LONDON MARKET OPEN: Stocks Shrug Off UK Recession; Admiral Rises

Alliance News) - Stock prices in London opened mixed on Wednesday after the UK officially entered into recession for the first time since the 2008-09 financial crisis, though there were tentative signs of a recovery.

In London, early Wednesday, the blue-chip FTSE 100 index was up 18.72 points, or 0.2%, at 6,173.06. The mid-cap FTSE 250 index was down 7.57 points at 17,989.31. The AIM All-Share index was up 0.1% at 946.95.

The Cboe UK 100 index was up 0.4% at 614.69. The Cboe 250 was down 0.1% at 15,378.68, and the Cboe Small Companies was flat at 9,441.65.

In mainland Europe, the CAC 40 index in Paris was down 0.3%, while the DAX 30 in Frankfurt was down 0.4%.

The UK economy entered into recession for the first time since the financial crisis with the sharpest quarterly decline in economic activity in at least 65 years, according to figures the Office for National Statistics on Wednesday.

On an annual basis, UK gross domestic product fell 21% in the three months to June, having contracted 1.7% in the first quarter of 2020. Market forecasts, cited by FXStreet, was for an annual contraction of 22%.

On a quarterly basis, UK GDP shrank by 20% having contracted 2.2% in the first three months of 2020. The quarterly figure was in line with the consensus estimate.

However, the ONS highlighted there has been a phased easing of lockdown restrictions through May and June, including the reopening of non-essential shops. The ONS said this is reflected in the latest figures, which show some rebound in June, when GDP increased by 8.7% on the month.

The pound was quoted at USD1.3044 Wednesday morning, down from USD1.3084 at the London equities close Tuesday. Sterling picked up from an overnight low of USD1.3017 versus the greenback.

"With plenty of forewarning, the FTSE shook off the UK's worst quarterly GDP reading on record this Wednesday - and actually found some reason to celebrate...for the overall quarter the economy shrank by 20%, [but] the economy grew by 8.7% in June. And while that still leaves the UK way off where it was pre-pandemic, it has sparked hopes that the country can turn the ship around," commented Spreadex analyst Connor Campbell.

In the FTSE 100, Admiral Group was the best performer, up 6.5% after the insurer reinstated its special dividend and reported a rise in profit.

For the half-year ended June 30, net revenue rose to GBP689.7 million from GBP647.2 million, and pretax profit was up to GBP286.1 million from GBP218.2 million.

Admiral declared an interim dividend of 70.5 pence, up 12% from 63p last year. In addition, Admiral said its deferred special dividend from 2019 of 20.7p will be paid alongside the 2020 interim dividend.

Just Eat Takeaway.com was up 3.5% after the online takeaway platform said revenue rose as a result of increased demand for food deliveries during lockdown.

The firm said the integration of Takeaway.com with Just Eat is on track and progressing well. The merger completed in April.

For the half-year ended June 30, revenue multiplied to EUR675 million from EUR179 million last year. The figures are presented as if the combination was completed on January 1, 2019 to provide comparable information for the full six-month period, the company said.

Like-for-like revenue grew by 44% to EUR1 billion from EUR715 million a year ago. But the company's net loss widened to EUR158 million from EUR27 million.

During the period there was a 32% increase in orders to 257 million, with many restaurants turning to takeaway deliveries due to lockdown restrictions.

Adjusted earnings before interest, taxes, depreciation and amortization came in at EUR177 million, up from EUR76 million a year earlier.

M&G was up 3.3%. The investment manager said the first-half performance was "resilient" amidst the global economic impact of the Covid-19 pandemic, but does not intend to raise shareholder payouts while the "threat of Covid-19 remains".

M&G, which was demerged from Prudential in 2019, added that it remains committed to its dividend policy of stable or increasing payouts. It has declared an interim dividend of 6.00 pence per share, in line with its policy of paying one-third of the previous year's final dividend.

The London-based company posted pretax profit of GBP665 million for the six months to June 30, down 53% from GBP1.43 billion a year ago.

Gross premiums fell year-on-year to GBP3.46 billion from GBP5.91 billion. Earned premiums, net of reinsurance from continuing operations, were down 44% at GBP3.02 billion.

First-half adjusted operating profit before tax - the company's preferred profit measure - totalled GBP309 million, down 57% from GBP714 million a year ago.

At the other end of the large-cap index, International Consolidated Airlines Group was the worst performer, down 3.0% after Davy downgraded the British Airways parent to Neutral from Buy.

Meanwhile, British Airways has signed an agreement in principle with unions GMB and Unite over its restructuring plan.

The agreement applies to "those colleagues working above the wing in Heathrow and in engineering" and was announced in a staff letter by Alex Cruz, chief executive of British Airways, on Tuesday. The letter, seen by Alliance News, was first reported by the Financial Times.

The dollar was stronger across the board.

The euro was quoted at USD1.1737, down from USD1.1770 late Tuesday. Against the yen, the dollar was quoted at JPY106.75, firm from JPY106.49 in London.

In Asia, the Japanese Nikkei 225 index ended up 0.4%. In China, the Shanghai Composite is ended down 0.7%, while the Hang Seng index in Hong Kong is up 1.0%.

Gold was trading at USD1,915.31 an ounce early Wednesday, lower from USD1,947.40 at Tuesday's equities close in London. The precious metal's price collapsed from the USD2,026 mark at the start of the week.

Brent oil was priced at USD44.92 a barrel Wednesday morning, soft from USD45.12 a barrel at Tuesday's close.

In Wednesday's economic calendar there is a eurozone industrial production print at 1000 BST, followed by US MBA mortgage applications at 1200 BST and the US consumer price index reading at 1330 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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