(Alliance News) - Stock prices in London opened in the red on Friday, as worsening US–China relations overshadow optimism from the easing of coronavirus lockdowns across the globe.
The FTSE 100 index was down 36.50 points, or 0.6%, at 6,182.29 on Friday. Since the week began, the blue-chip index is up 2.8%, though it remains down 18% so far in 2020.
The mid-cap FTSE 250 index was down 58.89 points, or 0.3%, at 17,279.59, and the AIM All-Share index was down 0.2% at 873.60.
The Cboe UK 100 index was 0.8% lower at 10,446.43. The Cboe 250 was down 0.4% at 14,781.40, and the Cboe Small Companies down 0.1% at 12,120.78.
In mainland Europe, the CAC 40 in Paris was down 0.8%, while the DAX 30 in Frankfurt was down 1.1%.
"Risk-off is dominating as investors look ahead to Trump's response, provoked by China's crackdown on civil liberties in Hong Kong, Asia's financial hub," said City Index analyst Fiona Cincotta.
Trump said he will give a press conference Friday on China amid rising US-Chinese tensions over Hong Kong and the coronavirus fallout.
Trump told reporters of his plan for the press conference at an Oval Office meeting on Thursday, but gave no specific details of what he would be announcing.
Fears that China will use a new law to end Hong Kong's freedom as a semi-autonomous territory have prompted expectations that Trump plans to hit back, possibly signalling a wider economic confrontation between the two superpowers.
Washington and Beijing are already clashing over responsibility for the extent of the coronavirus pandemic, which originated in China but has caused devastation in the US. The US recorded 1,297 coronavirus deaths on Thursday, bringing its total to 101,573 since the global pandemic began, according to a tally kept by Johns Hopkins University.
The country has officially logged 1.7 million cases of the virus, far more than any other nation, the tracker kept by the Baltimore-based university showed. Trump blames that on China, although his domestic critics accuse him of mismanagement.
"The fear is that the US–China spat could hamper a fragile economic recovery from the coronavirus crisis," added Cincotta.
The Hang Seng index in Hong Kong closed down 0.7% on Friday. Elsewhere in China, the Shanghai Composite finished up 0.2%. In Japan, Tokyo's Nikkei 225 index closed down 0.2%.
On the London Stock Exchange, AstraZeneca was among the best performers in the blue-chip index, up 1.3%, after its phase 3 Adaura trial of Tagrisso in early-stage cell lung cancer found that the drug reduced the risk of disease recurrence or death by around 80%.
The detailed results were from a trial of Tagrisso, the brand name for osimertinib, after surgery in patients with "epidermal growth factor receptor-mutated (EGFRm) non-small cell lung cancer after complete tumour resection with curative intent". EGFR mutations are associated with some lung cancers.
In the primary endpoint of disease-free survival in patients with stage 2 and 3A disease, treatment with Tagrisso reduced risk of disease recurrence or death by 83%. Disease-free survival in the overall trial population, covering stages 1B to 3A, found a 79% drop in the risk of disease recurrence or death.
At the two year mark, 89% of patients in the trial who had been treated with Tagrisso were still alive and disease free compared to a 53% figure in patients who were given a placebo.
Admiral Group was among the worst performers on Friday morning, down 1.6%, after Barclays cut the insurer to Equal Weight from Overweight.
Fresnillo was trading 1.5% lower after saying that it is responding to operational challenges caused by Covid-19 after a tough 2019. The Mexican gold miner said it has focused on responding to the Covid-19 over the past three months, implementing a range of safety measures across the business.
"Up to this point, we have had no officially confirmed Covid-19 cases originating from inside our operations," said Chair Alberto Bailleres. However, he noted that three colleagues were officially diagnosed from exposure outside.
Fresnillo also confirmed that the board and senior management took voluntary and temporary pay cuts to help the company get through this "unprecedented" situation.
Fresnillo said its operations are critical to the economies in which it operate, with mining now confirmed as an essential activity in Mexico.
"Operationally, 2019 was a more challenging year, as expected," said Bailleres.
Both silver and gold production fell from 2018 levels, due to lower-than-anticipated grades in its key mines. This also hurt Fresnillo's financial performance.
