LONDON MARKET OPEN: Travel Stocks Weigh As UK Quarantine List Grows

(Alliance News) - Stock prices in London opened lower on Friday as economic data from China raised fears over its economic recovery, while travel stocks fell after the UK added France to its 14-day quarantine list.

In London, early Friday, the blue-chip FTSE 100 index was down 54.94 points, or 0.8%, at 6,137.20. The mid-cap FTSE 250 index was down 102.88 points, or 0.6% at 17,814.50. The AIM All-Share index was off 0.1% at 955.87.

The Cboe UK 100 index was down 0.9% at 611.69. The Cboe 250 was down 0.8% at 15,230.68, and the Cboe Small Companies was flat at 9,631.65.

In mainland Europe, the CAC 40 index in Paris was down 0.2%, while the DAX 30 in Frankfurt was down 0.4%.

"After a couple of sessions arguably on the sidelines, Covid-19 returned to the forefront of investors' minds following the latest China data dump and another UK travel update. Once again Chinese retail sales became a sticking point for the markets," said Spreadex analyst Connor Campbell.

"July's reading marked the second month in a row that retail sales in the country had failed to climb back into positive territory as expected. Combine that with an industrial production reading that remained unchanged at 4.8%, missing the forecast 5.1%, and there are signs of a stalling recovery in the superpower," Campbell added.

On the London Stock Exchange, British Airways parent International Consolidated Airlines was the worst blue-chip performer, down 4.0% after UK quarantine measures were imposed on France, effective from Saturday.

Midcap budget airline easyJet was down 5.5% and Anglo-German travel firm Tui was down 5.6%. Irish carrier Ryanair Holdings was down 3.5%. In addition, WH Smith - which generates a substantial amount of its revenue from stores in airports and train stations - was the worst midcap performer, down 8.0%.

People arriving in the UK after 0400 BST on Saturday will be required to spend 14 days in self-isolation due to rising numbers of coronavirus cases in France. The conditions will also apply to travellers returning to the UK from the Netherlands, Monaco, Malta, Turks & Caicos and Aruba.

The move, which applies throughout the UK, comes after Prime Minister Boris Johnson promised to be "absolutely ruthless" in decisions about imposing quarantine restrictions on countries.

The Joint Biosecurity Centre and Public Health England detected a significant change in Covid-19 risk in all six destinations.

"With France being added to the quarantine list for the UK, travel & leisure is under pressure. Shares in IAG, Ryanair, Tui and EasyJet were all sharply lower as the move will force a large swathe of cancellations right at the peak of the summer holiday season for one of the largest markets for UK tourists. Half a million Brits are thought to be in France right now," said Markets.com analyst Neil Wilson.

"Related stocks were also hit. WH Smith - purveyor of overpriced sweets and Evian - slipped down the board as a result. Apart from the immediate damage this will do at the height of the school holidays and peak summer season, the quarantine decision also underlines the inherent risk you take in booking a holiday abroad right now, which will do nothing for consumer confidence," Wilson added.

Elsewhere, easyJet said it has completed the sale and leaseback of 23 aircraft, generating USD771 million in proceeds.

The proceeds of the sale will be used to maximise liquidity and further strengthen easyJet's financial position. The USD771 million, or GBP608 million, proceeds is at the upper end of the company's GBP500 million to GBP650 million forecast range.

The final transaction was executed with Jin Shan 37 Ireland Co, a unit of Bocomm Leasing, for the sale and leaseback of five A321neo aircraft for USD266 million.

The agreement will see the aircraft leased back until each of them reach 10 years of age. Following the deal, 50% of the company's fleet remains unencumbered.

easyJet said it has now raised over GBP2.4 billion since the beginning of the Covid-19 pandemic to maximise liquidity and strengthen its financial position.

The Japanese Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite closed up 1.2%, while the Hang Seng index in Hong Kong is up 0.1%.

China's retail sales dropped in July, official data showed Friday. The key indicator of consumer sentiment shrank by 1.1% on-year, falling short of forecasts and suggesting many are still reticent about going out to spend time and money, even as China appears to have the virus largely under control. The latest data follows a drop of 1.8% on-year for retail sales in June.

Industrial production grew by 4.8% in July, the same as the previous month but below predictions of 5.2% growth.

The pound was quoted at USD1.3067 on Friday morning, down from USD1.3084 at London equities close Thursday.

The euro was priced at USD1.1817, lower from USD1.1830. Against the yen, the dollar was quoted at JPY106.85, flat from JPY106.90.

In commodities, Brent oil was trading at USD45.11 a barrel Friday morning, flat from USD45.18 a barrel Thursday evening in London.

Gold was quoted at USD1,953.86 an ounce, slightly higher from USD1,947.60 an ounce at the London equities close Thursday.

In Friday's economic calendar, there is the eurozone GDP reading at 1000 BST. Then in the afternoon, there is US retail sales at 1330 BST, with industrial production at 1415 BST and the Michigan consumer sentiment index at 1500 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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