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(Alliance News) - Stocks in London are set to open ever-so-slightly higher in London on Monday as hopes for fresh US economic stimulus measures outweigh jitters caused by new virus clusters in China.
"As we start the new trading week equity markets in Asia have undergone a somewhat mixed start to the week, with reports of fresh Covid-19 outbreaks across Asia, with markets here in Europe set for a mildly positive start, as investors mull the prospect of another US stimulus program to replace the one that is set to expire at the end of this week," said Michael Hewson, chief market analyst at CMC Markets.
Meanwhile, the dollar slumped at the start of the week, helping gold smash its 2011 record price.
In early UK company news, AstraZeneca has entered into an oncology collaboration with Daiichi Sankyo worth up to USD6 billion, while both Ryanair and Ascential reported swings to loss.
IG says futures indicate the FTSE 100 index of large-caps to open just 0.18 of a point higher at 6,126.80 on Monday. The FTSE 100 index closed down 87.62 points, or 1.4%, at 6,123.82 on Friday.
The slightly higher start in Europe follows mixed trade in Asia overnight after China recorded 61 new coronavirus cases on Monday – the highest daily figure since April – propelled by clusters in three separate regions that have sparked fears of a fresh wave.
The bulk of 57 new domestic cases were found in the far northwestern Xinjiang region, according to the National Health Commission, where a sudden outbreak in the regional capital of Urumqi occurred in mid-July.
Fourteen domestic cases were also recorded in the northeastern province of Liaoning where a fresh cluster broke out in the city of Dalian last week. Two more local cases were found in the neighbouring province of Jilin near the North Korean border – the first since late May. The last four infections confirmed on Monday were imported from overseas.
It is the highest daily tally of new virus cases since April 14, when 89 cases, mostly imported, were recorded.
The Japanese Nikkei 225 index closed down 0.2%. In China, the Shanghai Composite is up 0.1%, while the Hang Seng index in Hong Kong is down 0.4%. Â
Providing a reason to be upbeat at the start of the week, though, was progress on some fresh US stimulus.
US Treasury Secretary Steven Mnuchin said the White House and Republicans in Congress will finally introduce their proposal for a new stimulus bill on Monday, as major protections to help cushion the blow from the pandemic are expiring.
Already, a ban on housing evictions at the federal level ended last week, and enhanced unemployment benefits are effectively finished this weekend, meaning whatever comes in the future will already be too late for out-of-work people relying on government assistance. Support for small businesses, a lifeline to keep people connected to their jobs, wraps up in early August.
"The bill will be introduced Monday and we're prepared to act quickly," Mnuchin told broadcaster Fox on Sunday.
However, Republican leaders in Congress have suggested the negotiations with Democrats on a final bill may take weeks, with economists warning the damage from delays will be significant.
Republicans say their bill is worth about USD1 trillion and would see at least a 30% decline in federal unemployment benefits. Congress in March passed stimulus bills which together with a later supplement were worth nearly USD3 trillion. Democrats want another USD3 trillion in stimulus, something Republicans have rejected out of hand, saying it is too costly.
In the US on Friday, the Dow Jones Industrial Average closed down 182.44 points, or 0.7%, at 26,469.89. The S&P 500 closed down 20.03 points, or 0.6%, at 3,215.63 and the Nasdaq Composite fell 98.24 points, or 0.9%, to 10,363.18.
The dollar was sharply lower across the board early Monday. Sterling was quoted at USD1.2823 early Monday, higher than USD1.2786 at the London equities close on Friday.
The euro traded at USD1.1705 early Monday, higher than USD1.1635 late Friday. Against the yen, the dollar was quoted at JPY105.56, down versus JPY105.85.
"Currency markets appear to be girding themselves for another notable leg lower by the US dollar. With geopolitics the new normal, it seems to fall of the radar as fast as it appears and thankfully so. With a new US stimulus package, a European one, an ultra-dovish Federal Reserve, and China leading Asian recovery hopes, more losses for the US Dollar across the board are set to continue," said Jeffrey Halley, senior market analyst for Asia Pacific at Oanda.
The greenback's fall also helped to boost gold prices to record levels.
