LONDON MARKET MIDDAY: Stocks Unperturbed By Record Plunge In UK GDP

(Alliance News) - Stock prices in London were higher at midday on Friday, shrugging off dismal economic growth figures which showed the UK economy shrank by 20% in April at the height of the coronavirus lockdown - the worst slump since records began.

The large-cap FTSE 100 index was up 75.47 points, or 1.2%, at 6,152.17 on Friday - but still is on track to end the week down almost 3%.

The mid-cap FTSE 250 index was up 244.52 points, or 1.3% at 17,218.19. The AIM All-Share index was up 1.79 points, or 0.2% at 867.40.

The Cboe UK 100 index was up 1.1% at 10,423.08. The Cboe 250 was up 1.4% at 14,802.35, and the Cboe Small Companies up 0.5% at 9,681.71.

Markets elsewhere in Europe also were rallying. In Paris the CAC 40 was up 1.9%, while the DAX 30 in Frankfurt was up 1.3%.

"The FTSE 100, packed with multinational companies, is not really a barometer for the UK economy but even the more domestic-facing FTSE 250 did not suffer severe damage. Investors are not stupid, they know April was arguably the height of the lockdown. The unprecedented nature of the fall in economic activity just mirrored the unprecedented act of effectively shutting down a modern economy," commented AJ Bell's Russ Mould.

On the London Stock Exchange, Pearson was the best blue-chip performer, up 13%.

Activist investor Cevian Capital has built a stake in the education publisher, according to a regulatory filing on Thursday. Cevian Capital II holds a 5.4% stake in Pearson, according to the filing, equal to 40.6 million shares.

Informa was up 10%. The business events and publishing company said trading has remained mixed, with the Events division hammered by cancellations due to government-imposed lockdowns across the world, while the Subscriptions unit continues to trade well.

The London-based company said its Subscriptions unit - which makes up 35% of revenue - continues to perform "resiliently". The Events unit - contributing 65% of revenue - is focusing on providing alternative digital services, as no physical product has been offered anywhere in the world due to Covid-19.

Informa noted the Events unit is focusing on "long-term relationships ahead of short-term revenue", but added the return of events in China is now a "real" possibility. The company has scheduled a minimal physical product for June but is now planning to run a number of major events in China from early July, with China Beauty Expo in Shanghai the first scheduled major Informa event to be held post-Covid-19.

easyJet, Ryanair Holdings and International Consolidated Airlines Group's British Airways have launched legal action against the UK government's "flawed" 14-day quarantine policy.

easyJet and IAG were up 8.5% and 5.5%, respectively, while Ryanair was up 1.7%.

The airlines said they have asked for a judicial review to be heard "as soon as possible", claiming the measures introduced this week will have a "devastating effect on British tourism and the wider economy". Most international arrivals into the UK have been required to enter a 14-day quarantine since Monday.

At the other end of the large-cap index, Russian gold miner Polymetal International was down 2.3%, tracking spot gold prices lower.

Gold was quoted at USD1,733.06 an ounce at midday, down from USD1,742.15 late Thursday.

The pound was quoted at USD1.2652 at midday, firm from USD1.2642 at the London equities close on Thursday, shrugging off dismal UK economic data.

The UK economy shrank by a fifth in the month of April, according to the latest figures from the Office for National Statistics.

Gross domestic product slumped 20% month-on-month in April, the biggest monthly fall since the series began - far steeper than the falls of 5.8% and 0.2% seen in March and February respectively. In the three months to April, the economy contracted an "unprecedented" 10% on a sequential basis.

The latest release captures the direct effects of the Covid-19 pandemic and government measures taken to stem its spread.

Rupert Thompson, chief investment officer at wealth manager Kingswood, said: "The record 20.4% drop in UK GDP in April followed a 5.8% fall in March and confirms the UK is likely to be one of the economies worst hit by the pandemic. Indeed the OECD only this week forecasted the economy would shrink by 11.4% over the year as a whole, a larger decline than any other developed economy. Activity will now have started to recover but hopes of a rapid bounce-back look misplaced."

The euro stood at USD1.1324 at midday, down from USD1.1377 at the European equities close Thursday after eurozone industrial production continued to fall steeply in April, data from Eurostat showed.

Industrial production plunged by 17% month-over-month in April following a 12% monthly fall in March and compared to market forecasts according to FXStreet of a 20% drop.

On an annual basis, industrial output in the eurozone collapsed by 28% in April following a drop of 14% in March, while economists expected a fall of 30%.

The monthly drop was the biggest ever recorded in eurozone industrial production and significantly higher than the declines seen in late 2008 and early 2009, during the financial crisis, as coronavirus containment measures forced businesses and factories closures, the EU statistics office said.

Against the yen, the dollar was trading at JPY107.53 at midday, up from JPY107.20 late Thursday in London.

Brent oil was quoted at USD38.96 a barrel at midday, firm from USD38.70 at the London close on Thursday.

Stocks in New York look set for a strong open on Friday after spiking coronavirus cases in several US states prompted on Thursday the worst sell-off since March, when market turmoil over Covid-19 was at its peak.

The DJIA called was called up 2.3%, the S&P 500 index up 1.9% and the Nasdaq Composite up 1.7%.

On Thursday, figures showing a spike in new infections in key states including Texas, California, Arizona and Florida, fanned concerns of a new wave as the nation slowly reopens.

However, US Treasury Secretary Steven Mnuchin on Thursday said there would be no more shutdowns, telling CNBC: "I think we've learned that if you shut down the economy, you're going to create more damage."

White House officials have played down the severity of the virus surge, which they sought to blame on factors beyond President Donald Trump's forceful push to reopen the economy, which he is counting on to help him win reelection in November.

IG Group said: "The potential for Trump to allow a second wave to go unchecked in the name of preserving economic growth provides yet another key reason to doubt his re-election chances come November. Pricing around the US election has swung heavily towards [Democratic nominee] Joe Biden, and the potential of an unimpeded surge in coronavirus deaths will do little to boost optimism for Trump's re-election.

"From a market perspective, the outcome of November's election has huge consequences, with the market outperformance under his leadership providing clues as to how people view the impact of his 'America First' approach. However, while Trump's focus on the economy has been great for US stock markets over the years, it could also be his downfall if he chooses to ignore a second wave."

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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