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(Alliance News) - Stocks in London ended strongly on Thursday, shrugging off another huge US jobless claims figure, amid optimism over the gradual reopening of world economies.
UK Prime Minister Boris Johnson said he will act with "maximum caution" in easing the coronavirus lockdown amid signs of tensions with the devolved administrations in Scotland and Wales.
Downing Street insisted the PM would be announcing only a "very limited" easing of the social distancing rules when he sets out his "road map" for the way forward in an address to the nation on Sunday.
The FTSE 100 index closed up 82.22 points, or 1.4% at 5,936.00. The FTSE 250 ended up 265.50 points, or 1.7%, at 16,247.90 and the AIM All-Share closed up 739 points, or 0.9%, at 815.11.
The Cboe UK 100 ended up 1.5% at 10,041.17, the Cboe UK 250 closed up 1.3% at 13,884.30, and the Cboe UK Small Companies ended up 1.0% at 8,991.00.
In Paris the CAC 40 ended up 1.5%, while the DAX 30 in Frankfurt ended up 1.4%.
"Equity markets appear set to finish the day firmly in positive territory on the back of hopes that countries will continue to reopen segments of their economies. Lately there has been a lot of optimism that governments are keen to loosen their lockdown restrictions, so that has fuelled the bullish move in equities. Dealers have the impression that we are over the worst of it in terms of the lockdowns, so that should the pave the way less stringent restrictions," said CMC Markets analyst David Madden.
On the London Stock Exchange, Anglo American ended as the best blue-chip performer, up 7.0%, after Credit Suisse raised the miner to Outperform from Neutral.
RSA Insurance closed up 6.6% after the insurer said the first quarter of 2020 was "strong", with the insurance market conditions "largely unchanged".
RSA said its business operating profit in the first quarter rose by "double-digit percentages", with an improved combined ratio and slightly lower investment income. The company also said Covid-19 hit its balance sheet but did not hurt operating profit, given the timing of lockdowns late in the quarter.
At the other end of the large-cap index, BT ended as the worst performer, down 8.0%, after the telecommunications firm suspended its dividend until financial 2022 - resuming payments then at a lower rate - and said profit declined in its most recent year, partly as a result of regulation and partly from legacy product decline.
BT reported a GBP2.35 billion pretax profit for its year ended March 31, down 12% from GBP2.67 billion the prior year as revenue fell 2.2% to GBP22.91 billion from GBP23.43 billion. BT said its revenue drop predominantly reflected "the impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments".
The company has suspended its final financial 2020 dividend and all dividends for financial 2021 "to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis". It will resume payments in financial 2022 at a 7.7 pence per share annual rate.
For the 2019 financial year, BT paid out 15.40p per share.
Meanwhile, Liberty Global confirmed it has agreed to merge its Virgin Media unit with Telefonica's UK telecommunications unit O2 in a deal worth more than GBP31 billion.
Liberty and Telefonica each will own 50% of the joint-venture which is expected to be completed in 2021. The combination will produce a stronger rival to BT's EE mobile network.
International Consolidated Airlines closed down 3.2% after the British Airways parent reported a quarterly loss, in line with guidance given last week.
The Iberia-owner also said Chief Executive Officer Willie Walsh will stay a little longer.
Walsh will remain at the helm until September 24, not departing at the end of June as initially planned. His departure was announced back in January with boss IAG-owned Iberia Luis Gallego replacing him.
IAG confirmed it endured a difficult fourth quarter, swinging to an operating loss of EUR1.86 billion in the three months to March 31, from a EUR135 million profit a the year prior. It affirmed on Thursday that its first-quarter operating loss before exceptional items was EUR535 million, again a swing from last year's EUR135 million profit.
The pound was quoted at USD1.2308 at the London equities close, down from USD1.2349 at close Wednesday, after the Bank of England issued a stark warning over the future prospects of the domestic economy.
Looking to the UK economy, the central bank said the spread of Covid-19 and the measures to contain it are having a "significant impact". Both in the UK and around the world, activity has fallen sharply since the beginning of the year and unemployment has risen.
An "illustrative scenario" for the UK's economic outlook models a "very sharp fall" in UK GDP in the first half of 2020. Under the BoE's "illustrative scenario", UK GDP falls 14% in 2020 but picks up in 2021 to grow 15%, before settling back to grow 3% in 2022.
