LONDON MARKET MIDDAY: Stocks Down Amid No New Fed Stimulus, Steady BoE

(Alliance News) - London stocks remained in the red at midday on Thursday, after the Bank of ...

Alliance News 17 September, 2020 | 12:09PM
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(Alliance News) - London stocks remained in the red at midday on Thursday, after the Bank of England left UK interest rates unchanged, saying it doesn't plan to tighten policy until its sees clear evidence it is achieving its inflation target.

The central bank expects UK consumer price inflation to remain below 1% until early 2021, meaning its target of close to 2% inflation remains far off.

The BoE's Monetary Policy Committee voted unanimously, 9-0, to keep the UK Bank Rate at 0.1% and stock of purchases at GBP745 billion.

The pound was quoted at USD1.2916 on Thursday after the BoE announcement, lower than USD1.2996 at the London equities close on Wednesday.

The FTSE 100 index was down 43.38 points, or 0.7%, at 6,035.10 on Thursday. The mid-cap FTSE 250 index was down 89.65 points, or 0.7%, at 17,705.61. The AIM All-Share index was down 0.2% at 971.94.

The Cboe UK 100 index was down 0.8% at 600.76. The Cboe 250 was down 0.5% at 15,112.430, and the Cboe Small Companies flat at 9,473.50.

In mainland Europe, the CAC 40 in Paris was down 0.6%, while the DAX 30 in Frankfurt was down 0.6% Thursday afternoon.

The lower start in Europe came as markets digested the US Federal Reserve's meeting on Wednesday, with stocks continuing to struggle as Thursday's session progressed.

"It's only been a few weeks since the market cheered the Fed's plan to target average inflation and allow the economy to run hot for a significant time before even thinking about raising rates. Now, the petulant crowd is disappointed that there's nothing new to feed it," said Kit Juckes at Societe Generale.

"The upshot this morning is a 1% or so fall in equity indices, very slightly higher bond yields than we saw before the FOMC, and some risk aversion across markets," he said.

Wall Street, which ended broadly in the red on Wednesday in the wake of the Fed decision, is set for another leg lower. The Dow 30 is called up 0.1%, but the S&P 500 is seen down 1.0% and the Nasdaq Composite down 0.9%.

The euro traded at USD1.1794, lower than USD1.1843 late Wednesday. Versus the yen, the dollar was a touch lower at JPY104.79 versus JPY104.85.

Gold was quoted at USD1,941.50 an ounce on Thursday, down from USD1,969.00 on Wednesday, amid a stronger dollar. Brent oil was trading at USD42.26 a barrel, higher against USD41.90 late Wednesday.

Back in the UK, Prime Minister Boris Johnson has warned actions to stop a second surge of coronavirus must be "tough now" in order to "protect" Christmas.

His words came as stricter new measures are set to be announced for the North East of England, including a 10pm curfew on pubs and restaurants.

The PM said people have to be "both confident and cautious" and that it is "crucial" the country does not re-enter "some great lockdown again that stops business from functioning".

Pub firms were lower at midday, with JD Wetherspoon down 1.2% and Marston's down 3.7%.

Against a sea of red in London on Thursday, Next was pushing higher in the FTSE 100, up 3.1% and the best blue-chip performer at midday.

"Having seen decent trading updates from the likes of H&M and Inditex earlier this week, expectations were high that Next would be able to follow suit when they reported on their latest first half numbers today, and they haven't disappointed," said Michael Hewson, chief market analyst at CMC Markets.

For the six months ended July 25, Next posted a pretax loss of GBP16.5 million, swinging from a profit of GBP327.4 million the year prior. This was as revenue dropped 26% to GBP1.29 billion from GBP2.01 billion.

Excluding the impact of IFRS 16, an accounting rule related to leases, Next posted a pretax profit of GBP9.0 million, dropping from GBP319.6 million a year prior.

Full price sales were down a third on last year, though Next highlighted that sales in the last seven weeks have been up 4% on a year ago. In the last thirteen weeks, since stores reopened, brand full price sales have "been much better" than anticipated, down 2% on last year.

For the rest of the year, full price sales are expected to be down 12%. Pretax profit is guided for GBP300 million, up from GBP195 million given in July's trading statement.

At the bottom of the large-caps was Informa, trading 3.4% lower after JPMorgan cut the events and business publishing firm to Neutral from Overweight.

IG Group topped the FTSE 250, rising 5.5% on an "outstanding" first-quarter performance.

Net trading revenue of GBP209 million in the three months to August 31 was up 62% on GBP129.1 million a year ago, the company said, driven by continued high levels of trading activity from existing clients and a 50% rise in total active clients to 201,500.

Trainline chugged ahead 2.6% after the train and coach ticketing platform reported an improvement in sales as the second quarter progressed.

The company recorded revenue of GBP31 million for the six months to August 31, just 24% of the prior year's level. By division, the core UK unit generated GBP25 million in revenue, down 78% year-on-year, while the International unit saw a 57% revenue slump to GBP6 million.

Trainline noted a tough first quarter, which saw net ticket sales at just 9% of the same period a year ago, but this stepped up to 30% in the second quarter and exited in August at 42%. Overall, net ticket sales for the first half amounted to GBP358 million, just 19% of the prior year's level.

Over the first half of the year, Trainline said it outperformed its expectations for operating cost savings.

Playtech slipped 6.1% on a sharp fall in interim profit.

The online gaming and sports betting firm reported pretax profit fell by 71% to EUR10.5 million in the first half of 2020 from a restated EUR36.0 million a year before. Even on an adjusted basis, pretax profit still declined by 45% to EUR52.4 million from EUR96.1 million.

Playtech's profit performance was hurt by a rise in interest expenses on bond loans, leading to finance costs for the period increasing by 18% to EUR35.2 million.

In addition, revenue declined by 23% to EUR564.0 million from EUR727.8 million, as a strong performance in January and February from Snaitech in Italy and favourable sporting results were more than offset by the effects of the pandemic from mid-March to June, when most sporting events were cancelled.

Still to come in Thursday's economic calendar are weekly US initial jobless claims at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Wetherspoon (J D) PLC 923.50 GBX 6.15 -
Marston's PLC 50.20 GBX 6.27 -
Playtech PLC 366.30 GBX 1.33 -
IG Group Holdings PLC 777.00 GBX 0.52 -
Next PLC 6,328.00 GBX 1.80 -
Trainline PLC 290.00 GBX -0.68 -
Informa PLC 449.00 GBX 2.91 -

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