LONDON MARKET MIDDAY: Rally As Markets Look To Lockdowns Lifting

(Alliance News) - London stocks started the new week in an upbeat mood as markets look towards the lifting of global Covid-19 lockdowns around the world, even as closer to home UK Prime Minister Boris Johnson warned the country is at the point of "maximum risk" in its battle against the virus.

The FTSE 100 index was up 80.53 points, or 1.4%, at 5,832.76 at midday on Monday. The FTSE 250 was up 403.99 points, or 2.6%, at 16,091.42, and the AIM All-Share was up 1.3% at 792.09.

The Cboe UK 100 was up 1.4% at 9,868.06, the Cboe UK 250 was up 2.1% at 13,867.92, and the Cboe UK Small Companies up 0.4% at 8,858.43.

In European equities on Monday, the CAC 40 in Paris was up 1.8%, while the DAX 30 in Frankfurt was up 2.5%.

"Stocks throughout Asia and Europe have kicked off the week in optimistic fashion, with the decline in coronavirus deaths across the globe being accompanied by a significant push towards easing lockdown measures across Europe and America," said Joshua Mahony, senior market analyst at IG.

"Boris Johnson's first appearance in weeks has put to bed the notion that we are on the cusp of a move to ease restrictions, with the UK still seeing the second highest numbers of deaths, second only to the US," Mahony continued. "Despite the prospect of further restrictions, the prospect of easing coronavirus [lockdowns] has sparked a surge towards the heavily hit travel firms such as Carnival and Intercontinental Hotels Group."

The UK is at the point of "maximum risk" in its battle with coronavirus, UK Prime Minister Boris Johnson said as he acknowledged frustrations over the continuing lockdown but insisted he would not risk a second peak in the disease by relaxing restrictions too quickly.

As Johnson returned to take charge of the government's response to the coronavirus crisis following his recovery from Covid-19, he said there are signs that the UK is "passing through the peak" of the outbreak and "coming now to the end of the first phase of this conflict".

But he said it is also the moment of maximum risk because of the danger that people would look at the "apparent success" and "go easy" on social distancing measures.

The prime minister has less than two weeks before the next major decision point comes up with the next three-week review of the lockdown restrictions due on May 7.

It is thought that among the first restrictions to be eased could be a reopening of schools, although Foreign Secretary Dominic Raab – who had been deputising for Johnson – said that would be "inconceivable" without some further measures in place.

Ministers are thought to be considering allowing some non-essential businesses to open, such as garden centres and car showrooms, provided social distancing can be maintained.

The pound was quoted at USD1.2429 Monday midday, up from USD1.2333 at the London close Friday.

In Italy, Prime Minister Giuseppe Conte promised citizens they would soon be allowed to stroll in parks and visit relatives as the country emerges from the world's longest coronavirus lockdown.

The Italian leader also vowed to reopen schools by September and most other businesses over the next three weeks. But he warned that people would have to wear face masks in public places and rigorously observe social distancing measures when the current restrictions are lifted on May 4.

Italy's official coronavirus death toll of 26,664 is Europe's highest and only second globally to the US. But the number of cases has been ebbing and Italy believes its contagion rate – reported at between 0.2 and 0.7 – is low enough below the key threshold of 1.0 to try and get back to work.

The euro was quoted at USD1.0847, up from USD1.0801 late Friday. Against the yen, the dollar was quoted at JPY107.17, down from JPY107.45.

Gold was trading at USD1,716.82 an ounce on Monday, down from USD1,721.60 late Friday. Brent oil was at USD20.64 a barrel, down from USD21.15.

Stocks in the US were set to follow Europe in a higher start on Monday, with the Dow Jones Industrial Average called up 1.1%, the S&P 500 also up 1.1% and the Nasdaq Composite up 1.3%.

In London, Ashtead was sat atop the FTSE 100, up 7.1% after indicating it expects to remain free cash flow positive amid the Covid-19 crisis.

The FTSE 100 equipment rentals firm said that, with a few exceptions, its locations in the US, UK and Canada remained open and active, although trading volumes have been hit by the actions taken by several governments to contain the virus outbreak.

Rental-only revenue for Sunbelt US in March was up 2% from a year before; however revenue for April is expected to be down by 15% year-on-year. Revenue from the general tool business is expected to be 18% lower year-on-year, driven by declines in volume rather than rental rates.

Ashtead said that it remains in a strong financial position with long-term committed debt facilities. In response to the coronavirus crisis, the company has modelled a variety of downside scenarios over the coming year. Under such scenarios, Ashtead said it remains free cash flow positive throughout the next financial year.

"Many companies will envy the kind of reassurance equipment hire business Ashtead has been able to give its stakeholders today. Effectively it has said that even if business drops off a cliff it can remain cash flow positive for the current year. And just to make them even greener with envy, business is currently holding up very well in the circumstances – with Ashtead adapting its operations to incorporate social distancing," commented Russ Mould at AJ Bell.

InterContinental Hotels Group was up 4.3% despite saying it expects a decline in first-quarter revenue.

However, IHG simultaneously announced new financing arrangements to strengthen its liquidity amid the Covid-19 pandemic.

The hotel owner said it expects to report that, globally, revenue per available room fell 25% in the first-quarter due to travel restrictions and government-enforced lockdowns. It said that trading in Greater China continues to steadily improve, with only 12 out of 470 hotels now closed.

IHG said it has amended its revolving credit facility to include a waiver of existing covenants until the end of 2021 and to introduce a minimum liquidity covenant of USD400 million until June 30, 2021. It added that it has issued GBP600 million in commercial paper under the UK government's Covid Corporate Financing Facility.

Other travel firms were higher at the start of the week on hopes that Covid-19 lockdowns across the globe will start to be eased soon. Premier Inn-owner Whitbread was up 4.3% and cruise operator Carnival up 4.6%, while FTSE 250 constituent TUI was up 9.5%.

In the FTSE 250, Investec spin-off Ninety One was up 8.9% after JPMorgan started the firm, formerly Investec Asset Management, with a Neutral rating.

Meanwhile, luxury car maker Aston Martin was the worst mid-cap performer after Goldman Sachs cut the stock to Sell. Aston Martin shares were down 3.7% at midday.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.