LONDON MARKET MIDDAY: Stocks Rise As Market Awaits UK Brexit Response

Fri, 16th Oct 2020 11:59

(Alliance News) - Stock pricess in London were rebounding at midday on Friday following sharp losses on Thursday, while investors were anticpating the UK's next move in the Brexit saga after this week's self-imposed deadline for a trade deal with the EU was missed.

The FTSE 100 index was up 71.23 points, or 1.2%, at 5,903.75. The large-cap index ended 1.7% lower at 5,832.52 on Thursday.

The mid-cap FTSE 250 index was up 82.39 points, or 0.7%, at 17,920.84. The AIM All-Share index was up 0.8% at 980.41.

The Cboe UK 100 index was up 1.3% at 586.52. The Cboe 250 was up 0.7% at 15,130.61, and the Cboe Small Companies up 0.2% at 9,387.27.

In mainland Europe, the CAC 40 index in Paris was up 1.4% and the DAX 30 in Frankfurt was up 0.7%.

"Stocks have pulled back some of the ground that they lost yesterday even though the outlook is still downbeat. Traders have adjusted to the news about tighter restrictions, and there isn't much hope that US politicians will announce a coronavirus relief plan before the presidential election, which will take place early next month. The fear factor has faded for now, but that does not necessarily mean that traders are bullish, it might just be a case of short covering," said CMC Markets analyst David Madden.

On the London Stock Exchange, Rolls-Royce was the best blue-chip performer, up 7.5%. The jet engine maker's shares were higher after Bloomberg reported Europe's top aviation regulator is satisfied that changes to the Boeing 737 MAX have made the aircraft safe enough to return to the skies before 2020.

According to Bloomberg, the European Aviation Safety Agency is performing final document reviews ahead of a draft airworthiness directive it expects to issue next month. That will be followed by four weeks of public comment, while the development of a so-called synthetic sensor to add redundancy will take 20 to 24 months.

Chicago, Illinois-based Boeing was up 3.2% in pre-market trade in New York.

Fashion house Burberry Group was 4.2% higher, benefitting from a positive read-across from French peer LVMH Moet Hennessey Louis Vuitton.

LVMH late Thursday reported improving trends in the third quarter. The Louis Vuitton and Christian Dior owner reported revenue of EUR30.3 billion in the first nine months of 2020, down 21% on a year ago on both a reported and organic basis.

In the third quarter, revenue was down 7% organically, reflecting a "marked improvement" in trends versus the first half.

"The encouraging signs of recovery observed in June for several of the group's activities were confirmed in the third quarter in all regions, notably in the United States, and in Asia, which once again grew over the period," said LVMH.

LVMH shares were up 6.0% in Paris, hitting a record high in early trade.

JD Sports Fashion was up 3.5% after RBC Capital raised the sportswear retailer to Sector Perform from Underperform.

At the other end of the large caps, British Airways-owner International Consolidated Airlines was the worst performer, down 2.0%. The UK government late Thursday dealt a fresh blow to holidaymakers by adding Italy to its quarantine list.

This means that travellers returning to the UK from Italy, Vatican City and San Marino as of 0400 BST on Sunday must self-isolate for two weeks.

In addition, British Airways has been fined GBP20 million over a 2018 data hack, the Information Commissioner's Office said. Investigators found the airline should have identified the security weaknesses which enabled the attack to take place. The carrier failed to protect the personal and financial details of more than 400,000 customers, the ICO said. It did not detect the hack for more than two months.

In the FTSE 250, Serco Group was the standout performer, up 17% after the outsourcer upgraded its earnings guidance.

In an unscheduled trading update, the outsourcer said it expects full-year revenue to be around GBP3.9 billion and underlying trading profit in a range between GBP160 million to GBP165 million.

In 2019, Serco reported revenue of GBP3.24 billion and underlying profit of GBP120.2 million.

Serco said all of its regions worldwide are performing better than expected and have increased their forecasts for 2020. At both group level and in the divisions, effective cost control and the ability of systems to respond efficiently to increased demand has helped increase margins, it said.

At the other end of the midcaps, JD Wetherspoon was the worst performer, down 12% after the pub chain swung to an annual loss and skipped paying any dividend.

The Tim Martin-founded pub chain took aim at the UK government's handling of the coronavirus crisis and the ramifications this has had on the pub industry.

