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(Alliance News) - Stock prices in London were mixed at midday on Thursday as investors started to take profit following strong gains during the week so far, while analysts cautioned over the outlook for the UK economy.
Markets rejoiced on Monday after US pharma company Pfizer said its vaccine candidate had proved to be 90% effective. However, a worrying spike in new infections in the US and Europe has fanned concerns since about a deadly winter in the northern hemisphere with a number of countries already in lockdown.
In London, the FTSE 100 index was down 20.51 points, or 0.5%, at 6,361.59. The FTSE 250 was up 87.42 points, or 0.5%, at 19,427.61. The AIM All-Share was up 0.2% at 997.47.
The Cboe UK 100 index was down 0.5% at 633.28. The Cboe 250 was up 0.3% at 16,684.22. The Cboe Small Companies down 0.2% at 10,585.86.
The CAC 40 index in Paris was down 0.6% and Frankfurt's DAX 30 down 0.7%.
"A bout of profit taking was probably inevitable after the blow-out rally sparked by positive news on Covid-19 vaccines delivered this week and a busy day for corporate news on Thursday saw the FTSE 100 take a step back," said AJ Bell investment director Russ Mould. "Record UK GDP growth has little relevance to the index thanks to its global horizons."
In the FTSE 100, 3i Group was the best performer, up 5.0% after the private equity investor posted a rise in net assets for the first half of financial 2021 and maintained its dividend.
3i reported diluted net asset value per share of 905p as at September 30, up 13% from 804p at the end of March and up 3.7% from 873p as at the same time last year. Total return during the six months was GBP1.14 billion, up 49% from GBP767 million in the same period a year before. That represented a 15% return on opening shareholders funds, improved from 10% a year earlier.
3i credited its performance to resilient performance across its portfolio, highlighting that most of its portfolio companies outperformed its rebased Covid-19 outlook. 3i's portfolio value increased 12% to GBP9.58 billion on September 30, from GBP8.55 billion a year prior.
The interim dividend was maintained at 17.5p per share.
Burberry Group was up 2.3% as the fashion house said earnings for the first half of financial 2021 were hurt by global store closures due to the pandemic, but reassured investors it started to see "strong recovery" in the second quarter.
For the six months ended 26 September 2020. Burberry posted pretax profit of GBP73 million, down 62% from GBP193 million recorded a year prior. This was as revenue fell 31% year-on-year to GBP878 million from GBP1.28 billion. However, the revenue figure beat market estimates of GBP849 million.
More positively, Burberry said a recovery was "underway", with a sequential improvement in comparable store sales. These fell 6% in the second quarter, easing from a 45% drop in the first quarter.
"Cost saving efforts have come in ahead of plan, but this hasn't been enough to stop profits sliding. We're encouraged by the better trends brought by the second quarter, and it should mean that once things start to get back to normal, Burberry will be greeted by strong demand. In the meantime though, the extent of the damage to both ends of the income statement will depend on the duration of new lockdowns, and the speed at which tourism recovers," said Hargreaves Lansdown analyst Sophie Lund-Yates.
At the other end of the large caps, J Sainsbury was down 3.5%, after the stock went ex-dividend, meaning new buyers no longer qualify for the latest payout.
Croda International was down 3.0% after Barclays downgraded the speciality chemicals company to Underweight from Equal Weight.
The pound was quoted at USD1.3182 on Thursday at midday in London, lower from USD1.3199 at the London equities close Wednesday, after UK GDP figures missed market forecasts.
The UK economy returned to growth on a quarterly basis in the third quarter as lockdown measures eased, according to figures from the Office for National Statistics.
On an annual basis, UK gross domestic product fell 9.6% in the three months to September, the economy's contraction slowing from 21.5% in the second quarter of 2020. The third-quarter reading was slightly worse than market forecasts, cited by FXStreet, for an annual contraction of 9.4%.
However, on a quarterly basis, UK GDP grew by 15.5% in the third quarter, having shrunk by 19.8% in the second quarter. The quarterly figure also slightly missed the consensus estimate, which called for 15.8% growth.
Analysts fear there are dark clouds on the horizon for the UK economy with England in the midst of a second nationwide lockdown.
"We are likely to see a modest fall in GDP during October, reflecting the introduction of 'tiered restrictions' in England (which will have acted as a further drag on hospitality) and a local lockdown in Wales. However, the decline will be amplified in November, where we estimate we're likely to see a 6-7% slide in monthly GDP on the month-long English lockdown. This will also result in a negative figure for the fourth quarter as a whole," analysts at ING cautioned.
The euro stood at USD1.1812 at midday, up from USD1.1763 late Wednesday in London. Against the yen, the dollar was trading at JPY105.25, down from JPY105.57.
US stock market futures were pointed mostly lower amid a worrying rise in coronavirus cases. After several weeks of rapidly rising coronavirus cases, hospitals around the US are once again overwhelmed, forcing local authorities to take new measures to cope with the pandemic.
On Wednesday a record 65,368 people were in the hospital with Covid-19 across the country, marking the second day in a row and second time ever that the tally passed the 60,000 mark, according to the Covid Tracking Project.
The Dow Jones Industrial Average was called down 0.4% and the S&P 500 down 0.1% but the Nasdaq Composite was called up 0.5%.
In commodities, Brent oil was quoted at USD43.98 a barrel midday Thursday, down from USD44.30 at the London equities close Wednesday. Gold was trading at USD1,871.35 an ounce, firm against USD1,863.53.
The International Energy Agency cut its 2020 global oil demand forecast, citing a resurgence of the Covid-19 pandemic, with vaccines unlikely to have much of an impact until well into next year.
The IEA said that as a result of fresh restrictions imposed by governments in an effort to curb the disease, it expected full-year 2020 global oil demand of 91.3 million barrels per day, down by 8.8 mbpd compared with the drop of 8.4 mbpd given in last month's regular report.
The economic calendar Thursday has US inflation and initial jobless claims out at 1330 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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