LONDON MARKET CLOSE: FTSE 100's Three Day Winning Streak Snapped

(Alliance News) - Stocks in London ended lower on Thursday, with the FTSE 100's three-day rally running out of steam in a week which has seen heightened tensions between the US and China and mass protests across the US.

The FTSE 100 index closed down 40.97 points, or 0.6% at 6,341.44, having closed up 162.27 points, or 2.6%, at 6,382.41 on Wednesday.

The FTSE 250 ended down 71.12 points, or 0.4% at 17,825.96. However, the AIM All-Share closed up 0.2% at 896.78.

The Cboe UK 100 ended down 0.7% at 10,722.67, the Cboe UK 250 closed flat at 15,370.21, and the Cboe Small Companies ended down 0.1% at 9,614.02.

In Paris the CAC 40 ended down 0.3%, while the DAX 30 in Frankfurt ended down 0.5%.

"European shares held losses and Wall Street opened lower as the June rally in stocks paused for a wee breather, with tensions around Hong Kong resurfacing and US jobs data indicating a lacklustre recovery in the labour force," said Markets.com analyst Neil Wilson.

On the London Stock Exchange, travel stocks ended in the green with easyJet up 6.2% and International Consolidated Airlines up 3.2% amid optimism in the sector.

Virgin Atlantic on Thursday announced it plans to restart passenger flights on July 20. The airline will initially operate London Heathrow flights to Orlando, Hong Kong, Shanghai, New York and Los Angeles.

Flights will resume to more destinations in August, with details to be confirmed in the next two weeks.

In the US, American Airlines said it will boost its US flight schedule next month over dramatic reductions since the coronavirus pandemic, planning to fly more than 55% of its July 2019 domestic capacity.

Further, American Airlines plans to resume service to additional European and Latin American destinations in August. It will resume service to Rio de Janeiro, Brazil, from Miami on July 7.

The stock was up 24% on Wall Street.

At the other end of the London's large-cap index, Intermediate Capital Group ended the worst performer, down 7.7% after the asset manager reported a decline in profit in its most recently ended financial year.

ICG reported a pretax profit of GBP114.5 million for the year to the end of March, down 37% GBP182.9 million reported a year earlier. This was due to lower gains on investments, which fell to GBP117.4 million from GBP225.9 million year-on-year.

In addition, ICG said its administrative expenses grew to GBP241.4 million from GBP227.9 million a year prior. Net asset value as at March 31 was GBP4.63 a share, down from GBP4.93 a year earlier.

Pennon Group closed down 5.0% after the water company declared a higher dividend for financial 2020, but said it expects revenue for financial 2021 to be hurt by the Covid-19 pandemic.

For its financial year ended March 31, Pennon posted revenue of GBP636.7 million, up 0.6% from GBP632.6 million the year before. However, pretax profit declined 4.1% to GBP193.1 million from GBP201.4 million. For the continuing group and waste business Viridor - which Pennon in March agreed to sell to US-based private equity Kohlberg Kravis Roberts & Co for GBP4.2 billion - profit was up 16% to GBP301.5 million.

Pennon declared a final dividend of 30.11p, taking the total annual payout to 43.77p, up 6.6% from 41.06p the year before. Pennon noted that Viridor represents 22.66p of the financial 2020 dividend, implying a continuing dividend after the disposal of 21.11p.

Looking ahead, Pennon said it expects non-household revenue to reduce in financial 2021 due to Covid-19, highlighting a risk from expected credit losses for businesses, retailers and households.

The pound was quoted at USD1.2592 at the London equities close, down from USD1.2604 at the close Wednesday, amid a lack of progress in Brexit trade talks.

Germany said Thursday that the UK should give ground in Brexit trade talks and help break a stalemate in which both sides are dug into their positions.

While an agreement is possible, German EU ambassador Michael Clauss insists London will have to show "a more realistic approach" to reach one by the end of the year. It was not possible for Britain to have "full sovereignty and at the same time full access to the EU's internal market", Clauss told a panel at the European Policy Centre think tank.

The EU and Britain are holding a fourth round of virtual talks on their future relations following the UK's split from the bloc after 40 years of membership. A meeting is planned for later in June among UK Prime Minister Boris Johnson, EU Council President Charles Michel and EU Commission President Ursula von der Leyen to take stock of the situation.

