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(Alliance News) - Stocks in London are set to open higher on Wednesday as optimism over Covid-19 lockdown re-openings continues to support prices, for now offsetting increasing tensions between the US and China over Hong Kong.
In early UK company news, British Land Co reported a fall in net asset value, St James's Place saw "robust" gross inflows in April, and Provident Financial said its liquidity positions remains strong.
IG says futures indicate the FTSE 100 index of large-caps to open 30.34 points higher at 6,098.10 on Wednesday. The FTSE 100 index closed up 74.48 points, or 1.2%, at 6,067.76 on Tuesday.
"It was bulls on parade overnight as investors shifted into riskier corners of the markets, while Wall Street spent the better part of the session getting stopped into trades. Easy money, cash on the sidelines, and no secondary outbreaks as economies reopening have investors lining up to buy stocks," said Stephen Innes, chief global markets strategist at AxiCorp.
In New York on Tuesday, the Dow Jones Industrial Average ended up 2.2% and the S&P 500 up 1.2% but the Nasdaq Composite just 0.2% higher.
Innes added: "The economic reopening narrative will continue to get tested by increasingly challenging US-China trade relations. President Trump will probably respond to Hong Kong national security legislation after a May 28 vote at the National People's Congress. The risk of higher US tariffs will loom large, but as the summer of hope rolls on, does any of this matter in the broader scheme of things? It should and it will, but perhaps not as damaging as it has in the past given, we have been down this road before."
Hong Kong riot police ringed the city's legislature on Wednesday to stifle any protests ahead of a debate over a law that bans insulting China's national anthem, the latest measure activists say is chipping away at free speech in the finance hub.
The debate comes days after China announced separate plans to impose a sweeping national security law on Hong Kong following last year's huge and often violent pro-democracy rallies.
That move has prompted US President Donald Trump to warn that Hong Kong might lose its status as a global financial centre if the city's freedoms and vaunted judicial independence are swept aside.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.7%. In China, the Shanghai Composite is down 0.2%, while the Hang Seng index in Hong Kong is down 0.7%. Â
Against the yen, the dollar was quoted at JPY107.51, soft versus JPY107.62.
In early UK company news, British Land Co reported a fall in net asset value as its portfolio value slipped.
The property investor's EPRA net asset value per share fell 15% to 774 pence at the end of March from 905p a year ago as its portfolio valuation shrank by 10%.
The portfolio valuation fall was made up of a 26% decline in retail properties, due to structural challenges exacerbated by the early effects of Covid-19, while office property values saw an uplift of 2.3%.
The fall in valuations led to a loss after tax of GBP1.11 billion for the recently ended year versus GBP320 million the year before. British Land's pretax loss widened to GBP1.12 billion from GBP319 million.
As previously announced, dividends have been temporarily suspended, meaning the full-year payout was down 48% to 15.97p. Dividends will resume at an appropriate level as soon as there is "sufficient clarity of outlook".
"For this we will need to see a significant improvement in rent collection and have more visibility on the post lockdown productivity of our assets, principally how quickly retail customers and office workers return," British Land said.
It added that 68% of March rent has been collected, equating to 91% when adjusting for rent deferrals.
Chief Executive Chris Grigg said: "Near term, we are expecting the offices market to be more cautious, but we continue to conduct virtual viewings and are encouraged by negotiations we are having. In Retail, given current valuations and the lack of liquidity in the investment market, our focus is on delivering value though asset management, working to keep our places full and exploiting demand for assets which support an online offer. Our financial position is robust with debt low, significant covenant headroom and access to GBP1.3 billion of undrawn facilities and cash so we are well placed to weather today's challenges and succeed in the long term."
The property firm highlighted that it has significant headroom to its debt covenants, with the group able to withstand a further valuation fall of 45% before any mitigating actions.
Wealth management business St James's Place said April gross inflows were "robust", though did come in lower than a year ago.
Gross inflows for April amounted to GBP1.17 billion versus GBP1.35 billion a year ago, with net inflows broadly flat at GBP810 million. Closing funds under management totalled GBP108.83 billion.
For the four months to April, gross inflows were GBP5.21 billion, up from GBP4.96 billion a year before, and net inflows were up to GBP3.18 billion from GBP2.98 billion.
"Following record first-quarter new business, we have naturally seen a reduction in new investments as the Covid-19 crisis developed. In light of the need to observe social distancing, the Partnership has quickly adapted to managing client relationships 'virtually' and April gross inflows were robust, albeit 13% lower than the same month last year," said Chief Executive Andrew Croft.
"We are encouraged by the robust gross and net inflows we have continued to experience during May, though the short to medium-term impact of government measures and economic volatility on our flows remains uncertain," Croft added.
Provident Financial also said it has adapted well to Covid-19, adding that its liquidity position remains strong.
Regulatory capital was GBP710 million at April 30, equating to a core CET1 ratio of 33.4% and headroom of approximately GBP190 million above the minimum regulatory requirement. This is before taking into account the capital conservation buffer of GBP50 million, the subprime lender noted, which is held to be used in the event of a stress situation.
Underwriting standards have been "tightened significantly" in response to Covid-19. As a result, the four months to April has seen Vanquis Bank's new customer bookings reduced by 75%.
Moneybarn has remained open to new business throughout the Covid-19 crisis, while lending in Satsuma was temporarily paused. Restarting lending in Satsuma remains "under constant review".
Soft drinks maker Britvic said it delivered a "robust" first half, entering the Covid-19 crisis with good momentum.
Revenue in the half-year to March 31 fell to GBP698.8 million versus GBP769.2 million in the 28 weeks to April 14. However, pretax profit rose to GBP53.6 million from GBP45.2 million as administration costs were reduced to GBP99.9 million from GBP132.8 million.
While "confident" in liquidity, the board has decided to defer a dividend decision to later in the year, when the impact of Covid-19 will be clearer.
Since mid-March, Covid-19 restrictions have "significantly impacted" Britvic's Out-of-Home category, including on-the-go consumption.
"We entered the Covid-19 crisis with strong momentum, having delivered a robust first half performance, which continues our track record of consistent delivery since 2013. As a business and as a team, we have repeatedly demonstrated our agility as well as our ability to successfully navigate tough headwinds. While these times are clearly unparalleled, soft drinks has proven itself to be a resilient category time and time again," said Chief Executive Simon Litherland.
In the economic calendar for Wednesday, Kantar's latest UK grocery market share figures are out at 0800 BST.
EU chief Ursula von der Leyen will on Wednesday propose a roughly EUR1 trillion post-virus recovery fund for Europe, but will have to win over sceptical member states.
The global coronavirus outbreak has thrust the EU into its deepest ever recession, and Von der Leyen's proposal will set out to help the worst affected countries.
The virus has killed at least 172,000 people in Europe and put its economy in a deep freeze, with businesses only slowly reopening and tight controls on borders that were once wide open for travel and trade.
Italy and Spain were Europe's first victims of the outbreak and, still burdened with heavy debts, lack the firepower of Germany and others to rebuild their shattered economies.
The European Commission, the EU's executive arm, has won the crucial backing of Germany and France to raise EUR500 billion on financial markets to begin to fix the problem.
The euro traded at USD1.0959 early Wednesday, down from USD1.0978 late Tuesday.
Sterling was quoted at USD1.2319 early Wednesday, lower than USD1.2346 at the London equities close on Tuesday.
Gold was priced at USD1,706.14 an ounce early Wednesday, lower than USD1,713.19 on Tuesday. Brent oil was trading at USD35.88 a barrel early Wednesday, higher than USD34.72 late Tuesday.
By Lucy Heming; lucyheming@alliancenews.com
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