LONDON MARKET MIDDAY: Stocks Down Amid Covid-19 Resurgence In Europe

(Alliance News) - Stocks in London were recovering from steep morning losses at midday on Monday as investors weighed a rise in coronavirus cases on the European continent against progress on a vaccine.

Equity markets in the UK and Europe fell sharply in morning trade amid a surge of coronavirus cases across the US and in mainland Europe. The new wave already had forced governments in several countries including the UK, Germany and France to reimpose tough restrictions to prevent the disease from spreading.

Spain declared a national state of emergency on Sunday to tackle a second coronavirus wave as the World Health Organization reported a third straight day of record new infections across the world.

The WHO has warned that some countries are on a "dangerous track", with too many witnessing an exponential increase in cases, and called on countries to take further action to curb the spread of the disease.

In total, the UN agency's figures showed that 465,319 cases were declared on Saturday alone, half of them in Europe.

Further, Italy has ordered the closure of theatres, cinemas and gyms and said bars and restaurants must shut early.

The FTSE 100 index was down 5.25 points, or 0.1%, at 5,855.03. The FTSE 250 was down 31.35 points, or 0.2%, at 18,078.22. The AIM All-Share was up 3.07 points, or 0.3%, at 983.52.

The Cboe UK 100 was up 0.1% at 582.68, the Cboe 250 was flat at 15,333.56, and the Cboe Small Companies was up 0.6% at 9,720.09.

In Paris, the CAC 40 was down 0.7%, while the DAX 30 in Frankfurt was down 2.1%.

"While we are seeing nations attempt to stifle the spread of the virus through more localised and tentative restrictions, it seems highly likely that we will eventually see a swathe of nationwide lockdowns if the trajectory cannot be reversed. With travel stocks such as TUI and Carnival getting hit in early trade, it is clear that traders are preparing for a raft of more restrictive measures," said IG Group's Josh Mahony.

"Despite the rise in Covid cases, traders remain torn as they weigh up the potential impending benefits of a US stimulus package and potential vaccine. The latest update from Oxford highlighted how their early trials show a positive reaction to the vaccine for the elderly, with an immune response for those at most risk likely to prove a key cornerstone for any worthy vaccine candidate," Mahony added.

AstraZeneca was up 1.2% after the Anglo-Swedish drugmaker late Friday said clinical trials for its AZD1222 coronavirus vaccine, being developed alongside Oxford University, has been resumed around the world, as regulators in the US, UK, Brazil, South Africa and Japan confirmed that it is safe to do so.

The US Food & Drug Administration authorised the restart of the trials in the US, as they resumed in other countries in recent weeks, following the review of all safety data from trials in other regions.

The biggest riser in the FTSE 100, however, was Pearson. The education publisher was up 4.1%, after UBS upgraded the stock to Buy from Neutral, Pearson's US Higher Education business can hold the key to substantial growth in earnings going forward.

At the other end of the large caps, Royal Dutch Shell 'A' and 'B' shares were down 1.1% and 0.9%, respectively, tracking spot oil prices lower.

Brent oil was trading at USD40.98 a barrel on Monday at midday, down sharply from USD42.25 late Friday.

Warring factions in Libya signed a countrywide ceasefire on Friday brokered by the United Nations. The ceasefire is poised to lead to more Libyan oil supply to the market at a time when demand is weak.

In the FTSE 250, Anglo-German travel company Tui was the worst performer, down 5.8%, and cruise line operator Carnival was down 2.5% on fresh worries over Covid-19 travel restrictions.

Elsewhere, THG Group was up 13% after the online retailing platform raised its revenue guidance for 2020, following strong trading in the third quarter and continued momentum in the fourth quarter to date.

THG said that, for the three months to the end of September, total revenue grew by 39% year-on-year to GBP378.1 million. For the first nine months of 2020, revenue increased by 37% to GBP1.05 billion.

THG listed in London last month with a market capitalisation of GBP5.40 billion and at the time guided for annual revenue of GBP1.43 billion.

However, as a result of the stronger quarterly performance, the group now expects revenue to be between GBP1.48 billion to GBP1.52 billion, reflecting a 30% to 33% increase from GBP1.14 billion the year before.

The pound was quoted at USD1.3057 Monday at midday, flat from USD1.3050 at the London equities close Friday.

The euro was priced at USD1.1828, lower from USD1.1840. Against the yen, the dollar was trading at JPY104.87, marginally up from JPY104.80.

Elsewhere in commodities, gold was quoted at USD1,897.25 an ounce, down from USD1,900.50 late Friday.

US stock market futures were pointed lower as coronavirus infections in the US surged, while negotiations for a fiscal stimulus package before next week's election continue.

The Dow Jones Industrial Average was called down 0.9%, the S&P 500 down 0.8% and the Nasdaq Composite down 0.6%.

In the US, a record of nearly 80,000 new Covid-19 infections over the course of a day were reported on Friday, according to figures from Johns Hopkins University.

The virus has now claimed the lives of 1.1 million people and infected more than 42 million globally.

Meanwhile, China on Monday announced sanctions on US arms dealers, days after Washington approved the sale of weapons worth USD1 billion to Taiwan.

The sanctioned companies include Lockheed Martin, Boeing and Raytheon Technologies, according to Chinese Foreign Ministry spokesman Zhao Lijian. Zhao didn't detail the sanctions.

In the New York pre-market Monday, Boeing was down 1.9% and Raytheon down 1.5%. Lockheed Martin wasn't quoted in the pre-market session.

The move comes after the US on Wednesday approved the sale of three weapons systems worth just over USD1 billion to Taiwan, which Beijing sees as a breakaway province.

Ahead, US earnings season kicks into high gear this week with Microsoft, Pfizer, Merck, 3M and Caterpillar reporting on Tuesday, along with Visa, PayPal, Boeing, General Electric, eBay, Ford on Wednesday.

Tech companies Apple, Amazon, Alphabet and Facebook report on Thursday, while oil majors Chevron and ExxonMobil deliver earnings on Friday.

"The FANGs have been the primary drivers of the rebound in stocks, and their profit picture as well as forward guidance will be crucial to any further rally in the indices. If the high tech darlings fail to meet the expectations of investors the market could set up for a vicious downward slide as investors will face risk from Covid lockdowns, lack of fiscal stimulus, and peak growth in work from home stocks," analysts at BK Asset Management said.

The economic events calendar on Monday has US new home sales at 1500 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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