(Alliance News) - Steps taken across Europe and the US to ease Covid-19 lockdowns continued to buoy markets on Tuesday, with traders shrugging off further turmoil for WTI crude oil.
In London, the FTSE 100 index was up 87.55 points, or 1.5%, at 5,934.34 at midday on Tuesday. The FTSE 250 was up 282.87 points, or 1.8%, at 16,235.59, and the AIM All-Share was up 1.1% at 804.03.
The Cboe UK 100 was up 1.8% at 10,039.89, the Cboe UK 250 up 1.8% at 13,985.48, and the Cboe UK Small Companies up 0.6% at 8,950.64.
In European equities on Tuesday, the CAC 40 in Paris was up 1.3%, while the DAX 30 in Frankfurt was up 1.6%.
"Stock markets in Europe are showing small gains as traders are still hopeful that lockdowns will be relaxed. There is a sense that social distancing policies have helped governments get a handle on the Covid-19 crisis as the infection and death rates are tapering off. Dealers are taking the view that looser restrictions are in the pipeline," said David Madden at CMC Markets.
Confirmed coronavirus cases have now topped three million worldwide, as hard-hit France and Spain were on Tuesday set to detail their exit strategies from lockdowns imposed to stem the spread of the deadly disease.
More than 209,000 people have been killed around the world by Covid-19, a quarter of them in the US. For parts of the US, the lockdown has begun to ease.
Italy – the first European country to go into lockdown seven weeks ago – began allowing some construction and factory workers to go back to work on Monday.
Spain has already begun easing its tight lockdown and was set to announce more detailed plans on Tuesday, as was France, which has said it will begin to ease confinement on May 11. Florists, dentists and others went back to work in Switzerland in the first stage of a three-phase plan.
But UK Prime Minister Boris Johnson, who emerged from his own battle with the virus, called for patience, saying it was too early to follow suit.
The pound was quoted at USD1.2492 Tuesday midday, up from USD1.2421 at the London equities close Monday.
The euro was at USD1.0878, higher against USD1.0836. Against the yen, the dollar was quoted at JPY106.74, down from JPY107.21.
Stocks in the US are set for a higher start on Tuesday. The Dow Jones is called up 1.3%, with the S&P 500 set to rise 1.1% and the Nasdaq Composite 1.2%.
Safe haven gold was off slightly amid Tuesday's risk-on trade. The precious metal was trading at USD1,708.89 an ounce, down from USD1,712.14 on Monday.
"Equity traders have shrugged off the continued weakness in the oil market as it seems to be more of a unique problem for the energy itself, rather than a wider demand concern," CMC's Madden added. "The colossal losses witnessed in WTI recently have been partially fuelled by the US Oil Fund's announcement that it will unload all of its WTI June contracts, and in turn buy longer dated contracts."
Brent oil was quoted at USD20.48 a barrel Tuesday, up from than USD19.22 late Monday. WTI crude, however, was quoted at USD11.95, down from USD12.53.
USO - the world's biggest oil-focused exchange-traded fund - said on Monday it would be switching out of the June contract in favour of spreading its portfolio across the July, August, September, October and December contracts.
Despite the turmoil in oil markets, Royal Dutch Shell 'A' and 'B' shares both were up 2.1% in London, and BP was up 1.4%.
BP early Tuesday reported a sharp drop in first-quarter earnings. It said the oil and gas industry is suffering from supply and demand shocks "on a scale never seen before", but it kept its dividend intact.
Earlier this year, BP Chief Financial Officer Brian Gilvary had said for 2020, the company's breakeven price would be around the mid-USD50s mark. On Tuesday, BP said it is aiming to use cost cuts to drive its cash balance point below USD35 a barrel in 2021.
For the quarter ended March 31, underlying replacement cost profit - BP's preferred metric - was USD800 million, down 67% from USD2.4 billion for the same period a year earlier.
BP said it was dealing with an "exceptionally challenging environment" and "demand destruction".
Still, the oil major declared a first-quarter dividend of 10.5 US cents, up 2.4% from 10.25 cents in the fourth quarter and first quarter of 2019.
Among the losers in the FTSE 100 on Tuesday was Bunzl, down 1.3% after UBS cut the stock to Sell from Neutral.
HSBC was down 0.6% after reporting a sharp drop in first quarter profit as the London-headquartered, Asia-focused bank upped its expected credit loss in the face of the Covid-19 pandemic.
HSBC said it expects the global health crisis to hurt revenue in 2020 - due to lower customer activity - resulting in "materially" lower profit compared to 2019. For 2019, Europe's largest lender reported pretax profit of USD13.34 billion.
As a result, HSBC has been forced to up its expected credit loss by USD3.03 billion in the first quarter, from USD585 million a year before. For the three months ended March, pretax profit dropped 48% to USD3.23 billion from USD6.21 billion a year prior.
In the FTSE 250, Games Workshop rallied 10% as the wargames manufacturer and seller said it has commenced a phased re-opening of its business.
Following the suspension of all its operations in March, the retailer will start making trade sales in Europe and North America this week and online orders from May 1. Games Workshop noted that while majority of its stores remain closed, a small number have re-opened in China, the Netherlands and Scandinavia. It added that it will continue to re-open stores across the world as local restrictions are lifted.
The company said that while trading for the nine months to the end of February was in line with expectations, the closure of its operations globally has resulted in it lowering its annual earnings expectations. Pretax profit for its financial year to the end of May is expected to be no less than GBP70 million.
For comparison, pretax profit for financial 2019 was GBP81.3 million, so financial 2020 profit is expected to be down as much as 14%.
Royal Mail rose 5.3% after Citigroup boosted the postal operator to Buy from Sell.
Plus500 shares advanced 4.2%. The contracts-for-difference trading provider said revenue and profit for 2020 is likely to be ahead of expectations as it reported an "exceptional" first quarter.
Since its last business update on April 7, customer trading activity has increased significantly, amid continued market volatility. It highlighted strong financial and operational performance driven by a "significant" influx of new customers at an attractive cost and increased levels of activity from existing customers.
Plus500 said revenue from customer income in the first half to date remains at record levels, adding that it expects further progress in the second quarter following an exceptional first quarter. The company's half-year runs to June 30.
By Lucy Heming; lucyheming@alliancenews.com
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