LONDON MARKET CLOSE: FTSE On Sidelines As Virus Optimism Boosts Market

(Alliance News) - The FTSE 100 missed out on Tuesday's rally, held back by housebuilders, banks and oil stocks, while markets looked with hope towards the easing of some coronavirus lockdowns in Europe.

The FTSE 100 index closed down 51.35 points, or 0.9%, at 5,791.31. The FTSE 250 ended 325.35 points lower, or 2.0%, at 16,082.57, while the AIM All-Share closed up 8.68 points, or 1.2%, 754.29.

The Cboe UK 100 ended down 0.8% at 9,803.17, the Cboe UK 250 closed down 1.8% at 13,890.28, but the Cboe Small Companies ended up 1.6% at 8,643.31.

In European equities on Tuesday, the CAC 40 in Paris ended up 0.4%, while the DAX 30 in Frankfurt ended up 1.3%.

"Stocks in the US and mainland Europe have been on the rise today, with optimism over a potential loosening in restrictions providing a boost for now," said Joshua Mahony, senior market analyst at IG.

However, he noted: "UK bulls are clearly still in holiday mode today, with the FTSE 100 and FTSE 250 both underperforming their mainland European and US counterparts. Chief amongst the losers have been the housebuilders, with the prospect of an economic collapse alongside a widespread halting of property transactions dragging the sector lower."

Taylor Wimpey closed down 10%, Barratt Developments down 9.4% and Persimmon down 6.5%.

The Office for Budget Responsibility on Tuesday warned Britain's economy could shrink by 13% in 2020 in the case of a three-month coronavirus lockdown.

"The resulting 13% fall in annual GDP in 2020 would comfortably exceed any of the annual falls around the end of each world war or in the financial crisis," the OBR said.

In the model, real GDP could fall 35% in the second quarter, but bounce back quickly once the restrictions are eased. Unemployment could also rise by more than two million to hit 10% in the second quarter, with recovery lagging behind GDP, said the OBR.

The news came as health ministry figures showed the number of people who have died in hospital in the UK from the coronavirus has risen to 12,107.

This is an increase of 778 on the previous day and official figures also showed that the number of people who have tested positive for Covid-19 has reached 93,873.

The pound was quoted at USD1.2597 at the London equities close Tuesday, up compared to USD1.2455 at the close on Thursday.

The euro stood at USD1.0962 at the European equities close Tuesday, higher against USD1.0942 at the same time on Thursday.

Against the yen, the dollar was trading at JPY107.15, lower compared to JPY108.50 late Thursday.

Coronavirus deaths in the hard-hit US were flat for a second consecutive day, with New York's governor saying the "worst is over" as many countries weigh a gradual reopening of their shattered economies.

Austria cautiously eased confinement measures Tuesday as coronavirus deaths appeared to start levelling off in several hard-hit countries, though the world's top health body reignited warnings against lifting lockdowns too fast.

At the same time, International Monetary Fund warned on Tuesday that the global economy will contract 3% this year due to the new coronavirus and shutdowns as part of efforts to mitigate the spread. The prediction marked a massive 6.3% swing off previous estimates from January.

Badly-affected Spain on Monday allowed construction and factory employees to go back to work, and police handed out face masks in Madrid metro stations. Italy also allowed some business to resume, though a nationwide lockdown remained in place, keeping many in their homes.

Not all countries are ready to reopen, however. France extended its nationwide lockdown for another month, while India said lockdown measures for its 1.3 billion people would stay in place until May 3.

In Washington, Trump said US numbers could be steadying as 1,509 new daily deaths were reported – almost identical to the previous day.

In New York, where the virus has killed more than 10,000 people – almost half of the US total – and seen unclaimed victims buried in unmarked mass graves, Governor Andrew Cuomo said the nightmare might be coming to an end.

Stocks in New York were firmly in the green at the London equities close, with the Dow Jones up 1.7%, the S&P 500 index up 2.1%, and the Nasdaq Composite up 2.6%.

JPMorgan was down 4.6% as the bank kicked off US earnings season with a sharp drop in quarterly profit, as the lender upped its credit provision in anticipation of a "fairly severe recession".

In the three months to March 31, the US banking giant recorded net income of USD2.87 billion, down 69% on the USD9.18 billion seen in the same period the year before.

"In the first quarter, the underlying results of the company were extremely good, however given the likelihood of a fairly severe recession, it was necessary to build credit reserves of USD6.8 billion, resulting in total credit costs of USD8.3 billion for the quarter," Chair & Chief Executive Jamie Dimon said.

The lender took an USD8.29 billion credit loss provision in the quarter, compared to USD1.50 billion a year before. JPMorgan noted USD4.4 billion of the provision was taken in its Credit Card business.

Edward Moya at Oanda commented: "JPMorgan's results will likely be a template of what is to come this earnings season and unfortunately it will mean a battered US consumer."

Similarly, Wells Fargo reported a sharp fall in quarterly income as the US bank upped its credit provisions. The sharp drop in income was attributed to a USD3.1 billion reserve build in the quarter, as the bank prepares to face the economic fallout caused by Covid-19.

London-listed banks were down in a negative readacross from the US banks, with Royal Bank of Scotland closing down 6.2%, Lloyds down 4.8% and Barclays down 4.1%.

Also among the blue-chip losers on Tuesday were oil majors. BP shares closed down 4.4% while Royal Dutch Shell 'A' and 'B' shares ended 4.3% and 3.5% lower respectively.

Brent oil was quoted at USD30.08 a barrel at the London equities close Tuesday from USD33.18 late Thursday.

OPEC producers and their allies agreed on Sunday to cut production by 9.7 million barrels a day, which some analysts feared would be too little considering the plunging demand caused by the Covid-19 pandemic.

Meanwhile, gold was quoted at USD1,734.53 an ounce at the London equities close Tuesday against USD1,677.77 at the close on Thursday.

"Gold is still a safe-haven trade, but this last move is strictly a risk-on rally. The dollar is falling, and gold is loving it," commented Oanda's Moya.

Polymetal International and Fresnillo closed up 6.6% and 4.9% respectively, the gold miners benefiting from the precious metal's gains.

AstraZeneca advanced 6.8% after the pharmaceutical giant said its Adaura Phase III trial for Tagrisso, or osimertinib, for the treatment of lung cancer showed positive results.

The trial was stopped early due to "overwhelming efficacy".

The Anglo-Swedish drugmaker said that for three years, the trial assessed Tagrisso as a first-line treatment for "patients with locally advanced or metastatic epidermal growth factor receptor-mutated non-small cell lung cancer". The primary endpoint was disease-free survival, and the trial will now continue to assess its secondary endpoint of overall survival.

In the corporate calendar for Wednesday are full-year results from gambling firm 888 Holdings and first-quarter results from energy services firm Hunting.

The economic calendar has US retail sales at 1330 BST and an interest rate decision from the Bank of Canada at 1500 BST.

By Lucy Heming; lucyheming@alliancenews.com

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