In the face of these operational challenges, the company said its response has been to increase the pace and scale of investments in a series of projects and take corrective actions to bring production back to acceptable levels in the short-term, and to achieve steady growth in future years.
"We are investing in infrastructure, plant and machinery including a state-of-the-art tunnel boring machine which is now being ramped up at Fresnillo - one of the first of its kind. We have also begun to define a new programme to control costs and increase productivity," said Bailleres.
Among the mid-caps, Provident Financial was the best performer, up 4.4% in early trade, after getting an upgrade from Jefferies to Buy from Hold.
B&M European Value Retail was the second-best performer in the FTSE 250 index, up 3.6%. B&M reported a strong end to the fourth quarter - which ran to March 28 - driven by exceptionally strong March performance in Grocery, with the B&M UK fascia like-for-like revenue up 6.6%.
Going forward, B&M said it experienced strong revenue growth in the first 8 weeks to May 23, with B&M UK fascia like-for-like revenue up 23%, driven by exceptionally strong Do It Yourself and Gardening categories, and despite a significant fall in customer count.
If DIY and Gardening categories are excluded, the B&M UK fascia like-for-like revenue over that 8 week period was up 10%.
"We have encountered exceptionally strong demand in our UK business over recent weeks. Customers have been coming to our stores much less frequently through the lockdown but their average spend has been much higher than normal," said Chief Executive Simon Arora.
"Clearly, there is also considerable uncertainty in relation to both the progression of Covid-19 and the economic outlook, and it is therefore hard to predict future trading levels," added Arora.
SIG was up 3.6% in the morning trading on Friday. The building products supplier announced plans to bring in a substantial new investor as part of an equity fundraise to deliver a new growth strategy, after swinging to a loss in 2019.
SIG reported a 9.0% decline in revenue in 2019 to GBP2.08 billion. On a like-for-like basis, sales declined by 7.6%.
SIG said its performance was hurt by market share losses in UK and Germany due to poor execution of transformation initiatives which, it believes, disconnected the business from its customers, suppliers and its front-line colleagues.
As a result, the company swung to pretax loss of GBP112.7 million in 2019 compared to GBP10.3 million profit a year prior.
SIG cut its dividend to 1.25 pence, having paid a 3.75p per share payout in 2018.
"The 2019 results, albeit in line with January guidance, are disappointing. However, the board has taken decisive action to address this performance. A new chief executive has been appointed and, this morning, we announced the appointment of a new chief financial officer," said Chair Andrew Allner.
SIG named Ian Ashton as permanent CFO and Simon King as a non-executive director, both with effect from the start of July.
Ashton replaces Kath Kearney-Croft, who had taken on the role of interim CFO back in February. Ashton will join SIG from Low & Bonar, where he has served as CFO.
Going forward, SIG said it has explored its wider funding options and is intending to raise GBP150 million in new equity in the coming weeks to strengthen its capital structure and enable the management team to deliver its new growth strategy. The equity raise will be led by US private equity firm Clayton, Dubilier & Rice, which will contribute up to GBP85 million and take an about 25% stake in SIG as a result.
In commodities, gold was quoted at USD1,721.98 an ounce early Friday, soft from USD1,722.65 late Thursday. Brent oil was at USD35.08 a barrel, up from USD34.45.
"Safe haven gold is building on gains from the previous session as tensions between the US and China mount, although the US dollar is slipping lower, decoupling from falling stocks," said City Index's Cincotta.
Against the yen, the dollar was trading at JPY107.19 early Friday in London, down from JPY107.60 late Thursday.
The pound was quoted at USD1.2350 early Friday, firm from USD1.2323 at the London equities close Thursday. The euro was at USD1.1100 early Friday, up from USD1.1067 late Thursday.
German retail sales slumped in April, the latest data from Destatis showed on Friday, with a separate release showing import prices also sank.
Retail sales were down 5.3% on a monthly basis and 6.5% annually in April, far steeper than falls of 4.0% and 1.2% recorded, respectively, for March.
Separately, the statistical body showed import prices were down 7.4% in April year-on-year, the sharpest fall recorded since 2009. In March, prices had fallen 5.5%.
The economic events calendar on Friday has eurozone inflation figures at 1000 BST. In the London afternoon, there are US personal consumption expenditure index numbers at 1330 BST - the core reading is the US Federal Reserve's preferred gauge of inflation.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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