LONDON MARKET OPEN: Moderna Gives Stocks Boost; Burberry Sales Plunge

(Alliance News) - Stock prices in London opened higher on Wednesday on increased prospects for a treatment for the deadly new coronavirus, while shares in Burberry fell after its first-quarter sales took a huge hit from the pandemic.

Hopes rose when US biotech firm Moderna said late Tuesday that it would start the final stage of human trials for its vaccine candidate later this month after promising results from earlier testing.

Moderna is considered to be in a leading position in the global race to find a vaccine, and while its study should run until October 2022, preliminary results should be available long before then.

Anthony Fauci, the top US infectious disease expert, described the early results as "encouraging".

In London, the FTSE 100 index was up 47.16 points, or 0.8%, at 6,226.91. The mid-cap FTSE 250 index was up 153.01 points, or 0.8%, at 17,327.70. The AIM All-Share index was flat at 883.48.

The Cboe UK 100 index was up 0.8% at 620.68. The Cboe 250 was up 0.5% at 14,606.10, and the Cboe Small Companies was up 5.37 points, or 0.6% at 871.92.

In mainland Europe, the CAC 40 in Paris was up 0.7%, while the DAX 30 in Frankfurt was up 0.8%.

Spreadex analyst Connor Campbell said: "After the Dow Jones rose 557 points on Tuesday night, choosing to focus on bank earnings over Covid-19 cases, the European markets got extra juiced up on the latest vaccine news. This week the spinning wheel landed on Moderna, which reported that its Covid-19 vaccine had produced a 'robust' immune response in all of the 45 patients in its early stage human trial.

"Like with every vaccine update, the fact these are only baby steps when considering the timeline of clearance, mass production and implementation didn't stop investors buying into the optimism."

On the London Stock Exchange, 3i Group was the best blue-chip performer up 3.8% after Exane BNP started coverage on the private equity investor with an Outperform rating.

Glencore was up 2.5% after Goldman Sachs started coverage on the miner and commodities trader with a Buy rating.

At the other end of the large-cap index, Burberry was the worst performer, down 5.5% after the fashion house said sales in the first quarter took a severe hit, as demand for luxury goods was dealt a blow due to the coronavirus pandemic.

For the period ending June 27, retail revenue was down 48% to GBP257 million from GBP498 million in the first quarter of 2019. Comparable sales declined 45% in the first quarter, but eased to a 20% decline in the month of June as lockdown restrictions became less stringent. The luxury retailer expects the second quarter to end of September to continue to suffer from the pandemic. In retail, it said, tourist flows are likely to remain negligible, and store operations are continuing to face significant pressures, with some remaining closed and operating with reduced trading hours.

Burberry expects retail sales performance to decline by 15% to 20% in the second quarter. In wholesale, it is collaborating with partners to protect the brand and as a result, anticipates first-half sales to fall around 40% to 50%.

It added that it expects its first-half gross margin to decline by between 200 and 300 basis points annually, but operating expenses to be cut by "mid-teens percentage".

"Burberry's latest update suggests it will be the sectors that rely on people's aspirations and disposable income, such as fashion, that will take the longest to recover from Covid-19. While lockdowns have been lifted in many places, many major cities still resemble ghost towns compared to what they were before the pandemic, which is acting as a drag on the sales of luxury fashion goods. That won't change until people get back to their normal lives again and are ready to go shopping," noted eToro analyst Adam Vettese.

The Japanese Nikkei 225 index closed up 1.6%. In China, the Shanghai Composite ended down 1.5%, while the Hang Seng index in Hong Kong is down 0.2%.

The pound was quoted at USD1.2600 Wednesday morning, up from USD1.2547 at the London equities close Tuesday following UK inflation data.

On AIM, ASOS was up 2.2% after the online fashion retailer said total retail sales in the four months to June were GBP983.3 million, up 10% on a year before. However gross margin was down by 70 basis points. It expects full-year pretax profit to be at the top end of market expectations.

Meanwhile, ASOS has dropped a slew of suppliers after unearthing health, safety and human rights threats, the Daily Telegraph reported late Tuesday. According to the newspaper, a leaked 2018 report states that ASOS inspectors had found a series of breaches at roughly a quarter of its suppliers, include some sites in the UK.

The Telegraph added that since then, ASOS has ditched several factories. One supplier in the UK that ASOS has ditched is based in Leicester, a city that has been at the heart of allegations involving peers Boohoo Group and Quiz, according to the newspaper.

Boohoo and Quiz shares were down 0.7% and 3.0% respectively.

On the economic front, UK consumer prices nudged up in June but cheap energy kept the annual inflation rate subdued, according to the latest figures from the Office for National Statistics on Wednesday.

The annual inflation rate ticked up to 0.6% in June from 0.5% in May, beating consensus, according to FXStreet, of 0.4%.

Food prices rose 1.0%, while alcohol notched a 1.4% increase. Clothing prices fell 2.2%, however.

Fuel prices remained a drag, with gas prices down 12% on a year before, and liquid fuels down 35%. Prices of fuels & lubricants slipped 16%.

Month-on-month, consumer prices rose 0.1% after May's flat reading and April's 0.2% fall. This was helped by a 17% monthly rise in liquid fuel prices.

AJ Bell analyst Laura Suter commented: "The inflation rise in June doesn't necessarily mean that it's only going to head upwards this year. As we see the effects of lockdown easing further we'd expect to see some increases in prices. But everyone from the Bank of England to the Office for Budget Responsibility expects inflation to fall further this year, before rebounding slightly next year.

"Once the fall in the oil price and the cut to energy prices from Ofgem's price cap has filtered through the system, we should see inflation start to meaningfully pick up again. However, so much could happen with the pandemic and economy between now and then that even the most avid betting man wouldn't take on the gamble of predicting where inflation will be this time next year."

The euro was changing hands at USD1.1405, flat from USD1.1403 at the European equities close Monday. Against the yen, the dollar was trading at JPY107.26, flat from JPY107.21.

Brent oil was trading at USD43.05 a barrel Wednesday morning, flat from USD43.10 at the London close Tuesday. Gold was quoted at USD1,807.10 an ounce, flat against USD1,808.60 late Tuesday.

Ahead in the US earnings calendar, lender Goldman Sachs will report second-quarter results.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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