LONDON MARKET CLOSE: Stocks Rebound Slightly As Covid-19 Fears Remain

(Alliance News) - Stocks in London ended mostly higher on Tuesday, recovering somewhat from ...

Alliance News 22 September, 2020 | 5:04PM
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(Alliance News) - Stocks in London ended mostly higher on Tuesday, recovering somewhat from Monday's sharp sell-off as tighter coronavirus restrictions in the UK were not as harsh as first feared.

Prime Minister Boris Johnson warned the UK was at a "perilous turning point" in the battle with coronavirus as he abandoned efforts to get more workers back into offices, ordered wider use of face masks and imposed a 2200 BST curfew on pubs and restaurants.

Johnson warned that the new curbs could last for six months - taking them well beyond Christmas - "unless we palpably make progress", but refrained from announcing a nationwide lockdown for now.

The prime minister also announced tougher enforcement measures, with businesses facing fines or closure for failing to comply with coronavirus rules and people facing GBP200 penalties for failing to wear masks where required or breaching the so-called "rule of six".

The FTSE 100 index closed up 25.17 points, or 0.4%, at 5,829.46. The UK flagship index closed down 202.76 points, or 3.4%, at 5,804.29 Monday.

The mid-cap FTSE 250 index shed 49.12 points, or 0.3%, closing at 16,821.66. The AIM All-Share index ended up 2.42 points or 0.3% at 947.03.

The Cboe UK 100 index closed up 0.8% at 581.81. The Cboe 250 ended flat at 14,327.43, while the Cboe Small Companies closed down 0.3% at 8,992.12.

In Paris the CAC 40 ended down 0.4%, while the DAX 30 in Frankfurt added 0.4%.

"Equities are showing decent gains as we approach the end of the trading session. There was some indecision in the first few hours of trading as stocks got off to a strong start, before giving up some of their gains, but the positive momentum continued throughout the session," said CMC Markets analyst David Madden.

"The FTSE 100 was the most volatile European index today as the UK government announced tighter restrictions in a bid to tackle the health crisis. The London market gained ground in the wake of the update as the rules weren't as tough as some originally feared. The restrictions have more to do with social distancing and health precautions, and the economic impact is unlikely to be as bad as initially thought," Madden added.

On the London Stock Exchange, Kingfisher ended the best blue-chip performer, up 9.9% 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 pretax profit surged 62% to GBP398 million amid a decrease in selling & distribution expenses to GBP1.33 billion from GBP1.51 billion.

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.

British American Tobacco closed up 3.8% and Imperial Brands ended up 3.2% after RBC Capital upgraded the tobacco stocks to Outperform from Sector Perform.

At the other end of the large cap index, Hikma Pharmaceuticals ended the worst performer, down 4.5% after the drugmaker cut annual guidance following a regulatory setback.

Hikma said it has been given a "minor" complete response letter by the US Food & Drug Administration, relating to its new drug application for its own version of the Advair Diskus inhaler.

The US regulator sends a complete response letter if it decides to not approve the application in its present form. Advair Diskus - originally a GlaxoSmithKline product - treats asthma and chronic obstructive pulmonary disease.

The Jordan-founded firm now expects to gain approval for its generic version in early 2021.

As a result, Generic revenue for 2020 is expected to be between USD710 million to USD730 million, compared to the USD719 million the year before. In addition, Generics core operating margin is set to be ranged from 18% to 19%.

Whitbread closed down 2.7% after the Premier Inn hotel chain owner said it is looking to axe 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, the FTSE 100-listed company explained. First half UK like-for-like sales were down 78%, with total sales down 77%.

"While there are signs of some recovery in trading in some parts of the business these are clearly still difficult times for the business and the decision to reduce staff number reflects the management's assumption that demand will remain subdued for some time to come. The prospect of more restrictions being imposed shortly on the hospitality sector, along with the furlough scheme ending in October, simply add to the challenges the company is facing," said analysts at the Share Centre.

The pound was quoted at USD1.2717 at the London equities close, down sharply from USD1.2795 at the close Monday, extending its decline against the greenback as the UK announced tighter coronavirus restrictions.

Further, the pound's cause was not helped by negative Brexit headlines from the continent. Weary EU officials prepared for another round of urgent Brexit negotiations, with time running out and some European capitals beginning to doubt that London even wants a trade deal.

"But please, dear friends in London: Stop the games. Time is running out," Germany's European affairs minister Michael Roth warned as he met colleagues in Brussels ahead of a summit of EU leaders on Thursday.

Brussels' chief negotiator Michel Barnier will be in London on Wednesday for informal talks with his UK opposite number David Frost on slow-moving efforts to agree on a trade deal, as full negotiations resume next week.

Earlier, sterling was given a short term boost, rising to an intraday high of USD1.2868 in late morning trade after Bank of England Governor Andrew Bailey played down the prospect of the UK imminently slashing interest rates into negative territory for the first time in history.

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.

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

Analysts at DailyFX commented: "Another volatile session for the pound, which printed fresh multi-month lows as the UK announced new restriction measures, which are likely to last 6-months. While GBP had recovered from its early morning weakness, after BoE Governor Bailey stated that last week's statement regarding negative rates was no policy hint, downside risks remain for the Pound. Alongside this, the currency is likely to remain sensitive to Brexit related headlines."

The euro stood at USD1.1702 at the European equities close, down from USD1.1745 late Monday, as concerns about pandemic lockdowns in Europe continued to plague the single currency.

Against the yen, the dollar was trading at JPY105.00, up from JPY104.65 late Monday.

Stocks in New York were mostly higher at the London equities close, after three straight losing sessions amid an ongoing testimony on Capitol Hill from US Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell.

The DJIA was down 0.2%, but the S&P 500 index was up 0.2% and the Nasdaq Composite up 0.3%.

Mnuchin and Powell were speaking before a House panel amid diminished hopes US lawmakers can put aside partisan differences and reach an agreement on another stimulus package to boost the coronavirus-ravaged economy.

Democrats and Republicans remain far apart on a deal, a gulf that has widened with a push by Senate Republicans to replace deceased Supreme Court Justice Ruth Bader Ginsburg before the election.

Brent oil was trading at USD41.60 a barrel at the London market close, firm from USD41.50 at the close Monday.

"Oil prices are recovering some losses after coming under heavy selling pressure on Monday at the prospect of renewed lockdowns. Adding downward pressure to the oil price could be the addition of Libyan crude, with the country potentially adding around half a million barrels per day by year-end, although forecasts naturally vary," explained Oanda analyst Craig Erlam.

Gold was quoted at USD1,904.86 an ounce at the London equities close, flat against USD1,904.24 late Monday.

The economic events calendar on Wednesday has a slew of PMI readings from France, Germany, the eurozone, UK and the US at 0815 BST, 0830 BST, 0900 BST, 0930 BST and 1445 BST respectively.

The UK corporate calendar on Wednesday has annual results from personal care products maker PZ Cussons and interim results from tenpin bowling operator Ten Entertainment.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Whitbread PLC 2,386.00 GBX 2.54 -
British American Tobacco PLC 2,572.00 GBX 0.84
Kingfisher PLC 320.10 GBX 0.13
Imperial Brands PLC 1,300.00 GBX 2.04
Hikma Pharmaceuticals PLC 2,549.00 GBX -1.09

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