LONDON MARKET CLOSE: Virus Optimism; Housebuilders Shrug Off UK PMI

(Alliance News) - Hopes that some of the countries worst hit by Covid-19 in Europe are starting to pass a critical point helped stocks surge at the start of the week, with the FTSE 100 gaining over 150 points.

Leading the charge was Rolls-Royce in the blue-chips, while housebuilders also had a stellar session despite some woeful UK construction data.

The FTSE 100 index closed up 166.89 points, or 3.1%, at 5,582.39 on Monday. The FTSE 250 ended up 713.15 points, or 5.1%, at 14,812.36, and the AIM All-Share closed up 21.16 points, or 3.2%, at 680.41.

The Cboe UK 100 ended up 3.3% at 9,461.34, the Cboe UK 250 closed up 4.9% at 12,724.76, and the Cboe Small Companies ended up 1.4% at 8,043.25.

In European equities on Monday, the CAC 40 in Paris ended up 4.6%, while the DAX 30 in Frankfurt rallied 5.8%.

"Stock markets began the day with gains and haven't looked back, with the likes of the Dow, FTSE 100 and Dax all enjoying triple-digit gains. This might seem odd when we can expect weeks of poor data, but the simple fact is that talk of reopening economies is now widespread, and the data from Italy, Spain, Belgium and even New York is providing hope that some countries have passed the peak and others are nearing it," said Chris Beauchamp, chief market analyst at IG.

"A dire UK construction PMI has not deterred healthy inflows into UK housebuilders either. If the UK begins to ease restrictions in coming weeks, a no longer implausible scenario, then activity will resume too," said Beauchamp.

The best performing blue-chip housebuilder on Monday was Barratt Developments, surging 16%, while Taylor Wimpey ended up 15% and Persimmon up 13%.

This was despite the IHS Markit/Chartered Institute of Procurement & Supply UK construction activity index slumping to 39.3 in March from 52.6 in February, with firms overwhelmingly attributing the fall to Covid-19.

All three categories of construction work recorded a fall in output in March, with civil engineering leading the decline, followed closely by commercial building work.

The pound was quoted at USD1.2292 at the London equities close Monday, higher compared to USD1.2221 at the close on Friday.

The downturn was even more pronounced in the eurozone. The IHS Markit eurozone construction purchasing managers' index plunged to 33.5 in March from 52.5 in February, pointing to the steepest decline in construction activity across the currency area since February 2009 during the global financial crisis.

IHS Markit said the downturn in construction activity was broad-based across the eurozone, with Italy recording the sharpest decline.

The euro stood at USD1.0810 at the European equities close Monday, against USD1.0791 at the same time on Friday.

Against the yen, the dollar was trading at JPY109.06, higher compared to JPY108.55 late Friday.

Japan has announced an imminent state of emergency and a trillion-dollar stimulus package, after the US Surgeon General compared the likely impact of the epidemic in the week ahead to 9/11 or Pearl Harbor.

Japanese Prime Minister Shinzo Abe said hospitals face a "critical situation" and an emergency could be declared as early as Tuesday.

"We're currently seeing rapid increases of new infections particularly in urban areas like Tokyo and Osaka," he said.

Abe also told reporters his government will launch a JPY108 trillion economic stimulus package to help counter the economic impact of the pandemic, including cash payouts to households in need and support to protect businesses and jobs.

But news out of Europe was cautiously positive, with Austria looking to ease its coronavirus lockdown next week.

Also sparking hope over the weekend was Italy reporting its lowest death toll in two weeks and France its fewest dead in a week. Hard-hit Spain recorded deaths down for a fourth straight day, but still logged 637 fatalities.

"The curve has started its descent and the number of deaths has started to drop," said top Italian health official Silvio Brusaferro, adding the next phase could be a gradual easing of a strict month-long lockdown.

However, US President Donald Trump warned Americans to brace for a "very horrendous" number of coronavirus deaths in the coming days.

"This will probably be the toughest week," he said at the White House. "There will be a lot of death."

Nonetheless, stocks in New York were climbing at the London equities close. The Dow Jones was up 4.6%, the S&P 500 index 3.1%, and the Nasdaq Composite up 4.4%.

In commodities, gold was quoted at USD1,645.22 an ounce at the London equities close Monday, higher against USD1,618.25 at the close on Friday.

Brent oil was quoted at USD32.26 a barrel at the London equities close Monday from USD33.05 late Friday.

"Crude oil prices have struggled today after the latest OPEC+ meeting was deferred until later this week, over disagreements on the scale and scope of possible productions cuts between Russia and Saudi Arabia. They have recovered off the lows of the day, opening over 10% lower on Sunday night, however sentiment is set to remain cautious ahead of this week's possible OPEC+ meeting on Thursday," said Michael Hewson at CMC Markets.

Back in London, easyJet shares ended 16% higher after the budget carrier said it has secured GBP600 million from the UK government's Covid-19 Corporate Financing Facility, as part of the company's effort to maximise liquidity in the event of an extended aircraft grounding period.

Further, the Luton-based company has fully drawn on its USD500 revolving credit facility, secured against its aircraft assets, and said that it will continue to consider further liquidity and funding options.

The budget airline at the end of March grounded its entire fleet of aircraft due to "unprecedented" travel restrictions imposed by governments around the world in response to the new coronavirus pandemic and the implementation of national lockdowns across many European countries.

Rolls-Royce advanced 18% after the engine maker took actions to cope with the Covid-19 pandemic. It suspended its shareholder payout, withdrew financial guidance for 2020 and secured a new loan amid the grounding of aircraft around the world.

In response to the change in outlook and to ensure cash headroom in the event of a prolonged reduction in trading activity, Rolls-Royce took the precautionary decision in March to draw fully on its GBP2.5 billion revolving credit facility, it said.

London-based Rolls-Royce also secured an additional GBP1.5 billion revolving credit facility commitment with a consortium of banks, increasing its overall liquidity to GBP6.7 billion.

The company also has decided to cancel a final shareholder payment of 7.1 pence per share with respect to 2019.

"We are executing a number of specific mitigations to reduce our cash expenditure which will have a cash flow benefit of at least GBP750 million in 2020 in addition to our ongoing transformation plans," the company explained.

In the FTSE 250, GVC Holdings finished 19% higher after the betting firm cut its estimated earnings hit from the Covid-19 outbreak, though it did warn that revenue in the final two weeks of March slumped as bricks and mortar units closed and sports events were cancelled.

The company has also pulled its second interim dividend payment of 17.6 pence per share, saving it GBP103 million.

The coronavirus-disrupted sporting calendar led to GVC initially expecting a GBP100 million monthly hit on its earnings before interest, tax, depreciation and amortisation. On Monday, however, GVC cut its estimated monthly earnings fall to GBP50 million, after it reduced costs.

In the UK corporate calendar for Tuesday, there is a trading statement from Homeserve, first quarter production results from iron ore pellet producer Ferrexpo and first quarter results from Plus500.

In the economic calendar on Tuesday, there is German industrial production at 0700 BST and UK Halifax house prices at 0830 BST.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.