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(Alliance News) - Stocks in London ended higher on Monday as traders hold out for fresh stimulus on both sides of the Atlantic and amid reports that US President Donald Trump's health is improving.
The large cap index closed up 40.82 points, or 0.7%, at 5,942.94. The FTSE 250 ended up 1.1% at 17,583.09, and the AIM All-Share closed up 0.9% at 973.56.
The Cboe UK 100 ended up 1.0% at 591.72, the Cboe UK 250 closed up 1.4% at 14,904.17, and the Cboe Small Companies ended up 1.5% at 9,372.89.
The pound was quoted at USD1.2968 at the London equities close Monday compared to USD1.2939 at the close on Friday.
In European equities on Monday, the CAC 40 in Paris and the DAX 30 in Frankfurt ended up 1.0% and 1.1% higher, respectively.
The euro stood at USD1.1787 at the European equities close Monday against USD1.1717 at the same time on Friday. Against the yen, the dollar was trading at JPY105.67 compared to JPY105.34 late Friday.
"Markets have enjoyed a positive start to the week, with risk sentiment on the rise in anticipation of a fresh bout of stimulus. The market recovery has noticeably hit the buffers since governments and central banks started to wean the economy of constant supplies of fresh stimulus," said Joshua Mahony, senior market analyst at IG.
Chancellor Rishi Sunak said there would be "hard choices" to come as he attempts to balance the books following the coronavirus crisis.
Sunak told the Conservative Party conference that he could not continue to "borrow our way out of a hole".
He acknowledged that the pandemic had already forced ministers to make "difficult trade-offs and decisions" but promised the "overwhelming might of the British state" was being used to help as many people as possible.
Sunak warned that the UK was only "part way through" the coronavirus outbreak, which had already reached "deep into our economy and society".
The government has already committed more than GBP190 billion for people, firms and services but elements of that support – including the furlough scheme which ends this month – are now being withdrawn.
"Unfortunately Rishi Sunak's appearance at the Conservative conference today did little to boost hopes of another fiscal boost from the government, with the chancellor focusing more on how they will reduce the debt burden than add to it," added Mahony.
On the data front, The UK's key service sector continued to expand in September, figures showed, albeit at a slower pace than the month before.
The IHS Markit/CIPS UK services purchasing managers' index fell to 56.1 in September from August's 58.8. August's reading was the strongest since 2015.
While September's reading was the lowest since June, the index still pointed to a "marked" rate of growth, said IHS Markit. Further, it beat the flash reading of 55.1.
Supporting activity was an increase in levels of incoming new work, while market demand continued to improve.
Less positively, the latest data indicated that employee numbers in the UK service sector continued to fall. Though easing to the slowest since March, the level of job losses was "again marked".
Confidence over the year ahead remained "comfortably inside" positive territory, though did ease to a four-month low.
Brent oil was quoted at USD41.66 a barrel at the London equities close Monday, up from USD39.48 late Friday.
Elsewhere in the commodity space, gold was quoted at USD1,914.70 an ounce at the London equities close Monday, higher against USD1,906.50 at the close on Friday.
On the London Stock Exchange, Rolls-Royce closed as the best performer in the blue-chip index, up 8.6%, after saying that it will meet with fixed income investors ahead of the jet engine maker's plans to launch a bond offering.
Rolls-Royce, which back on Thursday said it plans to raise GBP1 billion in the offering, on Monday added that the senior unsecured notes will be dollar, euro and sterling denominated. Rolls-Royce is targeting maturity dates in 2026 and 2027.
"The group intends to raise gross proceeds of at least GBP1 billion from the bond offering and use these proceeds together with those of the rights issue that forms part of the recapitalization package to enhance its financial resilience and deliver a more appropriate balance sheet in order to position the group for the post Covid-19 environment," Rolls-Royce said.
"This will enable the group to improve its liquidity headroom, reduce its level of balance sheet leverage while supporting disciplined execution and investment to ensure maximized value for existing capabilities."
Vodafone closed up 4.7% after the telecommunications firm noted progress on the merger of Indus Towers and Bharti Infratel following the satisfaction of certain conditions.
The merger - first agreed in April 2018 - will see Vodafone merge its Indian mobile tower joint venture with a local rival to create the world's second largest tower mobile company.
