LONDON MARKET MIDDAY: FTSE 100 Dips As Markets Await ECB Rate Decision

(Alliance News) - London's FTSE 100 traded lower Thursday midday as caution prevailed ahead of the latest rate announcement from the European Central Bank.

Tugging on the blue-chip index was Wm Morrison Supermarkets, after posting a lower profit in its first half, while International Consolidated Airlines reversed earlier gains to trade in the red by midday amid fundraising plans.

The FTSE 100 index was down 48.50 points, or 0.8%, at 5,964.34 Thursday midday. The mid-cap FTSE 250 index was up 21.18 points, or 0.1%, at 17,616.11, and the AIM All-Share index was down 0.2% at 950.90.

The Cboe UK 100 index was down 1.0% at 593.95. The Cboe 250 was down 0.1% at 15,042.63, and the Cboe Small Companies up 1.3% at 9,528.61.

In mainland Europe, the CAC 40 in Paris was down 0.1%, while the DAX 30 in Frankfurt was 0.3% higher Thursday afternoon.

"European markets are edging lower ahead of the ECB, as the bullish sentiment that was so prevalent yesterday pauses for breath," commented Chris Beauchamp, chief market analyst at IG.

The ECB will release its latest interest rate decision at 1245 BST, followed by a press conference with ECB President Christine Lagarde at 1330 BST.

Ahead of the central bank decision, the euro was trading at USD1.1833, higher versus USD1.1812 late Wednesday.

Beauchamp added: "Today's ECB meeting should see the bank make at least a passing reference to recent euro strength against the dollar, although firm action is unlikely this time around. Instead we will likely see the bank lay out a path to further easing later in the year, responding as needed if and when the initial rebound from the Covid-19 economic shock begins to fade. Markets looking for a real boost may well be disappointed."

Stocks in the US are also on course for a lower start, with the Dow Jones, S&P 500 and Nasdaq Composite all pointed down 0.3%.

In addition to the ECB decision, the economic events calendar on Thursday has US producer prices and the latest initial jobless claims figures at 1330 BST.

Hastily arranged Brexit talks will take place on Thursday after the EU reacted strongly to Boris Johnson's move to override key parts of the Withdrawal Agreement break with Brussels.

An "extraordinary meeting" of the Joint Committee between the UK and EU is being held in London after the prime minister unveiled proposed legislation to alter key elements of the Brexit deal with Brussels regarding Northern Ireland.

Chancellor of the Duchy of Lancaster Michael Gove will meet senior EU official Maros Sefcovic to discuss the situation, as talks between the UK's chief Brexit negotiator Lord Frost and his Brussels counterpart Michel Barnier continue.

The meeting between Gove and Sefcovic comes as Speaker of the US House of Representatives, Nancy Pelosi insisted there was "absolutely no chance" of Congress passing an American trade deal with the UK if the Northern Ireland peace process was "imperilled".

Sterling was quoted at USD1.3023 midday Thursday, higher than USD1.2999 at the London equities close on Wednesday.

Against the yen, the dollar was quoted at JPY106.12, down from JPY106.23.

Gold was quoted at USD1,948.79 an ounce on Thursday, firm on USD1,945.72 on Wednesday. Brent oil was trading at USD40.40 a barrel, flat versus USD40.32 late Wednesday.

At the bottom of London's FTSE 100 was Wm Morrison Supermarkets, down 3.5% after reporting a lower interim profit on Covid-19 costs.

The Bradford-based supermarket chain posted a GBP145 million pretax profit for the 26 weeks ended August 2, a 28% drop from its GBP202 million profit the year before.

Morrison explained that its profit has been temporarily hurt by considerable Covid-19 costs, amounting to around GBP155 million in the first half. These extra costs were partially mitigated by business rates relief totalling GBP93 million, giving a net half-year Covid-19 cost impact of GBP62 million.

Revenue in the first half fell 1.1% to GBP8.73 billion from GBP8.83 billion due to very low fuel demand during and after the UK lockdown, though the company said this is now rebuilding.

Richard Hunter, head of markets at Interactive Investor, said: "Contrary to popular belief, the pandemic was not an automatic home run for the supermarkets and the 25% drop in pre-tax profits for Morrisons is proof positive that additional sales come at an additional price."

Other supermarkets were lower at midday, with Tesco down 1.8% and J Sainsbury down 1.6%.

International Consolidated Airlines fell 2.5% as it revealed plans to raise EUR2.74 billion.

The Anglo-Spanish airline said it will issue 2.98 billion shares at a price of EUR0.92 each. The subscription price represents a 36% discount to Wednesday's closing price.

The FTSE 100-listed company said the funds raised will strengthen its balance sheet and reduce leverage.

Turning to trading, the British Airways parent said June saw a significant increase in bookings to 30% of prior year levels by the end of the month, following an almost complete cessation of new booking activity in April and May.

Since July, IAG said it has experienced an overall levelling off of bookings, however. Short-haul bookings have fallen slightly following the re-implementation of quarantine requirements by the UK and other European governments for travellers returning from some countries.

As a result, the company said its capacity planning scenario for 2020 has been lowered to minus 63% in terms of available seat kilometres compared to 2019 from minus 59% previously.

At the top of the FTSE 250 was Games Workshop, surging 11%. The miniature wargames manufacturer said trading for the first quarter of financial 2021 remained strong due to a healthy growth in online and trade channels.

For the three months to the end of August, the Nottingham-based firm said it expects sales to reach GBP90 million, up 15% from GBP78 million the same period the year before. Operating profit for the period before royalty income is set to be GBP45 million, a 61% rise from GBP28 million the prior year.

Although Games Workshop said growth has been solid in its online and trade channels, its retail channel is still in a state of recovery from the Covid-19 closures earlier in 2020. Looking ahead, the group said the longer term impact as a result of the pandemic is still unknown.

Dixons Carphone advanced 4.2% on an strong online performance and plans for a possible listing of a minority stake of its Nordics business.

UK & Ireland Electricals revenue was up 12% on a like-for-like basis in the 16 weeks ended August 29, with online sales three times higher year-on-year while stores were closed and have continued at more than twice the prior year's sales since stores reopened.

UK & Ireland Mobile total revenue was down 56%, with sales and cashflow in line with plans following closures of UK standalone stores.

International like-for-like revenue was up 16%, including 17% Nordics growth ad 12% growth in Greece. Nordic online sales were up 49% and were more than 100% higher in Greece. The company is exploring a listing for a minority stake in its Nordics business, which has performed well in the last 10 years.

Dunelm fell 3.5% as total sales fell by 3.9% in the 52 weeks to June 27 to GBP1.06 billion from GBP1.10 billion reported a year earlier, resulting in a 13% fall in pretax profit to GBP109.1 million from GBP125.9 million.

Dunelm explained that the reduction in profit reflects the impact of Covid-19 and the store closure period.

Dunelm reported strong recent trading, however, with total year-on-year sales growth of 59% in July and 24% in August, partly as a result of pent up demand, the timing of its summer sale and a resilient homewares market.

By Lucy Heming; lucyheming@alliancenews.com

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