LONDON MARKET MIDDAY: FTSE 100 Buoyed By Gold's Historic Rally

(Alliance News) - Stocks in London were sharply higher at midday in London on Wednesday with gold miners among the blue-chip risers, as gold continued its meteoric rise, while Hastings Group led midcaps after agreeing a takeover.

The UK flagship FTSE 100 index was up 65.71 points, or 1.1%, at 6,102.09. The mid-cap FTSE 250 index was up 181.71 points, or 1.5%, at 17,489.45. The AIM All-Share index was up 1.0% at 903.48.

The Cboe UK 100 index was up 1.1% at 606.19. The Cboe 250 was up 0.5% at 14,723.68 and the Cboe Small Companies down 0.2% at 9,104.65.

In mainland Europe, the CAC 40 in Paris was up 0.8%, while the DAX 30 in Frankfurt was up 0.9%.

"Even the lacklustre FTSE 100 has managed to stage a decent rally of late, and this morning's gains have been helped along by the other big story, that of gold's dizzying ascent to USD2,000. That both equities and the supreme risk-off asset are moving higher just shows how conflicted investors are - they can't avoid being tempted by equities, but they can also read the unending stories of bankruptcies, such as Virgin Atlantic in the US this morning, and the litany of job losses, with WH Smith becoming the latest High Street firm to cut roles, and thus can see the appeal of gold," noted IG Group's Chris Beauchamp.

In the FTSE 100, Coca-Cola HBC was up 4.8% after the soft drinks bottler expressed confidence in its prospects going forward, despite posting a drop in interim earnings.

For the six months ended June 26, net sales revenue fell 16% to EUR2.83 billion from EUR3.35 billion last year, and operating profit declined 30% to EUR202.9 million from EUR288.9 million. Pretax profit fell 36% to EUR167.2 million from EUR260.8 million.

Coca-Cola HBC blamed the decline in revenue on closures of bars and restaurants in its out-of-home business, which it said typically accounts for around 40% of revenue.

Looking ahead, Coca-Cola HBC said current trading continues to confirm sequential improvement - with the second quarter the "trough" of performance caused by Covid-19.

Gold miners were in the green after the precious metal surged to fresh record highs, emphatically breaking past the USD2,000 barrier in the process. Gold was quoted at USD2,040.503 an ounce on Wednesday midday, up sharply from USD1,995.19 an ounce at the London equities close Tuesday.

Mexican gold miner Fresnillo and Russian gold miner Polymetal International were up 3.5% and 4.5% respectively.

Unease about the progress of US stimulus talks, the ever-weaker dollar caused by Federal Reserve monetary easing, and new flare-ups in virus infections around the world sent gold surging to fresh record highs.

At the other end of the large caps, Legal & General was down 2.5% after the 184-year-old insurer and pension provider reported a drop in interim profit amid increased claims related to Covid-19.

For the half-year ended June 30, operating profit declined 6.3% to GBP946 million from GBP1.01 billion last year, while pretax profit dropped much more steeply, down 73% to GBP285 million from GBP1.05 billion.

In the FTSE 250, Hastings Group was the best performer, up 18% at 253.00 pence after the motor insurer said it has agreed to a GBP1.66 billion offer from a newly created consortium comprising of Finland's Sampo and South Africa's Rand Merchant Investment Holdings.

Under the offer, accepting shareholders will receive 250p per share in cash, a 16% premium to Tuesday's closing price of 215p and a 47% premium to its closing price of 170p on July 28, the day before Hastings said it received the offer. Shareholders also will be able to keep the interim dividend of 4.5p declared Wednesday.

For the six months to June 30, Hastings's pretax profit increased to GBP63.5 million from GBP46.1 million last year, and gross written premiums were up 3% to GBP514.9 million from GBP499.2 million.

WH Smith was up 2.0% as the books and stationery seller said it was planning to cut up to 1,500 jobs due to the coronavirus pandemic.

The high street and travel outlets retailer said due to the impact of the pandemic on passenger numbers and lower footfall on the UK high street, it will review its store operations for both its Travel and High Street businesses.

WH Smith did note its situation has started to improve since April, with revenue for the month of July down by 57% year-on-year, compared to an 83% fall in April. However, sales have continued to be materially lower compared to the prior year.

In its Travel business, WH Smith has started a phase reopening of its UK stores, and is now trading in 246 of its largest stores, which represents 75% of annual Travel revenue.

WH Smith expects to report a headline pretax loss for the year ending August 31 of between GBP70 million and GBP75 million, compared to a profit of GBP155 million in financial 2019.

The pound was quoted at USD1.3117 at midday Wednesday, up from USD1.3062 at the London equities close Tuesday, after positive UK economic data.

The UK services sector activity expanded at its fastest pace in five years in July as lockdown measures eased and businesses reopened, IHS Markit said.

The IHS Markit-CIPS UK services purchasing managers' index reading was 56.5 points in July, up sharply from 47.1 in June and signalling the fastest pace of expansion since July 2015. The print was back above the 50.0 mark which separates expansion from contraction.

The UK composite output index reading was 57.0 points in July, up sharply from 47.7 in June. It was the fastest pace of expansion since June 2015, IHS Markit said.

The euro stood at USD1.1852, up from USD1.1769 after data showed the eurozone's private sector economy grew at the fastest pace in over two years in July.

The IHS Markit eurozone composite PMI print rose to 54.9 in July, above the 50.0 no-change mark for the first time since February. In June, the score came in at 48.5. The eurozone's services PMI score "comfortably" sat above the 50.0 mark in July, rising to 54.7 from 48.3 in June.

"On the eco front, the PMI data out of Europe and UK showed mild positive momentum with final readings coming in slightly better or in line with forecasts, but more importantly well above the 50 boom-bust region as the region is clearly returning back to work," comments analysts at BK Asset Management.

Against the yen, the dollar was quoted at JPY105.65, lower from JPY105.87, as the greenback continued to depreciate against major counterparts.

"The US dollar found itself on the back foot once more, as Covid-19 continues to plague the country. It is now widely accepted that the Fed must better their stimulus response to the virus and pledge to aid the population through the exit plan, once infection rates have fallen off. The dollar will likely weaken further, as its safe-haven status seems to be in question from investors, who look to other assets to plant their money," said analysts at OFX.

Brent oil was quoted at USD45.37 on Wednesday midday, up from USD44.27 a barrel at the London equities close Tuesday.

US stock market futures were pointed higher as investors look out for progress from Washington on a new coronavirus stimulus package.

The DJIA was called up 0.7%, the S&P 500 index up 0.3% and the Nasdaq Composite up 0.5%.

Shares in Walt Disney are up 6.4% in pre-market trading Wednesday, after the media and entertainment company reported strong subscriber growth for its Disney+ streaming service after the New York market close on Tuesday.

Disney reported a net loss of USD4.7 billion on revenue of USD11.8 billion for the third quarter - about half of the amount of money it took in sales during the same period last year. A year ago, Disney reported net income of USD1.43 billion.

Disney Chief Executive Bob Chapek said that the company has more than 100 million paid subscribers in what he touted as a "significant milestone", affirming the company's move to streaming its coveted content direct to homes.

Notably, Disney said it would move the repeatedly delayed release of the live-action version of Mulan direct to the Disney+ platform, bypassing movie theatres. Mulan - which stars martial arts icons Jet Li and Donnie Yen - will be released on September 4 and will be available to subscribers for USD30.

In London, movie house chain Cineworld was down 2.0%.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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