LONDON MARKET OPEN: Travel, Oil Stocks Rise; Eyes On US Jobless Claims

(Alliance News) - London stocks jumped at the open on Thursday as a rally on Wall Street overnight helped to boost sentiment.

There were broad gains in London in early trade, with travel firms gaining back some ground lost due to the Covid-19 pandemic, while oil stocks rose ahead of an OPEC+ meeting later on Thursday.

In the economic calendar, focus lies on US jobless claims later in the day following two straight weeks of dramatically worse-than-expected numbers. Over the past fortnight alone, initial jobless claims have surged by nearly 10 million.

The FTSE 100 index was up 129.42 points, or 2.3%, at 5,807.15 early Thursday. The mid-cap FTSE 250 index was up 79.34 points, or 2.8%, at 16,309.89, while the AIM All-Share index was up 1.4% at 737.94.

The Cboe UK 100 index was up 2.7% at 9,840.17. The Cboe 250 was up 3.1% at 14,068.16, and the Cboe Small Companies up 0.5% at 8,319.65.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both up 1.7% in early dealings.

"The mood in markets continues to improve but it's patchy. Virus cases continue to rise at a rapid clip but markets are extrapolating the data forward and hoping we're close to a peak," said Jasper Lawler at London Capital Group.

"Asian and European markets are playing catch-up to the rally on Wall Street with a more positive start on Thursday," said Lawler.

The Dow Jones Industrial Average ended up 3.4% on Wednesday, the S&P 500 also 3.4% higher and the Nasdaq Composite advancing 2.6%.

The uncertainty around the global coronavirus pandemic's duration and severity creates "major downside risks" to the US economy, the Federal Reserve said Wednesday.

The US is sure to take a hit in the near-term as businesses are forced to close and consumers are confined to their homes, the Fed said in the minutes of the March 15 emergency policy meeting, when the central bank slashed the benchmark interest rate to zero.

But while the shutdowns imposed to contain the virus create hardship for businesses and households, they should not have the lasting impact that was seen in the wake of the global financial crisis in 2008, Fed officials said.

The minutes were released as the US saw nearly 2,000 coronavirus deaths for a second day running as the toll soared again in Europe.

The US reported the highest one-day toll on record, with 1,973 deaths over a 24-hour period – reaching nearly 2,000 for the second day in a row.

Italy and Spain are still recording hundreds of deaths a day, and the situation is also deteriorating in the UK, which saw a record 938 fatalities Wednesday as Prime Minister Boris Johnson spent a third day in intensive care.

In the Chinese city of Wuhan, where the novel coronavirus first emerged in December, there was cause for celebration, however, as a ban on outbound travel was lifted.

In Asia on Thursday, the Japanese Nikkei 225 index ended flat. In China, the Shanghai Composite ended up 0.4%, while the Hang Seng index in Hong Kong is up 1.3%.

Amid broad-based gains in London, beleaguered travel firms were among the risers. Cruise operator Carnival was up 7.4%, Intercontinental Hotels Group up 7.3% and British Airways-owner International Consolidated Airlines up 5.5%.

Oil majors were higher as the price of Brent rose ahead of Thursday's OPEC+ meeting. BP shares were up 3.1%, while Royal Dutch Shell 'A' and 'B' shares rose 2.5% and 3.0% respectively.

Brent oil was trading at USD33.84 a barrel early Thursday, up from USD31.56 late Wednesday.

Oil prices rose Thursday after Russia said it was ready to slash output, fuelling hopes that key producers are poised to seal a deal aimed at boosting coronavirus-hit energy markets.

Exporting group OPEC and allies including Russia as well as other major producers will hold a teleconference later in the day with expectations growing that they will agree to reduce output to support the struggling market.

Prices are at near-two-decade lows with travel restrictions and lockdowns imposed to halt the spread of the virus throttling demand, and Riyadh and Moscow locked in a vicious price war.

In commodities, gold was quoted at USD1,655.20 an ounce early Thursday, up on USD1,650.50 on Wednesday.

Among London listings, Diageo rose 3.0% despite saying the widespread closure of bars and restaurants due to Covid-19 is having a "significant impact" on its performance.

In mainland China, the distiller and brewer said it is beginning to see "a very slow return" of on-trade consumption. In Europe and North America, there has been some pick-up in retail stores amid the closure of bars, but it is "unclear whether this will be sustained".

The Smirnoff vodka maker stressed that it has a strong balance sheet, and added that it will not initiate the next phase of its three-year buyback programme during the remainder of 2020.

"Given the global nature of the Covid-19 pandemic, and the uncertainty around the severity and duration of the impact across multiple markets, we are not in a position to accurately assess the impact of this on our future financial performance. We are therefore withdrawing our guidance on group organic net sales growth and organic operating profit growth for fiscal 2020," said Diageo.

In the FTSE 250, bookmaker William Hill was up 13% after RBC raised the stock to Outperform from Sector Perform.

Trainline shares advanced 6.1%. The ticketing platform said it has a "secure" liquidity position and has paused marketing and other discretionary spend in order to mitigate the fallout from Covid-19.

Since listing in June 2019, Trainline has delivered "strong growth" in net ticket sales, revenue and earnings while significantly reducing net debt, it said.

"Given a significant fall in industry passenger numbers over the past month as a result of the Covid-19 lockdown, we have taken quick and decisive measures to reduce operating costs and cash outflows," the company said.

These actions include pausing marketing and other discretionary spend, introducing a recruitment freeze, deferring bonus payments and pay reviews for staff and revising payment terms with some of the company's suppliers.

As a result, Trainline's cash outflow from operating costs and capital expenditure has reduced to around GBP8 million to GBP9 million per month.

To come in the economic events calendar for Thursday Irish inflation is at 1100 BST and ECB minutes are at 1230 BST.

Already released, data showed the UK economy contracted in February even before the Covid-19 situation intensified in Europe.

For the month of February, gross domestic product fell by 0.1% month-on-month after a 0.1% rise in January. Consensus had seen February's growth rate matching that of January.

Sterling was quoted at USD1.2395 following the data, down from USD1.2390 at the London equities close on Wednesday.

The euro traded at USD1.0866 early Thursday, down on USD1.0869 late Wednesday.

Against the yen, the dollar was quoted at JPY108.94 versus JPY108.80.

"There are no further UK economic data releases today, but there are a couple of timely measures in the US. Weekly initial jobless claims have surged by almost 10 million over the past two weeks and a further rise of as much as 5 million is forecast for this week," said Lloyds Bank.

US producer prices are at 1330 BST, with initial jobless claims due at the same time.

By Lucy Heming; lucyheming@alliancenews.com

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