(Alliance News) - Stocks in London started in the green on Friday, shaking off second coronavirus wave fears and despite worrying public borrowing data.
The FTSE 100 index was up 28.82 points, or 0.5%, at 6,252.89 early Friday. The mid-cap FTSE 250 index was up 21.04 points, or also 0.1%, at 17,539.30. The AIM All-Share index was up 0.3% at 890.16.
The Cboe UK 100 index was up 0.5% at 10,574.80. The Cboe 250 was up 0.1% at 15,063.29, and the Cboe Small Companies flat at 9,926.79.
"Despite starting the week on the back foot, due to concerns over a second wave of infections in China, Japan, India, as well as a number of US states, equity markets have managed to stabilise after the losses of last week, with markets in Asia managing to finish the week modestly higher," CMC Markets Chief Market Analyst Michael Hewson said.
In Asia on Friday, the Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite closed up 1.0%, while the Hang Seng index in Hong Kong was 0.6% higher in late trade.
Hewson continued: "The rise in infection rates over the past two weeks has increased the levels of uncertainty as to the effect this might have on any recovery and whether it will be V-shaped, as markets appear to be currently pricing, or whether it will be a much longer u-shaped type of rebound.
"Despite these concerns markets here in Europe have opened higher, after China said it plans to accelerate the purchases of US farm goods as it looks to comply with the phase one of its recently completed phase one trade deal with the US."
In mainland Europe, the CAC 40 in Paris was up 0.7%, while the DAX 30 in Frankfurt was 0.5% higher early Friday.
Retail sales in the UK partly rebounded in May from the record fall seen in April, the Office for National Statistics said Friday, with a third of all sales taking place online amid the continued closure of non-essential high street shops last month.
The volume of retail sales in May jumped 12% versus the previous month, when sales volume plunged 18%. In value terms, retail sales were 12% higher in May.
Market consensus, according to FXStreet, was for a 5.7% volume rise on April.
Despite May's strong rise, the ONS noted sales were still down 13% compared to February, before the coronavirus pandemic hit the UK.
"The monthly growth rate in May 2020 is strong because of a combination of recent increasingly rapid growth in non-store retailing and a pick-up for non-food stores from the lowest levels ever experienced," the ONS said.
Non-food stores provided the largest positive contribution to the monthly growth in May, the ONS said, aided by a strong increase of 42% in household goods stores, with the reopening of hardware, paints and glass stores during the month driving sales.
Food stores showed a slight monthly decline in volume of sales, falling 0.3% in May, but levels remain high from the spike in sales in March, partly caused by panic buying during the pandemic as reported by retailers, the ONS said.
Year-on-year, retail volumes were down 13% in May, while retail value was 14% lower.
"There has been a significant fall in the overall volume of sales in the retail industry since March 2020 as many stores paused trade from March 23 following official government guidance during the coronavirus pandemic. This has resulted in a fall of 13% in the three months to May 2020; the lowest levels since records began in 1996," the ONS said.
The proportion spent online soared to the highest on record in May at 33% of all sales. This compares with 31% in April.
Separately, ONS said UK public borrowing was larger than the country's entire economy in May.
This is the first time this has happened, the ONS noted, since the financial year ending March 1963.
The UK ended May with public sector borrowing at 100.9% of gross domestic product.
Public sector debt ended May at GBP1.950 trillion, GBP173.2 billion higher than a year before. The 21% rise was the highest year-on-year jump recorded by the ONS since it started keeping records in 1993.
"The coronavirus pandemic has had an unprecedented impact on borrowing. The GBP55.2 billion borrowed by the public sector in May is the highest monthly total on record," the ONS added.
May's borrowing was about nine times higher than a year before, ONS said.
April's borrowing was revised GBP13.6 billion lower to GBP48.5 billion, largely because of stronger than previously estimated tax receipts and National Insurance contributions and lower expenditure than previously expected from the Coronavirus Job Retention Scheme.
Public borrowing in the current financial year - April to May - is GBP103.7 billion, up more than GBP87.0 billion on a year before. ONS noted this is the highest April to May borrowing since records began in 1993.
