(Alliance News) - Stocks in London were higher at midday in London on Tuesday after European leaders reached a historical stimulus deal, while attention will turn to the US where the pandemic continues to rage.
It comes after a study suggested a Covid-19 vaccine being developed by the University of Oxford and AstraZeneca was safe and induces an immune reaction, which was branded "encouraging" by the scientific community. Other vaccines are also in development by different companies, including the US's Pfizer and Moderna.
In London, the FTSE 100 index was up 38.92 points, or 0.6%, at 6,300.73. The mid-cap FTSE 250 index was up 167.19 points, or 0.9%, at 17,553.04. The AIM All-Share index was up 0.6% at 891.13.
The Cboe UK 100 index was up 0.6% at 627.68. The Cboe 250 was up 0.8% at 14,875.10, and the Cboe Small Companies was up 0.3% at 9,172.11.
AstraZeneca shares were down 1.1%, though they are up 21% so far in 2020.
In mainland Europe, the CAC 40 in Paris was up 1.5%, while the DAX 30 in Frankfurt was up 1.9%.
Analysts at ActivTrades commented: "European stocks are trading significantly as investors welcome the deal reached by EU leaders on the new EUR750 billion virus relief package. While this news is the main driver, markets are also being supported by the latest positive developments in the search for a vaccine. Most investors will now switch their focus to Washington where another stimulus plan is said to be under discussion.
"However, some investors see these new market highs as a state of euphoria, with the current bullish momentum excessive and taking prices further away from their equilibrium levels. This would leave the market prone to a sharp correction in the future. Having said that, there aren't many traders willing to risk standing in front of such a fast-moving train so far."
EU leaders on Tuesday approved a landmark stimulus package to fight the destructive aftershocks of the coronavirus outbreak that has sunk Europe into its deepest recession in history.
The euro stood at USD1.1441 on Tuesday midday, unchanged from the European equities close Monday.
The EUR750 billion deal was sealed after four days and nights of intense negotiation that saw threats of walkouts and fierce resistance from the Netherlands.
"Deal!" tweeted EU Council Chief Charles Michel, whose job was to guide the tortuous talks over more than 90 hours.
The package was made possible by the crucial backing of Germany and France and includes the biggest-ever joint borrowing by the 27 members of the bloc, something that had been resisted by Berlin for generations. Crucially, support from the so-called 'frugal four' - Austria, Denmark, Sweden and the Netherlands - was secured by a sizeable boost to budget rebates they receive on their budget contributions.
Overall, the deal will dole out EUR390 billion in the form of grants to pandemic-hit countries. That was lower than an original EUR500 billion proposal made by France and Germany. Another EUR360 billion will be disbursed in loans, repayable by the member state. The rescue package was agreed along with the EU's long-term budget, bringing the agreed spending to EUR1.8 trillion through 2027.
"Barring any sabotage in the EU Parliament, which holds vast budgetary authority, the EU package should provide support for European assets as the continent returns back to normal economic activity. With the pandemic under much better control in EU than in the US, Europe may even enjoy a competitive advantage for the time being as its industrial and service base could resume work supported by stimulus money, while the US continues to fight the virus in key economic states like Texas, California and Florida," analysts at BK Asset Management said.
In the FTSE 100, Tesco was up 2.0% and WM Morrison Supermarkets was up 1.8% following the release of the latest UK grocery market share figures from Kantar Worldpanel.
Take-home grocery sales in the UK rose by 17% during the 12 weeks to July 12, the fastest growth rate since 1994, data from the research agency showed. Kantar said total sales reached a record GBP31.6 billion in the period, up from GBP27.05 billion, reflecting three months of increased grocery purchasing during lockdown while most other retailers, bars and restaurants were either closed or experiencing significant reductions in trade.
Among the "Big Four" UK grocers, Tesco's market share dipped to 26.7% from 27.1%. This was despite sales rising 15% annually to GBP8.45 billion. Morrison's sales rose 17% to GBP3.25 billion, and its market share increased to 10.3% from 10.2%.
At the other end of the large-cap index, GVC Holdings was the worst performer, down 13% after UK tax collector HMRC decided to extend its investigation into the gaming company's former Turkish-facing online gambling business. The Ladbrokes owner disposed of the Turkish business in December 2017.
When first informed of the probe by HMRC in November 2019, GVC said it understood the investigation was aimed at former third-party suppliers and related to the processing of payments for online gambling in Turkey.
GVC said that HMRC on Monday informed subsidiary GVC Holdings (UK) Ltd that it was widening the scope of its investigation and is now examining "potential corporate offending" by an entity within GVC, which HMRC has not yet identified. GVC added that it continues to co-operate fully with HMRC regarding the provision of information.
"It's no wonder GVC's management complain about the lack of clarity from the tax authorities, it is this lack of clarity which will do the damage. Simply put, management don't know what part of the business it relates to, nor what the details are bar a somewhat ominous reference to the Bribery Act 2010," said AJ Bell's Russ Mould.
"It is the last thing it needed as it looks to execute on the opportunity created by the deregulation of the US market. All GVC can do is continue to co-operate and await the next developments. Some shareholders have already decided they're not going to stick around to find out what happens next, judging by the share price slump on the news," Mould added.
BHP Group was down 2.5%. Citigroup downgraded the Anglo-Australian miner to Neutral from Buy. In addition, BHP on Tuesday said annual petroleum production was marginally short of guidance, with lower gas demand due to Covid-19, but it met its targets for iron ore and metallurgical coal among others.
Antofagasta was down 1.5% after Citi cut the Chilean copper miner to Neutral from Buy.
In London, the pound was quoted at USD1.2684 Tuesday midday, up from USD1.2644 at the London equities close Monday.
UK Prime Minister Boris Johnson will assemble his Cabinet in person for the first time in four months on Tuesday as the government presses ahead with plans to secure millions of doses of a potential Covid-19 vaccine.
Meanwhile, the UK and the EU resume talks on Tuesday, with the clock running down to a year-end deadline for a new post-Brexit deal to replace half a century of integration.
The latest round of negotiations takes place over three days in London, with a stalemate in key areas stoking fears of a no-deal scenario. Britain's chief negotiator David Frost and his EU counterpart Michel Barnier kicked off this week's talks with a joint dinner on Monday evening.
Their teams are discussing a host of issues, from fisheries and so-called level playing field rules on fair competition to law enforcement and judicial cooperation. Without a new agreement, the two sides would see ties reduced to minimum standards set by the World Trade Organization with high tariffs and serious disruptions to business.
Against the yen, the dollar was trading at JPY107.23, flat from JPY107.24 in London late Monday.
Brent oil was trading at USD43.36 a barrel, firm from USD43.00 at the London equities close Monday. Gold was quoted at USD1,825.70 an ounce, up from USD1,816.37.
US stocks look set for a higher open as advisers to US President Donald Trump and congressional Democrats meet to discuss the next steps in responding to the coronavirus crisis on Tuesday
The DJIA was called up 0.6%, the S&P 500 index up 0.7% and the Nasdaq Composite up 0.9%.
In the US earnings calendar, soft drinks maker Coca-Cola Co and tobacco firm Philip Morris International will report second-quarter earnings before the market open in New York.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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