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(Alliance News) - Stocks in London ended mostly lower on Thursday as concerns about a new spike in coronavirus infections around the world outweighed optimism for the global economic recovery.
Millions of people in Australia's second-biggest city went into lockdown on Thursday to battle another coronavirus outbreak, as the number of infections worldwide surged past 12 million. Caseloads and death tolls have risen relentlessly in many of the world's biggest nations, with the virus now claiming over 550,000 lives across the planet.
Punishing lockdowns to try to prevent the spread of the disease has led to catastrophic economic downturns. The US remains the worst-hit nation but President Donald Trump remains keen for the economy to restart despite warnings about the dangers of reopening too soon.
The FTSE 100 index closed down 106.54 points, or 1.7%, at 6,049.62. The FTSE 250 ended down 200.11 points, or 1.2%, at 16,985.13, but the AIM All-Share closed up 6.62 points, or 0.8%, at 880.80.
The Cboe UK 100 ended down 1.8% at 602.74, the Cboe UK 250 closed down 1.2% at 14,408.24, and the Cboe Small Companies ended down 0.7% at 9,209.28.
In Paris the CAC 40 ended down 1.1%, while the DAX 30 in Frankfurt ended flat.
"Stocks finished deep in the red as the pandemic is still playing on traders' minds as there are still concerns that cases could rise as lockdown restrictions have been eased. Traders in Europe are paying close attention to developments in the US. According to Reuters, 42 of the 50 states in the US registered an increase in the number of new cases yesterday, so that is influencing sentiment on this side of the Atlantic," said CMC Markets analyst David Madden.
On the London Stock Exchange, Persimmon ended the best blue-chip performer, up 6.4% after the housebuilder said it expects to report a 32% decrease in revenue in the first half after the UK's Covid-19 lockdown, but has entered the remainder of the year in a "strong position".
Persimmon expects to report revenue for the six months to the end of June of GBP1.19 billion. Average selling price in the first half was GBP225,050, higher than GBP216,942 a year ago.
The FTSE 100-listed company also said it has seen good activity in the six week period since sales offices re-opened in mid-May, with average weekly net private sales reservations of 278 new homes, around 30% higher than the same period last year. Customer enquiries remained at "healthy levels" throughout the lockdown period, Persimmon added.
Peers Taylor Wimpey, Barratt Developments and Berkeley closed up 1.4%, 2.0% and 3.8% respectively.
At the other end of the large-cap index, Rolls-Royce ended the worst performer, down 11% after the jet engine maker said it plans to cut over 9,000 roles across the company's worldwide operations, as it saw a GBP3.0 billion cash outflow in the first half of 2020 due to the Covid-19 pandemic.
The re-organisation is expected to deliver at least GBP1.3 billion in annual pretax cash savings by the end of 2022. It added that it has already received notice for more than 3,000 UK staff for voluntary severance, with two-thirds of the number currently expected to leave by the end of August.
Rolls Royce said the GBP3.0 billion cash outflow included GBP1.1 billion less in cash inflow due to lower receipts, with wide-body engine flying hours down 50% in the first half - and 75% lower in the second quarter - together with lower engine deliveries. A further GBP1.1 billion stemmed from a one-off adverse impact from the cessation of invoice factoring, and the firm also cited increased inventory and debtor balances.
Energy firms National Grid and SSE ended down 5.5% and 4.0% respectively after the UK energy regulator's next price controls framework was poorly-received by both companies, with SSE labelling it a "worrying return to austerity".
Ofgem's latest plans, known in the industry as RIIO-2, proposed GBP25 billion in funding, and the potential of an extra GBP10 billion, "to transform Great Britain's energy networks". It also said the measures will pocket each household an extra GBP20 in savings from network costs.
National Grid said it was "extremely disappointed" by Ofgem's proposals.
The power transmission and distribution firm said: "This proposal leaves us concerned as to our ability to deliver resilient and reliable networks, and jeopardises the delivery of the energy transition and the green recovery." SSE unit Scottish & Southern Electricity Networks Transmission said it was "deeply concerned" by the RIIO-T2 measures.
BP closed down 4.4%. The UK oil major and Indian conglomerate Reliance Industries announced the start of their new Indian fuels and mobility joint venture, called Reliance BP Mobility.
BP has paid USD1 billion to Reliance for a 49% stake in the joint venture, while Reliance holds the other 51%. Operating under the "Jio-bp" brand, the joint venture will leverage Reliance's presence across 21 states and its millions of consumers through the Jio digital platform, which is part of Reliance.
