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(Alliance News) - Stocks in London are set to stage a slight rebound on Tuesday after starting the week with drastic losses as a partial Covid-19 lockdown loomed in the UK.
In earlycompany news, DIY retailer Kingfisher said its sales recovery has continued into the third quarter. Whitbread revealed plans to cut up to 6,000 jobs amid a first-half hit by Covid-19. Hikma said it is working with the US Food & Drug Administration after receiving a complete response letter, which is a regulatory rejection.
IG says futures indicate the FTSE 100 index of large-caps to open 17.71 points higher at 5,822.00 on Tuesday. The FTSE 100 closed down 202.76 points, or 3.4%, at 5,804.29 on Monday.
London's blue-chip index ended Monday sharply lower as Covid-19 infections have begun to pick up again in Europe, with the UK recording another 4,368 cases - levels not seen since early May when the country was still in a stringent lockdown.
The UK government will on Tuesday announce new measures to curb rising coronavirus cases across England, hours after upgrading the virus alert level, with top advisers warning of a surging death toll within two months without immediate action.
Under new rules to come into force on Thursday, English pubs, bars and other hospitality venues will be required to close at 2200 BST while food and drink outlets will be restricted to table service only.
The ramped-up response follows warnings on Monday that the country could see up to 50,000 cases a day by mid-October, and a month later exceed 200 deaths every day.
The government's Joint Biosecurity Centre later changed its Covid-19 alert level from three to four to reflect the increase in cases. Level three states that the epidemic is in general circulation while level four reflects that "transmission is high or rising exponentially".
UK Prime Minister Boris Johnson will chair a meeting of Britain's COBR emergencies committee Tuesday morning ahead of making a statement to parliament. He will also address the nation on live television at around 1900 GMT to detail how the restrictions will help flatten the upward curve in cases going into the winter months when other respiratory infections are typically high.
Sterling was quoted at USD1.2785 early Tuesday, lower than USD1.2795 at the London equities close on Monday.
The sell-off on Wall Street on Monday was less severe than in Europe.
The Dow Jones Industrial Average ended down 1.8% and the S&P 500 down 1.2%, but the Nasdaq Composite edged just 0.1% lower.
"Yesterday's US session saw the S&P 500 close lower for the fourth day in succession, its worst run since March; however we did manage to close well off the lows, helped by a rebound in tech which helped the Nasdaq almost climb back off the canvas, closing down a modest 0.13%. Asia markets on the other hand have continued the negative tone, with travel and leisure bearing the brunt," said Michael Hewson, chief market analyst at CMC Markets.
"That said the late recovery in the US could manifest itself into a modest rebound for markets here in Europe when they reopen."
In Asia on Tuesday, the Shanghai Composite is down 1.0%, while the Hang Seng index in Hong Kong is down 0.8%. Tokyo is closed for a second day Tuesday for Autumn Equinox Day.
Against the yen, the dollar fell to JPY104.61 versus JPY104.65.
Under-pressure lenders HSBC and Standard Chartered lost further ground in Hong Kong on Tuesday, with HSBC down 2.7% and StanChart down 2.4%. In London on Monday, the pair had closed down 5.3% and 5.8%, respectively.
Amid rising concerns about being blacklisted by the Chinese government, the two banks also were named in an report for failure to prevent fraud. An investigation by Buzzfeed News and the International Consortium of Investigative Journalists alleges that potentially dubious transfers worth about USD2.0 trillion took place at a host of banks between 1999 and 2017.
Five banks - also including JPMorgan Chase, Deutsche Bank and Bank of New York Mellon - were specifically accused of continuing to move assets of alleged criminals, even after being fined for earlier failures to stem flows of dirty money.
Elsewhere on Tuesday, Kingfisher said its sales recovery has continued into the third quarter, as it reported a rise in interim profit.
The B&Q owner said sales for the six months to July 31 fell 1.3% to GBP5.92 billion, representing a fall of 1.6% on a like-for-like basis. However, pretax profit surged 62% to GBP398 million amid a decrease in selling & distribution expenses.
