LONDON MARKET MIDDAY: FTSE 100 Advances Amid US Stimulus Optimism

(Alliance News) - London stocks were seeking an upbeat end to the week, with renewed optimism over a US stimulus package driving sentiment on Friday.

At the top of the blue-chip FTSE 100 at midday was Rolls-Royce, in a week which has seen the jet engine maker's share price double after last week's 17-year low.

The FTSE 100 was up 37.45 points, or 0.6%, at 6,015.48 midday Friday. The mid-cap FTSE 250 index was up 75.12 points, or 0.4%, at 18,021.28. The AIM All-Share index was up 0.6% at 983.67.

The Cboe UK 100 index was up 0.4% at 598.38. The Cboe 250 was up 0.4% at 15,305.39, and the Cboe Small Companies flat at 9,504.81.

In mainland Europe, the CAC 40 in Paris was up 0.4% while the DAX 30 in Frankfurt was flat Friday afternoon.

After a rocky few days on the US stimulus front, stocks rose into the end of the week after President Donald Trump said he now sees "really good" odds of reaching a deal with Democrats in Congress.

His comments marked a turnabout after he called off talks on Tuesday, saying the stimulus package would have to wait until after the November 3 election.

Trump told Fox Business on Thursday, "We're starting to have some very productive talks" – referring to proposals for assistance for airlines and USD1,200 checks for workers.

White House Strategic Communications Director Alyssa Farah later in the day said the Trump administration still favors a "skinny package" over a larger bill, adding that loans and grants for small businesses were among their priorities.

However, House Speaker Nancy Pelosi is pushing for a broader package.

"The global stock markets have performed well over the last couple of days with US stimulus talks making some progress. After all, if both sides are still talking, at least they must have something to talk about," said Stephen Innes at Axi.

Wall Street is on course for a solid end to the week, with the Dow Jones called up 0.4%, the S&P 500 up 0.4% and the Nasdaq up 0.3%.

In London, Rolls-Royce was the top blue-chip performer with shares rallying 19%, looking to cap off a week which has seen the stock double in value after hitting a 17-year low on Friday last week.

IG's Joshua Mahony commented on the jet engine maker's performance: "Coming at a time when we are seeing significant anxiety over how the current rise in UK Covid-19 cases could force a secondary lockdown, there is a clear willingness to go bargain hunting as traders begin to see the light at the end of the tunnel."

As further virus restrictions loom in the UK, Chancellor Rishi Sunak will announce further support for jobs and businesses that are affected by coronavirus shutdowns.

Sunak will detail "the next stage" of the Jobs Support Scheme on Friday, ahead of new restrictions expected for the hospitality sector. Cities in northern England and other areas suffering a surge in Covid-19 cases may have pubs and restaurants temporarily closed to combat the spread of the virus.

Ministers are expected to outline a three-tier local lockdown system on Monday, which may see high-risk individuals told to stay at home for months and fresh measures for businesses.

A Treasury spokeswoman said: "The Chancellor will be setting out the next stage of the Job Support Scheme later today that will protect jobs and provide a safety net for those businesses that may have to close in the coming weeks and months."

The announcement comes after data showed the UK economy grew at a slower pace than expected in August.

Gross domestic product grew 2.1% month-on-month in August, slower than the 6.4% seen in July. Consensus, according to FXStreet, had seen growth of 4.6% in August.

Sterling was quoted at USD1.2938 at midday, a tough higher than USD1.2932 at the London equities close on Thursday.

August's reading did, though, mark the fourth consecutive monthly increase following a record fall of 20% in April. August GDP was 22% higher than its April low, though remains 9.2% below the levels seen in February, before the Covid-19 pandemic battered activity.

"The accommodation and food services sub-sector contributed 1.25 percentage points to the 2.1% growth in GDP for August 2020, as the combined impact of easing lockdown restrictions, Eat Out to Help Out Scheme and "stay-cations" boosted consumer demand," the ONS noted.

Even with the 'Eat Out to Help Out' discount running in August, accommodation and food services output was 14% lower than its February level.

Pub firms were higher at midday on the prospect of further business support. Mitchells & Butlers was up 5.0%, while JD Wetherspoon was up 1.7%.

In other pub company news, Marston's shares rallied 16% after the UK competition regulator cleared the brewer's proposed joint venture with Carlsberg.

In May, Marston's and Carlsberg announced the formation of a new joint venture for brewing and distribution in the UK. Under the agreement, Marston's would receive a 40% stake in the Carlsberg Marston's Brewing Co joint venture, plus a balancing cash payment of up to GBP273 million.

The joint venture valued Marston's brewing business at GBP580 million and Carlsberg's UK brewing business at GBP200 million. Marston's had said it would use the proceeds from the joint venture to cut debts.

The monopoly watchdog's decision on Friday follows a probe announced in August into several possible ways in which the deal could harm competition in the supply of beer and cider in the UK.

Elsewhere in London, British Land shares rose 4.1% on plans to resume dividend payments.

The FTSE 100-listed London-based real estate investment trust temporarily suspended its dividend in March given the "unprecedented circumstances" of the Covid-19 pandemic.

"Like many businesses, we continue to face challenges as a result of the Covid-19 pandemic, but we also recognise the importance of the dividend to shareholders. We benefit from the strong financial position we have established over several years, a unique and world-class portfolio of real estate and are reassured by the improving operational performance of our assets over recent months," said British Land.

Consequently, it will be resuming dividends, paid semi-annually rather than quarterly. Future dividends are to be paid at 80% of British Land's underlying earnings per share.

A dividend will be declared on this basis along with its results in November.

Petropavlovsk shares fell 3.1% after saying it expects full year production to be below its previous guidance but assured that the impact on profitability will be less significant given the lower margins on third-party production processing.

The FTSE 250-listed Russian gold miner said it expects total production of between 560,000 to 600,000 ounces, down from previous forecasts of between 620,000 to 720,000 ounces, blaming the underperformance on lower than expected grades - primarily from third-party material - and logistical issues associated with Covid-19 impacting deliveries of third-party concentrates.

Gold was quoted at USD1,915.55 an ounce on Friday, rising from USD1,889.10 on Thursday.

Brent oil was trading at USD43.08 a barrel, higher than USD42.80 late Thursday as hurricane Delta swept over the western Gulf of Mexico, ripping up trees and tearing down power lines.

The US national guard was mobilized and people on the Louisiana coast evacuated from their homes Friday. Delta was packing sustained winds of 120 miles per hour, the US National Hurricane Center said, with landfall expected Friday evening.

The euro traded at USD1.1799 on Friday, up from USD1.1753 late Thursday. Against the yen, the dollar was quoted at JPY105.88 versus JPY105.99.

By Lucy Heming; lucyheming@alliancenews.com

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