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(Alliance News) - Stocks in London maintained positive momentum on Wednesday after a medical breakthrough in the UK in the fight against the coronavirus.
Dexamethasone - a cheap and widely-available steroid - was shown to reduce deaths among patients on ventilators and on oxygen. The life-saving treatment is being used across the UK from today, following breakthrough results in a UK trial.
The FTSE 100 index closed up 10.46 points, or 0.2%, at 6,253.25. The large-cap index closed up 178.09 points, or 2.9%, at 6,242.79 on Tuesday.
The FTSE 250 ended up 117.66 points, or 0.7%, at 17,582.36, and the AIM All-Share closed up 10.93 points, or 1.3%, at 887.97.
The Cboe UK 100 ended up 0.2% at 10,583.30, the Cboe UK 250 closed up 0.5% at 15,121.92, and the Cboe Small Companies ended up 1.3% at 9,882.23.
In Paris the CAC 40 ended up 0.9%, while the DAX 30 in Frankfurt ended 0.5% higher.
CMC Markets analyst David Madden said: "It has been a lacklustre session today as there was an absence of new major news. Yesterday it was announced that Dexamethasone, a low-dose steroid, performed well in clinical trials as a possible treatment for Covid-19. A team from Oxford University is heading up the trials, and the drug lowered the fatality rate of Covid-19 patients.
"There is a large supply of the drug and it is cheap, so there is a sense of hope surrounding that story. European equity markets were showing respectable gains for much of the session but trading ranges were small as there wasn’t much in terms of news flow to inspire traders."
On the London Stock Exchange, SSE ended the best blue-chip performer, up 8.8% after the energy company backed its dividend plan despite annual profit being hit by Covid-19.
For the year ended March 31, SSE posted a pretax profit of GBP587.6 million from continuing operations, down sharply from GBP1.30 billion the year before.
"Reported results for the year to 31 March 2020 were significantly lower than the previous year, reflecting pre-tax exceptional charges of GBP738.7 million recognised during the year; both in relation to the reshaping of SSE (with the sale of SSE Energy Services and the closure of Fiddler's Ferry coal fired power station) and a deterioration in market conditions," SSE explained.
SSE recommended a full-year dividend of 80 pence, down 18% from 97.5p the year before. The reduced payout was in line with SSE's five-year dividend plan, which it said it continues to target.
"SSE's decision to withdraw from the rough-and-tumble of the retail energy market, limited hit from unpaid bills and confirmation of its 80p-a-share annual dividend for the last financial year are all generating interest in the utility's shares from investors as the firm looks to focus on the power generation and transmission markets for the long term," said AJ Bell's Russ Mould.
Berkeley Group closed up 4.5% after the housebuilder reported a double-digit decline in earnings in its most recently ended financial year as home deliveries dropped, but maintained its payout plans.
The Cobham, England-based property developer said revenue declined 35% in the year to the end of April to GBP1.92 billion from GBP2.96 billion a year earlier, taking pretax profit down 35% to GBP503.7 million from GBP775.2 million.
The company said it is maintaining a pretax return on equity target of at least 15% for the period stretching May 1 to April 30, 2025, which equates to an annual pretax profit of GBP500 million for the six-year period. Of the GBP140.0 million shareholder return already announced to be made by the end of September, GBP6.0 million has been made to-date through share buybacks, Berkeley noted.
The amount that will be returned as a dividend will be announced on August 13, it said.
Peer Taylor Wimpey, after the market close, proposed an equity placing to raise GBP500 million, to allow the housebuilder to pursue additional near term land acquisition opportunities.
Taylor Wimpey said it has seen strong sales demand since sales centres reopened - 0.62 net private sales per outlet per week for the three weeks ending June 14.
In March, Taylor Wimpey joined peers in cancelling its dividend due to the Covid-19 crisis. On Wednesday, it said it expects to resume ordinary dividend payments in 2021.
The stock closed up 0.3%.
In the FTSE 250, Serco ended by far the best performer, up 17%, after the outsourcer said it expects a sharp rise in interim revenue with strong growth in underlying trading profit and reinstated full-year guidance.
In the first half, ending June 30, Serco expects to report underlying trading profit between GBP75 million and GBP80 million, about 50% higher year-on-year. Serco said the growth was driven primarily by its overseas businesses including the impact of the acquisition in August 2019 of the Naval Systems Business Unit of Alion in North America.
Revenue in the period is expected to grow by about 23%, with organic growth of 14%. Serco is now guiding for full-year revenue of GBP3.7 billion, up from previous guidance of between GBP3.4 billion to GBP3.5 billion.