Looking ahead, the ONS said the UK's public borrowing for the year ended March 2021 could be GBP298.4 billion, which would be about five times higher than in the year ended March 2020.
In London, Rio Tinto was 0.9% lower in early trading after the miner launched a high-level review of its operations in Western Australia after the company blew up a 46,000-year-old Aboriginal heritage site to expand an iron ore mine.
In announcing the move, Rio Tinto Chair Simon Thompson issued a formal apology to indigenous communities for the destruction on May 24 of ancient rock shelters in the Juukan Gorge in Western Australia's Pilbara region.
"The decision to conduct a board-led review of events at Juukan Gorge reflects our determination to learn lessons from what happened and to make any necessary improvements to our heritage processes and governance," he said in a statement.
Rio Tinto had initially defended its blasting in the Juukan Gorge as authorised under a 2013 agreement with the state government.
Flutter Entertainment was 1.5% lower despite investment bank Goldman Sachs resuming its coverage of the bookmaker with a Buy rating.
In the midcaps, Avast gained 2.9% as Goldman initiated its coverage with a Buy rating.
William Hill was 2.6% higher as JPMorgan raised the bookmaker to Overweight from Neutral.
Hyve Group was 1.4% higher as it plans to run all its events scheduled in Shanghai from the end of July. The company also received its first insurance payment for cancelled events.
The events organiser said that while events in Shanghai are currently set to run as planned, a lack of clarity in other markets outside China regarding restrictions on large gatherings has resulted in it cancelling of events previously just postponed.
Hyve Group said that to date, it has submitted insurance claims for 17 events that have been cancelled, saying that it has now received a GBP7.4 million payment to cover some of the claims. It noted that the insurance cover for all events to the end of October is capped at GBP62 million.
Hyve's financial year ends on September 30.
Ferrexpo was 2.6% lower after a district court in Kiev, Ukraine, prohibited transfer of the company's 50% stake in Ferrexpo Poltava Mining.
The Kiev court has placed the restriction on the Ferrexpo AG Switzerland, the sole shareholder in Ferrexpo Poltava Mining. Ferrexpo AG intends to appeal against the court order.
The Baar, Switzerland-based commodity trader and iron ore mining company clarified that it has no intention, and never has had any intention, to transfer its shareholding in Ferrexpo Poltava Mining, the company's iron ore unit in Ukraine.
Ferrexpo's operations remain unaffected as the share freeze does not affect ownership of the shares but prohibits their transfer.
The company believes the restriction is in connection with ongoing matters in Ukraine involving former chief executive, chair and senior independent director Kostyantin Zhevago and one of the businesses he owned until 2015.
Elsewhere on the Main Market, SIG gained 5.8% after it proposed a GBP165 million placing to strengthen its capital structure.
As part of the placing, CD&R, an investment manager, has agreed to invest up to GBP94 million, with a guaranteed minimum investment of GBP80 million.
SIG will offer 347.9 million shares at 30 pence each, raising GBP105 million, with CD&R subscribing for a further 240.0 million shares at 25p each, for GBP60 million.
SIG also noted it has seen a gradual improvement in trading performance throughout May and June, particularly in the UK and Ireland where branches continued to reopen during May as lockdown eased.
Profitability improved "materially" in May - with operating losses in the UK materially lower than management expectations.
"Underlying revenue for May showed a steady recovery from its low point in April 2020. Although this remained below the underlying revenue achieved in March 2020, the group's daily sales at the end of May were largely in line with March levels," SIG added.
Wall Street ended mixed on Thursday. The Dow Jones Industrial Average ended down 0.2%, but the S&P 500 added 0.1% and the Nasdaq Composite closed 0.3% higher.
Sterling was quoted at USD1.2427 early Friday, firm on USD1.2421 at the London equities close on Thursday.
The euro traded at USD1.1210 early Friday, softer than USD1.1220 late Thursday. Against the yen, the dollar was quoted at JPY106.98, up from JPY106.77 a day before.
In commodities, Brent oil was trading at USD42.40 a barrel early Friday, up versus USD41.20 late Thursday. Gold traded at USD1,732.00 an ounce early Friday, higher than USD1,721.16 on Thursday.
By Paul McGowan; paulmcgowan@alliancenews.com
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