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(Alliance News) - Stock prices in London remained lower on Tuesday at midday, amid fears of a third wave of Covid-19 and as focus turns to Congressional testimony on the US government's pandemic relief efforts.
Investor sentiment was dealt a blow after Germany said it will impose a strict lockdown for five days over Easter as Covid-19 infections spiral "exponentially", while a row over exports of the AstraZeneca vaccine continues in Europe.
The FTSE 100 index was down 25.68 points, or 0.4%, at 6,700.42. The mid-cap FTSE 250 index was down 75.75 points, or 0.4%, at 21,380.14. The AIM All-Share index was 0.2% lower at 1,201.06.
The Cboe UK 100 index was down 0.4% at 667.57. The Cboe 250 was down 0.5% at 19,012.66, and the Cboe Small Companies down 0.5% at 13,747.44.
In mainland Europe, the CAC 40 in Paris was 0.5% lower, while the DAX 30 in Frankfurt was down 0.2%.
IG Group's Chris Beauchamp said: "As the number of big earnings releases continues to dwindle, and with key testimony on both the monetary and fiscal side expected today, plus a looming long weekend for US and UK markets, the list of 'reasons' to buy keeps getting smaller, and the litany of reasons to stay cautious gets longer. Thus it is not surprising to see equity markets in the red this morning, giving back the ground gained yesterday.
"Even fresh reports of a new infrastructure stimulus in the US have been treated with a degree of caution, investors preferring to wait for more concrete evidence before becoming too keen on jumping back into the water."
Chancellor Angela Merkel ordered the harsh nationwide measures after marathon talks with regional leaders, warning a potent strain of coronavirus was raging through the EU's most populous country.
A variant first identified in the UK has become the dominant strain circulating in Germany, the under-pressure leader said, adding that "we are in a new pandemic".
The spat continued between the UK and the EU over much-needed supplies of AstraZeneca's Covid-19 vaccine, which is cheaper and easier to store than many of its rivals. European officials are furious that the AstraZeneca has been able to deliver its UK contract in full, while falling short on its supplies to the EU.
Merkel on Tuesday threw her weight behind the bloc, which has threatened to ban AstraZeneca vaccines produced in the bloc from being exported unless it delivers more of the 90 million doses it agreed to supply in the first quarter of 2021.
Drugmaker AstraZeneca said Monday that US trials showed its drug was 100% effective in preventing severe disease.
However, US federal health officials late Monday said the US trial of AstraZeneca's Covid-19 vaccine may have used "outdated information". The Data & Safety Monitoring Board said it was concerned that AstraZeneca may have provided an incomplete view of the efficacy data.
AstraZeneca responded on Tuesday that the trial results were based on interim analysis, which was in line with the primary analysis.
"We will immediately engage with the independent data safety monitoring board to share our primary analysis with the most up to date efficacy data," the company said. "We intend to issue results of the primary analysis within 48 hours."
AstraZeneca shares were 1.0% lower in London at midday.
In the FTSE 100, Bunzl was the best performer, up 2.7% after RBC Capital upgraded the distribution firm to Sector Perform from Underperform.
At the other end of London large-caps, travel and travel-related stocks were once again lower on fears the return of summer holidays will be scuppered by a third wave of Covid-19. British Airways-owner International Consolidated Airlines was 3.6% lower.
In the FTSE 250, travel concessions operator SSP was down 6.5%, budget airline easyJet as down 3.6%, and cruise line operator Carnival was down 4.0%.
Kingfisher was down 2.8%, after Goldman Sachs downgraded the blue-chip DIY retailer to Neutral from Buy. The B&Q chain owner on Monday reported a surge in annual profit as millions of people stuck at home took on home improvement projects during lockdown.
Bucking the broader market trend, Crest Nicholson was the best mid-cap performer up 4.1%. The housebuilder it has continued to deliver a good trading performance in financial 2021, supported by UK government measures to prop up the housing market during the pandemic.