The pound was quoted at USD1.2525 at the London equities close, weaker from USD1.2588 at the close Tuesday, ahead of the Bank of England's interest rate announcement on Thursday, amid the prospect of negative UK interest rates.
UK inflation softened further in May, figures from the Office for National Statistics showed, amid ongoing pressure on fuel prices. The annual inflation rate eased to just 0.5% in May from 0.8% in April - having started the year with a rate of 1.8% in January.
A separate ONS release showed producer prices continued to decline in the UK. Output prices fell 1.4% year-on-year in May, double the rate of April's 0.7% decline. Input prices slumped 10.0%, though this was a marginal improvement from a 10.2% fall in April.
It comes as fuel prices tumbled by 17% in May - the biggest fall on record - while energy costs dropped 7% and clothing and footwear price tags fell 3.1% as retailers resorted to heavy discounts amid the lockdown.
Richard Pearson, director at Investment Platform, EQi, commented: "Another drop in inflation shows that, while life in the UK may be showing signs of returning to a semblance of normality, the economy is still in dire straits. Covering the second month in lockdown, the fact that falling demand for clothing and recreational goods played a such a key role isn't surprising, while products like food and alcohol saw growth as people entertained themselves at home.
"It's likely we'll see further drops in inflation going forward as retailers open up and discount heavily to get people back shopping. But inflation will bounce back up eventually. People returning to normal economic activities will start to feed through to the data soon, albeit slowly."
The BoE will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes, at midday in London on Thursday. The central bank is widely expected to keep interest rates unchanged at a record low of 0.10% following two cuts in March.
Further, the BoE is expected to top up its quantitative easing programme by at least GBP100 billion, as the UK economy continues to struggle with the economic fallout from Covid-19.
The BoE's Monetary Policy Committee has already used an array of stimulus measures to help support the domestic economy, but options are running out for Governor Andrew Bailey, raising fears of the possible introduction of negative interest rates.
Analysts at OFX explained: "The UK's IR rate is fixed at 0.1%; however rumours have circulated that Bailey may be the first to cut IR into the negative, which certainly wouldn't do much good for sterling. It is likely that sterling is currently undervalued and anchored to the downside due to the number of key dates in Britain's upcoming economic calendar and the number of unresolved, moving parts. To make matters worse, the UK hasn't seen a positive fundamental data release in a while, most recently unemployment data came in over 100k worse than expected."
The euro stood at USD1.1221 at the European equities close, down from USD1.1261 late Tuesday.
The annual eurozone inflation rate slumped to just 0.1% in May, figures from Eurostat showed. In April, the rate had been 0.3%, and in May a year earlier had stood at 1.2%. Energy prices acted as the largest drag, slumping 12% year-on-year in May, while food, alcohol & tobacco prices increased 3.4%. Month-on-month, prices slipped 0.1% after 0.3% growth in April.
The European Central Bank aims to keep inflation rates below, but close to, 2% over the medium term.
"We expect inflation to remain weak well into the medium term, only converging to the ECB's target towards the end of 2023. Inflation will be held back first by the ongoing slump and weak energy prices and subsequently by the pervasive economic slack coupled with higher savings and weaker demand," analysts at Oxford Economics said.
Against the yen, the dollar was trading at JPY107.24, lower from JPY107.33 late Tuesday.
Stocks in New York were mostly lower at the London equities close following three successive days of gains.
The DJIA was down 0.3%, the S&P 500 index down 0.2%, but the Nasdaq Composite was up 0.1%.
It comes as the US Federal Reserve and Bank of Japan pledged more support for troubled businesses – amid reports of a fresh US stimulus worth USD1.0 trillion and a worrying increase in infections from Beijing to Texas.
However, Fed Chair Jerome Powell on Tuesday offered a sobering summary of the outlook for the economy last week sparked a plunge across equities, warned in his congressional testimony that the recovery would take some time.
Brent oil was quoted at USD40.90 a barrel at the London close, up from USD40.22 at the close Tuesday.
Major oil producers sharply cut back output in May, data showed, as part of a concerted effort to prop up prices that have fallen dramatically in the wake of the global coronavirus pandemic.
In the latest monthly report by the Organization of Petroleum Exporting Countries, data showed that the cartel's 13 member states throttled output by 6.2 million barrels per day last month. OPEC itself does not officially publish exact output figures in its regular monthly bulletins, but instead cites data compiled by so-called secondary sources.
Gold was quoted at USD1,724.21 an ounce at the London equities close, lower against USD1,727.20 late Tuesday.
The economic events calendar on Thursday has US jobless claims at 1330 BST.
The UK corporate calendar on Thursday has annual results from the UK power lines operator National Grid and interim results from self-storage company Safestore Holdings.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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