LONDON MARKET CLOSE: Stocks Sink With Trump Set To Weigh In On China

Fri, 29th May 2020 17:13

(Alliance News) - Stocks in London ended lower on Friday in anticipation of what US President Donald Trump might say in a news conference addressing China planned later in the day.

Seeking re-election in November, Trump on Thursday said he would hold a news conference on Friday to speak about China, as investors fear rising tensions between the countries could seep into future trade relations.

The FTSE 100 index closed down 157.36 points, or 2.5%, at 6,061.43, but ended the week up 0.8%.

The FTSE 250 closed down 296.07 points, or 1.7%, at 17,042.41, ending the week up 4.1%. The AIM All-Share closed down 2.31 points, or 0.3%, at 873.06, ending the week up 4.0%.

The Cboe UK 100 ended down 2.7% at 10,246.80, the Cboe UK 250 closed down 1.7% at 14,581.28 and the Cboe Small Companies ended down 0.7% at 9,169.93.

In Paris the CAC 40 ended down 1.6%, while the DAX 30 in Frankfurt ended 1.7% lower.

IG Group analyst Chris Beauchamp said: "Market action this afternoon seems to have pivoted off a single-word tweet from the US president. 'China!' is hardly a coherent statement of intent, but given the president's record we can probably guess that it is not likely to be a particularly positive statement today from the White House. As a result, as month-end looms, we continue to see positioning trimmed ahead of the weekend, with global indices finishing up May with some modest downside.

"But another month has passed without the expected renewed slump in world stock markets, and while May has been more of a tough grind higher than an effortless rally, the general recovery from the lows of March goes on. If US policy towards their superpower rival continues to harden in its tone investors may decide that further cutbacks in risk assets may be appropriate".

In the FTSE 100, Rolls-Royce ended the worst performer, down 14%. The jet engine maker lost its investment-grade rating, after S&P on Thursday downgraded the company to junk status citing prolonged weak profitability.

S&P commented that the Covid-19 pandemic is continuing to "severely disrupt" global air travel, with most airlines grounding their fleets.

Fellow aviation aftermarket service providers Melrose Industries and Meggitt ended down 8.5% and 6.1% in a negative read-across. In addition, airlines easyJet and International Consolidated Airlines closed down 8.5% and 7.3%, respectively.

The pound was quoted at USD1.2330 at the London equities close, firm from USD1.2323 at the close Thursday, after UK Prime Minister Boris Johnson late Thursday announced a slight easing of lockdown measures from Monday.

Chancellor of the Exchequer Rishi Sunak, in the daily Downing Street press conference, announced that employers will need to contribute to their furloughed workers' salaries from August-onwards, as the UK government admitted the scheme cannot run "indefinitely".

The government's job retention scheme has so far covered the wages of 8.4 million staff unable to work during lockdown - costing GBP15 billion. Sunak previously had said that the government will extend the scheme covering 80% of workers' salaries up to GBP2,500 per month until the end of October.

The euro rose to its best levels against the dollar in over two months as investors remained optimistic about the recovery of the European Union.

The single currency stood at USD1.1117 at the European equities close, up sharply from USD1.1067 late Thursday, hitting an intraday high of USD1.1145 in early trade - its best level since the end of March.

The EU proposed a EUR750 billion fund to help member states recover from the coronavirus outbreak earlier this week.

"One of the key reasons for the euro's better performance is the growing evidence that the region will now move towards debt mutualization which will allow for much greater fiscal flexibility for the region's southern block economies. Assuming the Franco-German proposal of a EUR750 billion fund for pandemic relief is approved, it should have a positive impact on compressing bond yields in the region. That, in turn, should create a better risk appetite environment for EU equities," BK Asset Management said.

In economic news from the continent, consumer price inflation in the eurozone fell to its lowest level in four years in May, due to coronavirus containment measures, data from Eurostat showed.

On an annual basis, eurozone inflation was 0.1% in May, decelerating from 0.3% in April. The reading missed market expectations for an 0.2% rise and was the lowest rate since June of 2016.

On a monthly basis, consumer prices fell 0.1% in May, following an 0.3% rise in May.

Against the yen, the dollar was trading at JPY107.75, firm from JPY107.60 late Thursday.

Stocks in New York were lower at the London equities close amid rising US-China tensions as data showed a big drop in consumption spending in April.

The DJIA was down 0.1%, the S&P 500 index down 0.6% and the Nasdaq Composite down 0.8%.

Bureau of Economic Analysis, Department of Commerce, said personal income in US increased by 11% in April, while personal consumption expenditures decreased by 14%.

The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the Covid-19 pandemic.

Meanwhile, the decrease in personal consumption expenditures in April reflected a USD758.3 billion decrease in spending for goods - especially in food and beverages - and a USD943.3 billion decrease in spending for services.

Meanwhile, US President Donald Trump continued his crusade against Twitter after the social media platform affixed a warning label to one of his tweets which it said violated its rule against glorifying violence.

It was the second time in a week that Twitter enforced its rules against Trump's popular Twitter account.

In contrast, Facebook co-founder Mark Zuckerberg told Fox News on Thursday that the social media company should step away from regulating online speech.

Shares in the San Francisco, California based firm were down 2.7% on Wall Street and Facebook's stock was down 0.3%.

The post concerned intensifying protests in Minneapolis, Minnesota after the death of George Floyd, a black man who was filmed pleading for air as a white police officer knelt on his neck. In the post, Trump slammed the demonstrators as "THUGS" and appeared to promote violent retaliation against them by saying "when the looting starts, the shooting starts."

Twitter's placed a "public interest notice" on the tweet early on Friday, as well as on a retweet by the White House account. The move appeared to exacerbate the president's ire against the company, as he tweeted later that "it will be regulated" and called for Congress to revoke a law that protects technology companies.

Brent oil was quoted at USD35.72 a barrel at the London close, up sharply from USD34.45 at the close Thursday.

Gold was quoted at USD1,732.75 an ounce at the London equities close, higher from USD1,722.65 late Thursday.

The economic events calendar on Monday has manufacturing PMI readings from France, Germany, the eurozone, UK and US at 0850 BST, 0855 BST, 0900 BST, 0930 BST and 1445 BST respectively.

The UK corporate calendar on Monday has interim results from tenpin bowling operator Hollywood Bowl Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com