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(Alliance News) - Stocks in London eased back on Thursday as nervous investors booked their profits amid concerns over a second wave of virus outbreak, while the pound fell after the Bank of England's interest rate decision.
The FTSE 100 index closed down 29.18 points, or 0.5%, at 6,224.07. The FTSE 250 ended down 64.10 points, or 0.4%, at 17,518.26, and the AIM All-Share closed up 1.15 points, or 0.1%, at 888.53.
The Cboe UK 100 ended down 0.6% at 10,520.04, the Cboe UK 250 closed down 0.5% at 15,053.20, but the Cboe Small Companies ended up 0.5% at 9,929.22.
The CAC 40 in Paris and the DAX 30 in Frankfurt both ended 0.8% lower.
"Stocks in Europe are in the red this afternoon as health concerns have chipped away at market confidence. Beijing is currently in partial lockdown and its restrictions have become stricter in the past few days. A number of states in the US have seen an increase in the number of Covid-19 cases, most notably Texas - yesterday's hospitalisation rate jumped by 11%. This day last week, equity markets sold-off sharply as traders were terrified at the prospect of a second wave of infections. There has been a rise in cases since then, but dealers are less fearful about the situation spiralling out of control," said CMC Markets analyst David Madden.
In the FTSE 100, Prudential closed up 2.7% after the 172-year old insurer said its Jackson National Life unit will receive a USD500 million investment and struck a reinsurance agreement as the US business prepares for its minority initial public offering.
Retirement services firm Athene Holding will take an 11% economic interest in Jackson, in exchange for the investment. Athene is backed by private equity firm Apollo Global Management. Prudential explained the cash injection "will be deployed in Jackson, strengthening its capital base".
The FTSE 100 insurance company added that Athene also has fully reinsured a USD27.6 billion portfolio of Jackson's annuity liabilities in the US.
At the other end of the large-cap index, Taylor Wimpey ended the worst performer, down 5.9% at 142.90 pence after the housebuilder's fundraise of more than GBP500 million to spend on land.
Taylor Wimpey said it raised a total of GBP522 million from investors to help it buy up land which has been made cheaper by the coronavirus pandemic. The company raised funds from both new and existing shareholders in a share placing at 145p each.
In addition, Jefferies cut the stock to Hold from Buy.
Carnival closed down 1,1% after the cruise line operator said it is reducing expenses amid an extended halt to cruises due to the new coronavirus, as it reported a quarterly loss. The cruise ship operator reported US GAAP net loss of USD4.4 billion, or USD6.07 diluted loss per share, for the three months to the end of May, which includes USD2.0 billion of non-cash impairment charges.
Adjusted net loss for the second quarter was USD2.4 billion, or a USD3.30 adjusted loss per share. Revenue dropped to USD700 million from USD4.8 billion in the prior year. Carnival explained that its guest cruise operations have been in a pause for a majority of the second quarter.
Compounding its woes, Berenberg downgraded the stock to Sell from Hold.
National Grid closed down 0.2% after the UK power lines operator reported annual results below market expectations and said it expects earnings in the year ahead to be hurt by the coronavirus pandemic.
The company reported revenue in the year to March 31 down 2.6% to GBP14.54 billion from GBP14.93 billion, while pretax profit fell 5% to GBP1.75 billion from GBP1.84 billion. Underlying pretax profit, meanwhile, was 1% higher year-on-year, at GBP2.49 billion versus GBP2.47 billion a year prior. The market had expected National Grid to report underlying pretax profit of GBP2.55 billion.
National Grid will payout a full-year dividend of 48.57 pence, up 2.6% on the year before, but less than the 48.70p that the market had expected.
Looking out, National Grid expects Covid-19 to hit underlying operating profit by GBP400 million in the year ahead amid additional costs in the UK and higher bad debt charges in the US.
Elsewhere, Austria-based budget carrier Level Europe shut down operations and will file for insolvency, announced the subsidiary of International Consolidated Airlines Group, which includes British Airways and Iberia. IAG shares closed down 0.6%.
The pound was quoted at USD1.2421 at the London equities close, down sharply from USD1.2525 at the close Wednesday, in the wake of the Bank of England's expected monetary policy decision and expansion of its asset purchases.
The central bank kept UK interest rates unchanged at their record low levels and upped its quantitative easing programme by GBP100 billion, as anticipated. The BoE held interest rates at an all-time low of 0.1%, despite mounting speculation policymakers may look to take rates below zero for the first time ever to help facilitate an economic recovery.
The nine-strong Monetary Policy Committee was unanimous in keeping the Bank Rate at 0.1%, but there was one dissenter on the move to increase the total stock of asset purchases to GBP745 billion. Andrew Haldane - the central bank's chief economist - preferred to maintain the target at GBP645 billion, the BoE minutes showed.
On the UK economy, the BoE noted recent data suggest the fall in global and UK gross domestic product in the second quarter will be less severe than set out in the BoE's May monetary policy report. Following the 6% fall in GDP in March and 20% plunge in April, the UK economy has begun bouncing back in May and June as lockdown restrictions have eased, according to the central bank.
Pantheon Economics noted: "The surprise vote by the Chief Economist, Andy Haldane, to undertake no more QE suggests that the Committee won't rush to ramp up its purchases, at the first sign that the economy is deviating from the V-shaped recovery path envisaged by the Committee."
Further, the BoE warned there were risks of "higher and more persistent" unemployment following the crisis and that the path of recovery was still unclear. The bank said it "stands ready to take further action as necessary to support the economy".
Melissa Davies, chief economist at Redburn, noted: "Although the GDP outlook is proving to be less negative than feared in May, the unemployment outlook is of increasing concern along with precautionary savings behaviour by households. Realistically, the government is likely to have to beef up unemployment support as the furlough scheme ends and the Bank will be in the market to help maintain low borrowing costs. The negative interest rate debate will continue to rumble on over the summer."
The euro stood at USD1.1220 at the European equities close, flat from USD1.1221 late Wednesday.
Against the yen, the dollar was trading at JPY106.77, down from JPY107.24 late Wednesday. The yen held firm amid a surge in new coronavirus infections in several US states and the imposition of travel curbs in Beijing to stop a fresh outbreak.
Stocks in New York were mixed at the London equities close amid a fresh rise in US jobless claims, as markets weighed mixed trends in the country's battle against the coronavirus.
The DJIA was flat, the S&P 500 index down 0.4% and the Nasdaq Composite was up 0.2%.
Another 1.5 million US workers filed for unemployment benefits last week, the Labor Department said, bringing the number of people laid off, at least temporarily, by Covid-19 to 45.7 million. The entire population of the US is about 330 million.
Sentiment was also dented by data showing increased cases in Florida, Texas and other states as well as isolated instances in which hospitals are near full capacity.
Brent oil was quoted at USD41.20 a barrel at the London close, firm from USD40.90 at the close Wednesday.
Gold was quoted at USD1,721.16 an ounce at the London equities close, marginally lower against USD1,724.21 late Wednesday.
The economic events calendar on Friday has UK retail sales figures and Germany producer prices at 0700 BST.
The UK corporate calendar has annual results from currency manager Record and a trading statement from oilfield services firm John Wood.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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