UK GDP is expected to be close to 30% lower in the second quarter than it was in the final three months of 2019. It should recover "relatively rapidly" in the third quarter of 2020 as social distancing measures are gradually lifted, and rise further in the fourth quarter.
The unemployment rate is expected to rise to 9% in the second quarter - which would be more than double the 4.0% rate reported by the Office for National Statistics for the three months to February, and the highest rate since 1994.
Additionally, the BoE maintained the Bank Rate at its record low 0.1% in a unanimous vote, while the MPC voted 7-2 to continue with its GBP200 billion bond buying programme, to take the total stock of these purchases to GBP645 billion.
Robert Alster at Close Brother said: "While a 30% drop in GDP would have been unthinkable just months ago, in the circumstances, the economic shock could have been a lot worse. And, if the economy recovers by the end of next year as predicted, the monetary response to this crisis will be lauded. However, the bank's forecasts do come with significant caveats. Its expectation that social distancing, and associated financial support schemes, will be over by the end of September seems at odds with Government messaging that these measures, in some form, will be with us for many months to come.
"We are also, frankly, in unchartered waters when it comes to people resuming their pre-crisis habits – the forecasts rely on life and consumer spending, returning to normal fairly quickly. The truth is that much depends on exactly how the government steers Britain out of lockdown. The prime minister will need to balance the need to get the economy moving, and fast, with public health requirements to reassure people that it is safe to go about their daily business. The Bank of England believes a recovery is there for the taking. Markets will be hoping that the opportunity isn't missed."
Meanwhile, President Christine Lagarde said the European Central Bank is "undeterred" by a German Constitutional Court ruling critical of its government bond-buying programme and will do "whatever is necessary" to support the eurozone economy through the coronavirus crisis.
The euro stood at USD1.0790 at the European equities close, flat from USD1.0799 late Wednesday.
"We are an independent institution accountable to the European Parliament, driven by our mandate" to maintain price stability, Lagarde told a Bloomberg News panel discussion.
"We will continue doing whatever is needed, whatever is necessary... undeterred," Lagarde added.
Against the yen, the dollar was trading at JPY106.48, up from JPY106.05 late Wednesday.
Stocks in New York were higher at the London equities close shrugging off another huge jobless claims figure, amid optimism about the US economic restart and progress on pharmaceuticals to address the coronavirus.
The DJIA was up 1.1%, the S&P 500 index up 1.3% and the Nasdaq Composite up 1.2%.
US jobless claims continued to trend downwards data showed, though still remain at super-elevated levels due to the Covid-19 pandemic.
Seasonally adjusted initial claims totalled 3.2 million in the week to May 2, the US Department of Labor said on Thursday, down from 3.8 million a week ago and 4.4 million the week before that. Consensus, as cited by FXStreet, had seen initial claims of 3.0 million in the May 2 week.
The latest figure takes the number of initial claims filed since the Covid-19 crisis began to bite in March to around 33 million.
US stocks have begun May on a solid note, extending the momentum after the April rebound from the dismal March.
Analysts attribute the strength to unprecedented stimulus measures from Washington and optimism that the US economy will recover more quickly than expected as more states gradually relaunch activities.
"As has been the case for a while, investors weren't all that bothered by these job losses. Instead, focusing on Donald Trump's strategy to reopen America for business, deaths be damned, the Dow Jones added 300 points, once again putting a 24,000-crossing close in the conversation," Spreadex analyst Connor Campbell said.
In addition, another positive catalyst was an announcement from biotech company Moderna that it received clearance from the US Food & Drug Administration for a phase two study of a vaccine for the novel virus.
Brent oil was quoted at USD30.83 a barrel at the London close, up from USD29.41 at the close Wednesday, after Saudi Arabia raised prices for its crude globally.
State-run Saudi Aramco set its June official selling price for Arab Light grade crude to Asia at USD5.90 a barrel below the benchmark price.
"The price hike indicates a return to normal pricing by the Saudis and a possible sign demand is beginning is picking up. Energy traders don't want to be caught short oil anymore and if the headlines remain positive for both the demand and supply side, prices should continue to rise," said OANDA analyst Edward Moya.
Gold was quoted at USD1,700.80 an ounce at the London equities close, firm against USD1,685.00 late Wednesday.
The economic events calendar on Friday has trade figures from Germany at 0700 BST and the closely watched US jobs report for April at 1330 BST.
Financial markets in the UK will be closed on Friday for the early May bank holiday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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