(Alliance News) - London stocks remained in the green at midday, helped by a weaker pound after a surprise Bank of England rate cut while construction firms and housebuilders rallied ahead of hopes for stimulus in the UK budget later Wednesday.
The FTSE 100 index was up 44.72 points, or 0.8%, at 6,004.95 on Wednesday. The mid-cap FTSE 250 index was up 168.76 points, or 1.0%, at 17,715.81. The AIM All-Share index was up 0.2% at 808.07.
The Cboe UK 100 index was up 0.4% at 10,168.77. The Cboe 250 was up 0.4% at 15,673.81, and the Cboe Small Companies was down 0.9% at 10,721.18.
London stocks were boosted on Wednesday by a pre-market rate cut by UK central bank.
The BoE's Monetary Policy Committee unanimously decided to cut UK interest rates by 50 basis points to 0.25% from 0.75% at a special meeting ending on Tuesday, back to the record low reached in the aftermath of the vote to leave the EU in 2016.
The rate cut, coming just ahead of the UK government budget due at midday Tuesday, followed the US Federal Reserve last week unexpectedly cutting the federal funds rate by 50 basis points.
The BoE noted that prices of risk assets and commodities have fallen sharply amid the spread of the deadly Covid-19 virus, and government bond yields have reached all-time lows. Indicators of financial market uncertainty have reached "extreme" levels.
"If the effect was to help push European markets higher into the open the plan worked; however for the rate cut to be effective it also needs to rely on a fiscal response from new Chancellor of the Exchequer Rishi Sunak later today. Otherwise this morning's early gains could well be short-lived," said Michael Hewson at CMC Markets.
Sterling was quoted at USD1.2919 midday Wednesday, down from against USD1.2942 at the London equities close on Tuesday, but rebounding after dropping below USD1.29 following the central bank announcement.
Attention in the UK on Wednesday now turns to Chancellor Rishi Sunak and his budget at 1230 GMT. Sunak, in post less than a month, said on Sunday the government is ready to deliver "whatever action is required" to deal with the Covid-19 outbreak and has pledged to give the National Health Service the resources it needs to respond.
The euro traded at USD1.1326 on Wednesday, soft versus USD1.1342 late Tuesday. Against the yen, the dollar was quoted at JPY104.97, up from JPY103.94.
Gold was quoted at USD1,667.48 an ounce on Wednesday, up from USD1,655.61 on Tuesday. Brent oil was trading at USD36.24 a barrel, down from on USD36.63 late Tuesday after Saudi Aramco said it will further increase its maximum sustainable capacity to 13 million barrels of crude oil.
In mainland Europe, the CAC 40 in Paris was up 1.6% while the DAX 30 in Frankfurt was 1.3% higher.
Wall Street is set for a lower open. The Dow Jones is seen down 1.9%, the S&P 500 down 2.0% and the Nasdaq sown 1.9%.
"US futures markets have reacted to this morning's rebound in Europe, by pulling off their lows a touch but the Dow and S&P500 are still set to open lower, as doubts grow over the willingness of the US government to act quickly on coronavirus," said Hewson.
At least 28 people have died and 1,025 people have been infected in the US, according to a running tally by Johns Hopkins University – nearly double the 550 total confirmed cases the day before. Epidemiologists have said faulty test kits coupled with a diagnostic strategy that initially targeted too few people allowed the disease to spread beyond US authorities' ability to detect it.
US President Donald Trump had promised to announce "major" economic measures to counter the virus's economic fallout on Tuesday, but no concrete details had emerged by early evening.
The administration earlier in the day unveiled steps to help airlines and the cruise industry and agreements by insurance companies to waive copay charges for people seeking tests for the virus. Trump didn't mention further economic measures after meeting with senators, but CNBC reported the president wants to lower payroll taxes to zero percent through the rest of the year.
Due in the US economic calendar on Wednesday is inflation at 1230 GMT.
In the UK at that same time, housebuilders and other construction firms will be hoping that Sunak pledges a boost for infrastructure spending.
Speaking on the eve of his first Budget, Sunak pledged that "no region will be left behind" when he unveils the financial plan.
"We have listened and will now deliver on our promise to level up the UK, ensuring everyone has the same chances and opportunities in life, wherever they live," he added.
London's blue-chip housebuilders were higher ahead of the budget, with Persimmon up 3.7%, Taylor Wimpey up 3.6% and Barratt Developments up 2.3%.
Mid-cap construction firm Balfour Beatty was up 16%, buoyed as well by its full-year results released Wednesday.
For 2019, London-based Balfour Beatty said pretax profit was up 12% to GBP138 million from GBP123 million the year before, driven by improvements in the group's earnings-based businesses. On an underlying basis, which excludes an impairment of goodwill relating to the Gas & Water unit, pretax profit was up 10% to GBP200 million from GBP181 million.
Revenue for 2019, meanwhile, grew by 7.7% to GBP8.41 billion from GBP7.81 billion in 2018, buoyed by a stronger performance from Construction Services following a rise in volume in the UK and US.
Peer construction firm Kier was up 15%.
Elsewhere in the FTSE 250, G4S shares sank 25% as the security firm reported a sharp decrease in profit on impairments.
For the year, the London-based security services provider posted a pretax profit of GBP27 million, down more than 80% from GBP142 million in 2018, entirely due to a goodwill impairment charge amounting to a whopping GBP291 million.
The 2019 impairment comprised of GBP205 million for the UK Cash Solutions business on the declining rate in cash volumes in the UK, GBP35 million for G4S's Brazil Secure Solutions, and GBP40 million from the Facilities Management business.
On an underlying basis, pretax profit rose by 4.3% to GBP383 million in 2019 from GBP367 million the prior year.
Dignity was down 22% as it warned on Wednesday a regulatory investigation could "materially" impact both its industry and the company itself.
A year ago, the UK Competition & Markets Authority announced an in-depth probe into the funerals sector amid concerns over competition. Other concerns included the rising cost of funerals, which rose on average 6% a year in the 15 years prior to 2019.
"We have a strong business that is ready and willing to adapt to the challenges ahead. However, the challenges are significant," said Non-Executive Chair Clive Whiley.
"Average income per funeral and cremation are likely to reduce further; the CMA investigation could materially impact our plans; our transformation plan is strong however timing needs to be amended pending the outcome of the CMA investigation, thereby delaying anticipated savings."
Turning to results for the 52 weeks to December 27, Dignity's average income per funeral fell 1.4% to GBP2,930, with the reduction expected. Revenue fell 4% to GBP338.9 million, and the number of deaths during the period dipped 3% to 584,000.
Dignity swung to a pretax profit of GBP44.1 million, after a GBP18.0 million loss the year before. The 2018 figure was restated from a GBP40.5 million pretax profit, due to accounting changes.
Costain shares slumped 28% after the infrastructure construction firm announced a fundraise amidst a weakening of its cash position, and it has also decided against a final dividend.
Maidenhead-based Costain is to embark on a "fully underwritten" capital raise of up to GBP100 million, by issuing new shares, in the coming weeks. Costain said its market has changed "significantly" over the past few years. Major clients are consolidating supply chains, while there are also new requirements for contractors to pay supplies earlier leading to increased capital requirements.
Costain also posted 2019 results on Wednesday, showing a GBP6.6 million pretax loss from a GBP40.2 million profit the year before. Revenue including joint ventures and associates fell by 22% to GBP1.16 billion.
Costain has decided against paying a final dividend. It paid an interim of 3.8p, meaning the 2019 total has fallen to nearly a fifth of the 15.15p paid for 2018.
By Lucy Heming; lucyheming@alliancenews.com
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