LONDON MARKET CLOSE: Stocks End Lower As Second Wave Worries Intensify

(Alliance News) - As a raft of shops in England opened on Monday for the first time since the Covid-19 lockdown was implemented, an outbreak in Beijing caused concerns began to flare over a second wave of infections, causing stocks in London to slide.

The FTSE 100 index closed down 40.48 points, or 0.7%, at 6,064.70. The FTSE 250 ended up 11.83 points, or 0.1%, at 17,089.17, and the AIM All-Share closed down 4.13 points, or 0.5%, at 862.86.

The Cboe UK 100 ended down 0.5% at 10,263.12, the Cboe UK 250 closed up 0.1% at 14,698.88, and the Cboe Small Companies ended down 0.4% at 9,649.58.

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

European stocks started the week on the back foot after fears of a second wave of Covid-19 infections resurfaced after an outbreak in Beijing.

Beijing has carried out mass testing after 36 of China's 57 new cases on Sunday were linked to a wholesale food market in the capital. The city has raced to quash the new outbreak, issuing travel warnings, closing the market, deploying paramilitary police and putting nearby housing estates under lockdown.

The shock resurgence in domestic infections has rattled China, where the disease emerged late last year but had largely been tamed through severe restrictions on movement that were later emulated across the globe.

It also gives a bleak insight into the difficulties the world will face in conquering Covid-19, coming as many European countries prepare to welcome visitors from elsewhere on the continent starting Monday.

Adding to the concern, Italy is fighting new outbreaks of its own, Iran and India have reported worrying increases in deaths and infections and the pandemic is gathering pace in Latin America. In the US, more than a dozen states - including populous Texas and Florida - have in recent days reported their highest-ever daily case totals.

This comes as shops in England pulled up their shutters for the first time since March.

Customers are being encouraged to go out and spend but to "be sensible" in their approach, as the government seeks to begin reopening the economy "gradually and carefully".

Long lines were seen at Associated British Foods's Primark stores across the country, with dozens of keen shoppers waiting outside branches of the budget clothes store in Birmingham, Derby, Liverpool and Nottingham. AB Foods shares closed down 0.6% on Monday.

People heading into the Apple store on Regent Street in central London had their temperatures checked and were told they must wear face coverings when inside.

Visiting a Westfield shopping centre in east London on Sunday, Prime Minister Boris Johnson acknowledged some people may be nervous about returning to the high street after so long away but insisted they "should shop and shop with confidence".

The pound was quoted at USD1.2554 at the London equities close Monday, higher compared to USD1.2527 at the close on Friday. The euro stood at USD1.1266 at the European equities close Monday, up against USD1.1235 at the same time on Friday.

Against the yen, the dollar was trading at JPY107.40, firm compared to JPY107.35 late Friday.

Stocks in New York were lower at the London equities close, with the Dow Jones down 1.3%, the S&P 500 index down 0.9%, and the Nasdaq Composite down 0.3%.

"Fears that we're starting to see a 'second wave' have the market in their grips to start the week," said JJ Kinahan, chief market strategist at TD Ameritrade.

Gold advanced amid the risk-off mood, quoted at USD1,720.80 an ounce at the London equities close Monday against USD1,704.02 at the close on Friday.

In London, oil major BP closed down 2.2% after revealing it will record up to USD17.5 billion in exceptional charges for the second quarter of 2020 due to the recent oil price crash and weak demand.

Brent oil traded around the USD55 mark before prices collapsed in March. Brent oil was quoted at USD39.04 a barrel at the London equities close Monday, up from USD38.54 late Friday.

The London-based oil major said it sees the prospect of the coronavirus pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a "sustained period".

Further, BP believes there are growing expectations that the aftermath of the pandemic will accelerate the pace of transition to a lower-carbon economy and energy system, as countries seek to "build back better" so that their economies will be more resilient in the future.

"In late April, the oil titan maintained its dividend in the face of weaker oil prices, so now traders will be wondering if the payout will be cut in a bid to conserve cash. Royal Dutch Shell trimmed their dividend, so BP might go down that route," commented David Madden at CMC Markets.

Peer Royal Dutch Shell finished lower as well, with 'A' shares and 'B' shares both down 1.2%.

Airlines also ended the session in the red as fears over a second wave of infections heightened, with British Airways parent International Consolidated Airlines down 3.9% and easyJet down 4.7%.

In New York, United Airlines shares were down 4.6% after it reported a steady improvement in demand in the US for the second quarter of 2020 to date, but still expects a sharp decline in revenue for the period.

April's ticketed passenger revenue was down 98% year-on-year, with an 97% drop in bookings. The airline's reading for May recorded a slight improvement, with ticketed passenger revenue down 95%, while gross bookings declined by 82%.

Looking ahead, United Airlines expects further improvement, with June's revenue to be down by 90%, and beyond that for July's rate of decline to slow to between 82% and 88%.

In total, United Airlines expects total revenue to be down 88% for the second quarter of 2020, compared to the same period the year before, despite an expected 30% increase in Cargo revenue.

Back in London, blue-chip Bunzl advanced 9.8% after the distribution and services firm said it expects to report higher revenue for the first half of its financial year despite the ongoing Covid-19 pandemic.

The London-headquartered company is forecasting a 6% rise in revenue at actual and constant exchange rates for the six months ending June 30. Adjusting for the different number of trading days year-on-year, revenue is set to increase by around 5% at constant exchange rates due to a 2% rise in underlying revenue and a 3% contribution from recent acquisitions.

As a consequence of an altered product mix sold in the period, including an increase in the proportion of imported own-brand product, the overall interim operating margin is set "to be modestly higher" versus the prior year, Bunzl said.

In the FTSE 250, Cineworld gained 3.0% as it terminated its takeover of Canada's Cineplex.

Cineworld said the CAD2.8 billion, about GBP1.6 billion, deal was dropped after "certain breaches" of the acquisition deal. The takeover would have created North America's largest chain of movie theatres to better compete with AMC Entertainment.

But the coronavirus pandemic has closed theatres for months, and the continued appeal of cinemas is in doubt as major media companies are investing heavily in streaming services.

Toronto, Ontario-based Cineplex hit back on Friday saying it intends to commence legal proceedings promptly against Cineworld and seek damages for breach of contract.

The UK corporate calendar on Tuesday has full-year results from equipment rental firm Ashtead, utility services company Telecom Plus and car retailer Motorpoint.

In Tuesday's economic calendar, there is a monetary policy decision from the Bank of Japan at 0400 BST and UK job market data at 0700 BST. German inflation is at 0700 BST and the ZEW survey at 1000 BST. At 1330 BST are US retail sales, and Federal Reserve Chair Jerome Powell testifies to Congress at 1500 BST.

By Lucy Heming; lucyheming@alliancenews.com

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