Crest told its annual general meeting on Tuesday that, as of 22 March, the order book is over 70% covered for 2021, up from 55% as reported with its annual results in January. This includes sales that will legally complete after the end of Help to Buy phase 1 and the Stamp Duty holiday extension, further highlighting customers' confidence in the market, it noted.
The Chertsey, Surrey-based housebuilder said that, in light of the good trading performance and the continued strategic progress, it now expects financial 2021 adjusted pretax profit to be around GBP85 million - 14% ahead of current analyst consensus of GBP74.3million.
Large-cap peers, Barratt Developments, Taylor Wimpey and Persimmon were up 1.3%, 0.9% and 0.8% respectively.
At the other end of the midcaps, Tullow Oil was the worst performer, down 11%, while oilfield services firm Petrofac was down 3.5%, tracking spot oil prices lower.
Brent oil was quoted at USD61.88 a barrel Tuesday at midday, down sharply from USD64.21 a barrel at the London equities close Monday. Oil markets extended recent losses on worries about the demand outlook as European countries including Germany and France reimpose strict lockdown measures.
ThinkMarkets analyst Fawad Razaqzada said: "It looks like investors are paring back some of their excessively optimistic growth projections and end of lockdowns timing. They are realising that though there might be light at the end of the tunnel, it is proving to be an extremely long tunnel and we are still nowhere near the end of it.
"A surge in virus cases in mainland Europe, where the rollout of vaccines has been painfully slow, has cast doubt on resumption of travel in the region. This is why the German government has decided to extend the nation's lockdown to 18 April and will shut down almost completely over the Easter holiday to defuse another wave of Covid infections. Among other things, this is hurting demand projections for crude oil and holidays."
The dollar was higher against counterparts as investors flocked to the greenback's safe-haven allure. The pound was quoted at USD1.3778 at midday Tuesday, down from USD1.3860 at the London equities close Monday. Sterling slipped to its weakest levels since the start of February.
The euro was priced at USD1.1878, lower from USD1.1936. Against the yen, the dollar was trading at JPY108.70, flat from JPY108.69.
Gold was priced at USD1,737.71 an ounce, little changed from USD1,738.99 late Monday.
US stock market futures were pointed mostly lower as focus turns to Congressional testimony by US Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen later on Tuesday.
The Dow Jones Industrial Average was called down 0.4% and the S&P 500 was called down 0.3%, but the Nasdaq Composite was called up 0.1%.
The pair, who were former colleagues when Yellen was Fed chief under the Obama administration, have repeatedly said they do not see the spike in inflation lasting and will maintain ultra-loose monetary policies until there is stability in unemployment and inflation is above 2.0% for an extended period.
"In the short term, the Fed seems to have dealt with the tension by sticking to its guns and attempting to style it out in a 'nothing to see here' manner of sorts. Their issue remains how to balance a hugely positive economic outlook with dovish forward guidance and avoid further tantrums, but for now, whilst they wrestle with this 'credibility conundrum', their peers in emerging markets didn't feel they had the gumption to simply stick with the status quo. Brazil, Turkey and Russia all hiked rates," said Axi's Stephen Innes.
Construction-related stocks in the US will be in focus as President Joe Biden's administration is considering spending USD3 trillion on infrastructure in the US, split into two bills that face narrow paths to approval in Congress, US media reported on Monday.
The infrastructure plan would follow the USD1.9 trillion American Rescue Plan Biden signed earlier month, which was aimed at helping the world's largest economy recover from the damage done by the Covid-19 pandemic.
Biden, who took office in January, vowed to pass a second bill aimed at improving infrastructure in the US and creating jobs, and US media reported that would likely be divided up into two proposals costing a total of USD3 trillion.
However, construction-equipment firms Caterpillar, Deere & Co and United Rentals were down 0.7%, 0.4% and 1.0% respectively in pre-market trade in New York.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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