ADVFN Morning London Market Report: Tuesday 2 June 2020

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London open: Stocks up amid optimism over lockdown easing


London stocks rose in early trade on Tuesday amid optimism over lockdown easing.

At 0900 BST, the FTSE 100 was up 0.5% at 6,194.83.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “So far, investors remain focused on global business reopening, the fact that the number of new Covid cases remains stable as economies restart operating and of course, the massive fiscal and monetary support from central banks and governments.”

The positive tone came despite growing unrest in the US over the killing of George Floyd, as President Trump threatened to send in the army.

CMC Markets analyst Michael Hewson said: “If the violence on US streets continues for much longer US investors might have to cope with a lockdown of a different kind, imposed by the National Guard. This is something that President Trump hinted he might well do if the various states aren’t able to contain the outbreaks of violence across US cities.”

On home shores, a survey released earlier by Nationwide showed that house prices fell 1.7% in May in the steepest drop since the financial crisis.

The month-on-month decline was the biggest since February 2009 and followed the near shutdown of the property market during the Covid-19 crisis. The annual rate of house-price growth more than halved to 1.8% from 3.7% a month earlier and was well below expectations for a 2.8% drop.

The average house price fell to £218,902 from £222,915 in May even though the government eased restrictions to allow the market to reopen in the middle of the month. Nationwide, the UK’s biggest building society, said transactions would be affected for some time with potential buyers wary during what is expected to be a deep recession.

The UK housing market was showing signs of revival in early 2020 after years in the doldrums caused by uncertainty over Brexit. The Covid-19 restrictions forced estate agents to close and barred physical house viewings, effectively closing the market.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures suggested weak confidence would lead to further declines.

“The big month-to-month drop – surely is just the start of a protracted decline over the remainder of this year,” Tombs said. “The huge size of the blow from Covid-19 to households’ incomes and the deterioration in consumers’ confidence suggests that house prices must drop: we look for a 5% decline in prices by the end of Q3.”

In equity markets, aerospace and defence giant Rolls-Royce rallied again, having suffered heavy losses last week after a stake sale by AKO Capital and a credit rating downgrade by Standard & Poor’s.

Travel related stocks advanced, with cruise operator Carnival, British Airways and Iberia parent IAG and TUI all firmly higher.

Miner Glencore was lifted by an upgrade to ‘buy’ at Renaissance Capital.

Industrial products distributor Electrocomponents was also in the black even after it deferred its final dividend until it had a clearer view of the coronavirus pandemic’s impact as sales fell 14% in the first eight weeks of the current year.

The company said it would look at paying an extra interim dividend. Full year pre-tax profits rose 2.3% to £199.6m.

Private hospital operator Mediclinic was up after it reported a widening of its full-year losses due to impairment charges but noted improving trends in May.

Retirement housebuilder McCarthy and Stone was also trading higher after saying its sales offices and construction sites would start to reopen from the Covid-19 lockdown on 8 June and that fewer of its residents had died than in the wider older population.

On the downside, Tesco was a little lower as it said it is looking for a new chief financial officer after Alan Stewart decided to retire from the supermarket group.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Associated British Foods Plc +7.88% +143.50 1,964.50
2 Standard Chartered Plc +6.19% +22.80 391.20
3 International Consolidated Airlines Group S.a. +5.78% +13.20 241.70
4 Rolls-royce Holdings Plc +5.71% +15.50 287.10
5 Tui Ag +4.86% +21.20 457.30
6 Easyjet Plc +4.62% +31.40 711.40
7 Pearson Plc +4.55% +21.10 484.50
8 Micro Focus International Plc +4.13% +16.80 423.50
9 Marks And Spencer Group Plc +4.08% +3.99 101.75
10 Kingfisher Plc +3.86% +7.50 201.70


Top 10 FTSE 100 Fallers

Sponsored by
76.4% of retail CFD accounts lose money.


# Name Change Pct Change Cur Price
1 Burberry Group Plc -2.41% -36.00 1,459.50
2 Hikma Pharmaceuticals Plc -2.22% -57.00 2,514.00
3 Reckitt Benckiser Group Plc -1.88% -136.00 7,088.00
4 British Land Company Plc -1.45% -5.90 401.40
5 Halma Plc -1.24% -29.00 2,301.00
6 Croda International Plc -1.16% -60.00 5,130.00
7 Admiral Group Plc -1.07% -25.00 2,308.00
8 Segro Plc -1.02% -8.60 831.00
9 Bae Systems Plc -0.81% -4.00 492.20
10 Johnson Matthey Plc -0.80% -17.00 2,096.00


US close: Markets finish higher as manufacturing output contracts

Wall Street stocks finished slightly higher by the closing bell on Monday, after last week’s gains helped major averages record their first back-to-back monthly advances since late 2019.

