Kingfisher Share News (KGF)

(Alliance News) - Stocks in London ended lower on Wednesday amid renewed fears of US-China tensions, with the FTSE 100 also hindered by Melrose Industries shares sliding 14%.

Focus turns to the US as a heavy week of earnings picks up with results due from Microsoft and Tesla after the New York market closes.

The FTSE 100 index closed down 62.63 points, or 1.0%, at 6,207.10. The FTSE 250 ended down 36.10 points, or 0.2%, at 17,465.73, and the AIM All-Share closed down 3.47 points, or 0.4%, at 888.97.

The Cboe UK 100 ended down 0.9% at 618.72, the Cboe UK 250 closed down 0.2% at 14,854.12, and the Cboe Small Companies ended down 0.4% at 9,181.73.

In European equities on Wednesday, the CAC 40 in Paris ended down 1.3%, while the DAX 30 in Frankfurt ended down 0.5%.

Stocks in Europe faltered on Wednesday after Beijing said it was ordered by the US to close its Houston consulate, in what it called a "political provocation" that will further harm diplomatic relations.

The move comes as tensions soar between the world's two biggest economies on a number of fronts, including a controversial national security law in semi-autonomous Hong Kong.

"China urges the US to immediately withdraw its wrong decision, or China will definitely take a proper and necessary response," said foreign ministry spokesman Wang Wenbin, adding that they were told Tuesday that the consulate would have to close.

According to local media in Houston, firefighters and police were called to the consulate building on Tuesday evening on reports that documents were being burned in the building's courtyard. The Twitter feed of the Houston police force said smoke was observed, but officers "were not granted access to enter the building".

However, Wall Street appeared to be shaking off these concerns in morning trade.

Stocks in New York were, in the main, in positive territory at the London equities close, with the DJIA up 0.3%, the S&P 500 index up 0.1%, and the Nasdaq Composite flat.

"Post-market it is a pretty huge night for US earnings, with both Tesla and Microsoft making an appearance. The car company has had a mega-July, surging 47.6% since the month began – in fact, it is up around 275% since the start of the year – but might be tested on Wednesday night," Connor Campbell at Spreadex noted.

In London, the FTSE 100 was hindered as Melrose Industries shares sank 14%. The industrial turnaround specialist said revenue fell 27% year-on-year in the first half 2020 and said it is likely to make a "small" adjusted operating profit for the period.

Melrose - which is highly exposed to the aerospace and automotive sectors, the former having been particularly battered by the Covid-19 crisis - said an "extraordinary" trading period saw the factories of its Automotive and Powder Metallurgy businesses temporarily shut in Europe and the Americas due to Covid-19.

Melrose said trading was in line with expectations until mid-March and then fell steeply in the second quarter due to Covid-19. The company's Aerospace unit saw sales plummet 18% year-on-year in the first half of 2020 and these are not expected to recover in the second half of 2020.

Topping the blue-chip index was Fresnillo, up 9.6% with the gold miner tracking the price of the precious metal higher.

Gold was quoted at USD1,861.40 an ounce at the London equities close Wednesday against USD1,839.86 at the close on Tuesday, trading around its best levels since 2011.

"Gold jumped higher after the US-China dispute over the Houston consulate added to concerns that their relationship is beyond repair," said Edward Moya, senior market analyst for New York at Oanda.

"Demand for safe-havens were already growing after President Trump warned the outbreak will probably get worse before it gets better," Moya continued. "Gold is going to keep on shining as US Treasury yields continue to slide, virus worries remain persistent, and talks on fiscal stimulus resume in the US."

Fresnillo on Wednesday also reported second-quarter gold and silver production was resilient due to mine improvement initiatives. However, the FTSE 100 company has decided to lower annual gold output estimate due to Covid-19 related working restrictions mainly at Herradura and Noche Buena mines.

Fellow precious metals miner Polymetal International closed up 2.4%.

Brent oil was quoted at USD43.72 a barrel at the London equities close Wednesday, lower against USD44.62 late Tuesday.

The pound was quoted at USD1.2731 at the London equities close Wednesday, soft compared to USD1.2736 at the close on Tuesday.

The euro stood at USD1.1585 at the European equities close Wednesday, up against USD1.1491 at the same time on Tuesday and trading around its best levels since late 2018. Sentiment surrounding the single currency remains upbeat following agreement of a EUR750 billion virus rescue fund for the eurozone.

Against the yen, the dollar was trading at JPY107.17 compared to JPY106.85 late Tuesday.

London's FTSE 250 index was nursing more minor losses compared to its blue-chip counterpart, with Mediclinic leading the way as it gained 16%.

The private hospital operator said its Southern Africa revenue was lower in June as the region has not yet passed its Covid-19 peak, though operating performance has improved overall.

The firm's Southern Africa business revenue was 12% lower in June compared to the previous year as the area "is yet to reach the initial peak" when it comes to Covid-19 cases. Nonetheless, the private healthcare services company's overall June operational performance improved in June as lockdown measures eased, with elective surgical procedures and outpatient activities starting to gradually resume.

Hirslanden and Mediclinic Middle East, representing over two thirds of Mediclinic revenue, were ahead of the previous year.

Kingfisher also staged a double-digit percentage gain, shares rising 15% after the DIY retailer reported strong second-quarter trading figures following a good e-commerce performance and the phased reopening of stores in France and the UK as lockdown measures eased.

For the second quarter, ended July 18, group like-for-like sales were up 22% but year-to-date, they remain down 3.7%.

The B&Q owner said that based on the strong sales seen to date in the second quarter, combined with cost reductions, it anticipates its half-year adjusted pretax profit to be ahead of the prior year. The retailer posted interim pretax profit of GBP245 million last year.

Computacenter ended up 12% after the IT infrastructure services firm said its half-year saw adjusted pretax profit "substantially ahead" year-on-year, boosted by home working.

Computacenter saw a surge in demand for IT equipment for those setting up home offices during the lockdown. This considerably helped the performance of the company despite a drop in demand from most industrial clients.

The company's second half adjusted profitability "should be much improved" on prior forecasts, it said.

Thursday's UK corporate calendar has half year results from consumer goods firm Unilever, information and data analytics provider RELX and specialty chemicals firm Croda. Accounting software firm Sage releases third quarter results. Johnson Matthey puts out a trading statement, as will online trading platform IG Group.

The economic calendar on Thursday has a Gfk consumer confidence survey for Germany at 0700 BST and US initial jobless claims at 1330 BST. Markets in Japan will be closed for Marine Day.

By Lucy Heming; lucyheming@alliancenews.com

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