(Alliance News) - Stocks in London are set to open higher open on Tuesday following a positive close in New York overnight with prices boosted by vaccine and stimulus hopes.
In early UK company news, health and household products firm Reckitt Benckiser raised its outlook after a strong first half, boosted by cleaning products such as Dettol and Lysol. Miner Fresnillo reported a surge in interim profit as gold and silver prices improved. Baker Greggs swung to a loss.
IG says futures indicate the FTSE 100 index of large-caps to open 21.22 points higher at 6,126.10 on Tuesday. The FTSE 100 index closed down 18.94 points, or 0.3%, at 6,104.88 on Monday.
In the US on Monday, the Dow Jones Industrial Average closed up 114.88 points, or 0.4%, at 26,584.77. The S&P 500 closed up 23.78 points, or 0.7%, at 3,239.41 and the Nasdaq Composite ended up 173.09 points, or 1.7% at 10,536.27.
"Stock markets made further gains yesterday in the US, again lifted by tech stocks," said Danske Bank.
"Positive news on the vaccine front is also underpinning share prices as both Moderna and Pfizer launched phase-3 trials on Monday, which could pave the way for a vaccine already by year-end," Danske Bank noted.
The world's biggest Covid-19 vaccine study got under way with the first of 30,000 planned volunteers helping to test jabs created by the US government. It is one of several candidates in the final stretch of the global vaccine race.
There is still no guarantee that the experimental vaccine, developed by the National Institutes of Health and Moderna, will really protect. Volunteers will not know if they are getting the real shot or a dummy version. After two doses, scientists will closely track which group experiences more infections as they go about their daily routines, especially in areas where the virus still is spreading unchecked.
Next up in August, the final study of the Oxford shot begins, followed by plans to test a candidate from Johnson & Johnson in September and Novavax in October if all goes according to schedule.
Also lifting stocks were economic stimulus hopes. US Republicans put forward a proposal for another coronavirus stimulus bill worth around one trillion dollars on Monday.
"The American people need more help," Republican Majority Leader Mitch McConnell said.
The plan would see another round of one-off payments of USD1,200 to most American adults, Senator Chuck Grassley said.
Grassley defended plans to replace USD600 weekly payments for the unemployed - which are due to expire at the end of the month - with payments of 70% of laid-off workers' last wages. Republicans argue that expanded jobless benefits encourage people to stay home and not go back to work, although it is unclear the extent to which this is true.
The Democrats have called for a package of around USD3 trillion, including continued weekly unemployment payments of USD600, which are due to expire in several days.
"Risk market continues to soak in the lather of government stimulus and a Fed that's about to wax as dovish as dovish can get," said Stephen Innes, chief global markets strategist at AxiCorp.
The US Federal Reserve's two-day meeting begins on Tuesday, with the US central bank announcing its latest interest rate decision at 1900 BST on Wednesday.
In early UK company news, Reckitt Benckiser said its underlying performance has been ahead of expectations, the Dettol disinfectant maker getting a boost from Covid-19.
Revenue was up 11% to GBP6.91 billion in the first half of 2020, and pretax profit rose to GBP1.44 billion from GBP1.26 billion. Reckitt Benckiser reported Hygiene like-for-like sales growth of 16% and Health growth of 9.3%, resulting in overall like-for-like sales growth of 12%.
Its 2020 performance is now expected to be better than forecast back in April.
"Our underlying revenue performance (pre-Covid-19) has been ahead of our early expectations for the year and overall, including favourable tailwinds from Covid-19, we now expect high single digit growth for the year as a whole. Looking to the second half, net revenue growth is expected to reflect the benefit of Covid-19 tailwinds for Dettol and Lysol, improving trends in IFCN, offset by likely ongoing uncertainties of pantry-unloading, particularly for our OTC portfolio when combined with a likely weaker cough/cold and flu season and ongoing headwinds caused by social distancing," said Reckitt.
