LONDON MARKET MIDDAY: Kingfisher Leads FTSE 100's Cautious Bounce

(Alliance News) - London stock prices had staged a mild rebound by midday Tuesday with Kingfisher ...

Alliance News 22 September, 2020 | 12:02PM
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(Alliance News) - London stock prices had staged a mild rebound by midday Tuesday with Kingfisher leading the way in the FTSE 100, though travel stocks remained under pressure from worries about a second wave of coronavirus infection.

The FTSE 100 index was up 21,45 points, or 0.4%, at 5,825.74 midday Tuesday - taking back a bit of Monday's 3.4% fall.

The mid-cap FTSE 250 index was down 21.53 points, or 0.1%, at 16,849.25 on Tuesday. The AIM All-Share index was up 0.1% at 945.08.

The Cboe UK 100 index was up 0.5% at 579.57. The Cboe 250 was down 0.4% at 14,275.28, and the Cboe Small Companies down 0.2% at 9,004.19.

In mainland Europe, the CAC 40 in Paris was up 0.4%, while the DAX 30 in Frankfurt was up 1.0% Tuesday afternoon.

"European equity markets are largely in positive territory today as sentiment has rebounded from the brutal sell off that was witnessed yesterday," said David Madden at CMC Markets.

However, he noted, major equity benchmarks are off their highs for the session, "which speaks to a continued lack of confidence".

In London, travel stocks remained under pressure as the country braces for tighter virus restrictions.

"Travel and transport stocks are in the red again as concerns about the health situation and the government advice that people should work from home, if possible are hurting the sectors. The hospitality industry has rebounded from yesterday's painful fall as pubs and restaurants will be required to close at 10pm – so it appears the new restrictions won't be as tough as initially feared," said CMC's Madden.

British Airways parent International Consolidated Airlines was down 3.4% at midday, extending Monday's 12% fall.

However, pub firms were higher, with Marston's up 5.6% and Mitchells & Butlers up 9.8%. JD Wetherspoon rose 0.8% after announcing plans that could see it cut up to half of its jobs at pubs in six UK airports.

The UK government will later Tuesday announce new measures to curb rising coronavirus cases across England, hours after upgrading the virus alert level with top advisers warning of a surging death toll within two months without immediate action.

Under new rules to come into force on Thursday, English pubs, bars and other hospitality venues will be required to close at 10 pm, while food and drink outlets will be restricted to table service only.

"We know this won't be easy, but we must take further action to control the resurgence in cases of the virus," a Downing Street spokesperson said.

The ramped-up response follows warnings on Monday that the country could see up to 50,000 cases a day by mid-October, and a month later exceed 200 deaths every day.

A loser in the hospitality industry on Tuesday was Whitbread, down 3.1%. The Premier Inn hotel chain owner said it is looking to shed up to 6,000 jobs, after reporting a slump in half-year sales due to the closure of its hotels and restaurants because of the Covid-19 pandemic.

Total sales were "significantly" down year-on-year in the six months ended August 27, due to the closure of the vast majority of hotels and restaurants for a large chunk of that period, explained the FTSE 100-listed company, which also owns the Brewers Fayre and Beefeater chains.

First half UK like-for-like sales were down 78%, with total sales down 77%. The majority of hotels and restaurants were reopened by the first week of August, the company said, and a total of 801 hotels, representing 98% of total UK capacity, were open by the end of August.

Since reopening, UK accommodation sales performance has been ahead of the market, Whitbread said. August UK total sales - including both accommodation and food & beverage - were down 39% year-on-year.

Hargreaves Lansdown said Whitbread's UK staycation boost is likely to fade, and focus "now turns to business travel".

Emilie Stevens, equity analyst at Hargreaves Lansdown, commented: "We know city demand remains subdued and with more and more businesses announcing permanent work from home plans, we wonder if the return of business travellers is more 'if' than 'when'. The group's full first-half results in October should shed light on just how much change Whitbread sees and how permanent."

