LONDON MARKET MIDDAY: Stocks Down Ahead Of UK Mini Budget Statement

(Alliance News) - Stocks in London were trading in the red on Wednesday midday as investors are awaiting the summer statement from the UK chancellor.

The FTSE 100 was down 6.40 points, or 0.1%, at 6,183.50 in midday trade. The mid-cap FTSE 250 index was down 0.7% at 17,226.87. The AIM All-Share index was 0.9% lower at 875.30.

The Cboe UK 100 index was down 0.2% at 616.02. The Cboe 250 also was down 1.0% at 14,623.33 and the Cboe Small Companies down 0.5% at 12,232.63.

In mainland Europe, the CAC 40 in Paris was down 1.0%, while the DAX 30 in Frankfurt was 0.7% lower.

The euro was quoted at USD1.1269, down from USD1.1297 late Tuesday in London. Against the yen, the dollar was trading at JPY107.54, little changed from JPY107.52.

The pound was quoted at USD1.2526 midday Wednesday, soft from USD1.2586 at the London equities close Tuesday.

"The pound has eased back after rallying on Tuesday ahead of Rishi Sunak's "mini-Budget" summer statement, as the chancellor prepares for the next stage of the UK's economic recovery post lockdown," noted ThinkMarkets analyst Fawad Razaqzada.

The Summer economic update from UK Chancellor Rishi Sunak is scheduled at 1230 BST.

Sunak will announce a GBP2 billion scheme aimed at alleviating youth unemployment by subsidising work placements when he sets out his coronavirus recovery package.

A three-point plan to boost the ailing economy by helping job creation will include a plan to help pay for six-month placements for some under-25s facing long-term unemployment.

Sunak will also offer an immediate stamp duty "holiday" to temporarily exempt the tax on the first GBP500,000 of homes purchased in England and Northern Ireland, according to unconfirmed reports.

Brent oil was trading at USD43.00 a barrel Wednesday midday, lower from USD43.26 a barrel at the London equities close Tuesday. Gold was priced at USD1,803.37 an ounce, higher than USD1,793.61.

"The gold price has once again broken its previous high. Investors are still buying stocks but it seems they want to be covered in case of any market correction," noted ActivTrades analyst Carlo Alberto De Casa.

On the LSE, Mexican gold miner Fresnillo was benefiting from a surge in the price of the precious metal. The FTSE 100 constituent was up 1.1% in midday trading.

WPP was down 4.1% after Credit Suisse reinitiated the coverage of the advertising giant at Underperform.

HSBC was down 3.6% after Investec cut the bank to Hold from Buy.

Among the mid-caps, FirstGroup was the worst performer in the FTSE 250 index, down 15%. The Aberdeen, Scotland-based transport company reported widened a pretax loss of GBP299.6 million for the year to the end of March compared with GBP97.9 million loss a year ago.

FirstGroup explained that the loss reflects charges relate to the North American self-insurance provision, Greyhound impairment charges, restructuring and reorganisation costs and coronavirus-related charges.

Trading trends prior to the pandemic were broadly similar throughout the year, the company noted, with industry cost pressures offset by revenue growth in First Student, First Transit and First Bus and management actions.

Annual revenue, meanwhile, grew to GBP7.75 billion from GBP7.13 billion year-on-year.

FirstGroup is not proposing to pay a dividend for financial 2020, but said it will continue to review the appropriate timing for restarting dividend payments.

Victrex was down 6.2%, the second worst performer in the FTSE 250 index, after saying that it had a solid start but weaker end to its third quarter as Covid-19 headwinds hurt performance.

The polymer solutions provider reported a 12% drop in sales volume for the three months to the end of June to 805 tonnes, with revenue down 18% to GBP58.8 million, reflecting mix as a key driver.

On a year-to-date basis, Victrex sales volume of 2,797 tonnes was broadly in line with the prior year's 2,811 tonnes. Year-to-date revenue stands at GBP210.3 million, down 3% compared to GBP217.8 million a year prior.

Looking ahead, Victrex said lower production levels and a weak product mix will hurt margins in the second half and in financial 2021.

On the other side of the FTSE 250 index was Pantheon International, up 3.0% on Wednesday midday. The private equity investor said it expects a slight rise in annual net asset value, outperforming one benchmark but falling short of another.

The investor said its net asset value at the May 31 year-end was 2,882.8 pence, up 4.0% year-on-year from 2,770.6p.

The 4.0% gain compares favourably to the FTSE All-Share Index which returned negative 11% during the period. Pantheon lagged behind the MSCI World Index which returned 7.4%, however.

Elsewhere, boohoo was down 7.4% after saying that it is launching an immediate independent review of its UK supply chain, led by Alison Levitt QC. The fashion retailer said it is also accelerating its independent third party supply chain review with ethical audit and compliance specialists Verisio and Bureau Veritas.

In addition, boohoo said it will be making an initial commitment to invest an incremental GBP10 million to eradicate supply chain malpractice.

The move comes after Next and ASOS dropped boohoo clothing from their websites after claims that the fast-fashion retailer sold clothes made in factories where staff were paid less than the minimum wage and worked in poor conditions.

boohoo has had more than GBP1 billion wiped from its share value in the past two days after an article in the Sunday Times newspaper alleged that workers in a Leicester factory making clothes destined for boohoo were being paid as little as GBP3.50 an hour.

"We wonder what the negative impact will be from the supplier issues. We do not know the quantum but we do know that sales will be impacted by not being on the ASOS, Next and Zalando websites in the short term and we find it hard to believe that sales for the group’s brands won't be impacted given the current media storm," said Shore Capital analyst Greg Lawless.

Shore Capital cut boohoo to Sell from Hold.

Stocks in Wall Street are being clouded by rising coronavirus infections in the country. The Down Jones Industrial Average is pointed down 0.3%, the S&P 500 0.2% lower and the tech-heaving Nasdaq Composite called flat.

The US and China imposed visa restrictions on each other in tit-for-tat moves over their disagreement on Tibet, adding fuel to the diplomatic fire between the superpowers.

China announced Wednesday its curbs on people from the US who "behave badly" on Tibet-related issues, in retaliation for American curbs unveiled a day before.

Secretary of State Mike Pompeo said Tuesday he was taking action against an unspecified number of officials under a new US law that presses China to let Americans visit the far west region, renewing a call for "meaningful autonomy" in the predominantly Buddhist area.

"Unfortunately, Beijing has continued systematically to obstruct travel to the Tibetan Autonomous Region and other Tibetan areas by US diplomats and other officials, journalists and tourists, while PRC officials and other citizens enjoy far greater access to the US," Pompeo said in a statement.

In the economic calendar, there is US consumer credit at 2000 BST.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

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