LONDON MARKET MIDDAY: FTSE 100 Slips But Looking At Positive Week

(Alliance News) - The FTSE 100 was searching for momentum in midday trade - with volatility and trading volumes expected to be low with US markets closed - but remains on track for a positive end to the week.

The FTSE 100 index was down 49.59 points, or 0.8%, at 6,190.77 midday Friday. So far this week, the blue chip index is up 0.5%.

The mid-cap FTSE 250 index was 21.44 points lower, or 0.1%, at 17,346.42. The AIM All-Share index, however, was up 0.3% at 894.20.

"In a taste of what could be the tone for the rest of the session, things got off to an awfully slow start on a US-free Friday," SpreadEx analyst Connor Campbell said.

He continued: "Investors' reticence is understandable. For though the US markets won't be around to set the pace later this afternoon, news from America certainly is, with the country once against seeing a fresh record number of one-day Covid-19 cases. Thursday saw a further 55,220 infections, clearing Wednesday's high by around 2,500."

The UK's private sector saw a sharp improvement in business conditions in June, according to the results of a survey by IHS Markit released on Friday, though activity continued to contract.

The composite purchasing managers' index - which is a weighted average of the UK manufacturing output index and the UK services business activity index - improved to 47.7 in June from 30.0 in May. The index hit a record-low of 12.9 in April.

June's reading is the highest in four months but still remains below the no-change mark of 50. The flash figure for June was 47.6.

Manufacturing production - 50.7 in June - once again fared better than service sector output - 47.1 - IHS Markit said, with the latter hit by a sustained drag from business closures across vast swathes of the consumer services and leisure activity.

The IHS Markit/Chartered Institute of Procurement & Supply services PMI rose sharply to 47.1 in June from 29.0 in May. April's record low was 13.4.

Market consensus, according to FXStreet, was expecting a services PMI of 47.0.

Around 33% of the survey panel reported a drop in business activity during June, while 28% signalled an expansion, IHS Markit said. The proportion of service providers experiencing a fall in business activity has eased sharply from 54% in May and 79% in April.

"June data continued to signal a turnaround in business conditions across the UK service sector," IHS Markit said.

IHS Markit Economics Director Tim Moore added: "June data highlights that the worst phase of the service sector downturn has passed as more businesses start to reopen and adapt their operations to meet social distancing requirements."

Sterling was quoted at USD1.2455 early Friday, down from USD1.2465 at the London equities close on Thursday.

On the London Stock Exchange, Land Securities was 1.1% higher after the commercial property developer said that, following the reopening of most of its properties after the easing of lockdown measures, it has continued to make progress on the collection of rent and is set to reinstate its dividend.

All of LandSec's office properties have remained open, and following the easing of restrictions on non-essential retail in the UK in mid-June, all shopping centres, outlets and retail parks have now open.

By the end of June, 79% of the the real estate investment trust's retail units were trading, while 16 out of 18 leisure parks were open. Accor-managed hotels remain closed, but will go through a phased reopening over the next three months.

Looking ahead, LandSec said it intends to reinstate dividend payments following the announcement of its interim results on November 10. As at June 30, the group's adjusted net debt was GBP3.92 billion compared to GBP3.93 billion at the end of March.

Next was 2.9% lower after Goldman Sachs cuts its rating for the retailer to Sell from Neutral.

In the midcaps, Essentra advanced 5.6% as its trading for the second quarter of 2020 was much more affected by the Covid-19 pandemic than in the first.

However, the plastic and fibre products maker noted improvement in revenue as the quarter progressed.

In April, Essentra's like-for-like revenue declined by 17% but its performance improved from there, with a 10% drop in May and for June it is expected to have fallen just 1%. For the second quarter ended June 30, Essentra expects a 10% like-for-like revenue decline, while for the six-month period the decline is anticipated to be 9%.

Looking ahead, Essentra expects some continued some disruption to trading in the coming months, but, for the third quarter, Essentra expects the trend of revenue improvement to continue from the second quarter.

Elsewhere on the Main Market, CMC Markets jumped 17% in early trade. The online trading platform said its "entire business has continued to perform very well" in its first quarter.

Client trading activity remains around double that of the same period the year before, CMC added, with client income retention "materially" higher than the 82% reported in the first half of the previous financial year. Stockbroking net trading revenue also continues to benefit from the market conditions, the company added.

As a result, net operating income for the first quarter of financial 2021 is in excess of that reported for the first half of financial 2020 of GBP102.3 million.

"The board is confident that, even in the event that more normalised client trading activity returns, with the strong underlying performance of the business, 2021 net operating income will exceed the upper end of current market consensus," CMC added.

In mainland Europe, the CAC 40 in Paris was down 1.0%, while the DAX 30 in Frankfurt was 0.6% lower in midday trade.

"Without the US to guide the way this afternoon, it is going to be interesting to see whether Europe can strike out on its own, or whether it will wait for the return of the market daddy next week," SpreadEx's Campbell commented.

The eurozone's private sector saw a sharp improvement in conditions in June, according to IHS Markit on Friday, though activity continued to contract.

The composite output index for June surged to 48.5 points from May's 31.9, hitting its best level in four months and exceeding the flash reading of 47.5 by a full point. However, with the reading remaining below the no-change mark of 50, the latest data indicate business conditions in the eurozone remain tough.

France was the top performing country in terms of composite purchasing managers' index while Ireland was the worst. All those covered, though, recorded four-month highs in June.

Incoming new business continued to decline in June, but at a "much slower rate", said IHS Markit. Underlying demand also remained weak both at home and abroad, with exports falling at a "severe pace".

The eurozone services PMI rose to 48.3 from just 30.5 in May, posting its best level since February. However, with the reading also remaining below 50, June's print indicated the bloc's services sector continued to shrink.

The manufacturing PMI, released on Wednesday, rose to a four-month high of 47.4 in June from 39.4 in May.

Chris Williamson, chief business economist at IHS Markit, commented: "The upturn signals a remarkably swift turnaround in the eurozone economy's plight amid the Covid-19 pandemic. Having sunk to an unprecedented low in April amid widespread business closures to fight the virus outbreak, the PMI has risen to a level indicative of GDP contracting at a quarterly rate of just 0.2%, suggestive of strong monthly GDP gains in both May and June."

The euro traded at USD1.1233 early Friday, flat compared to USD1.1236 late Thursday.

Against the yen, the dollar was quoted at JPY107.51, down versus JPY107.55 late Thursday.

Gold was quoted at USD1,774.80 an ounce early Friday, down from USD1,775.75 on Thursday. Brent oil was trading at USD42.44 a barrel Friday, up slightly from USD42.30.

By Paul McGowan; paulmcgowan@alliancenews.com

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