At the top of the FTSE 100 was Kingfisher, rallying 8.7% after the DIY retailer posted a significant increase in profit for the first half of financial 2021.

For the six months ended July 31, the B&Q and Screwfix stores operator said sales for the six months to July 31 fell 1.3% to GBP5.92 billion, representing a fall of 1.6% on a like-for-like basis.

However, pretax profit surged 62% to GBP398 million amid a decrease in selling & distribution expenses to GBP1.33 billion from GBP1.51 billion. Administrative costs also were reduced, to GBP380 million from GBP396 million. Adjusted pretax profit was up 23% at GBP415 million.

Looking ahead, Kingfisher said it has seen an "encouraging" start to the second half of the financial year, with third quarter like-for-like sales up 17% up to September 19. However, continued uncertainty over Covid-19 limits visibility on the sales outlook for the remainder of the year, it said.

In the FTSE 250, AG Barr surged 14%. The Irn-Bru maker said significant changes in consumer purchasing and consumption patterns due to the Covid-19 pandemic resulted in a 62% slump in first half profit.

The soft drinks maker added that revenue for the year ending January 2021 will be 12% to 15% below the prior-year level, with a modest reduction in operating profit margin due to adverse sales mix and operational de-leverage, mitigated by cost savings.

For the six months to July 25, AG Barr recorded pretax profit of GBP5.1 million, down 62% from GBP13.5 million a year ago. Revenue fell 7.6% to GBP113.2 million from GBP122.5 million

Beazley tumbled 11% after the insurer doubled its total estimate for first-party Covid-19 claims to USD340 million.

Almost all of this increase cost of Covid-19 claims stems from further event cancellation losses, the company said.

"This revised figure assumes a resumption to some form of normality in the second half of 2021. Were this not to be the case, we estimate that we would have another USD50 million of further claims net of reinsurance," said Beazley.

Turning to business generally, Beazley said that it continues to see rate improvements, with an overall rate change of 13% at the end of August. The firm estimates that overall growth for 2020 will be in the "mid-teens".

In the US, Wall Street is headed for a mixed open with the Dow Jones called down 2.1% but the S&P 500 seen edging up 0.1% and the Nasdaq Composite up 0.5%.

The dollar was broadly lower at midday in London.

Against the yen, the dollar was down at JPY104.43 versus JPY104.65 on Monday afternoon in London. The euro traded at USD1.1754 on Tuesday, firm on USD1.1745 late Monday.

The pound was quoted at USD1.2824 midday Tuesday, higher than USD1.2795 at the London equities close on Monday.

Bank of England Governor Andrew Bailey has warned the surge in Covid-19 cases threatens the outlook for the UK economy, but stressed policymakers will do "everything we can" to support households and businesses.

Speaking on a British Chambers of Commerce webinar, Bailey cautioned over "hard yards ahead" for the economy as Britain faces a second wave of coronavirus infections. He said the rapid rise of cases "reinforce the downside risks" to the economy as he laid bare worries over unemployment that is rising faster than shown in official data and long-term scarring from the crisis.

He also played down the prospect of the UK imminently slashing interest rates into negative territory for the first time in history, insisting the bank just needed to make sure it could do so if required.

Speculation over below-zero rates mounted last week after minutes of its latest Monetary Policy Committee meeting revealed the bank was looking at how negative rates could be put into practice.

But Bailey said: "It would be a cardinal sin in my view if we said we had a tool in the box which we didn't think could be operationally used.

"Yes it's in the tool bag, but that doesn't mean we're going to use negative rates," he added.

Gold was quoted at USD1,906.70 an ounce on Tuesday, slightly higher than USD1,904.24 on Monday. Brent oil was trading at USD41.86 a barrel, up from USD41.50 late Monday in London.

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 -
Barr (A G) PLC 501.00 GBX 5.58 -
Whitbread PLC 2,386.00 GBX 2.54 -
Kingfisher PLC 320.10 GBX 0.13
Beazley PLC 326.80 GBX 0.12 -
International Consolidated Airlines Group SA 109.00 GBX 3.96 -

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