(Alliance News) - Stock prices in London are seen opening sharply higher on Tuesday tracking gains in Asian equity markets after the US Federal Reserve announced it will buy individual corporate bonds.
IG futures indicate the FTSE 100 index is to open 150.40 points higher at 6,215.10. The blue-chip index closed down 40.48 points, or 0.7%, at 6,064.70 on Monday.
In early UK company news, Ashtead said it delivered a resilient performance in light of the coronavirus outbreak and is confident in its prospects going forward.
For the financial year ended April 30, revenue rose 9% to GBP5.05 billion from GBP4.50 billion in financial 2019. The figure was in line with consensus estimates for GBP5.1 billion in revenue.
However, pretax profit fell 7% to GBP983 million from GBP1.06 billion. Pretax profit before amortisation and exceptional items was GBP1.06 billion, down from GBP1.11 billion. The adjusted pretax profit figure was just shy of the GBP1.07 billion consensus estimate.
Ashtead attributed the decline in profit to a sudden fall in activity levels seen in the fourth quarter due to the coronavirus outbreak.
Ashtead proposed a final dividend of 33.5 pence per share, bringing the total payout to 40.65p. Consensus expected a total dividend of 38.6p.
"Looking forward, we believe that the impact of the Covid-19 pandemic will continue to give rise to market uncertainties over the coming months. However, with strong market positions in all our markets, supported by good quality fleets and a strong financial position, we believe that we are well-positioned to respond to this market uncertainty and continue to support our customers and team members," said Ashtead Chief Executive Brendan Horgan.
Cineworld Group said it plans to reopen cinemas across some territories during the last week of June, with all theatres expected to be open over the course of July.
The cinema chain said it has modified booking systems to ensure social distancing within and throughout its auditoriums. It also has altered its daily movie schedules to manage queues and avoid the build-up of crowds in lobbies.
The US Federal Reserve on Monday said it would start purchasing individual corporate debt instruments, in a bid to ensure liquidity for loans to the private sector, in the latest market intervention by the central bank since the coronavirus pandemic shook the country.
The Fed said it "will begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers."
The US central bank has been buying up private sector bond index funds since March, but the latest announcement means it will move to buying individual bonds if company's meet certain criteria, including on ratings and maturities.
The Japanese Nikkei 225 index closed up 5.1% on Tuesday. In China, the Shanghai Composite is up 1.1%, while the Hang Seng index in Hong Kong is up 3.0%.
Japan's central bank on Tuesday ramped up aid for businesses struggling with the fallout from the coronavirus pandemic, as it attempts to ease the recession in the world's third-largest economy.
The Bank of Japan expanded its zero-interest loan programme to firms to JPY90 trillion from JPY55 trillion. Its total war-chest for companies amounts to JPY110 trillion when corporate bond purchases are taken into account.
The BoJ made no change to its ultra-loose monetary policy framework, which involves unlimited purchases of government bonds and a negative interest rate.
OANDA analyst Jeffrey Halley said: "Yesterday's concerns have dropped quickly from the hive memory, with Asia recovering back those losses with interest this morning. Wall Street rallied impressively from deep in the red after the Federal Reserve announced the start of its small business lending, and corporate bond-buying programmes.
"The impressive gains in Asia will continue throughout the remainder of the session, with Europe sure to climb aboard as well."
The pound was quoted at USD1.2661 Tuesday morning, up sharply from USD1.2554 at the London equities close Monday.
The UK unemployment rate held steady at 3.9% in the three months to April, the Office for National Statistics said. The figure beat the market consensus forecast, cited by FXStreet, for a rise to 4.5%.
"Whilst the government's furlough scheme offers an unprecedented amount of support to the UK labour market, we can expect to see this start to unravel in the coming months as the scheme is gradually withdrawn," said City Index analyst Fiona Cincotta.
UK Prime Minister Boris Johnson now believes it's possible to reach an agreement in principle on post-Brexit arrangements by the end of next month, following months of fruitless talks between negotiators.
"We see no reason why you shouldn't get that done in July," he told reporters from Downing Street following a video conference with European Commission President Ursula von der Leyen and the heads of the European Council and European Parliament.
With just over six months left to strike a deal before EU rules cease to apply in Britain, both sides agreed to step up their timetable of talks in July and introduce "new momentum", according to a rare joint statement.
Brussels and London say they want to avoid a "no-deal" Brexit - Britain leaving the EU's regulatory system without an agreement in place - but have so far made little progress in striking a crucial trade deal. The partners have set a new timetable for their negotiations in July, holding talks every week for five weeks, with a mix of formal rounds and smaller face-to-face groups in London and Brussels.
The euro was quoted at USD1.1346, up from USD1.1266. Against the yen, the dollar was trading at JPY107.45 in London, flat from JPY107.40 late Monday.
Brent oil was at USD39.80 a barrel Tuesday morning, up from USD39.04 at the London close Monday. Gold was priced at USD1,728.21 an ounce, higher against USD1,720.80.
In Tuesday's economic calendar, there are US retail sales at 1330 BST, while Federal Reserve Chair Jerome Powell testifies to Congress at 1500 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Ashtead Group (AHT)