LONDON MARKET CLOSE: Prospect Of Lockdowns Easing Boosts Sentiment

(Alliance News) - London stocks started the week in rally mode with markets upbeat about the lifting of lockdowns across Europe.

Travel firms benefited from Monday's risk-on mood while Ashtead ended at the top of London's blue-chip index. However, it was another disappointing session for oil.

The FTSE 100 index closed up 94.56 points, or 1.6%, at 5,846.79. The FTSE 250 ended up 265.29 points, or 1.7%, at 15,952.72, and the AIM All-Share closed up 12.80 points, or 1.6%, at 794.95.

The Cboe UK 100 ended up 1.3% at 9,862.61, the Cboe UK 250 closed up 1.2% at 13,739.74, and the Cboe UK Small Companies ended up 0.9% at 8,899.30.

In European equities on Monday, the CAC 40 in Paris ended up 2.6% and the DAX 30 in Frankfurt closed 3.1% higher.

Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average, S&P 500 Index and Nasdaq Composite all up 1.0%.

Stocks enjoyed a good start to the week "as investors continued to express their optimism-tinged relief at the latest round of countries to announce lockdown-easing measures", said Connor Campbell at Spreadex.

Europe's four worst-affected countries have all reported marked drops in their daily death tolls, offering hope that the outbreak may have peaked in some places.

On Sunday Britain's daily tally was the lowest since March 31, while Italy and Spain's were the lowest in a month. France's toll was a drop of more than a third on the previous day's figures.

Italy and the US state of New York laid out partial reopening plans, with France and Spain to follow suit this week, while tens of thousands of final-year students returned to school in the Chinese cities of Shanghai and Beijing after months of closures.

Primary schools in Norway also reopened on Monday, along with some businesses in Switzerland, such as hairdressers and florists, while New Zealand prepared to begin its phased exit from lockdown in the evening.

More than 205,000 coronavirus deaths have been confirmed across the globe – over a quarter in the US. Italy has the second-highest death toll at 26,000, followed by Spain, France and Britain, all at well over 20,000.

However, while other countries plan to begin easing lockdowns, UK Prime Minister Boris Johnson warned the country is at the point of "maximum risk" in its battle with coronavirus.

As Johnson returned to take charge of the government's response to the coronavirus crisis following his recovery from Covid-19, he said there are signs that the UK is "passing through the peak" of the outbreak and "coming now to the end of the first phase of this conflict".

But he said it is also the moment of maximum risk because of the danger that people would look at the "apparent success" and "go easy" on social distancing measures.

"It's going to be a very gradual process, both in terms of the loosening of restrictions and how people respond to the changes. So there's still quite a hefty cloud of uncertainty hanging over the global economy, but the picture is far improved from a month or two ago and we now have a better idea of the where we stand and what lies ahead. From an investor standpoint, that's a huge improvement and explains why we're seeing such positivity," commented Craig Erlam, senior market analyst at Oanda.

The pound was quoted at USD1.2421 at the London equities close Monday, compared to USD1.2333 at the close on Friday. The euro stood at USD1.0836 at the European equities close Monday, against USD1.0801 at the same time on Friday.

Against the yen, the dollar was trading at JPY107.21 compared to USD107.45 late Friday.

Gold lost some of its sparkle amid Monday's risk-on mood. The safe haven asset was quoted at USD1,712.14 an ounce at the London equities close Monday against USD1,721.60 at the close on Friday.

Oil also slid in Monday's session. Brent oil slipped to USD19.22 a barrel at the London equities close from USD21.15 late Friday.

"South Korea became the latest country to warn that it was running out of space to store oil today. The predictions of 'peak oil' from years ago were nearly right – it's just they missed out the word 'storage'. This vast ocean of oil and continued oversupply provide the explanation for why we are witnessing yet another dive in prices, with the June contract down by almost a quarter today," said Chris Beauchamp, chief market analyst at IG.

Also putting oil under pressure was news the United States Oil Fund is re-orientating its portfolio holdings towards longer-term futures contracts.

USO - the world's biggest oil-focused exchange-traded fund, which tracks West Texas Intermediate oil - said in a regulatory filing it will now invest 30% of its portfolio in the July delivery contract and 15% in each of the August, September, October and December contracts. It will hold 10% of its portfolio in the June 2021 contract.

This decision is due to "evolving market conditions, regulator accountability levels and position limits being imposed on USO with respect to the oil futures contracts, and risk mitigation measures taken by its [futures commission merchant]."

On Friday, USO should it would invest 20% of its portfolio in the June contract, with 40% put into the July contract, 20% in the August contract and 20% of the portfolio in the September contract.

WTI was quoted at USD12.53 Monday afternoon, down from USD17.25 at the same time on Friday.

A week ago, WTI prices crashed into negative territory as the expiry date for the May contract loomed. Oil markets have plunged in recent weeks as lockdowns and travel restrictions to fight the coronavirus around the world batter demand.

IG's Beauchamp added: "Rational analysis would suggest that stock markets should be at least slightly bothered that the key lubricant of the global economy is once again deep in the red by a double-digit percentage, but these are not normal times."

Helping the FTSE 100 rack up gains on Monday was Ashtead, closing up 8.4% after indicating it expects to remain free cash flow positive amid the Covid-19 crisis.

The FTSE 100 equipment rentals firm said that, with a few exceptions, its locations in the US, UK and Canada remained open and active, although trading volumes have been hit by the actions taken by several governments to contain the virus outbreak.

Rental-only revenue for Sunbelt US in March was up 2% from a year before; however revenue for April is expected to be down by 15% year-on-year. Revenue from the general tool business is expected to be 18% lower year-on-year, driven by declines in volume rather than rental rates.

Ashtead said that it remains in a strong financial position with long-term committed debt facilities. In response to the coronavirus crisis, the company has modelled a variety of downside scenarios over the coming year. Under such scenarios, Ashtead said it remains free cash flow positive throughout the next financial year.

Also among the risers were travel firms, as traders look to the easing of global lockdowns and travel restrictions. Carnival shares closed up 7.9%, InterContinental Hotels Group up 6.8% and Premier Inn hotel owner Whitbread up 5.1%. FTSE 250-listed TUI rallied 13%.

IHG on Monday announced new financing arrangements to strengthen its liquidity amid the Covid-19 pandemic as it anticipated a decline in first-quarter revenue.

The hotel owner said it expects to report that, globally, revenue per available room fell 25% in the first-quarter due to travel restrictions and government-enforced lockdowns. It said that trading in Greater China continues to steadily improve, with only 12 out of 470 hotels now closed.

IHG said it has amended its revolving credit facility to include a waiver of existing covenants until the end of 2021 and to introduce a minimum liquidity covenant of USD400 million until June 30, 2021. It added that it has issued GBP600 million in commercial paper under the UK government's Covid Corporate Financing Facility.

In the red was JD Sports Fashion, closing down 2.4% after the retailer late on Friday ruled out a final dividend.

The sportswear firm is looking to "preserve capital" so there will be no final payout.

"It is the board's current intention that the group would look to resume dividend payments when conditions allow," JD Sports said, adding that its board has taken salary cuts.

Tuesday's corporate calendar has first quarter results from oil major BP and Coca-Cola European Partners, while builders' merchants Travis Perkins puts out a trading statement. Before all of this are first quarter results from lender HSBC at 0500 BST.

In the economic calendar for Tuesday there is Japanese unemployment at 0030 BST and Irish retail sales at 1100 BST, with US consumer confidence at 1500 BST.

By Lucy Heming; lucyheming@alliancenews.com

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