(Alliance News) - London stocks opened lower on Thursday, following on from a weak Asian session, as investors eyed growing US-China tensions and a downbeat Federal Reserve.
Weighing on London's blue-chip index was Whitbread, after the Premier Inn-owner announced plans to raise GBP1 billion in a rights issue.
The FTSE 100 index was down 44.07 points, or 0.7%, at 6,023.09 early Thursday. The mid-cap FTSE 250 index was down 135.44 points, or 0.8%, at 16,232.04. The AIM All-Share index was down 0.2% at 833.67.
The Cboe UK 100 index was down 0.9% at 10,170.02. The Cboe 250 was down 0.9% at 13,828.97 and the Cboe UK Small Companies down 0.1% at 8,877.95.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 1.2%.
In Asia on Thursday, the Japanese Nikkei 225 index ended down 0.2%. In China, the Shanghai Composite ended down 0.6%, while the Hang Seng index in Hong Kong is down 0.5%.
"With Trump having continued to rail at China, and the latest FOMC minutes having underscored the Fed's lack of confidence in the economic outlook and illustrated its struggles to communicate clearly on the possible next steps for policy, Asian stock markets were largely uninspired today, mostly recording a mix of small gains and losses," said Daiwa Capital Markets.
Released on Wednesday, minutes from the US Federal Reserve's latest policy meeting showed the central bank thinks some damage from Covid-19 may persist especially if consumers remain reluctant to return to normal activities.
Officials "expressed concerns that a large number of small businesses may not be able to endure a shock that had long-lasting financial effects."
And they worried that "even after social-distancing requirements were eased, some business models may no longer be economically viable", especially if consumers decide to "avoid participating in particular forms of economic activity".
With over 90,000 deaths from the virus and data showing more than 30 million jobs destroyed at least temporarily, the central bankers said the US economy will see an "unprecedented" decline in the second quarter as the unemployment rate rises to the highest in the post-World War II period.
The Fed comments came as the World Health Organization has reported the largest single-day increase in coronavirus cases, while US President Donald Trump proposed hosting world leaders for the annual G7 summit as a sign of "normalization".
Trump, who is seeking to revive the battered US economy and his political fortunes ahead of the November election, again lashed out again at China, saying its "incompetence" was responsible for "this mass Worldwide killing".
The WHO, another frequent Trump target, said that 106,662 virus cases were reported to the UN agency on Tuesday – the most in a single day since the outbreak erupted in the Chinese city of Wuhan in December.
As the global death toll topped 325,000 and the number of cases neared five million, WHO chief Tedros Adhanom Ghebreyesus said he was "very concerned" about the situation in low- and middle-income nations.
The economic events calendar on Thursday has manufacturing and services PMI readings from Germany, the eurozone, UK and the US at 0830 BST, 0900 BST, 0930 BST and 1445 BST respectively. The lately shockingly dismal US jobless claims are out at 1330 BST.
Ahead of the data, sterling was quoted at USD1.2202 early Thursday, lower than USD1.2266 at the London equities close on Wednesday.
"In the UK PMI's for both the service and manufacturing sectors, due for release today. Analysts are expecting to see an improvement from April's worst-ever prints. However, given that the lockdown in Britain has only eased very slightly so far in May, activity is expected to have only increased very slightly," said Fiona Cincotta at City Index.
The euro traded at USD1.0972 early Thursday, down against USD1.0992 late Wednesday. Against the yen, the dollar was quoted at JPY107.81 versus JPY107.43.
In London, easyJet was up 2.2% after saying it will resume flights in mid-June with new biosecurity measures in place.
A small number of flights will restart on June 15 on routes where the airline thinks there is "sufficient customer demand to support profitable flying". The initial schedule will comprise mainly domestic flying in the UK and France.
easyJet will require customers, cabin and ground crew to wear masks, and easyJet will carrying out "enhanced" cleaning of aircraft.
"I am really pleased that we will be returning to flying in the middle of June. These are small and carefully planned steps that we are taking to gradually resume operations. We will continue to closely monitor the situation across Europe so that when more restrictions are lifted the schedule will continue to build over time to match demand," said Chief Executive Johan Lundgren.
Whitbread slumped 13% on plans to raise GBP1 billion in a fully underwritten rights issue.
For the year to February 27, the hospitality firm's revenue rose 1.1% to GBP2.07 billion and pretax profit was up 28% to GBP280 million. This increase in profit was largely due to separation costs incurred in the prior year from the disposal of the Costa coffee-shop business.
Adjusted pretax profit fell by 8.2% to GBP358 million due to a weaker UK travel market, high industry-wide inflation and the start-up of German operations, the Premier Inn hotel chain owner said.
"Whitbread delivered a resilient financial performance in FY20 in line with expectations, against a backdrop of low UK business and consumer confidence which particularly impacted the regional hotel market. The commercial initiatives we implemented during H1 helped drive a particularly strong end to the year, when we were trading ahead of the market and achieving very strong guest scores," said Chief Executive Alison Brittain.
She continued: "However, the period after the year-end has been dominated by the impact of the rapidly evolving Covid-19 pandemic. In response, the business took rapid and decisive action to protect our teams and our guests, and to secure our business to ensure that we will be in the best possible position to rebound strongly."
Whitbread said its UK hotels are ready to open when the government advises, with the company's internal scenario assuming that hotels are closed, or at low levels of occupancy, until September. German hotels reopened on May 11.
The FTSE 100 constituent said it had "significant" liquidity entering the new financial year and Covid-19 crisis, but it now intends to raise GBP1.01 billion via a fully underwritten rights issue to provide a platform for future growth and investment.
Shore Capital commented: "We struggle with the magnitude of the equity raise and its dilution given the low starting debt position, liquidity and the resultant dilution. Even so, Whitbread appears well positioned to drive further market share gains in the UK."
Pets at Home was down 5.6% as it warned on its half-year profit outcome after a strong annual result.
Like-for-like revenue growth was 9.0% in the financial year to March 26, with revenue up 10% on a reported basis to GBP1.06 billion, exceeding the GBP1 billion mark for the first time. Pretax profit surged to GBP85.9 million, up from GBP49.6 million the year before, the pets product retailer said.
However, "nearly all" of the exceptional demand witnessed in the closing weeks of the final quarter has unwound during the first quarter of the current year which, combined with social distancing across its operations and restrictions on the sale of pet products and services deemed non-essential, has temporarily depressed normal levels of group turnover, Pets At Home said.
Online sales have been good, but have been unable to mitigate the reduced level of in-store sales, it said.
"Accordingly, we anticipate H1 FY21 group pretax profit, including both the one-off benefit from the business rates holiday, which will be utilised to partially mitigate the estimated financial impact of Covid-19 this year, as well as additional operating costs related to social distancing, to be materially below the prior year," said Pets at Home.
The retailer added that it does not feel prudent to provide full-year guidance at this time.
By Lucy Heming; lucyheming@alliancenews.com
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Whitbread (WTB)
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