(Alliance News) - Stocks in London are set to open higher on Monday on a relief that the US and China's phase one deal trade remains intact for now despite tensions over Hong Kong.
In early UK company news, Associated British Foods said trading in its re-opened stores has been "encouraging" as it looked to June 15 as an opening date for its shops in England, while Ted Baker swung to a full-year loss and unveiled plans to raise GBP95 million.
IG says futures indicate the FTSE 100 index of large-caps to open 79.57 points higher at 6,141.00 on Monday. The FTSE 100 index closed down 157.36 points, or 2.5%, at 6,061.43 on Friday.
"Traders were on edge on Friday as they awaited the update from President Trump in relation to China. European equity benchmarks posted sizeable losses as dealers feared the US leader will take a very tough stance against China, and possibly look to undo the good work that was done with respect to the first phase of the US-China trade deal, which was signed in January," said David Madden at CMC Markets.
"Traders were too fearful for their own good as the update from the Donald wasn't that harsh as far as the markets were concerned. The US leader went into more detail about how he will remove Hong Kong's special status and effectively treat the region the same as mainland China," said Madden. "The US-Hong Kong relationship will change in regards to extradition, exports control and technology. Dealers reacted positively to the news as there was no suggestion that phase one of the trade agreement with China would be changed".
President Donald Trump on Friday said the US will "begin the process" of revoking Hong Kong's special trading status and withdraw from the World Health Organization, taking drastic steps as his feud with Beijing over the coronavirus pandemic escalates.
"They broke their word to the world on ensuring the autonomy of Hong Kong," Trump said from the White House, referring to Beijing's imposition of controversial national security legislation on the semi-autonomous territory and global financial centre.
"Therefore I am directing my administration to begin the process of eliminating policy exemptions that give Hong Kong different and special treatment," Trump said, adding the move will impact the "full range" of agreements with Hong Kong, including customs and travel agreements.
The latest moves by the president are sure to roil relations with Beijing and threaten to jeopardize the first-phase US-China trade deal signed earlier this year.
A formal status change would also be a major blow to Hong Kong's trading relationship with the US and the territory's status as a key Asian financial hub, which also serves as a port for Beijing's financial and commercial transactions with other countries.
While Trump's comments appeared to be a sweeping revocation of the special status it remains unclear if the president will formally end the decades-long relationship with Hong Kong, or if he will take a more piecemeal approach.
In the US on Friday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.1%, the S&P 500 up 0.5% and Nasdaq Composite closing 1.3% higher.
In Asia on Monday, the Japanese Nikkei 225 index closed up 0.9%. In China, the Shanghai Composite is up 2.2%, while the Hang Seng index in Hong Kong is up 3.3%. Â
The easing of restrictions related to the coronavirus pandemic led to a rise in Chinese manufacturing output in May, IHS Markit figures showed.
The headline seasonally adjusted purchasing managers' index - a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy - rose to 50.7 in May from 49.4 in April.
The above 50.0 reading signalled a renewed improvement in overall operating conditions, albeit only marginal.
May data signalled a further increase in output, IHS Markit said, following February's record decline, with firms widely mentioning the resumption of works due to an easing of Covid-19 related measures.
In Japan, meanwhile, the country's manufacturing downturn accelerated in May. The headline au Jibun Bank Japan manufacturing PMI fell for a fourth successive month in May to 38.4, signalling a sharper rate of deterioration in the health of the sector than in April, when it was recorded at 41.9.
Against the yen, the dollar was quoted at JPY107.51 versus JPY107.75.
To come in the economic events calendar on Monday are manufacturing PMI readings from France, Germany, the eurozone, UK and US at 0850 BST, 0855 BST, 0900 BST, 0930 BST and 1445 BST respectively.
Sterling was quoted at USD1.2406 early Monday ahead of the data, higher than USD1.2330 at the London equities close on Friday. The euro traded at USD1.1144 early Monday, up from USD1.1117 late Friday.
Gold was quoted at USD1,742.60 an ounce early Monday, higher than USD1,732.75 on Friday. Brent oil was trading at USD37.86 a barrel early Monday, down from USD35.72 late Friday.
In early UK company news, Associated British Foods said trading at re-opened stores has been "reassuring" as it plans to open its shops in England in two weeks' time.
All its Primark stores were closed over a 12-day period from March 11. As European governments have begun to ease restrictions on clothing retail, it has been able to re-open stores, as of Monday trading in 112 shops, or 34% of its total selling space.
It is working to re-open its stores in England on June 15, at that date expecting to be operating from 281 stores, representing 79% of total selling space. AB Foods is awaiting further guidance for the stores in Northern Ireland, Wales and Scotland and anticipate openings in late June.
The firm said it managed to exceed its estimate of a 50% reduction in Primark overheads in May and April.
"Trading in our re-opened stores has been both reassuring and encouraging, with customer queues outside most stores and, once in store, spending on larger basket sizes. However, the trading results since re-opening were delivered over a very short period, will have been influenced by a number of specific factors, and may not be indicative of a long term pattern. Cumulative sales since re-opening, on a like-for-like basis, were down on the same period last year in aggregate," said AB Foods.
Ted Baker said it plans to raise GBP95 million as it swung to a loss in its recently-ended financial year.
The upmarket fashion retailer reported a pretax loss of GBP79.9 million for the year to January 25 versus a profit of GBP30.7 million the year before. Revenue fell 1.4% to GBP630.5 million.
Ted Baker intends to raise GBP95 million in a fully underwritten placing and open offer and firm placing.
"I am confident that our transformation plan will enable us, Ted Baker, to capitalise on our opportunities and deliver value for all of our shareholders," said Chief Executive Rachel Osborne.
By Lucy Heming; lucyheming@alliancenews.com
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