LONDON MARKET CLOSE: TikTok Tensions And Lockdown Woes Hit Stocks

(Alliance News) - Stocks in London ended a frustrating week on a sour note Friday, with the US government deciding to ban some Chinese apps starting this weekend.

The aggressive move from the US added to an already downbeat mood amid gathering concern over a possible UK-wide lockdown next month.

A second national lockdown to curb the spread of coronavirus has not been ruled out but the "great hope" is that people will heed current advice to help manage a "very serious" situation, the UK Health Secretary has said.

Matt Hancock said a national lockdown was the "last line of defence" as he responded to reports that ministers are considering further national measures, even for just a two-week period, such as imposing a curfew on bars and restaurants.

The FTSE 100 index gave back 42.87 points, or 0.7%, to finish at 6,007.05 midday Friday. The blue chip index ended the week 0.8% lower.

SpeadEx analyst Connor Campbell said: "Coronavirus defined the FTSE's session, with the index falling 0.6% as it tumbled to 6025. A fresh round of lockdown measures up north, and the threat of further restrictions across the country, spooked the index, especially in the hospitality and services sectors.

"It is going to be interesting to see over the rest of September whether we return to a situation where daily Covid-19 case and death figures from the UK and across Europe become market movers like they were at earlier points in the pandemic."

The mid-cap FTSE 250 index closed down 168.04 points, or 1.0%, at 17,569.68. The AIM All-Share index added 0.4% at 973.52.

The Cboe UK 100 index closed down 0.7% at 599.08. The Cboe 250 ended 1.2% lower at 14,976.08 and the Cboe Small Companies lost 0.7% at 9,373.17.

In mainland Europe, the CAC 40 in Paris ended down 1.2%, while the DAX 30 in Frankfurt gave back 0.7% Friday evening.

"The atmosphere across stock markets is turning sour as the weekend looms, as investors fret about possible retaliatory measures from China after the US announced a ban on key apps from Sunday," IG Chief Market Analyst Chris Beauchamp said.

US officials on Friday ordered a ban on downloads of the popular Chinese-owned mobile applications WeChat and TikTok from Sunday, saying they threaten national security.

The move comes amid rising US-China tensions over technology and a Trump administration effort to engineer a sale of the video app TikTok to American investors.

The initiative would ban WeChat, an app with massive use among Chinese speakers, and TikTok from the online marketplaces operated by Apple and Google, a part of Alphabet.

TikTok slammed the decision and vowed to fight the Trump administration's ongoing crackdown on the company.

"We disagree with the decision from the Commerce Department," TikTok said, adding that it was "disappointed" in a ban on new downloads that takes effect on Sunday, saying it impedes a tool "for entertainment, self-expression and connection."

Beauchamp continued: "Such a move opens an entirely new dimension to the US-China standoff, and puts major tech firms squarely in Beijing's sights, as the two powers seek out their opponent's weak spots. US markets have struggled to hold their ground all week, and as the week comes to a close it looks like more pre-election losses are in store. The Nasdaq continues to lead the losses for US markets, which is a very negative sign for equities in the near-term; such an absence of risk appetite flags the potential for a much bigger drawdown as the election nears, which would conform to the normal pattern for election years, and also suggest that the Republicans are on course to lose the White House."

Wall Street was red at the equities close in London on Friday, in the wake of the Fed decision, with the Dow Jones down 0.3%, the S&P 500 down 0.7% and the Nasdaq 1.1% lower.

In London, travel firms struggled on the prospect of a lockdown spanning the October half-term school holiday.

British Airways-parent International Consolidated Airlines lost 15%, while Holiday Inn-owner Intercontinental Hotels gave back 4.5% and budget airline easyJet shed 9.2%.

Ryanair lost 3.9% after saying it will cut its capacity for October beyond the reduction already announced in mid-August.

The Irish low-cost carrier said that it will slash its October capacity by 20%, on top of the 20% cut that was announced earlier.

The capacity reduction was blamed on the damage caused to forward bookings by changes in EU government travel restrictions and policies, most of which Ryanair considers being introduced at short notice, undermining the willingness to make forward bookings.

Looking ahead, Ryanair said it now expects its capacity for October to fall to 40% of levels seen the same month the year before from 50%, but it still expects to maintain a load factor of more than 70%.

Lenders also continued their struggles with continued talk of the Bank of England going negative.

NatWest shed 3.3%, Barclays 3.1%, Standard Chartered 3.5%, HSBC 2.2% and Lloyds 3.9%.

Sterling was quoted at USD1.2949 Friday evening, soft on USD1.2955 at the London equities close on Thursday.

UK retail sales registered their fourth straight month of growth in August, but the pace of improvement is slowing, data from the Office for National Statistics showed.

Sales were up 0.8% month-on-month in August, slower than the 3.7% growth posted for July but ahead of expectations, according to FXStreet, of a 0.7% rise. The strength of the retail rebound has been fading since lockdown measures began to be eased, with sales having risen 12% in May and 14% in June.

The euro traded at USD1.1863, higher than USD1.1821 late Thursday in London. Against the yen, the dollar was lower at JPY104.41 versus JPY104.79.

Back in London, gold miner Fresnillo gained 4.9%, tracking the price of the precious metal higher.

Gold was quoted at USD1,953.70 an ounce at the close Friday, up from USD1,946.60 on Thursday. Brent oil was trading at USD43.34 a barrel, up from USD43.22 late Thursday in London.

Pennon added 4.0% after Royal Bank of Canada resumed its coverage of the stock at Outperform.

In the FTSE 250, John Laing, advanced 6.8% after agreeing to sell its entire 30% stake in a UK rail programme for up to GBP421 million in cash.

The mid-cap infrastructure investor has entered into an agreement to sell its 30% interest in the InterCity Express Programme Phase 2 to AIP Management, a Danish investment company. The sale consideration represents a strong uplift on the GBP333 million valuation of the stake as at June 30, John Laing noted.

John Laing said it will return 5% to 10% of gross proceeds from the sale to investors on an annual basis, as per the company's dividend policy.

At the other end of the midcaps, Essentra lost 9.5% after raising GBP100 million through a share sale, the money from which will go towards the acquisition of North Carolina-based 3C! Packaging, which provides packaging and labels with a pharmaceutical focus.

The FTSE 250 plastics and fibre products maker issued a total of 38.5 million shares through a placing, subscription and PrimaryBid retail offer at a price of 260 pence, reflecting a discount of 8.8% to Essentra's closing price on Thursday of 285.00p.

A quiet economic calendar next week is headlined by a slew of PMIs on Wednesday, with Japan's Jibun Bank manufacturing flash PMI at 0130 BST, followed by Markit flash composite PMIs from Germany at 0830 BST, the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST.

Also of note next week, financial markets in Japan are closed Monday and Tuesday as the country celebrates Respect for the Aged Day.

The UK corporate calendar on Monday will see retailer Superdry and IT services management firm GRC International issue full-year results. Biotech firm MaxCyte and blue chip publisher Informa will release half-year results.

By Paul McGowan; paulmcgowan@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.