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(Alliance News) -Â Stock market gains continued to flow into Wednesday with London shaking off fears of a second wave of Covid-19 after a new outbreak in China.
Helping London's blue-chip index push higher were gains for SSE, as investors were comforted by the utility's payout, while outsourcer Serco surged in the FTSE 250 amid strong results.
Meanwhile, the pound softened as UK inflation hit a four-year low amid a continued slide in fuel prices.
The large-cap FTSE 100 index was up 40.36 points, or 0.6%, at 6,283.15 at midday Wednesday - bringing its week-to-date gain to 2.9%.
The FTSE 250 index was up 162.50 points, or 0.9%, at 17,627.20 at midday and the AIM All-Share index was up 1.1% at 886.70.
The Cboe UK 100 index was up 0.6% at 10,630.35. The Cboe 250 was up 0.8% at 15,160.47, and the Cboe Small Companies up 0.7% at 9,826.28.
In mainland Europe, the CAC 40 in Paris was up 0.3% while the DAX 30 in Frankfurt was up 0.2% in early afternoon dealings.
"Tuesday saw investors giddy at the thought of Trump's potential USD1 trillion infrastructure spending plan, a sharp rebound in US retail sales AND reports of a 'major breakthrough' regarding the use of cheap steroid dexamethasone in reducing Covid-19 mortality. The residue of those gains was seen on Wednesday morning, which saw Europe, initially exhausted after yesterday's escapades, grow in confidence as the session gained traction," said Connor Campbell, financial analyst at Spreadex.
"Investors were clearly choosing not to linger on the situation in China, where government officials have warned that the latest outbreak in Beijing is 'extremely severe'," Campbell added. "Oh, and that multiple states are seeing record numbers of new cases on a daily basis in the US."
Beijing's airports cancelled more than 1,200 flights and schools in the Chinese capital were closed again on Wednesday as authorities rushed to contain a new coronavirus outbreak linked to a wholesale food market.
The city reported 31 new cases on Wednesday while officials urged residents not to leave Beijing, with fears growing about a second wave of infections in China, which had largely brought its outbreak under control.
"The epidemic situation in the capital is extremely severe," Beijing city spokesman Xu Hejian warned Tuesday.
Despite this, Wall Street is set for another session of gains. The Dow Jones and S&P 500 are both pointed up 0.2% and the Nasdaq up 0.3%.
The dollar was stronger in midday trade. Against the Japanese yen, the dollar was quoted at JPY107.38 versus JPY107.33 a day before.
Sterling was quoted at USD1.2540 on Wednesday after the data, lower against USD1.2588 at the London equities close on Tuesday.
The pound trended lower after data showed UK inflation softened further in May amid ongoing pressure on fuel prices.
The annual inflation rate eased to just 0.5% in May from 0.8% in April - having started the year with a rate of 1.8% in January.
Prices for clothing & footwear slumped 3.1%, with men's clothing recording a fall of 6.8%. Fuel prices also continued to slump, with petrol and diesel prices both down 17%.
Capital Economics said: "May's further fall in inflation is probably only the beginnings of a prolonged period of very soft price pressure that we think will prompt the Bank of England to announce a total of GBP350 billion more [quantitative easing], starting with GBP100 billion (or maybe even GBP150 billion) at tomorrow's policy meeting."
Eurozone inflation also softened in May. Consumer prices rose just 0.1% year-on-year last month, said Eurostat, after a 0.3% rise in April.
Energy prices acted as the largest drag, slumping 12% year-on-year in May, while food, alcohol & tobacco prices increased 3.4%.
A separate release showed eurozone construction slumped 15% month-on-month in April as Covid-19 lockdowns continued to hit activity. This followed a 16% fall in March.
Annually, construction output tumbled 28% in April after a 18% decline in March.
The euro traded at USD1.1231 on Wednesday, lower versus USD1.1261 late Tuesday.
Gold was quoted at USD1,716.08 an ounce early Wednesday in London, lower than USD1,727.20 on Tuesday. Brent oil was trading at USD40.44 a barrel, slightly higher against USD40.22 late Tuesday.
On the London Stock Exchange, SSE was the largest gainer in the FTSE 100 after the electricity utility reported a fall in full-year profit on exceptional charges, though it continues to target delivery of its five-year dividend plan.
For the year ended March 31, SSE posted a pretax profit of GBP587.6 million from continuing operations, down sharply from GBP1.30 billion the year before.
