LONDON MARKET MIDDAY: Travel Stocks Knocked Down By UK Lockdown Fear

(Alliance News) - London stock prices remained in the red on Friday at a midday, amid gathering ...

Alliance News 18 September, 2020 | 12:00PM
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(Alliance News) - London stock prices remained in the red on Friday at a midday, amid gathering concern over a possible UK-wide lockdown next month.

This hit travel firms, with the shares of airlines and hotel owners lower on the prospect of a lockdown spanning the October half-term school holiday.

The FTSE 100 index was off 13.15 points, or 0.2%, at 6,036.77 midday Friday. The mid-cap FTSE 250 index was down 154.95 points, or 0.9%, at 17,582.77. The AIM All-Share index was down 0.1% at 969.04.

The Cboe UK 100 index was down 0.4% at 600.87. The Cboe 250 was 1.2% lower at 14,972.96 and the Cboe Small Companies down 0.5% at 9,393.10.

In mainland Europe, the CAC 40 in Paris was down 0.3%, while the DAX 30 in Frankfurt was up 0.1% early Friday afternoon.

"With a whirlwind of political, economic, and healthcare activity creating a volatile backdrop, investors took time on Friday to take stock of events. Markets were relatively calm with the FTSE 100 trading 0.2% lower at 6,036, similar to movements in many parts of mainland Europe, but small gains seen across Asia," said Russ Mould, investment director at AJ Bell.

"Amid growing chatter about a potential two-week nationwide lockdown in October in the UK, it was perhaps no surprise to see investors lose interest in stocks that could be negatively affected by such activity," Mould added. "It would dash any hopes of a half-term getaway."

A second national lockdown to curb the spread of coronavirus has not been ruled out but the "great hope" is that people will heed current advice to help manage a "very serious" situation, UK Health Secretary Matt Hancock said.

A national lockdown was the "last line of defence", Hancock said, as he responded to reports that ministers are considering further national measures, even for just a two-week period, such as imposing a curfew on bars and restaurants.

Scientists from the government's Scientific Advisory Group for Emergencies have reportedly proposed a two-week national lockdown in October to tackle the rising number of Covid-19 cases. The Financial Times reported that they had said a lockdown could coincide with the October school half-term.

Earlier this week, UK Prime Minister Boris Johnson described the potential impact of a second national lockdown on the economy as "disastrous".

Amid the speculation, travel stocks were the worst performers in London on Friday. British Airways-parent International Consolidated Airlines was down 11%, while Holiday Inn-owner Intercontinental Hotels was down 6.3% and budget airline easyJet down 9.0%.

Ryanair was down 5.5% after saying it will cut its capacity for October beyond the reduction already announced in mid-August.

The Irish low-cost carrier said that it will slash its October capacity by 20%, on top of the 20% cut that was announced earlier.

The capacity reduction was blamed on the damage caused to forward bookings by changes in EU government travel restrictions and policies, most of which Ryanair considers being introduced at short notice, undermining the willingness to make forward bookings.

Looking ahead, Ryanair said it now expects its capacity for October to fall to 40% of levels seen the same month the year before from 50%, but it still expects to maintain a load factor of more than 70%.

Wall Street is on course for a mixed start, with the Dow Industrials seen down 0.5%, the S&P 500 flat and the Nasdaq Composite up 0.4%.

The dollar was lower on Friday.

The euro traded at USD1.1845, higher than USD1.1821 late Thursday in London. Against the yen, the dollar was lower at JPY104.35 versus JPY104.79.

Sterling was quoted at USD1.2990 Friday midday, up on USD1.2955 at the London equities close on Thursday.

UK retail sales registered their fourth straight month of growth in August, but the pace of improvement is slowing, data from the Office for National Statistics showed.

Sales were up 0.8% month-on-month in August, slower than the 3.7% growth posted for July but ahead of expectations, according to FXStreet, of 0.7%. The strength of the retail rebound has been fading since lockdown measures began to be eased, with sales having risen 12% in May and 14% in June.

Back in London, gold miner Fresnillo was up 4.1%, tracking the price of the precious metal higher.

Gold was quoted at USD1,953.90 an ounce at midday, up from USD1,946.60 on Thursday. Brent oil was trading at USD43.76 a barrel, up from USD43.22 late Thursday in London.

At the top of the FTSE 250 was John Laing, up 5.7% after agreeing to sell its entire 30% stake in a UK rail programme for up to GBP421 million in cash.

The mid-cap infrastructure investor has entered into an agreement to sell its 30% interest in the InterCity Express Programme Phase 2 to AIP Management, a Danish investment company. The sale consideration represents a strong uplift on the GBP333 million valuation of the stake as at June 30, John Laing noted.

John Laing said it will return 5% to 10% of gross proceeds from the sale to investors on an annual basis, as per the company's dividend policy.

Essentra fell 8.3% after raising GBP100 million through a share sale, the money from which will go towards the acquisition of North Carolina-based 3C! Packaging, which provides packaging and labels with a pharmaceutical focus.

The FTSE 250 plastics and fibre products maker issued a total of 38.5 million shares through a placing, subscription and PrimaryBid retail offer at a price of 260 pence, reflecting a discount of 8.8% to Essentra's closing price on Thursday of 285.00p.

Investec dipped 2.9% after the financial services firm announced plans to cut its London office's headcount by 13% and said it does not anticipate declaring an interim dividend.

The Anglo-South African corporate and investment banking business expects adjusted earnings per share for the first half ending September 30 to be between 10.5p and 8.3p, down 53% to 63% from last year's 22.4p.

The bank plans on cutting its headcount in the London office by 13%, or by 210 roles, after enhancing efficiencies by more closely integrating business-enabling functions, Investec said.

In its trading statement on Friday, Investec said it does not expect to declare an interim dividend, versus 11.0p a year prior.

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
Investec PLC 154.65 GBX 1.51 -
Ryanair Holdings PLC 12.40 EUR 1.27 -
John Laing Group PLC 298.40 GBX 0.81 -
Fresnillo PLC 1,333.00 GBX 0.08 -
Essentra PLC 253.40 GBX -0.16 -
easyJet PLC 521.40 GBX 5.67 -
InterContinental Hotels Group PLC 4,330.00 GBX 3.59
International Consolidated Airlines Group SA 106.85 GBX 6.85 -

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