LONDON MARKET OPEN: Stocks Dip On Second Wave Worry; BoE Decision Due

(Alliance News) - Share prices in London opened lower on Thursday as worries over a second Covid-19 wave lingered with the risk-off mood further driven by tensions between the US and China.

The pound edged up slightly ahead of the Bank of England's latest monetary policy decision due at midday. Sterling was quoted at USD1.2532 early Thursday, firm against USD1.2525 at the London equities close on Wednesday.

"The Bank of England is expected to announce an increase in its asset purchase programme at today's policy update. It will need to do if it plans to continue to add to its net holdings after early July. We expect the Monetary Policy Committee will opt for a GBP100 billion increase, although there has been some speculation about a larger rise," said Lloyds Bank.

The FTSE 100 index was down 24.72 points, or 0.5%, at 6,228.53 early Thursday. The mid-cap FTSE 250 index was down 85.87 points, or also 0.5%, at 17,496.49. The AIM All-Share index was up 0.2% at 889.33.

The Cboe UK 100 index was down 0.5% at 10,532.84. The Cboe 250 was down 0.4% at 15,064.44, and the Cboe Small Companies up 0.3% at 9,906.95.

In mainland Europe, the CAC 40 in Paris was down 0.6% while the DAX 30 in Frankfurt was down 0.3% early Thursday.

"Fears if a second wave of coronavirus persisted overnight dragging on risk sentiment, pulling Asian markets lower and setting European bourses up for a lower start," said Fiona Cincotta at City Index.

In Asia on Thursday, the Japanese Nikkei 225 index ended down 0.5%. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong is down 0.4% in late trade.

Beijing has reported a decline in newly confirmed cases of coronavirus as the city continued to press stricter measures to contain a new outbreak.

The Chinese capital reported 21 new cases, down from 31 on Wednesday, and these were among 28 new cases recorded across the whole country.

Beijing moved to suspend classes and restrict tourism and travel in and out of the city earlier this week to stem any further spread in the latest outbreak traced to the city's largest wholesale market.

Cincotta added: "The number of cases in some US states are rising to record levels, which is unnerving investors. Texas, saw its largest daily increase in infections since the start of the coronavirus pandemic."

Also damping the mood were further tensions between the US and China.

Secretary of State Mike Pompeo met over nearly nine hours at a Honolulu military base with senior Chinese official Yang Jiechi, in the two countries' highest-level meeting since the coronavirus pandemic sent tensions skyrocketing, a State Department official said.

Just as Pompeo met Yang, Trump signed into law an act that authorises sanctions for Chinese officials involved in the detention of some one million Uighur Muslims and other Turkic Muslims. Beijing quickly responded that the law "maliciously attacks" China and threatened consequences.

In London, cruise operator Carnival was the worst performer in the FTSE 100, down 5.3% after Berenberg cut the stock to Sell from Hold.

Taylor Wimpey shed 5.2% after raising GBP522 million in a placing, subscription and retail offer.

Taylor Wimpey placed 355.0 million shares at a price of 145p each, raising GBP515 million. Concurrently, directors subscribed for 324,823 shares in total at the same price, while employees and other retail investors subscribed for 4.9 million shares via the PrimaryBid platform.

The placing price represented a 4% discount to Wednesday's closing price of 151.8p.

National Grid was down 1.0% as it forecast a GBP400 million hit from Covid-19 in the financial year ahead after reporting a dip in profit for its recently-ended one.

Revenue in the year to March 31 edged down 2.6% to GBP14.54 billion from GBP14.93 billion, while pretax profit fell 5% to GBP1.75 billion from GBP1.84 billion.

The power company took a GBP117 million provision for bad debts in the period, and expects a "slightly bigger" impact in the financial year due ahead to the weaker economic backdrop.

National Grid expects Covid-19 to hit underlying operating profit by GBP400 million in the year ahead amid additional costs in the UK and higher bad debt charges in the US. For the recently ended financial year, underlying operating profit amounted to GBP3.45 billion, up 1% on the year before that.

"Whilst Covid-19 will impact our financial performance in FY21, we expect this to be largely recoverable over future years and therefore anticipate no material economic impact on the group in the long-term. We continue to target asset growth of 5% to 7% in the near term and with an efficient balance sheet that underpins asset and dividend growth, the group is well positioned to create value for shareholders," said Chief Executive John Pettigrew.

National Grid will payout a full-year dividend of 48.57 pence, up 2.6% on the year before.

Among the blue-chip risers was Tesco, up 1.0% after agreeing to sell its business in Poland for GBP181 million.

"We have seen significant progress in our business in Central Europe, but continue to see market challenges in Poland. Today's announcement allows us to focus in the region on our business in Czech Republic, Hungary and Slovakia, where we have stronger market positions with good growth prospects and achieve margins, cashflows and returns which are accretive to the group," said Chief Executive Dave Lewis.

The sale includes the disposal of 301 stores, with the associated distribution centres and head office, to Salling Group. Net proceeds from the sale are expected to be GBP165 million, settled in cash, with completion expected in the current financial year.

Further, the grocer said it has made "good progress" in selling its remaining Polish property outside of the transaction.

Over the past 18 months, it has either sold or agreed to sell 22 stores for net proceeds of GBP200 million. Tesco said it will seek to realise value from the remaining assets, which include 19 currently trading stores not covered in the Salling transaction.

Outside of equities, safe haven assets firmed amid Thursday's cautious mood. Against the yen, the dollar was quoted at JPY106.91, down from JPY107.24 a day before, while gold traded at USD1,726.96 an ounce early Thursday, firm versus USD1,724.21 on Wednesday.

Elsewhere in commodities, Brent oil was trading at USD40.82 a barrel early Thursday, soft versus USD40.90 late Wednesday.

The euro traded at USD1.1256 early Thursday, higher than USD1.1221 late Wednesday.

The economic events calendar on Thursday has US jobless claims at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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