SSE recommended a full-year dividend of 80 pence, down 18% from 97.5p the year before. The reduced payout was in line with SSE's five-year dividend plan, which it said it continues to target.
"SSE's dividend remains a key attraction, which helps to explain the surge in the shares this morning following its results. Utilities remain in high demand across the globe, and even a smaller payout than last year has not diminished the attractiveness of the firm to investors," commented Chris Beauchamp, chief market analyst at IG.
Berkeley Group advanced 3.1%. The housebuilder reported a double-digit decline in earnings in its most recently ended financial year as home deliveries dropped, but maintained its payout plans.
The Cobham, England-based property developer said revenue declined 35% in the year to the end of April to GBP1.92 billion from GBP2.96 billion a year earlier, taking pretax profit down 35% to GBP503.7 million from GBP775.2 million.
Of the GBP140.0 million shareholder return already announced to be made by the end of September, GBP6.0 million has been made to date through share buybacks, Berkeley noted. The amount that will be returned as a dividend will be announced on August 13, it said.
Serco shares surged 17% after the outsourcer reinstated its 2020 guidance amid anticipation of a strong first half.
For the six months ending June 30, Serco expects to report underlying trading profit between GBP75 million and GBP80 million, about 50% higher year-on-year. Revenue in the period is expected to grow by about 23%, with organic growth of 14%.
Serco is now guiding for full-year revenue of GBP3.7 billion, up from previous guidance of between GBP3.4 billion to GBP3.5 billion. Organic sales growth is now guided for about 9%, stepped up from about 4% previously. Underlying trading profit will land between GBP135 million to GBP150 million, similar to previous guidance of about GBP145 million.
"Being able to reinstate guidance for the full year reflects the resilience of our business, which depends for its revenues on governments rather than businesses or consumers, our strong order book, and growing confidence that our people and systems can adapt effectively to the challenges of Covid-19. Clearly, there is a more than normal degree of risk in our guidance, but we feel it better that we give some indication rather than none," Chief Executive Rupert Soames said.
Kingfisher rallied 6.0% as it saw an improvement in sales in the second quarter of its new financial year.
The B&Q and Screwfix stores operator reported a 1.5% fall in revenue for the year to the end of January to GBP11.51 billion from GBP11.69 billion. Pretax profit, meanwhile, dropped by 66% to GBP103 million from GBP300 million a year before amid GBP441 million of exceptional items.
In financial 2021, first quarter like-for-like sales were down 25% even though trading up to March 14 continued the "positive trends" seen in the fourth quarter of the recently ended year. However, second quarter like-for-like sales to date were up 22% amid strong e-commerce growth and the phased reopening of stores.
Domino's Pizza Group fell back 8.0% after incurring "considerable" costs as it implemented changes to its UK and Irish operations during Covid-19 lockdowns.
From December 31 to June 14, like-for like sales were up 3.7%, driven by an increased order count. However, Ireland recorded a weaker performance as sales fell by 5.9%.
The pizza takeaway firm said that while UK operations benefited from an increased order count during lockdown, the Irish business suffered from weak consumer spending generally in the Republic.
Domino's Pizza said changes implemented - such as re-routing all store deliveries to stop two-person deliveries, ensuring all stores are closed during restocking, changing its supply chain shift patterns, paying salary premiums and purchasing contact-free boxes and facemasks - has meant that it has incurred "considerable" costs.
On AIM, boohoo rose 7.4% as the online clothing retailer reported a "very strong" performance in the first quarter and unveiled the acquisition of the online businesses of Oasis and Warehouse.
boohoo said revenue in the three months to the end of May totalled GBP367.8 million, up 45% year-on-year, with strong underlying growth across brands boohoo, PrettyLittleThing and Nasty Gal. Despite the uncertain backdrop, boohoo said it delivered a strong gross margin performance, up 60 basis points year-on-year to 55.6%.
In addition, the Manchester-headquartered company said it bought the online businesses and all associated intellectual property of two brands, Oasis and Warehouse, for GBP5.3 million in cash from Hilco Capital.
John Moore, senior investment manager at Brewin Dolphin, commented: "With excess cash on its balance sheet, you wouldn't rule out further additions in the months ahead as less resilient names struggle in the current retail climate. The trading environment remains mixed and seasonality will start to become a factor, but boohoo is in a strong position to weather any further challenges with a low-cost structure, agile operating model, shorter lead times, and cash to invest."
By Lucy Heming;Â lucyheming@alliancenews.com
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