LONDON MARKET OPEN: Stocks Drop On Rising Virus Cases; Airlines Fall

(Alliance News) - Stock prices in London opened lower on Monday amid a rise in Covid-19 cases, while travel stocks fell after German carrier Lufthansa warned of a worsening outlook for the sector.

Investor sentiment was hurt by a surge of coronavirus cases across the US and Europe. The new wave already had forced governments in several countries including the UK, Germany and France to reimpose tough restrictions to prevent the disease from spreading.

Spain declared a national state of emergency on Sunday to tackle a second coronavirus wave as the World Health Organization reported a third straight day of record new infections across the world.

The WHO has warned that some countries are on a "dangerous track", with too many witnessing an exponential increase in cases, and called on countries to take further action to curb the spread of the disease.

In total, the UN agency's figures showed that 465,319 cases were declared on Saturday alone, half of them in Europe.

Italy has ordered the closure of theatres, cinemas and gyms and said bars and restaurants must shut early.

In the US, a record of nearly 80,000 new Covid-19 infections over the course of a day were reported on Friday, according to figures from Johns Hopkins University.

The virus has now claimed the lives of 1.1 million people and infected more than 42 million globally.

The FTSE 100 index was down 38.67 points, or 0.7%, at 5,821.61. The FTSE 250 was down 159.55 points, or 0.9%, at 17,950.02. The AIM All-Share was 0.2% lower at 978.42.

The Cboe UK 100 was down 0.9% at 576.68. The Cboe 250 was down 0.7% at 15,218.56 and the Cboe Small Companies down 0.1% at 9,650.09.

In Paris the CAC 40 was down 1.2%, while the DAX 30 in Frankfurt was down 2.1%.

"Another spike in Covid-19 cases both in the US and Europe has dented sentiment. Despite some positive developments from the likes of Gilead and AstraZeneca on the search for a vaccine, the immediate damage is already being felt in the real economy, with unemployment and the containment of the virus becoming [US] election focal points," Interactive Investor's Richard Hunter said.

In the FTSE 100, AstraZeneca was up 0.9% after the Anglo-Swedish drugmaker late Friday said clinical trials for its AZD1222 coronavirus vaccine, being developed alongside Oxford University, have been resumed around the world, as regulators in the US, UK, Brazil, South Africa and Japan confirmed that it is safe to do so.

The US Food & Drug Administration authorised the restart of the trials in the US, after they had resumed in other countries in recent weeks, following the review of all safety data from trials in other regions.

At the other end of London large caps, British Airways parent International Consolidated Airlines as down 2.8% on fresh worries over Covid-19 restrictions.

Sentiment towards the travel sector was hurt after German airline Deutsche Lufthansa said it was planning further cost-cutting measures including reducing its fleet and grounding additional aircraft due to ongoing travel restrictions, the company's board wrote in a letter to staff on Sunday.

Lufthansa shares were down 4.7% in Frankfurt.

Midcap travel stocks Tui and easyJet were down 6.1% and 1.9% respectively. Ryanair Holdings was down 1.1%.

Royal Dutch Shell 'A' and 'B' shares were down 2.2% and 2.1% respectively and BP was down 0.7%. The oil major was tracking spot oil prices lower.

Brent oil was trading at USD40.88 a barrel on Monday morning, down sharply from USD42.25 late Friday.

Warring factions in Libya signed a countrywide ceasefire on Friday brokered by the United Nations. The ceasefire is poised to lead to more Libyan oil supply to the market at a time when demand is weak.

"The chief culprit was Libya, where the national oil body lifted all its force majeure's and [will] ramp up production to 1 million barrels per day in the next few weeks," said Oanda Markets analyst Jeffery Halley.

"The return of just one million barrels per day of extra production to the world market has sent oil into a tailspin. It highlights how fragile sentiment is to the supply/demand balance of oil in international markets. A double-dip recession in Europe will add to the demand concerns," Halley added.

The Japanese Nikkei 225 index closed down 0.1%. In mainland China, the Shanghai Composite closed down 0.9%. Financial markets in Hong Kong were closed for a local holiday, the Chung Yeung festival.

The pound was quoted at USD1.3015 Monday morning, down from USD1.3050 at the London equities close Friday.

The euro was priced at USD1.1828, lower from USD1.1840. Against the yen, the dollar was trading at JPY104.87, flat from JPY104.80.

Elsewhere in commodities, gold was quoted at USD1,897.25 an ounce, lower from USD1,900.50.

The economic events calendar on Monday has US new home sales at 1500 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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