LONDON MARKET MIDDAY: Stocks Rise As Investors Shrug Off Covid Rebound

(Alliance News) - Stock prices in London were higher at midday on Friday after regulators eased US banking regulations on Thursday, which offered markets a reprieve from concerns about a severe resurgence in Covid-19 cases.

With several US states - particularly Texas, Florida and California - reporting a rebound in cases, there is an increasing sense that state leaders will have to stall their economic reopenings and in some cases reimpose containment measures. Further, the World Health Organization raised concerns of a new surge in Europe, where lockdown easing has seen flights between countries resume and bars, restaurants and cinemas reopen.

However, investors, for the most part, have continued to see the positives in the situation, backed up by trillions in government and central bank support.

The FTSE 100 index was up 98.71 points, or 1.5%, at 6,245.41 by midday in London. The large-cap index is on track to end the week up 0.3%.

The FTSE 250 was up 186.58 points, or 1.1%, at 17,298.70, and the AIM All-Share was up 6.10 points, or 0.7% at 889.48.

The Cboe UK 100 was up 1.4% at 10,560.36, the Cboe UK 250 was up 1.1% at 14,774.27, and the Cboe Small Companies down 0.1% at 9,413.42.

In Paris the CAC 40 was up 1.6%, while the DAX 30 in Frankfurt was up 0.9%.

"Governments and central banks continue to shield equities from the bad news on fresh spikes in coronavirus and evidence of the economic damage wrought by the pandemic," said AJ Bell investment director Russ Mould.

"That explains a strong end to the week for the FTSE 100 which is up more than 1%. The question is how long fiscal and monetary largesse can keep the rally going," Mould added.

In the FTSE 100, InterContinental Hotels rose 3.2% after Peel Hunt started coverage on the hotel operator with a Buy rating.

Tesco was up 1.1%. The UK's largest supermarket chain said higher volumes and business rates relief in its first-quarter only partly offset the extra costs of kitting out stores to comply with Covid-19 measures and of increasing online capacity.

Total sales in the 13 weeks ended May 30 increased by 8.0% to GBP13.38 billion, a 7.9% like-for-like increase. This was most pronounced in the UK and Republic of Ireland, where sales were up 9.2% at GBP12.21 billion and up 8.2% like-for-like. Online capacity increased to 1.3 million slots per week from 600,000.

In the FTSE 250, 888 Holdings was the best performer, up 15% after the online gambling firm said adjusted earnings before interest, tax, depreciation and amortisation for 2020 will be ahead of previous expectations following a strong year-to-date trading performance.

Average daily revenue in the year-to-date has been 34% higher than in the prior year, the company said, due to increased levels of customer acquisition during the second half of 2019 and the structural shift towards online gaming accelerated by the Covid-19 pandemic during recent months.

At the other end of the midcaps, Aston Martin Lagonda was the worst performer, down 12% after the luxury carmaker said it plans to sell new shares totalling up to 19.99% of its current issued share capital in an attempt to secure enough cash to "successfully emerge from the extended Covid-19 lock-down".

At its current market capitalisation of about GBP850 million, the share offer could raise up to GBP170 million. Aston Martin completed a GBP536 million rights issue back in April. The price at which the shares are to be sold will be determined at the close of the bookbuilding process, the luxury carmaker said.

Separately, the Valkyrie hypercar maker said its retail sales in the second quarter were hit by the Covid-19 disruption. Wholesales are expected to be lower in the second quarter than in the first quarter and wholesale average selling price will continue to suffer from its de-stocking process.

The pound was quoted at USD1.2396 at midday, lower from USD1.2405 at the London equities close on Thursday.

The euro stood at USD1.1223 at midday, firm against USD1.1216 at the European equities close Thursday, as European Central Bank chief Christine Lagarde said the worst of the economic crisis unleashed by the coronavirus pandemic is likely over.

"We probably have passed the lowest point. I say that with some trepidation because of course there could a severe second wave if we learn anything from the Spanish Flu," she told an online conference. "We are not going to return to the status quo. It's going to be different. The recovery is going to be incomplete and transformational."

The hardest-hit industries - such as airlines, hospitality and entertainment - will emerge from the crisis "in a different shape", while new sectors may arise.

Against the yen, the dollar was trading at JPY106.95 down from JPY107.17 late Thursday.

Stocks in New York look set to open mostly higher following the release of the Federal Reserve's latest bank stress-test results on Thursday and as bank regulators eased the Volcker rule, which was enacted in the wake of the 2008 financial crisis to limit speculative trading.

The DJIA was called down 0.1%, while the S&P 500 index was called up 0.1% and the Nasdaq Composite up 0.2%.

The Federal Reserve on Thursday ordered 34 major US banks to suspend share buybacks in the third quarter and limit dividend payments to shareholders. The stress test results varied depending on the severity of the downturn modelled, but Fed Vice Chair Randal Quarles said the outcomes were generally positive.

Nike shares will be in focus following the sportswear maker's disappointing fourth-quarter results late Thursday. The stock is down 3.1% in pre-market trade.

Nike reported a surprise loss as shutdowns due to Covid-19 prompted a big drop in revenue in spite of higher online sales. Nike reported a loss of USD790 million in the quarter ending May 31, which translated to a loss of 51 cents per share compared with analyst expectations for nine cents per share in profit. Revenue tumbled 38% to USD6.3 billion.

Brent oil was quoted at USD41.47 a barrel at midday, up from USD40.44 at the London close Thursday.

Oil prices rose as investors cheered news that Russia had cut exports to their lowest level in a decade, indicating Moscow was sticking to a deal with other producers to ease the glut in the market.

Gold was quoted at USD1,763.05 an ounce at midday, firm against USD1,760.11 at the London equities close on Thursday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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