LONDON MARKET MIDDAY: UK's Spain Travel Rules Cause Headache For FTSE

(Alliance News) - The FTSE 100 continued to drag its heels at midday on Monday, hampered as London-listed travel stocks were dealt a blow by the UK reimposing quarantine measures on travellers returning from the holiday hotspot of Spain.

This was offsetting a strong session for gold miners, buoyant as the price of the precious metal eyed the USD2,000 mark amid a weak dollar.

The FTSE 100 index was down 9.13 points, or 0.2%, at 6,114.69 on Monday at midday. The mid-cap FTSE 250 index was down 73.92 points, or 0.4%, at 17,190.92. The AIM All-Share index was up 0.4%, however, at 887.35.

The Cboe UK 100 index was down 0.1% at 609.54. The Cboe 250 was down 0.7% at 14,593.54 and the Cboe Small Companies down 0.6% at 9,095.21.

In mainland Europe, the CAC 40 in Paris was down 0.1%, but the DAX 30 in Frankfurt was up 0.3% Monday afternoon.

Breaking from Europe, stocks in the US are on course for a positive start to the week, with the Dow Jones called up 0.4%, the S&P 500 up 0.5% and the Nasdaq up 0.8%.

In contrast to US equity markets, however, the US dollar was battered on Monday.

"The thing that's changed in the last few days is that it's not just gold which has gone up against the dollar, but almost everything. That's partly driven by a sense that the US is having a harder time controlling the virus than others, which will see the US economy under-perform," said Kit Juckes, strategist at SocGen.

Gold continued its breakout on Monday, quoted at USD1,934.57 an ounce at midday from USD1,900.17 on Friday. The precious metal hit a record high of USD1,944.36 an ounce in the early hours of Monday.

The US on Sunday recorded 55,187 new coronavirus cases in 24 hours, Johns Hopkins University reported in its real-time tally. This brings the total caseload to over 4 million.

An additional 518 deaths brought the overall death toll to 146,909.

After a drop in infection rate in the late spring, the US has seen a recent surge in Covid-19 cases, particularly in southern and western states such as California, Texas, Alabama and Florida.

The last time the daily number of new cases clocked in below 60,000 was almost two weeks ago, on July 13. Scientists agree that an increase in death rates follows the spike in infections by three to four weeks.

The daily death toll for the past four days exceeded 1,000.

The dollar was sharply lower against majors on Monday. Sterling was quoted at USD1.2866 on Monday, higher than USD1.2786 at the London equities close on Friday and reaching levels last seen in March.

The euro traded at USD1.1727 midday Monday, higher than USD1.1635 late Friday and still trading around its best price in two years. Against the yen, the dollar was quoted at JPY105.26, down versus JPY105.85.

Brent oil was trading at USD43.42 a barrel on Monday, up on USD43.06 late Friday.

In London, gold miners were the top blue-chip performers as they chased the price of the precious metal. Polymetal International was up 6.3% and Fresnillo up 3.3%.

Mid-cap producers were also higher, with Hochschild up 5.5% and Centamin up 5.1%.

Back in the FTSE 100, International Consolidated Airlines remained the biggest loser, shedding 7.6% after the UK's reintroduction of strict quarantine rules on travellers returning from Spain in the midst of the summer holidays.

Ministers announced on Saturday that holidaymakers who had not returned from Spain and its islands by midnight would be forced to quarantine for 14 days after Covid-19 second wave fears saw the popular holiday destination struck off the UK's safe list.

The Foreign Office guidance advising against all but essential travel to mainland Spain does not include the islands, but ministers opted to apply blanket quarantine arrangements across the Spanish territories.

The quick turnaround even caught out UK Transport Secretary Grant Shapps, who is currently in Spain for his summer break and will join thousands of others in being forced to self-isolate for a fortnight on his return to Britain.

Russ Mould, investment director at AJ Bell, commented: "The market is now pricing in the risk of restrictions on more countries and thus raising the potential for earnings estimates to be downgraded once again for travel-related industries."

Other travel stocks were lower on the UK's reimposed rules for the holiday hotspot. TUI shares slumped 11% and easyJet was also 11% lower.

Ryanair shares dipped 4.4%. The budget airline swung to a loss of GBP185 million in the first quarter ended June 30 from a net profit of GBP243 million a year ago.

The company saw 99% of its fleet grounded from mid-March to the end of June due to travel restrictions caused by Covid-19. Passengers fell to 500,000 in the quarter from 41.9 million a year ago.

"The past quarter was the most challenging in Ryanair's 35-year history. Covid-19 grounded the group's fleet for almost 4 months as EU governments imposed flight or travel bans and widespread population lockdowns," Ryanair said.

The Irish airline added that its "biggest fear" right now is a second wave of Covid-19 infections across Europe in late autumn, when the annual flu season starts.

In the FTSE 250, Kainos shares surged 20% after saying it will make a special dividend payout as the IT provider reported "resilience" in its trading so far this financial year.

Kainos, which had opted not to make a final payout for the financial year ended March 31, will release a special dividend of 6.7 pence. It added that it also expects to return to its usual cycle of paying an interim and final payout.

"The resilience in our business has been driven by our long-term relationships with our customers, by on-going demand within the NHS, Public Sector and Workday segments and by our diversification of revenues across customers, end markets and geographic regions," Kainos said.

Despite Covid-19, it expects annual revenue and adjusted profit to be "well ahead" of current consensus forecasts.

Elsewhere in London, Indivior shares continued where they left off on Friday, surging 32%.

On Friday, Indivior said it will part with USD600 million to resolve criminal charges in the US related to its Suboxone film opioid dependence medication. Indivior ended Friday's session 38% higher, meaning the stock has surged 82% since the news of its US settlement.

Jefferies raised the pharmaceutical firm to Buy from Hold on Monday.

To come in Monday's economic calendar are US durable goods orders at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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