LONDON MARKET EARLY CALL: Higher Call But EU GDP Set For Bruising Fall

(Alliance News) - Stock prices in London are seen clawing back some of Thursday's sharp losses, ...

Alliance News 31 July, 2020 | 7:00AM
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(Alliance News) - Stock prices in London are seen clawing back some of Thursday's sharp losses, despite a number of Covid-19 flare-ups forcing the UK government to enforce more local lockdowns and ahead of data from Europe poised to show just how much damage the virus has done to the continent's economy.

IG futures indicate the FTSE 100 index is to open 2.7 points higher at 5,985.0 on Friday. The blue-chip index shed 141.47 points, or 2.3%, to 5,989.99 on Thursday.

The pound was quoted at USD1.3131, improved from USD1.3036 at the London equities close. Sterling is trading at around its highest levels versus the greenback since March.

Another packed UK corporate calendar on Friday has results from state-backed lender Natwest Group - formerly RBS - British Airways-parent International Consolidated Airlines, testing specialist Intertek Group, London Stock Exchange Group, and British American Tobacco.

UK Health Secretary Matt Hancock announced on Thursday evening that "immediate action" was needed across Greater Manchester and parts of east Lancashire and West Yorkshire to keep people safe.

The stricter lockdown measures, announced via Hancock's Twitter feed at around 9pm and later posted online, mean members of different households are not be able to meet indoors.

The economic events calendar on Friday has France inflation figures at 0745 BST and eurozone inflation and gross domestic product readings at 1000 BST.

CMC Markets analyst Michael Hewson predicts a record 12% decline in EU GDP, as well as a 15.2% slump in France GDP, a 15.5% decline in Italy and Spain falling 16.6%.

Already out, French GDP fared slightly better than forecast, down 13.8% in volume terms, after a 5.9% decrease in the first quarter of 2020. It is 19% lower than in the second quarter of 2019.

"None of these numbers should be viewed with too much surprise, but they will still be viewed through a lens of how much of this lost activity can be pulled back by the end of the year. Given the concerns about rising infection rates, travel bans, lockdowns and quarantines that are being imposed there is a concern that we could see further economic downside to some of the annualised GDP estimates, unless these virus spikes are stamped out," Hewson said.

He added "European markets certainly don't look like they will see much of a benefit from last night’s blow out US tech earnings."

The euro stood at USD1.1892, up from USD1.1781 on Thursday's equities close in Europe.

Against the yen, the dollar was trading at JPY104.27, down from JPY105.08.

In New York on Thursday, the Dow Jones Industrial Average closed down 0.9% and the S&P 500 lost 0.4%. The US economy contracted a massive 33% on an annual basis in the second quarter due to lockdowns imposed to stop the spread of the coronavirus, data from the Bureau of Economic Analysis showed.

The tech-heavy Nasdaq Composite closed up 0.4%, ahead of earnings from tech behemoths Apple, Amazon.com, Facebook, and Google-owner Alphabet.

E-commerce firm Amazon posted a 26% hike in net income to USD7.78 billion on the year before, despite forking out USD4.00 billion in Covid-19 related initiatives.

Facebook reported a rise in second-quarter earnings as more businesses used the social media firm's digital advertising tools during the coronavirus pandemic. Net income came in at USD5.18 billion, almost doubled annually.

Alphabet reported its first revenue decline in its history, on tumbling advertising income. Revenue fell 1.6% to USD38.30 billion.

Apple reported a rise in net income for the third quarter of its financial year, for the three months ended June 27, the iPhone maker posted net income of USD11.25 billion, a 12% year-on-year increase.

But it was Apple's plans for a four-for-one share split which also got tongues wagging overnight. The firm said its board has approved the split to make the stock "more accessible to a broader base of investors". At the close on August 24, each Apple shareholder will receive three additional shares for every one existing share held.

The corporate calendar in the US has second-quarter earnings from oil majors Chevron and Exxon Mobil, hot on the heels of Royal Dutch Shell, which posted a chunky USD16.8 billion impairment charge on Thursday.

US President Donald Trump floated an unprecedented delay to the 2020 election – which polls show him losing – but the suggestion drew cross-party fire and has virtually no chance of being accepted.

Trump, who faces Democrat Joe Biden on November 3, has no constitutional authority to change the date, which is set by law.

In Asia, the Nikkei 225 in Japan was 2.4% lower late in the day. In China, the Shanghai Composite was up 0.2%, despite briefly sitting in the red. The Hang Seng index in Hong Kong was 0.1% lower.

Factory activity in China edged upwards in July as the country's manufacturing sector gathered pace after a sharp coronavirus hit and demand gradually rebounded, according to official data.

The PMI of the world's second-largest economy came in at 51.1 points in July, up from 50.9 the month before.

Gold changed hands at USD1,971.63, up from USD1,941.55 an ounce at the London equities close on Thursday.

Brent oil fetched USD43.08, improved from USD42.72.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Amazon.com Inc 3,196.97 USD -0.25
Facebook Inc A 255.48 USD 2.55
Apple Inc 445.26 USD 1.14

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