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(Alliance News) - Stocks in London ended mixed Monday but the blue-chip FTSE 100 was able to avoid a sell-off despite England being put back into a month-long national lockdown.
"Financial markets don't move in straight lines, is an old adage, and it seems that today's positive move could just be a technical bounce because from a fundamentals point of view, the UK and the eurozone economies are bracing themselves for a tough few weeks ahead," CMC Markets analyst David Madden said.
In London, grocers more than offset declines in the non-essential retail sector.
In London, the FTSE 100 index closed up 77.70 points, or 1.4%, at 5,654.97. The more UK domestic-oriented FTSE 250 lost 33.86 points, or 0.2%, to close at 17,180.52. The AIM All-Share ended down 1.62 points, or 0.2%, at 946.98.
The Cboe UK 100 closed up 1.2% at 562.34. The Cboe 250 shed 0.6% at 14,438.44. The Cboe Small Companies ended down 0.3% at 9,438.93.
In mainland Europe, the CAC 40 in Paris added 2.1% and Frankfurt's DAX 30 climbed 2.0%.
"The UK's stock market seems to be taking the imposition of a second lockdown in England pretty calmly, all things considered, and there are three possible reasons why this may be, even if at first sight a fresh halt to most economic activity is not likely to helpful to companies' profits, cash flows or valuations," AJ Bell investment director Russ Mould said.
The first reason offered by Mould is that the bulk of the FTSE 100's earnings coming from overseas, so a lockdown in England "might not be the hammer blow that it first seems".
"A fresh slide in sterling below say USD1.29 to the dollar and EUR1.10 against the euro could even boost overseas earners as a plunging pound would increase the value of their foreign profits and cash flows once they are translated back into the British currency. The inverted relationship between the FTSE 100 and the sterling/dollar cross rate, forged in the wake of 2016's Brexit vote, could be reasserting itself after a bit of a break-down in the spring," Mould added.
The pound was quoted at USD1.2894 Monday evening, down from USD1.2952 at the London equities close Friday. Against the dollar, the euro fell to USD1.1630 from USD1.1649 at the European equities close Friday.
The second reason, Mould said, is the new lockdown is only going to last for a month, whereas the first one was introduced on an open-ended basis back in March.
"In addition, government support schemes continue to run and the Bank of England may decide to leap into action when the Monetary Policy Committee meets on Thursday," Mould added.
Finally, Mould noted, the FTSE 100 began the week at a six-month low, so "hopes for a V-shaped economic recovery and rapid bounce back from the pandemic had already begun to fade and some degree of bad news may have already been priced in."
Blue-chip takeaway delivery firm Just Eat Takeaway was among those befitting from the latest UK restrictions, adding 2.7%. In the last lockdown, consumers turned to takeaways since restaurants were not allowed to provide in-dining.
Grocers J Sainsbury, Tesco and WM Morrison advanced 2.8%, 2.7% and 0.5%.
Ocado was also in the green, closing 8.7% higher, the best of the blue-chips. Online grocer Ocado upped its annual earnings guidance Monday as its Marks & Spencer Group joint venture grows in strength.
Ocado expects annual Ebitda to be over GBP60 million, up from its previous forecast of GBP40 million.
M&S shares closed 1.3% higher in the FTSE 250 index.
JD Sports Fashion lost 6.7% and Next shed 1.7%. Bookmakers GVC Holdings and Flutter Entertainment gave back 2.9% and 1.1%. The non-essential retail sector will be forced to close high street units as a result of lockdown measures.
Despite the new restrictions expected to hit travel, Ryanair closed 2.2% higher. Ryanair revenue came in at EUR1.18 billion in the six months ended September 30, down 78% from EUR5.39 billion and the airline swung to a pretax loss of EUR432.3 million from a EUR1.26 billion profit.
Customer numbers were 80% lower at 17.1 million, demonstrating the hit Ryanair has taken from Covid-19 travel restrictions.
Also flying in the face of the new lockdown, cruise ship operator Carnival gained 4.2%
US health authorities late Friday issued a detailed set of requirements that would allow cruise ships to resume services as early as next month. The requirements for a "phased resumption" of cruise ship passenger operations were released by the US Centers for Disease Control & Prevention. This would include "simulated voyages to test cruise ship operators' ability to mitigate Covid-19 risk," the CDC said.
At the other end of the mid-caps, Serco shed 13%.
The outsourcer was dealt a blow as the UK's Ministry of Defence renationalised the Atomic Weapons Establishment. AWE has been managed by a joint-venture with Lockheed Martin and Jacobs since 2000. Serco and Jacobs each had a 24.5% stake in AWE and Lockheed 51%.
Stocks in New York were in the green at the London equities close, with the Dow Jones up 1.5%, the S&P 500 index up 1.2%, and the Nasdaq Composite up 0.4%.
Hargreaves Lansdown analyst Susannah Streeter said: "'On the eve of the presidential election US stocks have lifted, clawing back some of the last week's losses, boosted by key manufacturing data showing a sharp rebound in activity."
The manufacturing sector in the US was "solid" in October, data from IHS Markit showed Monday, seeing its sharpest rise since January 2019.
The seasonally adjusted IHS Markit final US manufacturing purchasing managers' index posted 53.4 at the start of the fourth quarter, up slightly from 53.2 in September and broadly in line with the earlier released flash estimate of 53.3.
Market consensus, according to FXStreet, predicted 53.3.
Contributing to the rise in the headline figure, IHS Markit said, was a quicker upturn in production in October. The rate of output growth accelerated to the sharpest since November 2019. Companies often stated that greater output was driven by stronger client demand and higher new order inflows, IHS Markit noted.
Street continued: "But share trading is expected to be relatively cautious with some investors holding back as polls remain tight in key battleground states. At the same time, virus cases are still climbing in many areas, adding to nervousness about the economic impact of the pandemic ahead of the vote.
"Democrat Joe Biden maintains a clear lead, but uncertainty is lingering and it could reach a level that US politics has rarely seen if the election is contested."
Versus the Japanese yen, the dollar rose to JPY104.84 compared USD104.56 at the London equities close on Friday.
Brent oil prices shook off the recently announced Covid-19 lockdowns. A barrel of the North Sea benchmark fetched USD37.94 Monday, up from USD37.68 a barrel at the London market close Friday.
IG's Chris Beauchamp said: "It has been a reversal day for crude oil, which kicked off the week with steep losses before reversing on hopes of some kind of new OPEC+ deal. After the one-way move last week some rebound was to be expected, but the lack of any real forward momentum in oil prices since the beginning of September suggests that there is precious little conviction that the price can move higher over the near-term."
Gold was quoted at USD1,891.20, up from USD1,879.42.
In a busy economic calendar Tuesday, there is an interest rate decision from the Reserve Bank of Australia, with US factory orders in the afternoon at 1500 GMT. The day, however, will be dominated by the US presidential election.
Also of note, financial markets are closed in Japan on Tuesday, as the country celebrates its Culture Day holiday.
In the UK corporate calendar, Primark-owner AB Foods will issue full-year results, while packaging firm DS Smith, office workspace provider IWG and oil producer Genel Energy will issue trading statements.
By Paul McGowan; paulmcgowan@alliancenews.com
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