The Dow Jones Industrial Average ended the session up 0.36% at 25,475.02, the S&P 500 added 0.38% to 3,055.73, and the Nasdaq Composite was 0.66% firmer at 9,552.05.

It was a session of continuing gains for the Dow, which had opened 51.67 points higher, reversing losses seen on Friday after Donald Trump said the White House was set to begin taking action to revoke Hong Kong’s favoured trade status with the United States.

Trump said he would take steps to revoke the city’s favoured trade status with the United States in response to a controversial new security law passed by Beijing that would effectively bar political protest in Hong Kong.

“I am directing my administration to begin the process of eliminating policy exemptions that give Hong Kong different and special treatment,” the president said.

“My announcement today will affect the full range of agreements that we have with Hong Kong, from our extradition treaty, to our export controls and technologies,” he added.

“We will take action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China.”

As far as Monday was concerned, market participants digested news that China had responded with comments from the foreign ministry that included several non-descript warnings of “countermeasures” if the US did not leave the matter alone.

Investors were also focussed on the reopening of US states following the coronavirus-related shuttering of their economies and a wave of protests across the country following the death of another unarmed African-American man in police custody.

Disappointing results from a trial of a breast cancer drug over at Pfizer also weighed on sentiment, with that stock ending the day down 7.15%.

In terms of data, manufacturing output in the US continued to fall in May, with client demand weakening further and a negative outlook driving down employment.

US factories saw output slump to 39.8 in May, according to IHS Markit‘s Purchasing Managers’ Index, which was up marginally from a print of 36.1 recorded in April.

Elsewhere, the Institute for Supply Management‘s purchasing managers’ index fell more than expected last month to 41.5.

Consensus estimates were for a reading of 43.5.

In the corporate space, companies reliant on the reopening of the US economy were in focus, with Carnival up 6.73%, Norwegian Cruise Line ahead 10.41% and Royal Caribbean Cruises 7.27% higher.

Among hotel giants, Hilton Hotels Corporation gained 3.28% and Marriott International added 7.38%, while the legacy carriers American AirlinesDelta Air Lines and United Airlines were up 5.81%, 3.81% and 5.06%, respectively.


Tuesday newspaper round-up: Cash access, Parkdean Resorts, Monsoon Accessorize

Failure by the G20 group of leading developed and developing nations to organise a global Covid-19 recovery plan is a potential death sentence for the world’s poor, the former prime minister Gordon Brown has said. Brown, who pushed successfully for coordinated action during the financial crisis of 2008-09, said the lack of G20 action was disgraceful and risked a second wave of infection for rich countries. – Guardian

Vulnerable people risk being unable to access the money they need to pay for goods and services, unless the government acts to support the “fragile” cash system, the consumer group Which? has warned. The coronavirus crisis has accelerated the adoption of contactless and other cashless transactions across the UK and led to sharp drops in ATM use as more people shop online or opt for what they perceive to be safer payment methods. – Guardian

Britain’s biggest holiday park operator could run out of money within weeks unless the lockdown is lifted, analysts have warned. Parkdean Resorts is being squeezed by customers demanding refunds for holidays cancelled because of coronavirus, experts at credit agency Moody’s said, with all of its 67 sites closed since Mar 23. – Telegraph

Ailing retailer Monsoon Accessorize has warned landlords that they have a week to offer up rent waivers or it will shut down stores. The chain issued the ultimatum in a letter as it scrambles to survive the lockdown. Monsoon said it is trying to determine which – if any – of its 220 stores can be kept open. – Telegraph

The City regulator pledged to “get smarter” about cracking down on investment scams and protecting consumers as it banned a group of Cypriot trading firms that had been using fake celebrity endorsements, including Sir Richard Branson, from operating in Britain. In an interview with The Times, Chris Woolard, interim chief executive of the Financial Conduct Authority, also said he thought the watchdog would have “some painful lessons” to learn from a scandal that erupted last year over unregulated minibonds sold to savers. – The Times


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