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(Alliance News) - Stock prices in London were mixed at midday on Friday, with investors considering the prospect of rising UK unemployment when the government's furlough scheme ends in October.
The FTSE 100 was down 11.22 points, or 0.1%, at 6,015.72. The UK flagship index is on track to end the week up 0.5%, however.
The mid-cap FTSE 250 index flat at 17,467.14. The AIM All-Share index was up 10.03 points, or 1.0% at 927.33.
The Cboe UK 100 index was down 0.3% at 599.69. The Cboe 250 was down 0.2% at 14,841.68, and the Cboe Small Companies was flat at 9,215.65.
The pound was quoted at USD1.3085 Friday midday, lower from USD1.3137 at the London equities close Thursday. Sterling was easing from five-month highs versus the greenback, achieved after the Bank of England on Thursday said it was not planning to use negative interest rates in the immediate future.
UK Chancellor of the Exchequer Rishi Sunak is resisting calls to extend the furlough scheme with targeted measures to stave off widespread job losses, saying the support cannot go on "indefinitely".
Many economists fear that there will be a spike in job losses after the furlough scheme, which has been propping up the UK labour market, concludes in October. The scheme has so far cost GBP33.8 billion, supporting the payrolls of 9.6 million workers during the coronavirus crisis. It has begun tapering off before it ends completely in two months.
However, opposition parties are calling for the UK government to extend it for the hardest-hit sectors and those plunged into local lockdown, warning ending the scheme is a "grave mistake".
Sunak visited Glasgow on Friday to praise the benefits the programme has had to Scotland amid rising concerns the crisis has strengthened the demand for independence in the nation.
The chancellor warned "there is hardship ahead for many people" as he again ruled out extending the jobs retention scheme.
"It's one of the most difficult decisions I've had to make in this job," he told Sky News. "I don't think it's fair to extend this indefinitely, it's not fair to the people on it. We shouldn't pretend there is in every case a job to go back to."
Shares in Europe were faring slightly better. The CAC 40 in Paris was down 0.3%, but the DAX 30 in Frankfurt was up 0.1%.
"UK stocks are on the back foot today, with the US decision to block both TikTok and WeChat raising fears of another breakdown in relations between the US and China. While the Chinese have stated that they want to avoid another Cold War, there is certainly a significant fear that we could see retaliation towards US tech firms such as Apple or Microsoft," said IG Group's Josh Mahony.
"UK stocks are underperforming their mainland European counterparts this morning, with fears growing over a potential economic collapse in October as both Rishi Sunak and BoE Governor Bailey stand by the current plan to drop the furlough scheme in two-months' time. With the furlough scheme now likely to end before a vaccine can be found to fully reopen the economy, we are staring at a likely spike in unemployment and bankruptcy," Mahony added.
On the London Stock Exchange, Hikma Pharmaceuticals was the best blue-chip performer, up 11% after the generic drugmaker raised the annual sales outlook for its two main units and reported higher first-half profit, as hospitals stocked up on essential medicines during the Covid-19 pandemic.
For the half-year ended June 30, attributable profit came in at USD212 million, up 16% from USD185 million last year, and revenue was USD1.13 billion, up 8% from USD1.05 billion.
Further, Hikma said it expects 2020 revenue from the Injectables business to be between USD950 million and USD980 million, up as much as 9.6% from USD894 million in 2019, raised from a previous forecast of growth in the low to mid-single digits. The Injectibles unit makes needle-based drugs primarily for hospitals.
Hikma raised the revenue outlook for its Generics division to a range of USD720 million to USD760 million, from USD700 million to USD750 million previously. The Generics arm makes a broad range of branded and non-branded generic medicines - usually cheaper than patented medicines.
The Jordan-founded drugmaker raised its interim dividend 14% to 16.0 cents from 14.0 cents.
In addition, Hikma said it has started manufacturing Covid-19 treatment remdesivir, from Foster City, California-based Gilead Sciences at Gilead's Portugal facility, for an undisclosed amount.
Hikma will supply the first batches of the antiviral drug, and Gilead is expected to distribute the treatment, which was the first to be approved to treat symptoms caused by the coronavirus that causes Covid-19.
Rightmove was up 7.7% as the property portal pointed to positive signs in the UK housing market going forward, despite posting a fall in interim profit.
The Milton Keynes, England-based firm reported a drop in first-half profit and scrapped its dividend after the Covid-19 crisis prompted the property portal to offer discounts to its customers.
For the half-year to June 30, pretax profit dropped to GBP61.6 million, down from GBP108.1 million last year, as revenue fell to GBP94.8 million from GBP143.9 million. Average revenue per advertiser was down by 34% to GBP712 per month from GBP1,077 last year.
