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(Alliance News) - Stocks in London were to set to end the week on a bright note despite the World Health Organisation warning a resurgence in Covid-19 cases could push Europe's health care systems "to the brink".
Thereopening of tourist sites and beaches has been tempered by a new warning from the World Health Organization that Europe is not yet in the clear.
WHO regional director Hans Kluge warned that in 11 nations, "accelerated transmission has led to very significant resurgence that if left unchecked will push health systems to the brink once again in Europe".
In early UK company news, Tesco's quarterly sales improved, Aston Martin launched another fund raising, and Weir Group agreed to refinance its main banking facilities.
IG says futures indicate the FTSE 100 index of large-caps to open 74.76 points higher at 6,221.90 on Friday. The UK flagship index closed up 23.45 points, or 0.5%, at 6,147.14 on Thursday.
"Yesterday was a relatively quiet session. The European trading session started off on a negative note, but the losses were reversed by mid-morning and then indices largely traded sideways for several hours. Sentiment in Europe ticked up when US markets opened," CMC Markets Analyst David Madden commented.
The positive move in the US was driven by lenders, who gained prior to the results of banking system stress tests for the year being performed by the Federal Deposit Insurance Corp, a US banking regulator.
Following the tests, the US Federal Reserve ordered 34 major US banks to suspend share buybacks in the third quarter and limit dividend payments to shareholders.
The decision is the first such move since the global financial crisis 12 years ago, and limits how banks can spend their capital amid the coronavirus pandemic that has caused a sharp economic downturn.
"The changes would hopefully free up cash for the bank. The banking system is under pressure at the moment so there is an argument to be made that assisting the banks will allow them to operate more freely," Madden commented. "On the other hand, if the system is feeling the strain of the pandemic, is now the best time to be cutting back on regulation?"
The stress test results varied depending on the severity of the downturn modelled, but Fed Vice Chair Randal Quarles said the outcomes were generally positive.
"The banking system has been a source of strength during this crisis, and the results of our sensitivity analyses show that our banks can remain strong in the face of even the harshest shocks," Quarles said in a statement.
However the Fed noted that in some of the more severe scenarios "most firms remain well capitalised but several would approach minimum capital levels".
Wall Street ended in the green, despite reports showing that another 1.5 million Americans have been sent to the unemployment line and that the US economy shrank by 5% in the first quarter of 2020.
The Dow Jones Industrial Average closed up 1.2%, while the S&P 500 and Nasdaq Composite both closed 1.1% higher.
The 1.48 million unemployment claims in the week to last Saturday were down slightly from the previous week's level of 1.54 million. However, the latest figure was higher than the 1.3 million claims the market had pencilled in, according to FXStreet, and remain a historically high level. The latest data take the total number of Americans to file for unemployment since the Covid-19 crisis began to bite in March to around 47 million.
Elsewhere, the US economy shrank by 5% in the first quarter of 2020, latest figures from the Bureau of Economic Analysis confirmed.
In Asia on Friday, the Japanese Nikkei 225 index closed up 1.1%. In Hong Kong, the Hang Seng is 0.8% lower. Financial markets in Shanghai remained closed on Friday for the Dragon Boat Festival holiday.
Against the yen, the dollar was quoted at JPY107.09, soft versus JPY107.17.
In London on Friday morning, FTSE 100-listed supermarket Tesco said it saw an uptick in sales in the first quarter of its financial year.
For the 13 weeks to May 30, Tesco's total sales improved 8% year on year to GBP13.38 billion, with like-for-like sales improving 7.9%.
In the UK, sales were up 9.1% to GBP9.91 billion and like-for-like sales improved 8.7%.
Growth was most marked online, the supermarket noted, with online sales up 49% for the quarter as a whole and the rate of growth increasing to nearly 100% by the end of May.
Sales in its convenience business grew by 9.5% including a particularly strong performance from One Stop.
Chief Executive Dave Lewis said Tesco has transformed its stores with "extensive" social distancing measures so that everyone who was able to shop in store "could do so safely".
"The costs of doing this have been significant and only partly offset by business rates relief and increased volume. We see the balance as an investment in supporting our customers at a time when they need it most," he added
Looking ahead, Tesco's current expectation is that Retail operating profit in the current year is likely to be at a similar level to financial 2020 on a continuing operations basis.
Aston Martin Lagonda plans to sell new shares totalling up to 19.99% of its current issued share capital in an attempt to secure enough cash to "successfully emerge from the extended Covid-19 lock-down".
The price at which the shares are to be sold will be determined at the close of the bookbuilding process, the luxury carmaker said.
The institutional placing will be run by Barclays, JPMorgan, Morgan Stanley and Deutsche Bank. A retail offer also will be made via PrimaryBid.
"The directors of the company are confident that this additional flexibility will allow the company to pursue its strategy to realise its full potential to operate as a true luxury company and remain focussed on ensuring the company builds the appropriate capital structure for the longer term," Aston Martin added.
Yew Tree Overseas has agreed to subscribe for 25% of the placing and Prestige Motor will buy 7.8%.
Separately, Aston Martin said its retail sales in the second quarter were hit by the Covid-19 disruption. Wholesales are expected to be lower in the second quarter than in the first quarter and wholesale average selling price will continue to suffer from its de-stocking process.
Budget airline easyJet has agreed the sale and leaseback of six A320neo aircraft for aggregate cash sales proceeds of USD255 million.
The proceeds of this transaction make up part of the anticipated GBP500 million to GBP650 million in funding from sale and leasebacks which was highlighted in the airline's recent trading update - where it noted the sales will be used to "maximise liquidity and further strengthen easyJet's financial position".
The net book value of the aircraft, which vary in age from six months to two years of age, was about GBP141 million at March 31.
Weir Group said it has completed the refinancing of its main banking facilities, with a syndicate of 12 global banks.
The facilities comprise a new USD950 million revolving credit facility which will mature in June 2023 with the option to extend for up to a further two years and a new GBP200 million term loan, which will mature in March 2022.
The margin on the new facilities is slightly higher than current levels, Weir noted, which reflects market conditions but remains "highly competitive" and significantly lower than the group's existing long-term bonds.
Weir said its covenant terms remain unchanged and noted it continues to be "highly" cash generative and has a "strong" liquidity position - which includes about GBP500 million of immediately available committed facilities and cash balances.
Turning to trading, Weir said Minerals business continues to show "resilience" in the second quarter, with aftermarket orders similar to the first quarter.
Its ESCO unit has shown "resilience" but has seen customers run down ore stockpiles.
In Oil & Gas, Weir saw a "significant" step-down in North American activity levels in during the quarter.
Sterling was quoted at USD1.2415 early Friday, firm from USD1.2405 at the London equities close on Thursday.
The euro traded at USD1.1212 early Friday, down from USD1.1216 late Thursday.
Gold was priced at USD1,760.70 an ounce early Friday, slightly higher than USD1,760.11 on Thursday. Brent oil improved to USD41.29 a barrel early Friday from USD40.44 late Thursday.
The economic events calendar on Friday has US personal consumption expenditure index figures at 1330 BST - the core reading is the Federal Reserve's preferred gauge of inflation.
By Paul McGowan; paulmcgowan@alliancenews.com
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