(Alliance News) - European markets shook off rising tensions between the US and China over Hong Kong to start Thursday's session on the front foot, with the FTSE 100 on course to record its third consecutive day of gains.
easyJet was among the blue-chip risers as it announced plans to cut up to 30% of its workforce, while Cineworld shares climbed more than 20% in the FTSE 250 as it eyed a July re-opening of its movie houses.
The FTSE 100 index was up 23.18 points, or 0.4%, at 6,167.43 early Thursday. The mid-cap FTSE 250 index was up 116.65 points, or 0.7%, 17,260.27. The AIM All-Share index was up 1.1% at 861.56.
The Cboe UK 100 index was up 0.5% at 10,432.49. The Cboe 250 also was up 0.5%, at 14,739.59, and the Cboe Small Companies up 0.6% at 9,100.48.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both 0.7% higher early Thursday.
"European bourses are looking to extend gains for a third straight session on Thursday as optimism over the reopening of economies once again overshadows rising tensions between the US and China over Hong Kong," said Fiona Cincotta at City Index.
Washington on Wednesday requested an emergency UN meeting over a controversial security law China has proposed for Hong Kong, but Beijing refused to allow it to proceed, according to US diplomats.
The US spelled out its desire for the Security Council session, saying it was "deeply concerned" by Beijing's move, which would ban "sedition" and other perceived offences in the international finance hub.
Hong Kong activists say that the proposed law effectively abolishes the basic freedoms enjoyed in the city since it was returned to China by the British in 1997.
It will "fundamentally undermine Hong Kong's high degree of autonomy and freedoms as guaranteed under the Sino-British Joint Declaration of 1984, which was registered with the UN as a legally binding treaty," Washington's UN mission said in a statement.
"This is a matter of urgent global concern that implicates international peace and security," the statement continued. But, it said, China has "has refused to allow this virtual meeting to proceed."
The Beijing legislature is expected on Thursday to move forward on the law, bypassing Hong Kong's own lawmaking body.
The US already announced earlier Wednesday that Hong Kong would no longer enjoy the autonomy promised by China under US law, opening the door to potential trade retaliation.
City Index's Cincotta said: "The backdrop of cooling relations between US and China could limit gains, but we are not seeing that here in Europe at the moment. Instead stocks are bounding higher on the expectations that consumers will be coming out of lock down with an increased desire to spend, making up for those months stuck at home. This rally does of course assume that consumers will feel financially confident to continue spending."
Asian equities trade on Thursday displayed the conflicting influences on markets. Stocks in Japan and Australia rose, while those in China slumped. The Nikkei 225 index in Tokyo closed up 2.3% and the S&P/ASX 200 in Sydney up 1.3%. The Shanghai Composite ended up 0.3%, while the Hang Seng index in Hong Kong was down 1.0%.
In the FTSE 100, easyJet rose 4.1% after setting set out plans to reduce the business as it warned pre-Covid demand is not expected to be reached again until 2023.
The low-cost airline confirmed it will take to the skies again on June 15 on a "small" number of routes where there is sufficient demand to support profitable flying. This will mainly comprise domestic travel in the UK and France.
Further routes will be announced as demand increases and government restrictions across Europe are relaxed, easyJet said. So far, booking trends on the resumed flights have been encouraging, and the demand indications for summer 2020 are improving, albeit from a low base. Bookings for winter are well ahead of the equivalent point last year, including customers who are rebooking coronavirus-disrupted flights for later dates.
In the company's financial fourth quarter to the end of September, easyJet expects to fly around 30% of the planned capacity flown in the fourth quarter a year ago.
"Looking further forward, easyJet expects its year-end 2021 fleet size to be at the bottom end of our fleet range at around 302 aircraft, which is 51 aircraft lower than the anticipated fleet size for year-end 2021 which was reported to the market prior to Covid-19," the carrier said.
Alongside this, easyJet is planning to reduce staff numbers by up to 30%. It will shortly launch an employee consultation process.
Among the mid-caps, Cineworld rose 22% as it eyed a July reopening of its cinemas.
The cinema chain said its lenders have agreed to waive the leverage covenant for its credit facility's June test, and has increased the covenant to 9.0 times net debt to Ebitda for the December test.
The group has agreed the terms of USD110 million of additional liquidity through an increase in its revolving credit facility. It also has secured credit committee approval to apply for an additional USD45 million through the Coronavirus Large Business Interruption Loan Scheme in the UK and expects shortly to commence a process to access USD25 million through the US government CARES Act.
Cineworld expects cinema restrictions will be lifted in each of its territories by July, and it plans to reopen all its cinemas that month.
Stagecoach was up 5.2% as it reported improved financial liquidity.
Available liquidity has increased "significantly" due to positive cashflow and new borrowing capacity. Due to the strong liquidity position, Stagecoach has increased its planned 2020/21 capital expenditure by GBP14 million to include additional vehicles available for delivery in the short-term.
For its financial year recently-ended, on May 2, Stagecoach expects adjusted earnings per share between 12.5p and 14.0p. The year before, adjusted EPS from total operations came in at 22.1p.
"We see a lasting effect of the Covid-19 pandemic on travel patterns with an acceleration in trends of increased working from home, shopping from home, telemedicine and home education. We anticipate that it will be some time before demand for our public transport services returns to pre-Covid levels and we are planning for a number of scenarios," said Chief Executive Martin Griffiths.
boohoo shares gained 11% after the online fashion retailer said it is buying the remaining 34% stake in PrettyLittleThing from minority shareholders Umar Kamani and Paul Papworth for an initial consideration of GBP269.8 million, potentially rising to GBP323.8 million.
"By acquiring the remaining 34% stake in PLT today, the group is taking an important further step towards achieving its vision to lead the fashion e-commerce market globally by accelerating full ownership of a brand that is in high growth with enormous growth potential ahead of it, in a transaction that creates significant value for the group's shareholders," said boohoo.
boohoo bought a 66% stake in PrettyLittleThing for GBP3.3 million in 2016 and had the option to buy the remaining stake in 2022.
The initial consideration will be settled in a combination of shares and cash, worth GBP107.9 million and GBP161.9 million respectively. The cash element will be funded from the GBP240.7 million net cash the group had on its balance sheet at the end of February.
boohoo's purchase comes a just a day after it "strongly" refuted allegations made by short seller ShadowFall. ShadowFall claimed boohoo has provided "a misleading impression" of its free cash flow.
"We see a risk that BOO doesn't use its recent cash call for mergers & acquisitions, but instead combines it with its considerable GBP241 million net cash, to be paid to BOO's chair's son, through material dividends and a potential PrettyLittleThing [non-controlling interest] buy-out," the short seller also alleged.
The chief executive and founder of PrettyLittleThing is Umar Kamani, son of boohoo Chair & Co-Founder Mahmud Kamani.
The economic events calendar on Thursday has eurozone economic sentiment at 1000 BST, German inflation figures at 1300 BST and US GDP and initial jobless claims readings at 1330 BST.
The euro traded at USD1.1006 early Thursday ahead of the data, up from USD1.0977 late Wednesday. Sterling was quoted at USD1.2264 early Thursday, higher than USD1.2217 at the London equities close on Wednesday.
Against the yen, the dollar was quoted at JPY107.83, flat on JPY107.80.
Gold was priced at USD1,720.85 an ounce early Thursday, sharply higher than USD1,701.04 on Wednesday. Brent oil was trading at USD33.84 a barrel early Thursday, soft on USD34.43 late Wednesday.
By Lucy Heming; lucyheming@alliancenews.com
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