LONDON MARKET CLOSE: Stocks Dismiss US-China Tensions And Weak Data

(Alliance News) - Stocks in London ended sharply higher on Thursday from optimism over reopening economies, shrugging off worries about mounting tensions between the US and China.

The FTSE 100 index closed up 74.54 points, or 1.2%, at 6,218.79. The FTSE 250 ended up 194.86 points, or 1.1%, at 17,338.48, and the AIM All-Share closed up 23.14 points, or 2.7%, at 875.36.

The Cboe UK 100 ended up 1.5% at 10,530.23, the Cboe UK 250 closed up 1.1% at 14,824.00, and the Cboe UK Small Companies ended up 2.0% at 9,230.05.

In Paris the CAC 40 ended up 2.0%, while the DAX 30 in Frankfurt ended up 1.1%.

"Equity markets in Europe are set to finish the day in positive territory as traders are hoping that governments will continue to loosen their lockdown restrictions. The reopening of economies has been a common theme across the markets in recent weeks, and it's the reason why stocks have been bullish lately...The growing standoff between the US and China hasn't had a major impact on the European indices, but dealers are mindful the situation could get ugly very quickly," said CMC Markets analyst David Madden.

On the London Stock Exchange, M&G ended the best blue-chip performer, up 7.1%, adding to the 10% gained on Wednesday, after the fund manager said it added GBP14 billion to its assets under management by acquiring Royal London Mutual Insurance Society's platform business Ascentric.

easyJet closed up 4.5% after the budget airline confirmed its plans to resume flights on June 15, adding that booking trends on the scheduled flights have been encouraging with the demand indications for summer 2020 showing improvement, albeit from a low base.

Bookings for winter are well ahead of the equivalent point last year, including customers who are rebooking coronavirus-disrupted flights for later dates, the Luton-based firm added.

In addition, easyJet said it plans to reduce staff numbers by up to 30%, it has around 15,000 full-time employees - including 8,000 based in the UK - meaning a maximum of 4,500 jobs are at risk. By the end of September next year it expects to have reduced its fleet size by around 51 aircraft to approximately 302. This will be achieved through measures such as deferring new aircraft arrivals.

At the other end of the large-cap index, HSBC Holdings and Standard Chartered closed down 3.1% and 4.7% respectively.

The Asia-focused banks were lower after China's parliament adopted a controversial national security law for Hong Kong, in a move expected to spur protests in the financial hub and heightened tensions with the US.

China's plan to impose a new security law on Hong Kong puts it in direct violation of its international commitments, the UK, the US, Canada and Australia said.

The US took the dramatic step of revoking the special status conferred on Hong Kong in response, paving the way for the territory to be stripped of trading and economic privileges.

The four nations said they were "extremely concerned that this action will exacerbate the existing deep divisions in Hong Kong society; the law does nothing to build mutual understanding and foster reconciliation within Hong Kong."

Elsewhere in London, AIM-listed boohoo Group closed up 15% after the online fashion retailer bought the remaining stake in PrettyLittleThing from the co-founder's son, a day after defending itself over the issue against a short seller.

boohoo said it is buying the remaining 34% stake in PrettyLittleThing from minority shareholders Umar Kamani and Paul Papworth for an initial consideration of GBP269.8 million. The chief executive and founder of PrettyLittleThing is Umar Kamani, son of boohoo Chair & co-founder Mahmud Kamani.

The pound was quoted at USD1.2323 at the London equities close, up sharply from USD1.2217 at the close Wednesday. Sterling was recovering from a sharp drop against the dollar after Wednesday's reports that Brexit talks are at an impasse.

However, against the greenback, the pound remains down 0.9% over the past month.

"Sterling's by far the worst of the major currencies this month and while that opens the way for month-end short-covering, [Governor] Andrew Bailey reasserts the MPC's readiness to act further in the Guardian. He's keeping the negative rate debate alive. Meanwhile, the FT focuses on the UK having the highest 'excess death' toll of the countries which publish detailed statistics, and all the papers discuss the government's problems. Sterling's only support is the size of the short positions and thin month-end markets magnify that support, but that doesn't change the fundamentals," said Societe Generale's Kit Juckes.

The euro stood at USD1.1067 at the European equities close, up from USD1.0977 late Wednesday, continued to be bolstered by proposals from the EU for a EUR750 billion coronavirus recovery fund on Wednesday.

The proposal kicked off fraught negotiations leading up to a June 19 summit, the first chance for EU leaders to discuss the proposal in depth. If passed, the deal - which aims to help the worst-affected countries with a mix of grants and loans - would be the biggest EU stimulus package ever.

Against the yen, the dollar was trading at JPY107.60, down from JPY107.80 late Wednesday.

Stocks in New York were higher at the London equities close as hopes about the reopening economy offset another batch of gloomy economic data on employment and economic growth.

The DJIA was up 0.4%, the S&P 500 index up 0.5% and the Nasdaq Composite up 0.6%.

US Labor Department data showed another 2.12 million people filed for unemployment in the US last week, down from the previous week's 2.4 million. This pushes the total layoffs since the start of the coronavirus crisis to more than 40 million.

The figures continue to be elevated by historical standards due to the pandemic, but have trended downwards since a record weekly high of 6.9 million claims was set in late March.

Artur Baluszynski, head of research at Henderson Rowe, said: "Recent data shows that over 40 million Americans have filed for unemployment but the pace is decelerating which means that people are slowly starting to return to work. However, this figure means that we are looking at an unemployment rate of approximately 25% in the US. If one considers that it took only three months to achieve such a high figure, this must be the worst contraction in employment since the great depression."

In addition, the US economy shrank 5% in the first quarter of 2020, the latest figures from the Bureau of Economic Analysis showed.

Gross domestic product fell 5.0% year-on-year in the first three months of 2020, having been first estimated as a 4.8% drop. In the fourth quarter of 2019, the economy grew 2.1%.

"Given the magnitude of the shock, the Global Coronavirus Recession is all but certain to leave a scar on the US economy. While the collapse in activity will be partially offset by massive fiscal spending and unprecedented Federal Reserve stimulus - which has led to a significant easing in financial conditions - we stress that more will be needed and fear that policy fatigue could hinder the recovery," said analysts at Oxford Economics.

Brent oil was quoted at USD34.45 a barrel at the London close, flat from USD34.43 at the close Wednesday

Gold was quoted at USD1,722.65 an ounce at the London equities close, higher against USD1,701.04 late Wednesday.

The economic events calendar on Friday has Japan unemployment overnight and eurozone inflation figures at 1000 BST. In the afternoon, there are US personal consumption expenditure index numbers at 1330 BST - the core reading is the US Federal Reserve's preferred gauge of inflation.

The UK corporate calendar on Friday has annual results from building products supplier SIG.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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