LONDON MARKET OPEN: Stocks Up As US-China Trade Fears Averted For Now

(Alliance News) - London stocks started the week on the front foot with the US-China phase one trade deal intact for now, despite Hong Kong tensions, and Monday's mood buoyed by some upbeat manufacturing data overnight from China.

The FTSE 100 index was up 102.18 points, or 1.7%, at 6,178.78 early Monday. The mid-cap FTSE 250 index was up 247.88 points, or 1.5%, at 17,290.84. The AIM All-Share index was up 0.7% at 880.99.

The Cboe UK 100 index was up 1.9% at 10,439.08. The Cboe 250 was up 1.3% at 14,771.14, and the Cboe UK Small Companies up 0.3% at 9,195.29.

In mainland Europe, the CAC 40 in Paris was up 1.5%.

"Whilst riots and demonstrations in the US dominated the weekend headlines, the markets were more focused on President Trump's speech on Friday. A softer tone from Trump combined with encouraging PMI's from China have resulted in rising risk sentiment at the start of the new week," said Fiona Cincotta at City Index.

President Donald Trump on Friday said the US will "begin the process" of revoking Hong Kong's special trading status and withdraw from the World Health Organization, taking drastic steps as his feud with Beijing over the coronavirus pandemic escalates.

"They broke their word to the world on ensuring the autonomy of Hong Kong," Trump said from the White House, referring to Beijing's imposition of controversial national security legislation on the semi-autonomous territory and global financial centre.

"Therefore I am directing my administration to begin the process of eliminating policy exemptions that give Hong Kong different and special treatment," Trump said, adding the move will impact the "full range" of agreements with Hong Kong, including customs and travel agreements.

The latest moves by the president are sure to roil relations with Beijing and threaten to jeopardize the first-phase US-China trade deal signed earlier this year.

A formal status change would also be a major blow to Hong Kong's trading relationship with the US and the territory's status as a key Asian financial hub, which also serves as a port for Beijing's financial and commercial transactions with other countries.

While Trump's comments appeared to be a sweeping revocation of the special status it remains unclear if the president will formally end the decades-long relationship with Hong Kong, or if he will take a more piecemeal approach.

In Asia on Monday, the Japanese Nikkei 225 index closed up 0.9%. In China, the Shanghai Composite ended up 2.2%, while the Hang Seng index in Hong Kong is up 3.3%.

Cincotta added: "Optimum surrounding the reopening of economies continues to drive trading. Asian stock markets hit a three-month high as the post coronavirus recovery continues. Here in the UK, lower Covid-19 infection rates and death rates have led Boris Johnson to ease lockdown restrictions further".

The UK partially reopened schools on Monday and allowed the most vulnerable to venture outdoors despite warnings that the world's second worst-hit country is moving too quickly out of its coronavirus lockdown.

A death toll that now officially stands at 38,489 has piled political pressure on Prime Minister Boris Johnson, who was elected in December with a big majority.

As England's lockdown eases, Associated British Foods eyed the reopening of its Primark stores on June 15. The stock was up 5.9% in early trade in London.

The low-cost fashion retailer's parent said trading at re-opened Priarmk stores has been "reassuring" as it prepares to lift the shutters on shops in England.

All its Primark stores were closed over a 12-day period from March 11. As European governments have begun to ease restrictions on clothing retail, it has been able to re-open stores, as of Monday trading in 112 shops, or 34% of its total selling space.

It is working to re-open its stores in England on June 15, at that date expecting to be operating from 281 stores, representing 79% of total selling space. AB Foods is awaiting further guidance for the stores in Northern Ireland, Wales and Scotland and anticipate openings in late June.

The firm said it managed to exceed its estimate of a 50% reduction in Primark overheads in May and April.

"Trading in our re-opened stores has been both reassuring and encouraging, with customer queues outside most stores and, once in store, spending on larger basket sizes. However, the trading results since re-opening were delivered over a very short period, will have been influenced by a number of specific factors, and may not be indicative of a long term pattern. Cumulative sales since re-opening, on a like-for-like basis, were down on the same period last year in aggregate," said AB Foods.

Also higher in the FTSE 100 at the start of the week was Standard Chartered, up 5.4% after Jefferies raised the lender to Buy from Underperform, while Perason advanced 4.9% after an upgrade to Buy from Neutral by Goldman Sachs.

Elsewhere in London, Ted Baker was down 15% on plans to raise GBP95 million and a swing to a loss in its recently-ended financial year.

The upmarket fashion retailer reported a pretax loss of GBP79.9 million for the year to January 25 versus a profit of GBP30.7 million the year before. Revenue fell 1.4% to GBP630.5 million.

Ted Baker intends to raise GBP95 million in a fully underwritten placing and open offer and firm placing.

"I am confident that our transformation plan will enable us, Ted Baker, to capitalise on our opportunities and deliver value for all of our shareholders," said Chief Executive Rachel Osborne.

To come in the economic events calendar on Monday are manufacturing PMI readings from France, Germany, the eurozone, UK and US at 0850 BST, 0855 BST, 0900 BST, 0930 BST and 1445 BST respectively.

Sterling was quoted at USD1.2407 early Monday ahead of the data, higher than USD1.2330 at the London equities close on Friday. The euro traded at USD1.1135 early Monday, up from USD1.1117 late Friday.

Already released, IHS Markit figures showed the easing of restrictions related to the coronavirus pandemic led to a rise in Chinese manufacturing output in May.

The headline seasonally adjusted purchasing managers' index - a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy - rose to 50.7 in May from 49.4 in April.

The above 50.0 reading signalled a renewed improvement in overall operating conditions, albeit only marginal.

May data signalled a further increase in output, IHS Markit said, following February's record decline, with firms widely mentioning the resumption of works due to an easing of Covid-19 related measures.

In Japan, meanwhile, the country's manufacturing downturn accelerated in May. The headline au Jibun Bank Japan manufacturing PMI fell for a fourth successive month in May to 38.4, signalling a sharper rate of deterioration in the health of the sector than in April, when it was recorded at 41.9.

Against the yen, the dollar was quoted at JPY107.61 versus JPY107.75.

Gold was quoted at USD1,740.09 an ounce early Monday, higher than USD1,732.75 on Friday. Brent oil was trading at USD37.74 a barrel early Monday, up from USD35.72 late Friday.

By Lucy Heming; lucyheming@alliancenews.com

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