Analysts at FXPro told Alliance News: "Many factors may put pressure on the British pound. We see signs of slipping negotiations between the EU and Britain on the parameters of Brexit. Moreover, friction between China and the UK has intensified. All these factors were in the game before but did not prevent the pound from growing against the dollar. However, buyers' alertness increased the price to 1.2600, an important short-term resistance level. Touching this mark caused GBPUSD to reverse in April and May.

"It is possible that we see only a slight respite, and the markets will soon be able to brush aside alarming macroeconomic data and regression in trade negotiations. But, in our opinion, the chances of a corrective rollback or slipping of both global markets and the British currency are much higher".

In UK economic news, a restart of work on site helped the UK's construction sector downturn to ease in May, data from IHS Markit showed.

The IHS Markit/Chartered Institute of Procurement & Supply UK construction total activity index picked up to 28.9 in May from just 8.2 in April. While an improvement, the figure remained well below the no-change mark of 50, indicating the sector is still contracting at pace. It was the second-lowest reading since February 2009.

The euro stood at USD1.1333 at the European equities close, up sharply from USD1.1223 late Wednesday, after the European Central Bank upped its pandemic bond-buying programme by a more-than-expected EUR600 billion and held its key interest rates unchanged.

The Frankfurt-based central bank kept its interest rates on main refinancing operations, the marginal lending facility, and the deposit facility all unchanged at 0.00%, 0.25% and minus 0.50%, respectively.

However, the pandemic emergency purchase programme has been increased by EUR600 billion to a total of EUR1.35 trillion from EUR750 billion previously. Most analysts had pencilled in a EUR500 billion top-up to the stimulus package.

The central bank launched PEPP in March in a bid to shore up the eurozone economy, after the Covid-19 pandemic put a halt to activity across the bloc.

Against the euro, sterling fetched EUR1.1142, down sharply from EUR1.1231.

Analysts at OFX said: "The European Central Bank added an extra EUR600 billion to their pandemic emergency purchase programme this afternoon, bringing the total to EUR1.35 trillion. European businesses will be delighted not just with the funding, but with the intent show by the ECB. A combination of medium-term economic stress, Brexit turmoil and the Covid-19 pandemic has dented European business confidence over the past few years, and the ECB are doing a good job in providing a safety net for innovation. The euro reacted well to the news, rallying against both the pound and US dollar.

"A number of our European based clients were able to benefit from the surge as they purchased pounds at a rate 0.5% cheaper than was available this morning. With supply side shortages still common and a lack of accurate forecasting available in the current climate, businesses seem more inclined to take advantage of spot market spikes than utilise long-term forward contracts to manage currency risk".

Against the yen, the dollar was trading at JPY108.98, flat from JPY108.95 late Wednesday.

Stocks in New York were higher at the London equities close, shrugging off weak economic data, worries over US-China relations and mass protests in the US following the police killing of George Floyd in Minneapolis, Minnesota.

The DJIA was up 0.3%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.2%.

Another 1.9 million people applied for jobless claims last week, the Department of Labor reported, taking the total to more than 42 million in the wake of coronavirus shutdowns.

Analysts at Oxford Economics said: "Initial claims for unemployment benefits declined for a ninth straight week, falling 249,000 in the week ended May 30 to 1.88 million. While the drop in new claims is welcome news and more evidence that the worst of the job losses are behind us, the recovery in the labour market is expected to be painfully slow. We look for a two-phase recovery, with an initial burst in rehiring followed by a much slower retracement of job losses".

The US will report its May employment data on Friday, and as the focus shifts to economic reopenings, forecasts indicate better figures. The country is expected to have lost 8 million jobs in May, an improvement from the 20.5 million shredded in April.

Brent oil was quoted at USD39.28 a barrel at the London close, down from USD39.52 at the close Wednesday.

Gold was quoted at USD1,713.66 an ounce at the London equities close, higher against USD1,697.55 late Wednesday.

The economic events calendar on Friday has Germany factory orders at 0700 BST, UK Halifax house price index readings at 0830 BST and the US jobs report for May at 1330 BST.

The UK corporate calendar on Friday has annual results from office provider Workspace Group and waste disposal firm Biffa.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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