LONDON MARKET OPEN: Rebound As Risk-On Mood Brings Out Bargain Hunters

(Alliance News) - Stock prices in London opened higher on Friday morning, as investors and traders seek out bargains at the end of another volatile week.

The FTSE 100 index was up 140.71 points, or 2.7%, at 5,292.32 on Friday. Since the week began, the blue-chip index is down 0.6%. It is down 32% so far in 2020.

The mid-cap FTSE 250 index was up 782.12 points, or 6.1%, at 13,611.82, and the AIM All-Share index was up 3.6% at 610.82.

The Cboe UK 100 index was 2.1% higher at 8,949.51. The Cboe 250 was up 4.4% at 11,749.83, and the Cboe Small Companies up 0.8% at 9,724.37.

In mainland Europe, the CAC 40 in Paris was up 6.1%, while the DAX 30 in Frankfurt was up 5.9%.

The pound was quoted at USD1.1857 early Friday, up from USD1.1665 at the London equities close Thursday, though down 6% from a week ago. At this time last Friday, the pount traded at USD1.2607.

The euro was at USD1.0783 early Friday, firm from USD1.0710 late Thursday.

Against the yen, the dollar was trading at JPY109.79 early Friday in London, marginally down from JPY110.06 late Thursday.

The Bank of England has cancelled the annual stress tests for UK banks, it said Friday, in order to allow lenders to focus on providing the country with credit amid Covid-19.

In 2019, the test showed that the UK banking system was resilient to "deep simultaneous recessions" in the UK and global economies that were more severe overall than the global financial crisis, combined with large falls in asset prices and a separate stress of misconduct costs, the BoE noted.

The BoE and Prudential Regulation Authority noted "very high levels" of uncertainty around how Covid-19 will impact the economy.

Financial markets in Japan are closed for holiday on Friday. The Hang Seng index in Hong Kong ended up 5.1%. The Shanghai Composite closed up 1.6% .

"The coronavirus outbreak continues to escalate, with Italy experiencing more deaths than China, California ordering people to stay at home and London looking towards an imminent lock down," said CityIndex analyst Fiona Cincotta.

"Yet despite the rapidly growing numbers and stricter measures being implemented to contain the virus outbreak, there is a calmer mood among traders today."

Italy surpassed China on Thursday as the country with the most deaths from coronavirus, as California, home to more than 39 million people, was placed under lockdown in the most drastic containment measure yet by a US state.

US President Donald Trump said the US is fast-tracking antimalarial drugs for use as a treatment and lashed out at China for not informing the world earlier about the original outbreak.

China for its part reported on Friday a second day with no new domestic cases since the virus appeared in the central city of Wuhan in December, before spreading worldwide.

While there was a glimmer of hope in China, several nations tightened their borders and imposed lockdowns, trapping tens of millions of people in their homes.

And the UN chief warned "millions" could die if the virus spreads unchecked around the globe.

In commodities, gold was quoted at USD1,495.10 an ounce early Friday, higher than USD1,477.90 late Thursday. Brent oil was at USD29.19 a barrel, up from USD28.02.

On the LSE, InterContinental Hotels Group jumped to the top of the blue-chip index, up 23% on Friday morning, despite warnings that demand for hotels is currently at the lowest levels it has ever seen.

The company said global revenue per available room declined by 6% in January and February. While IHG reported a broadly flat performance in the US, the decline in Greater China reach almost 90% in February.

Looking ahead, IHG said it expects global decreases in March to be around 60%, with steeper declines in those markets most impacted by government restrictions.

"IHG has a robust business model, and the measures we are announcing today to reduce costs and preserve cash give us the capacity to manage the business through this unique environment and to support our owners during this incredibly difficult time," said Chief Executive Keith Barr.

The company noted that cost cutting measures are expected to result in a reduction of up to USD150 million in employee salaries and incentives.

Carnival was among the top gainers as well, up 12% in early trade.

The cruise operator reported revenue for the first quarter up 2.1% to USD4.8 billion from USD4.7 billion a year ago. However, the company swung to a first-quarter loss, with earnings dented by disruption due to the early days of the current Covid-19 pandemic.

Carnival recorded a GAAP net loss of USD781 million, or USD1.14 per share, for the quarter ended February 29. This compares to net income of USD336 million, or earnings per share of USD0.48, for the first quarter a year ago.

The impact of Covid-19 on the first quarter's net loss was around USD0.23 per share, the firm said, taking into account cancelled voyages and disruptions.

Among London mid-caps, JD Wetherspoon started the day 29% higher. The company reported revenue growth of 4.9% in the 26 weeks ended January 26 to GBP933.0 million. Like-for-like sales, meanwhile, grew by 5.0% over the first half.

The pub chain achieved 15% growth in pretax profit before exceptional items and pre-IFRS 16, up to GBP57.9 million. Post-IFRS 16 and including exceptional items, pretax profit was GBP42.0 million, down from GBP48.6 million a year ago.

Wetherspoon's said it will not be paying an interim dividend, having paid a 4.0 pence a share in the first half of its financial 2019.

"The company has decided to delay most capital projects and to reduce expenditure, where possible, including the cancellation of the interim dividend," due to the virus situtation, explained Chair Tim Martin.

Looking ahead, Wetherspoon's said in the six weeks to March 8, like-for-like sales increased by 3.2% and total sales by 2.9%. However, in the week to March 15, sales declined by 4.5%.

"In the early part of the current week, following the prime minister's advice to avoid pubs, sales have declined at a significantly higher rate," Martin added.

John Wood Group was 22% higher in the morning trading after Barclays raised the oil field services firm to Overweight from Underweight.

Investec was the worst performer, down 2.8%. The investment bank and wealth manager warned a "challenging" operating environment is going to lead to a drop in annual profit.

Anglo-South African Investec, listed in both London and Johannesburg, forecast a 7% to 14% fall in adjusted operating profit for its financial year ended March. Adjusted earnings per share are guided to decline by 16% to 23%.

In financial 2019, Investec posted an adjusted operating profit of GBP732 million and adjusted earnings per share of 60.9 pence.

The company blamed challenging market conditions as well as normalisation in its tax rate. The environment was particularly tough in the second half of its year, Investec said, in both the UK and South Africa.

Further, fourth-quarter operating performance is expected to have been held back by the effect of the Covid-19 pandemic on global markets.

The economic calendar on Friday has US existing home sales at 1400 GMT.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

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