(Alliance News) - London stocks started the week on a downbeat note, with investors wary on Monday as tensions between the US and China began to reawaken over the outbreak of Covid-19.
The FTSE 100 index closed down 9.28 points, or 0.2%, at 5,753.78. The FTSE 250 ended down 196.66 points, or 1.2%, at 15,951.68, while the AIM All-Share closed up 2.08 points, or 0.3%, at 799.73.
The Cboe UK 100 ended down 0.1% at 9,735.45, the Cboe UK 250 closed down 1.3% at 13,702.41, and the Cboe UK Small Companies ended down 1.5% at 8,864.20.
In European equities on Monday, the CAC 40 in Paris ended down 4.2%, while the DAX 30 in Frankfurt ended down 3.6%, both catching up after Friday's holiday.
Markets in France and Germany were closed on Friday for Labour Day, a day which saw London's FTSE 100 shed 2.3%.
"The overall tone remains negative across stock markets, with investors worrying that the outlook for economic growth looks poor despite the ongoing easing of lockdown restrictions. To add to that, we now have to contend with a possible renewal of the US-China trade war, something that many hoped would have been forgotten now that the world has something much more important to worry about," said Chris Beauchamp, chief market analyst at IG.
China's state broadcaster CCTV on Monday attacked US Secretary of State Mike Pompeo's "insane and evasive remarks" over the origins of the coronavirus pandemic, further fuelling Sino-US tensions.
Pompeo on Sunday said "enormous evidence" showed the virus originated in a lab in China, doubling down on previous claims that have been repeatedly denied by the World Health Organization and various scientific experts.
The theory has been heavily pushed by the Trump administration, which has been increasingly critical of China's handling of the outbreak that first emerged in the Chinese city of Wuhan late last year. Trump last week claimed to have proof the Wuhan Institute of Virology was the source.
Two further commentaries published on Monday by Chinese state newspaper People's Daily attacked Pompeo and former White House strategist Steve Bannon as a "pair of lying clowns".
Highlighting the cautious mood on Monday, the price of safe haven asset gold jumped. The precious metal was quoted at USD1,705.55 an ounce at the London equities close Monday against USD1,685.70 at the close on Friday.
Brent oil was quoted at USD26.12 a barrel at the London equities close Monday from USD26.68 late Friday.
In Europe, data from IHS Markit showed weeks of harsh lockdowns dealt a blow to the eurozone manufacturing sector in April.
The eurozone manufacturing purchasing managers' index reading came in at 33.4 in April, down sharply from 44.5 registered in March. The score missed the market consensus estimate of 33.6.
The figure was well below the 50.0 mark which separates expansion from contraction.
IHS Markit said lockdown measures imposed by European governments heavily dented demand and production.
The euro stood at USD1.0913 at the European equities close Monday, lower against USD1.0955 at the same time on Friday.
Meanwhile, British Prime Minister Boris Johnson will set out his plan to ease a nationwide coronavirus lockdown next Sunday, media reports said, as new guidance emerged on how to maintain social distancing in workplaces.
Stay-at-home orders imposed in late March are up for review on Thursday in Britain, one of the worst hit countries in the Covid-19 pandemic, but the government has already said the measures will be eased only gradually.
"There is no requirement for us to set out publicly the next steps" on Thursday, Johnson's spokesman said Monday. "It's going to be crucial that we get the advice to the public right, if it means taking some extra time to do that then that's what we will do," he added.
The pound was quoted at USD1.2425 at the London equities close Monday, lower compared to USD1.2593 at the close on Friday.
Against the yen, the dollar was trading at JPY106.87 compared to JPY107.16 late Friday.
Stocks in New York were in the red at the London equities close, with the Dow Jones down 0.9% and the S&P 500 index down 0.5% but the Nasdaq Composite up 0.4%.
Among the worst performers on Wall Street were airline stocks. American Airlines shares were down 9.8%, Delta down 8.7%, Southwest Airlines down 7.4% and United Airlines Holdings down 9.1%.
Billionaire investor Warren Buffet over the weekend said his company sold all its stakes in four major US airlines last month as the pandemic clobbered the travel industry.
"It turns out I was wrong," he said of his acquisitions of 10% stakes in American Airlines Group, Delta Air Lines, Southwest Airlines and United Airlines Holdings.
Berkshire Hathaway had paid USD7 billion to USD8 billion, and "we did not take out anything like that," he said. Between the purchases that took place over months, and the sale, "the airlines business I think changed in a very major way" and could no longer meet Berkshire criteria for profitability, he said.
"The selloff in airlines and travel stocks is not the only impact from the weekend news about Warren Buffett withdrawing completely from investments in the big US carriers. Firms supplying parts for aircraft, such a Rolls-Royce in the UK and Boeing in the US, are bearing the brunt of heavy losses too," said IG's Beauchamp.
Rolls-Royce ended down 6.5% in London as the Financial Times reported the engine maker is considering cutting up to 8,000 jobs as part of a restructuring plan to reduce its 52,000-person workforce by 15% in response to Covid-19 crisis.
Also among London's blue-chip losers were airlines, with British Airways parent International Consolidated Airlines finishing down 4.7% and easyJet down 7.6%.
Another travel firm, cruise operator Carnival, shed 3.6% after extending cancellations for its North American service on all but eight of its ships.
The cruise line owner - which already put cruises on hold in response to Covid-19 restrictions - said that, starting August 1, cruises on eight of its ships will resume.
These will be the Carnival Dream, Carnival Freedom and Carnival Vista ships from Galveston, Texas; as well as the Carnival Horizon, Carnival Magic and Carnival Sensation ships from Miami, Florida. Ships Carnival Breeze and Carnival Elation from Port Canaveral, Floria will also resume cruises.
All North American cruises between June 27 and July 31 are cancelled and, outside of the eight ships specified, all other North American cruises are cancelled through August 31.
Rentokil Initial ended in the green, up 2.6% after Morgan Stanley initiated the pest control and hygiene firm with an Overweight rating.
On AIM, Hotel Chocolat ended up 3.0% as the retailer said it had been encouraged by the "agility and resilience" of its business model amid Covid-19 store closures.
The chocolate seller closed all its stores on March 23 in line with UK government imposed lockdown measures. Online sales failed to fully offset a total sales loss as a result of the store closures which stretched over the key Easter period, it said.
"Every day at Easter the online demand exceeded the quantity of orders we could accept, due to the requirements to ensure safe working, combined with the short adjustment period. With the plans we are putting in place over the next months, we aim to be able to switch the vast majority of demand to online should the need arise in the future," said Co-founder & Chief Executive Angus Thirlwell.
Plans are in progress to re-open stores when appropriate, the firm added.
In the UK corporate calendar on Tuesday, there are full-year results from neuroscience technology company Cambridge Cognition.
In the economic calendar on Tuesday, there are eurozone producer prices at 1000 BST and a US IHS Markit PMI at 1445 BST followed by the ISM's non-manufacturing PMI at 1500 BST.
By Lucy Heming; lucyheming@alliancenews.com
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