LONDON MARKET PRE-OPEN: UK Economy Recovers; Ashmore Ups Payout

(Alliance News) - Stock prices in London are set to open marginally lower on Friday, after the ...

Alliance News 11 September, 2020 | 7:53AM
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(Alliance News) - Stock prices in London are set to open marginally lower on Friday, after the European Central Bank kept interest rates steady, and figures showed that UK economy is recovering from the damages caused by coronavirus.

In early UK company news, Anglo American unit De Beers reported rough diamond sales cycles six and seven of 2020, while investment management company Ashmore posted a marginal increase in annual earnings.

IG says futures indicate the FTSE 100 index of large-caps to open just 2.12 points lower at 6,001.20 on Friday. The FTSE 100 index closed down 9.52 points, or 0.2%, at 6,003.32 on Thursday.

The UK gross domestic product rebounded in July, following two consecutive quarterly falls, but has still only recovered just over half of the lost output caused by the coronavirus, the Office for National Statics said.

The ONS on Friday noted July's 6.6% growth marked the country's third consecutive monthly increase. In the first and second quarter, however, GDP shrank, on a quarterly basis, by 2.2% and 20%, respectively.

On an annual basis, UK gross domestic product fell 21% in the three months to June, having contracted 1.7% in the first quarter of 2020.

The second quarter contraction was the largest the UK had seen since 1955.

Monthly gross domestic product grew by 6.6% in July as lockdown measures continued to ease, following growth of 8.7% in June and 2.4% in May - which followed a record fall of 20.0% in April.

"While it has continued steadily on the path towards recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic," ONS Director of Economic Statistics Darren Morgan said.

July's monthly figure came in slightly behind market consensus, according to FXStreet, of 6.7% growth.

Sterling was quoted at USD1.2814 early Friday, lower than USD1.2877 at the London equities close on Thursday.

The ECB on Thursday maintained its ultra-loose monetary policy amid pressure to deliver another round of stimulus to ward off the economic fallout from the pandemic.

The central bank's 25-member governing council said it was holding its key refinancing rate at zero on an open-ended basis, while maintaining its bond-buying programme at EUR1.35 trillion. The programme is currently due to end in June 2021.

The Frankfurt-based bank also left its deposit rate unchanged at negative 0.5% and the marginal lending rate at plus 0.25%, saying it plans to hold borrowing costs at their present levels on an open-ended basis.

In addition, the ECB said it plans to reactivate a long-term review of its policy instruments, which was put on hold earlier this year due to the onslaught of the coronavirus crisis.

ECB President Christine Lagarde forecast the eurozone's coronavirus downturn would be less severe than feared.

The euro traded at USD1.1837 on Friday, lower on USD1.1880 late Thursday. Against the yen, the dollar was quoted at JPY106.18, soft from JPY106.20.

In London, miner Anglo American reported the value of rough diamond sales for De Beers' sixth and seventh sales cycles of 2020, amounting to USD116 million and USD320 million, respectively.

Owing to the restrictions on the movement of people and products in various jurisdictions around the globe, De Beers has continued to implement a more flexible approach to rough diamond sales during the sixth and seventh sales cycles, Anglo American said.

"Diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations, and manufacturers focused on meeting retail demand for polished diamonds," said De Beers Chief Executive Bruce Cleaver.

Emerging markets investment manager Ashmore reported a slight rise in annual profit but a drop in assets under management due to the Covid-19 pandemic.

For the year to the end of June, the company's pretax profit increased 1% year-on-year to GBP221.5 million. Adjusted net revenue increased by 5% to GBP325.0 million when compared to the prior year, driven by 7% growth in net management fees.

The asset manager declared a dividend of 12.10 pence to give a 2% year-on-year increase in total payout to 16.90p.

Ashmore said assets under management declined by 9% to USD83.6 billion amid negative market performance reflecting the third-quarter impact of Covid-19 pandemic.

LondonMetric Property reported the disposal of a portfolio of six distribution warehouses for GBP57.3 million to Canmoor and Canadian institutional investor, AIMCo.

The portfolio has been acquired over a number of years, LondonMetric said, and is located in Worcester, Leamington Spa, Royston, Castle Donnington, Milton Keynes and Huyton. Most of the buildings were constructed in the 1990s.

Completion of the sale is delayed until March 25, 2021 allowing LondonMetric to receive GBP1.5 million of additional rent. Total receipts upon completion will be 3.8% above March book value, the company highlighted.

Elsewhere, Sound Energy named the first half of 2020 as "an active and productive period" despite the challenging business environment brought on by the Covid-19 global pandemic and exacerbated in the oil and gas sector.

Pretax loss for the six months to the end of June narrowed to GBP380,000 from GBP11.5 million reported a year ago as the company reported no exploration costs versus GBP6.5 million in the first half of 2019.

In addition, administrative expenses were reduced to GBP1.17 million from GBP4.0 million year-on-year.

Going forward, the company said it intends to continue to focus on disciplined cost and cash management.

Hurricane Energy, meanwhile, marked the first anniversary of production from the Lancaster early production system. During the period, 2.7 million barrels of oil was produced from the field, compared to just 528,000 barrels a year ago, taking total production since field start up in May 2019 to 6.6 million barrels.

Hurricane Energy said revenue for the six months to the end of June rose to USD81.9 million from USD22.5 million, as sales volumes grew to 2.8 million barrels from 356,000 barrels year-on-year.

Average sales price realised were lower, however, at USD29.8 per barrel versus USD63.2 a barrel a year earlier.

"2020 is proving to be a hugely challenging year for Hurricane. We have had to contend with not only a significant fall in oil prices and the effects of the Covid-19 pandemic, but also poorer than expected reservoir performance from the Lancaster early production system," said Chair Steven McTiernan.

"On a more optimistic note, initial studies suggest water injection could partially mitigate the reserves downgrade, and onlapping sandstones at Lancaster could represent material upside potential," added McTiernan.

In Asia on Friday, the Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite is up 0.7%, while the Hang Seng index in Hong Kong is up 0.6%.

In the US on Thursday, Wall Street ended in the red, with the Dow Jones Industrial Average ending down 1.5% and S&P 500 down 1.8%. The tech-heavy Nasdaq Composite closed 2.0% lower.

The economic events calendar on Friday there is US inflation figures at 1330 BST.

"US consumer price inflation could be one to watch in the context of the new Fed policy of allowing periods of higher inflation," said LCG analyst Jasper Lawler.

CPI is expected at 1.2% in August, up from 1% in July with core prices forecast to be up 1.6%.

By Evelina Grecenko;

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Ashmore Group PLC 380.60 GBX 1.28 -
Hurricane Energy PLC 3.00 GBX 5.26 -
LondonMetric Property PLC 228.40 GBX -2.73 -
Sound Energy PLC 1.46 GBX 1.67 -
Anglo American PLC 1,979.00 GBX 0.51

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