LONDON MARKET CLOSE: Stocks Climb As US Earnings Season Kicks Off

(Alliance News) - Stocks in London ended Monday on the front foot, shrugging off the dramatic ...

Alliance News 13 July, 2020 | 5:10PM
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(Alliance News) - Stocks in London ended Monday on the front foot, shrugging off the dramatic rise in coronavirus infections in the US.

The FTSE 100 index closed up 80.78 points, or 1.3%, at 6,176.19. The mid-cap FTSE 250 index added 205.12 points, or 1.2% to 17,385.09. The AIM All-Share index ended down 1.19 points, or 0.1% at 881.14.

The Cboe UK 100 index closed up 1.5% at 616.06. The Cboe 250 ended 1.0% higher at 14,690.22, and the Cboe Small Companies finished up 0.3% at 9,193.61.

In Paris the CAC 40 advanced 1.7%, while the DAX 30 in Frankfurt added 1.3%.

"Stocks on both sides of the Atlantic are rallying, led once again by the Nasdaq, even as a vital earnings season looms," IG Chief Market Analyst Chris Beauchamp said.

He continued: "Stocks are showing little sign of nervousness ahead of earnings season tomorrow, with the Nasdaq hitting a fresh record high and the S&P 500 just a short distance away from its highest reading in five months.

"It will be interesting to see whether US indices can maintain this bullishness in the face of what is expected to be the direst earnings season in over a decade. In one sense, there is little room for disappointment, indices having enjoyed such a strong run since the March low, pricing in a much improved economic outlook. But with some estimates forecasting a 44% slump in S&P 500 earnings there is also plenty of scope for even small positive surprises, and if the outlook for the rest of the year is sufficiently positive then July may be another good month for US stocks."

In London, blue chip gold miner Fresnillo and Polymetal International added 5.6% and 2.0% respectively tracking spot gold prices higher. The precious metal was quoted at USD1,806.50 an ounce at equities close, higher against USD1,801.62 late Friday.

Oanda's Edward Moya commented: "Gold prices are rising but the gains are being kept in check as global equities rise ahead of the start to earnings season. Gold should continue to rise higher as the record increases in Covid-19 cases worldwide will likely force US and European leaders into strongly signaling more fiscal stimulus is coming."

The US, the country hardest hit by the coronavirus pandemic, on Sunday recorded 59,747 new cases over the last 24-hour period, according to a tally from Johns Hopkins University.

The number of cases in the US has rocketed in recent weeks, hitting a record of 66,528 in 24 hours on Saturday.

The country has now registered a total of 3.3 million infections, the Baltimore-based university said in its latest data as of 8:30 pm (0030 GMT Monday).

The death toll stood at 135,171 with 442 additional deaths counted.

The surge in cases has forced some state governors to retreat from earlier efforts to reopen their economies, with some now embracing the wearing of masks.

US President Donald Trump's administration on Sunday again pressed for full school reopenings in the fall despite resurgent Covid-19 infections.

US President Donald Trump has taken to Twitter to attack medical experts combatting the coronavirus, accusing them of playing politics and hindering an economic rebound.

The president retweeted several conservatives on Twitter early on Monday, avoiding making the comments directly himself.

"Everyone is lying. The CDC, Media, Democrats, our Doctors, not all but most, that we are told to trust," said on of the messages Trump retweeted, referring to the Centers for Disease Control.

Another tweet appeared to come from an account that belongs to a supporter of a fringe conspiracy theory group.

Trump's aides have also pushed attacks on Anthony Fauci, the government's infectious disease expert. They reportedly supplied US media outlets with a list of the expert's statements made early in the pandemic which were incorrect, the Washington Post reported.

Returning to the London Stock Exchange, Barclays gained 1.5% 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.

In the midcaps, outsourcer G4S said its earnings for the first six months of 2020 will be "significantly" above market consensus following a "resilient" trading performance in June.

According to the company, analysts' average forecast for first-half adjusted profit before interest, tax and amortisation is GBP159 million and adjusted earnings per share of 4.3 pence. In the first half of 2019, G4S recorded adjusted Pbita of GBP234 million and adjusted EPS of 3.8p.

On AIM, Boohoo Group was down another 18% 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 the start of July.

Boohoo peer Quiz reversed its losses seen in earlier in the session to close 3.2% higher. It opened down 16%, 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 DJIA was up 1.6%, the S&P 500 index up 1.4% and the Nasdaq Composite up 1.9%.

SpreadEx's Connor Campbell said: "The US index appears to be benefiting - alongside the overnight Chinese automobile/remdisivir news - from a pivot towards earnings season."

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.

Campbell continued: "It has to be something. Because the domestic situation is more alarming than it has been at any point in the pandemic so far. Florida just recorded 15,299 new cases in a single day, while the country as a whole has crossed the 70,000 mark, moving closer and closer to the 100,000 daily infections Anthony Fauci warned about a couple of weeks ago."

Soft drinks maker PepsiCo kicked off the season, reporting a slip in second-quarter earnings, as investors brace for the worst quarter since the great financial crisis.

PepsiCo shares were up 2.1% in mid-morning 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.

"PepsiCo's performance could just be a one off, however. The bigger picture will start to emerge from Tuesday, when JP Morgan, Barnes & Noble and a surely dreadful Delta Air all report. Domino’s Pizza, Morgan Stanley and Bank of America are then on Thursday, with BlackRock on Friday," Campbell added.

The pound was quoted at USD1.2615 at the London equities close, down from USD1.2661 at the same time on Friday.

The euro stood at USD1.1359 at midday, up from USD1.1317 at the European equities close Friday. Against the yen, the dollar was trading at JPY107.28, up from JPY106.75 late Friday.

Brent oil was quoted at USD42.92 a barrel Monday evening, up from USD42.72 at the equities close Friday.

In a busy corporate calendar in the UK on Tuesday, Ocado will issue its half-year results, hazard detection firm Halma will report full-year results, along with AO World, Polar Capital Technology Trust, Motorpoint and Zoo Digital. Recruitment firm PageGroup and emerging markets asset manager Ashmore will issue trading statements.

In the economics event calendar, there is a China trade balance print, followed by Japanese industrial production at 0530 BST and a UK trade balance and GDP reading at 0700 BST. There is also German consumer price index figures due at 0700 BST. Later in the day, there is eurozone industrial production at 1000 BST and US consumer price index print at 1330 BST.

By Paul McGowan;

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
QUIZ PLC 6.35 GBX -2.46 -
Fresnillo PLC 1,275.00 GBX 3.45 -
Barclays PLC 103.82 GBX 3.24
Boohoo Group PLC 270.30 GBX 3.56 -
Polymetal International PLC 1,937.50 GBX 2.24 -
PepsiCo Inc 136.70 USD -0.70

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