2020 margins are expected to be in line with current consensus expectations, it added.
Reckitt declared an interim dividend of 73p, flat on a year ago.
Wealth manager St James's Place reported a dip in funds under management for the first half, but expects 2020 to be "another year of major net inflows".
For the six months to June 30, the FTSE 100 constituent reported funds under management of GBP115.7 billion versus GBP117.0 billion at the end of December. Gross inflows totalled GBP7.3 billion, down 2% on a year ago, but net inflows edged up to GBP4.5 billion from GBP4.4 billion, helped by retention of existing client investments.
However, the wealth management firm's investment return was negative GBP5.8 billion.
"As the population at large recovers from more than four months of lockdown, we anticipate a period of recuperation for the UK. Nonetheless, from what we have experienced so far in July, we still expect new business flows for the third quarter to be similar or slightly lower in terms of value to the level of flows recorded for the second quarter," the firm said.
Overall, it added, 2020 is set to be "another year of major net inflows as our business model proves resilient in a really difficult period."
Gold miner Fresnillo reported sharp interim profit growth as commodity prices improved and costs were reduced.
Revenue was up 5.2% to USD1.05 billion in the first half of 2020, mainly due to higher gold and silver prices. The average realised gold price jumped 27% in the half-year to USD1,676.8 per ounce, while silver prices rose 10%.
This was partially offset by lower volumes of gold and silver sold, with gold production down 12% in the half and silver down 2.7%.
Pretax profit surged to USD127.9 million from USD54.1 million a year ago, with cost of sales falling to USD733.0 million from USD796.5 million even as revenue rose, and exploration expenses falling to USD50.7 million from USD84.0 million.
"The combination of higher commodity prices and lower costs has resulted in a significant rise in profitability during the first half. Our performance improvement initiatives we have set out in previous reports are having a positive impact. We remain committed to delivering a sustainable improvement in our operating performance and maintaining the momentum in the improvement plan into the second half," said Chief Executive Octavio Alvidrez.
Fresnillo said it will pay out an interim dividend of 2.3 US cents per share, down 12% on a year ago.
Baker Greggs said sales slumped in the first half with shops closed for most of the second quarter.
Total sales in the half were GBP300.6 million, down sharply on GBP546.3 million a year ago. Company-managed shop like-for-like sales slumped 49%.
This saw the sausage roll maker swing to a pretax loss of GBP65.2 million from a GBP36.7 million profit a year prior. It did not declare an interim dividend.
Greggs said it is "clear" sales will be constrained while the need for social distancing exists, with an "observed impact" on both its capacity to serve and on customer demand.
"Company-managed shops have seen sales develop since reopening, and reached 72% of 2019 levels in the most recent week to 25 July 2020. Whilst these are early days, Greggs is already showing that the variety and geographical reach of our shop estate, combined with the broad appeal of the brand, which is not materially dependent on office-based workers, means we are less impacted by social distancing than many," said Greggs.
In Asia on Tuesday, the Japanese Nikkei 225 index ended down 0.3%. In China, the Shanghai Composite is up 0.3%, while the Hang Seng index in Hong Kong is also up 0.3%. Â
The dollar nudged higher on Tuesday. Against the yen, the dollar was quoted at JPY105.55, up versus JPY105.15.
Sterling was quoted at USD1.2865 early Tuesday, lower than USD1.2888 at the London equities close on Monday. The euro traded at USD1.1735 early Tuesday, lower than USD1.1775 late Monday.
Gold was quoted at USD1,938.85 an ounce early Tuesday, up slightly from USD1,937.08 on Monday. The precious metal closed in on the USD2,000 mark late Monday, trading just above USD1,980 an ounce, but since has given back some gains.
Brent oil was trading at USD43.38 a barrel early Tuesday, higher than USD42.47 late Monday.
By Lucy Heming; lucyheming@alliancenews.com
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