LONDON MARKET MIDDAY: Stocks Higher As Mood Lifts And Oil Prices Climb

(Alliance News) - London stocks bounced on Tuesday as a rise in oil prices reinforced a more upbeat mood resulting from the re-opening of countries across Europe and the US after weeks of lockdowns.

Meanwhile, the euro slipped after Germany's Constitutional Court largely upheld several complaints against the European Central Bank's purchase of government bonds, threatening the Bundesbank's participation in the economic stimulus programme.

The FTSE 100 index was up 55.88 points, or 1.1%, at 5,809.66. The FTSE 250 was up 122.77 points, or 0.8%, at 16,074.45, and the AIM All-Share was up 0.3% at 802.15.

The Cboe UK 100 was up 1.0% at 9,830.65, the Cboe UK 250 up 0.6% at 13,790.23, and the Cboe UK Small Companies up 0.4% at 8,902.18.

"Stocks opened higher everywhere in Europe on Tuesday, extending the gains at the end of yesterday's trading session by US equities. This change in sentiment was triggered by investors noticing good signs on the virus front from California, ahead of the reopening of the state next Friday," said Pierre Veyret, technical analyst at ActivTrades.

"Spain, France and Hong Kong are among the latest areas to be easing lockdown measures soon, with investors eagerly awaiting the impact these changes have in turning around the existing economic data that is already outdated," said Veyret. "Traders are likely to retain a defensive trading stance on riskier assets before more clues emerge on how economies are coping with opening back up again."

In Europe, citizens basked in a return to the outdoors, mixed with a dose of trepidation about life ahead and the economic damage wreaked by lockdowns. Workers banged away at construction sites in Rome, police handed out masks in Madrid and older children returned to school in Vienna as Europeans gingerly stepped out of their homes. Spain and Portugal made face masks mandatory on public transport as they further eased their lockdowns, while Slovenia, Poland and Hungary allowed public spaces and businesses to partially reopen.

Some retailers in California, including book stores, flower shops and clothing stores, will be allowed to reopen for business at the end of the week, the state's governor announced. His announcement came following protests across the state last week to demand the lifting of restrictions that have kept the majority of Californians at home and crippled the state's economy, one of the largest in the world.

Also helping London stocks was a rebound in oil prices as traders bet a demand boost will follow the restart of economic activity. Brent oil was quoted at USD29.29 a barrel Tuesday morning, up from USD26.12 late Monday.

Oil majors BP and Royal Dutch Shell were among the top blue-chip performers in London at midday, with BP up 4.6% and Shell 'A' and 'B' shares rising 3.5% and 3.2% respectively.

In mainland Europe, the CAC 40 was up 1.8%, while the DAX 30 was 1.7% higher.

The euro lost ground over Tuesday morning after Germany's Constitutional Court largely upheld several complaints against the European Central Bank's purchase of government bonds under a programme designed to boost the economy and inflation since 2015.

The single currency was quoted at USD1.0849, flat from USD1.0913.

This was the result of years of debate over the role of the eurozone central bank, with judges announcing their ruling in the city of Karlsruhe on Tuesday. It does not cover current ECB aid issued in response to the coronavirus crisis.

Top German judges raised concerns back in 2017 that one part of the bond-buying programme, the Public Sector Purchase Programme, could engage in economic policy and government financing, both of which the ECB is prohibited from doing.

Germany's Bundesbank central bank will be barred from participating in QE in three months' time unless the ECB "demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the ECB are not disproportionate," the Constitutional Court said in a landmark ruling.

Meanwhile, the pound strengthened to USD1.2455 midday Tuesday from USD1.2425 late Monday after April's final services PMI reading was slightly better than the flash score.

IHS Markit-Chartered Institute of Procurement & Supply services purchasing managers' index fell to 13.4 in April from 34.5 in March. The earlier flash reading for April was 12.3.

Prior to the onset of Covid-19, the survey's record low had been at 40.1 in November 2008. Any reading below 50 indicates contraction.

Nearly 80% of survey respondents reported a drop in business activity in April, almost double the record set in March of 43%. Reduced activity volumes were overwhelmingly attributed to business closures, shutdowns among clients, or falling sales due to a drop in non-essential spending.

Safe haven gold was soft on Tuesday as stock markets rose. The price of the precious metal was quoted at USD1,699.91 an ounce, marginally lower from USD1,705.55.

However, fellow safe haven the Japanese yen remained firm. Against the yen, the dollar was quoted at JPY106.71, lower than JPY106.87.

In New York, stocks are poised for a strong start to Tuesday's session. The Dow Jones, S&P 500 and Nasdaq Composite all are called up 1.0%.

To come in the US economic calendar on Tuesday is an IHS Markit PMI at 1445 BST followed by the ISM's non-manufacturing PMI at 1550 BST.

Back in London, Carnival was up 2.8% after the cruise operator said any resumption of cruise line operations will be dependent on government approvals and will include enhanced operational protocols and social distancing guidelines.

The Anglo-American cruise operator has been hit hard by the global Covid-19 pandemic, with port restrictions around the world forcing the company to halt cruise operations and offer refunds to customers. It also had to raise around GBP6.5 billion in April to bolster its liquidity position.

The statement came following the company's announcement on Monday of the resumption of some North American cruise operations from August 31.

In the FTSE 250, Brewin Dolphin was up 5.6% after Berenberg started coverage on the investment manager with a Buy rating.

On AIM, BATM Advanced Communications was up 19% as it started shipping a new Covid-19 antibody test to European customers.

The company's Adaltis subsidiary has launched a CE-certified enzyme-linked immunosorbent assay serological test that detects antibodies produced against Covid-19 present in a person's blood. The new ELISA Serological test measures the amount of various antibodies present in the blood of a human body when it is responding to a specific infection, like Covid-19.

The test detects a human body's immune response to the infection caused by the virus rather than detecting the virus itself. BATM said the new test kit is designed to test for antibodies produced within four to five days of the immune system response - as well as antibodies produced after a few weeks and stay present in the body for at least several months.

By Lucy Heming; lucyheming@alliancenews.com

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