"We delivered a resilient financial performance in the first half of the year, with the adverse impact of Covid-19 in Q1 offset by a strong recovery in Q2. This recovery has continued into Q3 to date, with growth across all banners and categories," said Chief Executive Thierry Garnier.
Kingfisher said like-for-like sales were up 20% in the second quarter.
The DIY retailer said it has seen an "encouraging" start to the second half, with third quarter like-for-like sales up 17% up to September 19. However, continued uncertainty over Covid-19 limits visibility on the sales outlook for the remainder of the year.
"Looking forward, while the near-term outlook is uncertain, the longer-term opportunity for Kingfisher is significant. There is a lot more to do, but the new team and new plan is now established in the business, and we are committed to returning Kingfisher to growth," said Garnier.
Premier Inn-owner Whitbread reported a slump in half-year sales amid the closure of its hotels and restaurants, and said it is looking into cutting up to 6,000 jobs.
Total sales were "significantly" down year-on-year in the six months ended August 27, due to the closure of the vast majority of hotels and restaurants for a large chunk of that period.
UK like-for-like sales were down 78% in the first half, with total sales down 77%. UK & International sales were down 77%.
The majority of hotels and restaurants were reopened by the first week of August, and a total of 801 hotels, representing 98% of total UK capacity, were open by the end of August.
Since reopening, UK accommodation sales performance has been ahead of the market, Whitbread said. Occupancy levels have improved on a weekly basis across the entire UK estate, averaging 51% in August, while restaurants got a boost from the UK government's Eat Out to Help Out scheme.
August UK total sales - including both accommodation and food & beverage - were down 39% year-on-year.
Whitbread commented: "Trading in the first two weeks of September saw year-on-year total accommodation sales remain ahead of the market. Bookings in tourist destinations remain strong, and business bookings are growing, albeit from a low base. September and October are traditionally a period when business bookings pick-up after the quiet summer period, however at this point it is too early to assess the impact of Covid-19 on this traditionally busy booking period."
With market demand expected to remain at "lower levels" in the short to medium-term, Whitbread said it has decided to enter into consultation on proposals that could result in up to 6,000 redundancies across its hotel and restaurant staff - representing 18% of the total workforce.
Hikma Pharmaceuticals said it has received a "minor" complete response letter from the US Food & Drug Administration in relation to its abbreviated new drug application for a generic version of GlaxoSmithKline's Advair Diskus.
The US regulator sends a complete response letter if it decides to not approve the application in its present form.
The FTSE 100 drugmaker said: "Hikma is working closely with the FDA to quickly address the small number of questions raised in the CRL. Once answered, Hikma can expect to receive a response from the FDA within 90 days. Hikma now expects to receive approval for its generic Advair Diskus in early 2021."
As such, Generics revenue is expected to be within a range of USD710 million to USD730 million with a core operating margin around 18% to 19% for 2020.
Insurer Beazley said its total estimate for first party Covid-19 claims has doubled to USD340 million from USD170 million anticipated previously.
Almost all of this increase stems from further event cancellation losses, the FTSE 250 company said.
"This revised figure assumes a resumption to some form of normality in the second half of 2021. Were this not to be the case, we estimate that we would have another USD50 million of further claims net of reinsurance," said Beazley.
Turning to business generally, Beazley said that it continues to see rate improvements, with an overall rate change of 13% at the end of August. The firm estimates that overall growth for 2020 will be in the "mid-teens".
"Looking towards next year we expect these rate improvements to continue, and are again planning for double digit growth in 2021. We have contemplated this growth within our capital planning and, following the equity raise and LOC extension earlier this year, are able to take full advantage of the opportunity that lies ahead of us," said Beazley.
The euro traded at USD1.1742 early Tuesday, flat on USD1.1745 late Monday.
Gold was quoted at USD1,905.10 an ounce early Tuesday, slightly higher than USD1,904.24 on Monday. Brent oil was trading at USD41.44 a barrel, down from USD41.50 late Monday.
The economic events calendar on Tuesday has US existing home sales at 1500 BST.
By Lucy Heming; lucyheming@alliancenews.com
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