For the financial year ended July 26, Wetherspoon swung to a pretax loss of GBP34.1 million before exceptional items from a GBP102.5 million profit the year prior. After exceptional items and application of the IFRS 16 accounting rule for leases, Wetherspoon swung to a loss of GBP105.4 million. Revenue fell 31% to GBP1.26 billion from GBP1.82 billion, with like-for-like sales down 30%.

Wetherspoon said like-for-like sales in the first 11 weeks of the new financial year have been 15% below those of last year, with strong sales in the first few weeks, followed by a marked slowdown since the introduction in the UK of a curfew, which forces pubs and restaurants to close at 2200 BST.

The pub chain skipped its annual dividend, having paid out 12.0 pence the year before.

"Putting aside the validity of the government's approach, the reality is that unless pubs return quickly to normal or receive substantial support, then it'll soon be last orders for a significant number of favourite pubs and restaurants," commented eToro analyst Adam Vettese.

Chair Martin said that, as a result of recent changes in regulations, the outlook for pubs over the remainder of the current financial year is "even more unpredictable".

"It appears that the government and its advisers were clearly uncomfortable as the country emerged from lockdown. They have introduced, without consultation, under emergency powers, an ever-changing raft of ill-thought-out regulations - these are extraordinarily difficult for the public and publicans to understand and to implement. None of the new regulations appears to have any obvious basis in science," Martin complained.

The pound was quoted at USD1.2912 Friday at midday, lower from USD1.2926 at the London equities close Thursday, amid a lack of negative Brexit headlines as investors anticipate UK Prime Minister Boris Johnson's next move.

The UK PM is due to set out whether trade talks with the EU should continue after his deadline for reaching an agreement passed without a deal in place.

David Frost, the chief negotiator, said the UK was "disappointed" by the outcome of a EU summit in which the bloc signalled it was willing to continue trade negotiations but called on Britain to make the next move.

Frost said the prime minister would set out his response on Friday.

Analysts at OFX said: "Brexit trade talks continue to yield little progress while increasing Covid restrictions dampen any hope for a rebound in economic activity. With the EU leaders summit beginning today, we will have a clearer picture whether Brexit talks will continue through the coming weeks, suggesting compromises have been made or abandoned and a hard Brexit becomes a reality.

"We now await the reaction from UK Prime Minister Boris Johnson, as to whether the UK will want to continue with negotiations beyond this week."

The euro was priced USD1.1717, firm from USD1.1705 at the European equities close Thursday.

In economic news from the continent, eurozone consumer prices fell for the second straight month on an annual basis in September, figures from Eurostat showed.

Annually, the eurozone's consumer price index was down 0.3% in September, deflation accelerating from a 0.2% fall in August. The reading was in line with market forecasts but represented the steepest decline in prices since April 2016.

On a monthly basis, consumer prices rose 0.1% in September, after falling by 0.4% in August. This figure is also in line with market expectations.

Against the yen, the dollar was trading at JPY105.32, flat from JPY105.30.

In commodities, Brent oil was quoted at USD42.74 a barrel Friday midday, up from USD42.58 late Thursday. Gold was quoted at USD1,906.78 an ounce, flat from USD1,904.50.

US stock market futures were pointed slightly higher as investors remain concerned about the presidential election an economic stimulus deadlock and flaring outbreaks of Covid-19.

The Dow Jones Industrial Average was called up 0.1%, the S&P 500 up 0.1% and the Nasdaq Composite up 0.2%.

As November's election draws closer, US President Donald Trump delivered a combative defense on Thursday of his Covid-19 response while challenger Joe Biden - offering a glaring contrast in style in a rival town hall - accused him of doing "nothing" to end the pandemic.

The dueling appearances, scheduled at the same time on rival television networks, showed Biden giving unflashy, empathetic, often in-depth answers to voters in the audience, while Trump delivered a fiery, sometimes agitated defense of his presidency on NBC.

Trump, who trails in the polls ahead of the November 3 election, was especially under pressure about the coronavirus that has killed over 217,000 Americans and inflicted deep economic damage.

"We're rounding the corner," Trump insisted with his usual optimism, even as swaths of the US see sharply rising caseloads.

By contrast, Biden's appearance on rival network ABC mirrored his steady and generally low-key campaign, with promises of bipartisan healing in divided Washington and aiming steady fire on Trump's coronavirus record.

The next planned presidential debate is on October 22, in Nashville, Tennessee.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com