The FTSE 100-listed telecoms company said the agreement to proceed with the merger was conditional on consent for a security package for the benefit of the combined company from Vodafone's existing lenders for the EUR1.3 billion loan used to fund Vodafone's contribution to the Vodafone Idea rights issue in 2019. On Monday, Vodafone stated that consent has now been received from its lenders, adding that all parties will now approach the National Company Law Tribunal to make the merger scheme effective.
Among the mid-caps, Weir was the best performer, closing 16% higher on Monday, after the engineering firm agreed to sell its entire Oil & Gas division to US-based Caterpillar for a USD405 million enterprise value.
The Glasgow-headquartered company said the decision follows its February announcement that it would seek to maximise value from Oil & Gas as part of its strategic transformation into a premium mining technology pure play.
Net proceeds of the sale of Weir Oil & Gas will be used to reduce the company's leverage, with pro forma net debt to earnings before interest, tax, deprecation and amortisation on a pro forma basis of 1.9 times as of June 30. The sale is expected to complete by 2020 end.
At the other end of the mid-caps was Cineworld, closing down 36% after deciding to temporarily shutter its UK and US movie theatres, affecting 45,000 jobs.
The cinema chain operator said it will halt operations at all its 536 Regal theatres in the US and its 127 Cineworld and Picturehouse theatres in the UK starting Thursday.
Cineworld stated that while the decision was not made lightly, the continued closure of major US markets and uncertainty regarding the timing of re-openings has made studios reluctant to release their pipeline of new films.
The firm's statement comes just days after the release of the latest James Bond film was pushed back again.
"The best-case scenario is that the pandemic is reined in, studios release their films and customers are happy to return to cinemas, but Cineworld will still probably need to raise fresh cash to see it through, unless this happens much more quickly that MGM and the team behind the James Bond franchise currently expect," commented Russ Mould, investment director at AJ Bell.
Greencore shares closed down 6.7% after the convenience foods manufacture guided to a slump in full-year earnings.
For the year ended September 25, the FTSE 250-listed firm has forecast an adjusted earnings before interest, tax, depreciation and amortisation of GBP85 million, down 40% from GBP142.0 million reported the year before. Meanwhile, revenue for the period is expected to be GBP1.27 billion, a 12% decline from GBP1.45 billion.
More positively, for the fourth quarter of financial 2020, revenue declined by 19%, reflecting an improvement from the 36% drop in the third quarter, supported by a continued increase in demand for food to go categories.
In Tuesday's corporate calendar, there are half-year results from Frankie & Benny's and Chiquito owner Restaurant Group and land & property company Harworth Group.
Stocks in New York were in the green at the London equities close, with the Dow Jones up 1.3%, the S&P 500 index rising by 1.4%, and the Nasdaq Composite up 1.6%.
The gains came amid optimism surrounding the health of President Trump. At the end of last week, it was announced that the US leader tested positive for Covid-19 and that hurt market confidence.
The president was flown to Walter Reed with a high fever on Friday after a "rapid progression" of his illness, with his oxygen levels dropping worryingly low, Trump's physician Sean Conley said in a Sunday briefing.
However, on Monday, Trump's medical team said he had "continued to improve" and could be returned to the White House, which has the facilities to treat and isolate the president.
Later on Monday, the White House Press Secretary Kayleigh McEnany announced she has tested positive for Covid-19, three days after Trump was hospitalised with the disease.
"After testing negative consistently, including every day since Thursday, I tested positive for Covid-19 on Monday morning while experiencing no symptoms," McEnany said in a statement.
"No reporters, producers, or members of the press are listed as close contacts by the White House Medical Unit," added Trump's spokeswoman, who said she was going into quarantine following the diagnosis.
The US services sector has seen an upturn in business activity in September, figures from IHS Markit showed on Monday, albeit one that was slightly slower than August's recent high.
The seasonally adjusted final IHS Markit US services PMI business activity index registered 54.6 in September, down slightly from 55.0 in August, but matching the earlier released flash estimate.
This rise in business activity was linked to stronger demand conditions, with the rate of new business accelerating.
The IHS Markit composite PMI output index posted 54.3 in September, down fractionally from 54.6 in August. Manufacturing firms registered the fastest increase in output since November 2019.
In line with greater new business inflows, firms increased their workforce numbers in September, IHS Markit noted.
In the economic calendar on Tuesday, there is UK construction PMI at 0930 BST.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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