LONDON MARKET OPEN: Shell And BP Retrace But Bus Operators Cheer Aid

(Alliance News) - Stocks fell early on Friday in London, with oil majors Royal Dutch Shell and BP giving back some of the gains made on Thursday from oil's rebound, though bus operators rose on the promise of UK government help.

The FTSE 100 index was down 67.74 points, or 1.2%, at 5,412.48 in early trade.

The mid-cap FTSE 250 index was down 131.42 points, or 0.9%, at 14,305.38. The AIM All-Share index was down 0.3% at 663.02.

The Cboe UK 100 index was down 1.0% at 9,170.00. The Cboe 250 was down 0.9% at 12,328.79, but the Cboe Small Companies was up 0.2% at 7,994.80.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 0.7% and 0.6% respectively.

The number of confirmed coronavirus cases around the world has soared past one million and deaths have topped 50,000 as the US reported the highest daily death toll of any country so far.

Despite more than half the planet living in some form of lockdown, the virus is continuing to spread rapidly and to claim lives at an alarming pace, with the US, Spain and the UK all seeing their worst days yet.

The economic cost of the pandemic is getting starker by the day, with new figures on Thursday showing that an extra 6.6 million Americans signed on for unemployment benefit last week, taking to 10 million the number of people who lost their jobs in the last two weeks of March.

Brent oil was at USD30.35 a barrel early on Friday, up from USD30.02 at the London close Thursday.

Brent had hit an intra-day high of USD36.16 during Thursday's session, after US President Donald Trump saying oil production cuts are imminent after talks with Crown Prince Mohammed bin Salman of Saudi Arabia and Russian leader Vladimir Putin.

"The way the US president put the news out there was unusual. It had a bit of a Musk-style 'funding secured' feeling to it. One can only assume the 10 million barrel per day cut is happening, if not more for the president to announce it. It would represent a massive 10% cut to global output," said Jasper Lawler at London Capital Group.

"The question is how much has demand dropped because of the coronavirus lockdown? 50%? 10 million barrels is probably still not enough. We will need to see US producers also reduce output, however such an agreement would not be allowed under US anti-cartel rules. It's unclear what combination of carrot and stick Trump has used with the Russians and Saudis. It's possible we could soon see some US sanctions lifted on Russia."

London's oil majors Royal Dutch Shell and BP had gained 6% to 9% on Thursday on the Trump tweet were giving back some of that early Friday. Shell's 'A' shares were down 3.3%, while 'B' shares were down 3.2% and BP fell 4.2%.

Peers Chevron and ExxonMobil, which ended up 11% and over 7% respectively on Thursday, helped Wall Street register a strong session.

The Dow Jones Industrial Average closed up 2.2%, the S&P 500 up 2.3%, and the Nasdaq Composite up 1.7%.

The closely watched US jobs report for March comes later on Friday, although the numbers could mask the full extent of the damage Covid-19 has caused to the world's largest economy.

The US economy is expected to have lost 100,000 jobs in March, while the unemployment rate is seen at 3.8%, up from 3.5% in February.

This jobs report will follow Thursday's initial jobless claims which set an eye-watering new high. For the week ended March 28, seasonally-adjusted initial claims were a whopping 6.6 million, with the previous week's level revised up by 24,000 to stand at just over 3.3 million.

For perspective, the record high before the past two readings was 695,000, recorded in October 1982.

Back in London, UK travel operators early Friday welcomed financial support from the UK government for the bus sector amid the collapse in demand caused by Covid-19.

Bus companies in England will receive almost GBP170 million in new government funding to ensure services continue to operate during the coronavirus pandemic.

UK Transport Secretary Grant Shapps said on Friday the investment will protect crucial local transport links across England for those unable to work from home.

FirstGroup Chief Executive said he was "pleased" with the help, while his counterpart at Go-Ahead Group David Brown said he was "very pleased". Stagecoach said the aid was "welcome".

National Express, which did not put out a statement Friday, rose 4.3%. FirstGroup was up 5.4%, Go-Ahead 5.5% higher, and Stagecoach 4.7% higher.

In the FTSE 100, defence company BAE Systems dipped 1.7% as it said it is in a "strong" position with a large order backlog, mainly in the form of contracts from governments across the world.

The balance sheet is strong, BAE continued, as is liquidity. Covid-19 has had no material impact on financial performance in the first quarter of 2020, though disruption is beginning to increase.

However, BAE has still decided to defer its 13.8 pence per share final dividend for 2019 declared in February. An update on the dividend will be provided in July when reporting results for the first half of 2020.

Back in the FTSE 250, events and data firm Ascential fell 13% as it took the "difficult" decision to cancel the Cannes Lions festival this year, having already postponed it due to Covid-19.

Ascential said it would not have been commercially viable to run it this year, with the next edition running in June 2021.

Ascential has decided to withdraw the 4.0p per share final payout for 2019 declared earlier this year, which will save it GBP15 million. Salary increases, including for some executive and non-executive directors, have also been halted.

Pets at Home climbed 2.4%, as HSBC raised the pet products firm to Buy from Hold. On Thursday, the company had reported a steep rise in demand amid the Covid-19 lockdown.

Elsewhere, budget airline Ryanair edged up 0.1% after it reported a 48% fall in passenger numbers in March to 5.7 million, as airlines bear the brunt of the new coronavirus pandemic.

It operated 33,000 flights in March, just under half of the budgeted number of 64,000. Ryanair expects to carry out "minimal if any" traffic during April and May. It is currently operating less than 20 flights a day.

The firm expects pre-exceptional items post-tax profit of between EUR950 million and EUR1.00 billion in the financial year ended March 31, which is at the lower end of the previously guided range.

Ryanair will be booking a EUR300 million charge due to the ineffectiveness of fuel hedges made for financial 2021, it added.

Ryanair stressed it has one of the "strongest" balance sheets in the industry. No guidance is yet possible for its newly begun financial year.

In Asia on Friday, the Japanese Nikkei 225 index closed flat after a late surge. In China, the Shanghai Composite ended down 0.7%, while the Hang Seng index in Hong Kong is down 0.6%.

Later Friday are services PMI readings from Germany, the eurozone, the UK and US at 0855 BST, 0900 BST, 0930 BST and 1445 BST, respectively.

By George Collard; georgecollard@alliancenews.com

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