LONDON MARKET MIDDAY: Stocks Fall Ahead Of Trump Press Conference

(Alliance News) - Stocks in London were lower at midday on Friday after US President Donald Trump called a news conference for later in the day to outline his response to China's plan to crack down on Hong Kong.

The US president told reporters at an Oval Office meeting that he was "not happy" with Beijing and the news conference would be about "what we're doing with respect to China", while giving no specifics.

The FTSE 100 index was down 53.19 points, or 0.9%, at 6,165.60. However, the large-cap index is on track to end the week up 2.4%.

The mid-cap FTSE 250 index was down 156.35 points, or 0.9%, at 17,182.13. The AIM All-Share index was down 0.2% at 873.64.

The Cboe UK 100 index was down 1.0% at 10,426.62. The Cboe 250 was down 0.9%, at 14,696.60, and the Cboe Small Companies down 0.4% at 9,196.75.

"The suggestion that the US will no longer consider Hong Kong to be autonomous from China would affect the current special trading relationship the island enjoys. The deteriorating relationship between the US and China has been an uncomfortable soundtrack to the last two years or more and investors could do without it as they already look to contend with the fall-out from a global pandemic," AJ Bell's Russ Mould said.

In Paris the CAC 40 was down 0.9%, while the DAX 30 in Frankfurt was down 1.1%.

In the FTSE 100, AstraZeneca was up 2.2%. The drugmaker said its phase 3 Adaura trial of Tagrisso in early-stage cell lung cancer found that the drug reduced the risk of disease recurrence or death by around 80%.

The detailed results were from a trial of Tagrisso, the brand name for osimertinib, after surgery in patients with "epidermal growth factor receptor-mutated (EGFRm) non-small cell lung cancer after complete tumour resection with curative intent". EGFR mutations are associated with some lung cancers.

At the other end of the large-cap index, Rolls-Royce was the worst blue-chip performer, down 9.5% after the jet engine maker lost its investment-grade rating, after S&P on Thursday downgraded the company to junk status citing prolonged weak profitability.

IG Group's Josh Mahony said: "Rolls-Royce has come under significant selling pressure this morning, with the stock hit by a double-whammy of a substantial hedge fund sale and S&P downgrade to Junk. The AKO Capital decision to ditch shares in the manufacturing giant comes as a warning sign for investors that had enjoyed the recent shift into riskier equity stocks."

In addition, travel stocks were down with Carnival, easyJet and International Consolidated Airlines down 8.7%, 6.5% and 5.7% respectively.

"While the aviation sector may pick up amid a rise in holiday bookings, the possibility of new airplane orders appears to be a step too far for now. Unfortunately, the risk-on rally for travel stocks appears to have come to an end, with recent risers such as Carnival, IAG, and easyJet all slumping as traders take profits ahead of the weekend," Mahony added.

The pound was quoted at USD1.2313 at midday, lower than USD1.2323 at the London close Thursday.

On the political front, UK Chancellor of the Exchequer Rishi Sunak is set to tell employers they will need to contribute to their furloughed workers' salaries from August as the government admitted the scheme cannot run "indefinitely".

Sunak will use the daily Downing Street press conference to outline changes to the job retention scheme, which has so far has covered the wages of 8.4 million staff unable to work during lockdown – costing GBP15 billion.

The chancellor is facing calls, including from a cross-party group of 113 MPs, to extend the scheme supporting self-employed workers past Sunday or risk leaving many "without work and without support".

The euro stood at USD1.1138 at midday, up sharply from USD1.1067 at the European equities close on Thursday.

Consumer price inflation in the eurozone fell to its lowest level in four years in May, due to coronavirus containment measures, data from Eurostat showed.

On an annual basis, eurozone inflation was 0.1% in May, decelerating from 0.3% in April. The reading missed market expectations for an 0.2% rise and was the lowest rate since June of 2016.

Robert Alster, head of investment services at Close Brothers commented: "Considering the ongoing effects of Covid-19, this low level of inflation is hardly surprising. It is worth noting that in recent years European policymakers have struggled to deliver inflation, but, amid the pandemic, and the associated EU-wide slump in consumer spending, their job today is exponentially harder. On the ground, weak day-to-day consumer spending is exacerbated by limited transactions for key 'big ticket' items such as cars and holidays."

The European Central Bank aims for a eurozone inflation rate of just below 2.0%.

Against the yen, the dollar was trading at JPY107.15, down from JPY107.60 late Thursday.

Stocks in New York are set to open lower ahead of Trump's news conference on US-China relations. The DJIA was called down 0.3%, the S&P 500 index down 0.2% and the Nasdaq Composite down 0.3%.

Meanwhile, Twitter concealed one of Trump's tweets on Friday for "glorifying violence", ramping up a dispute with the US president who attacked social media companies for censoring conservative voices.

In a move bound to infuriate one of the platform's most-followed users, Twitter said it was placing a "public interest notice" on a Trump message about protests in Minneapolis, Minnesota over the death of an unarmed black man at the hands of the police.

Trump, who has more than 80 million followers on Twitter, lashed out at the platform on Thursday, signing an executive order seeking to strip social media giants of legal immunity for content they carry. He told reporters at the White House he acted because big tech firms "have had unchecked power to censor, restrict, edit, shape, hide, alter any form of communication between private citizens or large public audiences."

Twitter Chief Executive Jack Dorsey defended the platform's decision to add a warning to two previous Trump tweets, saying the site would continue to flag misinformation.

Twitter shares were down 0.8% in pre-market trade, having ended down 4.7% in New York on Thursday.

Brent oil was quoted at USD35.22 a barrel at midday, up from USD34.45 at the Lonon close Thursday.

Gold was quoted at USD1,727.01 an ounce at midday, up from USD1,722.65 late Thursday.

"The precious metal has been boosted by several factors. First, because of a falling US dollar, with the Dollar Index breaking below its 200-day average thanks to a corresponding rally for the euro which in turn has been boosted as European countries ease lockdown measures. The greenback has also fallen as investors have favoured riskier currencies of late, tracking the recent stock market rally. In addition, the rising US-China rift, which has deepened over moves by Beijing to impose a security law on Hong Kong, has further boosted the appeal of the haven metal," ThinkMarkets analyst Fawad Razaqzada said.

Ahead in the economic events calendar, there are US personal consumption expenditure index numbers at 1330 BST - the core reading is the US Federal Reserve's preferred gauge of inflation.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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