The pound was quoted at USD1.2615 at the London equities close, up from USD1.2575 at the close Wednesday, as investors continued to react positively to the UK government's GBP30 billion stimulus package aimed at kickstarting the economy.
UK Chancellor of the Exchequer Rishi Sunak on Thursday urged people to dine out and embrace post-lockdown freedoms as he warned that jobs are at risk if economic activity does not return to normal.
Sunak said he was "anxious" about the state of the UK's economy which is "entering into a very significant recession" because of the coronavirus crisis. But he said the GBP30 billion of extra spending announced in his summer statement on Wednesday aimed to make the recovery as strong as can be.
The chancellor told the Commons in what amounted to a mini-Budget that the government would do "all we can" to keep people in work.
He announced that firms that have furloughed staff will be given a GBP1,000 bonus to keep workers in jobs, a move designed to help protect livelihoods after the economy contracted by 25% in just two months.
Other measures included an "eat out to help out" plan for dining out in August to boost the hospitality sector, a cut to VAT on food, accommodation and attractions from 20% to 5% from July 15 until January 12 and a temporary increase in the stamp duty threshold.
Analysts at OFX explained: "It has been a good 24 hours for the pound as another round of stimulus from Chancellor of the Exchequer Rishi Sunak buoyed the pound as he continues to attempt to shield the UK economy from an extended Coronavirus driven depression. A lot of Sunak's policies were expected however it could be said he surprised to upside with the waiving of stamp duty for nine months on house purchases up to GBP500,000, and bonus payments of GBP1,000 to business' per employee who retain formally furloughed staff to the end of January 2021.
"He also put in place a series of schemes to help young workers trying to find work; grants and payments to help homes become more carbon-efficient, as well as a month-long effort to help the hospitality sector by offering everyone in the country a GBP10 discount on eating out Mon-Wed at participating restaurants throughout August. The total cost of the above is expected to be around GBP30 billion and we shouldn't rule out Sunak getting his chequebook out again in the Autumn should unemployment rise rapidly, as is widely expected."
The euro stood at USD1.1297 at the European equities close, down from USD1.1322 late Wednesday. Against the yen, the dollar was trading at JPY107.27, down from JPY107.47 late Wednesday.
Stocks in New York were lower at the London equities close as data showed new unemployment claims remained elevated and investors continued to back away from bets on a swift economic recovery.
The DJIA was down 1.5%, the S&P 500 index down 0.9% and the Nasdaq Composite down 0.2%.
US weekly jobless claims continued their gradual climb down, data from the Department of Labor showed on Thursday.
For the week to July 4, seasonally-adjusted initial claims were 1.31 million, down from 1.41 million the week before. Consensus had anticipated 1.38 million claims for the week to July 4.
The figures continue to be elevated due to the Covid-19 pandemic, but have declined gradually since a record weekly high of 6.9 million claims was set in late March. In February, claims were running around 210,000 a week.
Continuing claims, or seasonally-adjusted insured employment, fell to 18.1 million in the week to June 27 from 18.8 million the week prior.
"The US economy is in recovery mode, but the recovery isn't that smooth as per the data. The continuing claims have gone back to June and there is a feeling that momentum in terms of recovery has slowed or started to level off," said analysts at AvaTrade.
On the corporate front, drugstore operator Walgreens Boots Alliance slumped 9.9% as it projected full-year profits well below analyst expectations. Market conditions in the UK - where it operates the Boots pharmacy chain - are "expected to remain very depressed," the company said.
The outlook is somewhat better in the US, but profit margins there "are expected to remain compressed in comparison to fiscal 2019," Walgreens Boots said.
Brent oil was quoted at USD42.33 a barrel at the London close, lower than USD42.86 at the close Wednesday.
"Oil prices are in the red today as fears that US demand will dwindle on account of the pandemic has impacted the energy market. The EIA report yesterday showed that gasoline inventories in the US fell by over 4.8 million barrels, a sign that people were driving more. The finer details showed that areas where lockdown restrictions were reintroduced, saw a fall in consumption, so traders are mindful of that today," said CMC's Madden.
Gold was quoted at USD1,802.20 an ounce at the London equities close against USD1,811.86 late Wednesday, retreating from multi-year highs reached in the previous session.
The economic events calendar on Friday has US producer prices and Canada unemployment data at 1330 BST.
There are no events scheduled in the UK corporate calendar on Friday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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