The company elected against paying an interim dividend, having paid out 2.8p last year.
However, Rightmove said stamp duty holidays offered by the UK government provided the potential for cautious optimism that housing transaction levels will increase from the low point in the second quarter, due to pent up demand.
Rightmove was boosted as well as data from mortgage lender Halifax showed that UK house prices increased to the highest levels since the Halifax house price index began thanks to a "mini-boom" in the housing market.
On an annual basis, UK house prices were 3.8% higher than in the same month a year earlier, while on a monthly basis, prices were 1.6% higher in July than in June - its highest ever monthly increase. The average price of a house in the UK was GBP241,604 versus GBP237,616 in June.
"Given what has been thrown at it in the last six months, the ability of the UK housing market to bounce back is pretty remarkable. This was reflected in the commentary alongside first-half results from property site Rightmove and the big increases in demand for sales properties in June and July. Whether the momentum created by this pent up demand can continue is open to question and Righmove certainly doesn't seem sure it can, notably not paying a dividend at the half-year stage," noted AJ Bell's Russ Mould.
Hargreaves Lansdown was up 6.0% after it said it delivered a strong annual performance, despite an external environment of persistent challenges.
The Bristol, England-based company, which offers an investment platform for retail investors, said assets under administration for the year to June 30 increased 5% year-on-year to GBP104.0 billion from GBP99.3 billion a year ago. Net new business inflows also rose 5% year-on-year to GBP7.7 billion from GBP7.3 billion.
Annual pretax profit jumped 24% to GBP378.3 million from GBP305.8 million profit a year ago. This included a gain on disposal of GBP38.8 million relating to FundsLibrary Ltd. Stripping out the exceptional disposal gain, pretax profit rose 11% year-on-year to GBP339.5 million.
Revenue rose 15% to GBP550.9 million from GBP480.5 million, driven by higher asset levels and record share dealing volumes seen in the second half of the year.
Following the strong performance, Hargreaves Lansdown raised its total dividend 11% to 54.9 pence from 42p.
At the other end of the large-cap index, Rolls-Royce Holdings was down 2.0% after the Financial Times reported US-based activist investor ValueAct sold its entire shareholding in the jet engine maker - citing two people familiar with the situation.
According to FT, ValueAct built a 10% stake in Rolls-Royce in 2015 after it issued a string of profit warnings. The UK engineering company is currently evaluating a GBP1.5 billion to GBP2 billion capital raise to help restore its balance sheet.
ValueAct started reducing its stake - which peaked in 2017 at 11% - after the departure of Rolls-Royce's chief operating officer Brad Singer in December.
The euro was priced at USD1.1818, down from USD1.1845. Against the yen, the dollar was trading at JPY105.57, flat from JPY105.51 in London.
Brent oil was quoted at USD45.02 a barrel Friday midday, lower from USD45.37 at the London equities close Thursday.
Gold was priced at USD2,058.24 an ounce Friday midday, up from USD2,052.10 late Thursday.
US stock market futures are pointed to a lower open after US President Donald Trump signed an executive order barring US residents from doing any business with the Chinese parent companies of social media platforms TikTok and WeChat, citing national security concerns.
The DJIA was called down 0.2%, the S&P 500 index down 0.3% and the Nasdaq Composite down 0.5%.
The move, which comes into force in 45 days, is the latest salvo in a tech stand-off between the superpowers and adds to a laundry list of issues they have butted heads over in recent months, including Hong Kong, Huawei and the coronavirus.
TikTok on Friday hit back, threatening to take legal action in US courts against Trump's executive order banning anyone under US jurisdiction from doing business with the company's owner ByteDance.
"We will pursue all remedies available to us in order to ensure that the rule of law is not discarded and that our company and our users are treated fairly - if not by the administration, then by the US courts," TikTok said in a statement.
Meanwhile, in Washington, the bipartisanship that passed a multi-trillion-dollar rescue package earlier this year has given way to the familiar Capitol Hill wrangling as Democrats and Republicans refuse to budge on key issues.
With the Democrats' USD3.5 trillion proposal more than three times the size of the Republicans' offer, a deal appears a distant hope, despite a Friday deadline.
"There are a lot of issues we are close to a compromise position on," Treasury Secretary Steven Mnuchin said after holding talks with House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer.
However, he added they were "very, very far apart on some significant issues."
Ahead in the economic events calendar on Friday, there is the closely-watched US jobs report for July at 1330 BST. Economists expect US nonfarm payrolls to have increased by 1.6 million jobs in July after a record gain of 4.8 million in June. The unemployment rate is expected to have shrunk to 10.5% in July from 11.1% in June.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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