Gold was quoted at USD1,932.27 an ounce early Monday, higher than USD1,900.17 on Friday. The precious metal hit a record high of USD1,944.36 an ounce overnight.
Brent oil was trading at USD43.06 a barrel early Monday, higher than USD43.06 late Friday.
In early London news, AstraZeneca said it has entered into a multi-billion dollar oncology collaboration with Daiichi Sankyo.
The two will work on Daiichi Sankyo's proprietary trophoblast cell-surface antigen 2 (TROP2)-directed antibody drug conjugate and potential new medicine for the treatment of multiple tumour types.
"DS-1062 is currently in development for the treatment of multiple tumours that commonly express the cell-surface glycoprotein TROP2. Among them, TROP2 is overexpressed in the majority of non-small cell lung cancers and breast cancers tumour types that have long been a strategic focus for AstraZeneca," the London-listed pharmaceutical firm said.
The companies will jointly develop and commercialise DS-1062 worldwide, except in Japan where Daiichi Sankyo will maintain exclusive rights.
AstraZeneca will pay Daiichi Sankyo USD1 billion upfront in staged payments, with USD350 million due on completion, USD325 million after a year and USD325 million after two years. AstraZeneca will pay additional conditional amounts of up to USD1 billion for the successful achievement of regulatory approvals and up to USD4 billion for sales-related milestones.
AstraZeneca added that the transaction does not impact its financial guidance for 2020.
"We see significant potential in this antibody drug conjugate in lung as well as in breast and other cancers that commonly express TROP2. We are delighted to enter this new collaboration with Daiichi Sankyo and to build on the successful launch of Enhertu to further expand our pipeline and leadership in Oncology," said AstraZencea Chief Executive Pascal Soriot.
In a separate release, AstraZeneca said its Imfinzi drug has been recommended for marketing authorisation in the EU for the first-line treatment of adults with extensive-stage small cell lung cancer.
Ryanair turned to a loss in the first quarter due to travel restrictions put in place because of the Covid-19 pandemic.
The budget airline swung to a loss of GBP185 million in the first quarter ended June 30 from a net profit of GBP243 million a year ago.
The company saw 99% of its fleet grounded from mid-March to the end of June due to travel restrictions caused by Covid-19. First quarter air traffic fell to 500,000 passengers from 42.0 million a year before.
"The past quarter was the most challenging in Ryanair's 35 year history. Covid-19 grounded the group's fleet for almost 4 months as EU governments imposed flight or travel bans and widespread population lockdowns," Ryanair said.
Data and analytics company Ascential said it produced a "resilient" performance in the first half against a challenging backdrop.
Revenue slumped to GBP144.3 million from GBP236.2 million, down 39%. Marketing segment revenue slumped 74%, primarily due to the cancellation of the 2020 edition of Cannes Lions.
Ascential swung to a pretax loss of GBP78.3 million from a GBP30.5 million profit a year ago.
Looking ahead, the FTSE 250 firm said: "Clearly, the impact on our business in 2020 from Covid-19 has been significant. While we do not expect an immediate recovery in underlying trading conditions it is also apparent that a number of our brands remain well positioned, arguably more so than six months ago, to benefit from the accelerated shift towards eCommerce that we have witnessed, particularly clearly, in the past period."
Signature Aviation reported a like-for-like sales decline of 31% in the first half "solely due to the impact of Covid-19".
The aviation support services provider said revenue for the continuing group was down 38% in the six months to June.
Flying activity continues to show an improving trend, said Signature Aviation, with activity down just 32% in June versus an average of 77% in April.
"All guidance remains suspended. We will continue to monitor the Covid-19 recovery closely and will provide further updates when we publish our interim results in early September. Furthermore, the board will review the decision on suspension of dividend payments as trading conditions become clearer," said Signature Aviation.
The company added that it has secured a covenant waiver from lenders for the testing periods ending December 31, 2020 and June 30, 2021.
The economic calendar on Monday is fairly light, with the Ifo's German business climate index at 0900 BST and US durable goods orders at 1330 BST.
The focus of next week will be the US Federal Reserve's interest rate decision on Wednesday, while second quarter GDP readings on Thursday from Germany and the US also will be eyed, followed by the same from the eurozone on Friday.
By Lucy Heming; lucyheming@alliancenews.com
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