EU membership on January 31, almost four years after the historic Brexit vote, but agreed a standstill transition period until the end of the year while it tries to negotiate a new trade deal with Brussels.

The talks are moving slowly, sparking alarm among businesses that almost half a century of economic integration with the EU will end abruptly in a few months' time. Citing the disruption caused by the coronavirus outbreak, London has already said it will not immediately introduce checks on EU imports, instead delaying them until July.

The euro stood at USD1.1327 at midday, up from USD1.1317 at the European equities close Friday.

"Currency markets were much more muted as usual by EURUSD continued to move higher as well pushing towards 1.1350 level. Comments by French finance minister Bruno Le Maire that French consumption was just 5% below normal may have helped the single currency," said analysts at BK Asset Management.

Against the yen, the dollar was trading at JPY107.09, up from JPY106.75 late Friday.

Stocks in New York were set for a higher open as earnings season gets underway, with soft drinks maker PepsiCo reporting a slip in second-quarter earnings, as investors brace for the worst quarter since the great financial crisis.

PepsiCo shares were up 1.8% in pre-market trade. The company said it has spotted green shoots of a recovery amid easing of restrictions after recording a drop in quarterly income and revenue

Net revenue in the period to June 13 slipped 3.1% annually to USD15.95 billion from USD16.45 billion and net income was down 19% to USD1.66 billion from USD2.04 billion.

The DJIA was called up 0.5%, the S&P 500 index up 0.4% and the Nasdaq Composite up 0.5%.

In addition, the pace picks up on Tuesday with major US banks Citigroup, JPMorgan Chase and Wells Fargo reporting second-quarter results.

Analysts at JPMorgan said: "Second quarter reporting season is upon us. Given the extreme activity oscillation during the quarter, as well as the lack of visibility by corporates, where a record number of companies have withdrawn their earnings guidance when they reported first-quarter results, the range of potential outcomes is clearly greater than usual.

"Appreciating the heightened uncertainty at present, we note that the hurdle rate for Q2 appears very subdued. For S&P 500, the consensus is projecting -45% yoy earnings per share growth, and for STOXX Europe 600 -59% yoy. These are, by far, the lowest EPS growth forecasts by consensus since th GFC, and suggest that we will see earnings beats."

Brent oil was quoted at USD42.31 a barrel at midday, down from USD42.72 at the equities close Friday, as OPEC's Joint Ministerial Monitoring Committee meets on Tuesday and Wednesday to recommend the next level of cuts.

"Oil moved in the opposite direction to equities, slipping on speculation that producers' cartel OPEC and its affiliates will effectively turn the taps back on by easing supply cuts," said AJ Bell's Russ Mould.

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
QUIZ PLC 6.50 GBX 3.50 -
Fresnillo PLC 1,294.00 GBX -2.74 -
Boohoo Group PLC 286.60 GBX 3.06 -
Barclays PLC 104.60 GBX -1.17
Polymetal International PLC 2,012.00 GBX 0.35 -
PepsiCo Inc 136.74 USD 0.65

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