ADVFN Morning London Market Report: Wednesday 3 June 2020

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London open: Stocks rally after solid Chinese services data

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London stocks rose in early trade on Wednesday, with sentiment boosted by encouraging services data out of China .

At 0840 BST, the FTSE 100 was up 1.1% at 6,285.82.

Data released earlier showed that China’s services sector returned to growth in May for the first time since January. The Caixin/Markit services purchasing managers’ index increased to 55.0 from 44.4 in April, marking the highest level since October 2010 and coming in comfortably above the 50 mark that separates contraction from growth. It was also above expectations for a reading of 47.3.

Spreadex analyst Connor Campbell said: “Ignorant, oblivious or uncaring about the domestic situation in the USA, investors instead focused on a gangbusters Caixin services PMI out of China, extending the month’s early rebound.”

Campbell said the figures were “a huge boost” to Europe, adding that the FTSE would have been even higher “if the pound weren’t continuing to rebound itself”.

“Though the ongoing Brexit talks seem frosty at best, outright hostile at worst, cable rose 0.4% to $1.2588, its best price in close to seven weeks,” he said. “It remains to be seen whether the pound can keep hold of that growth in the face of another weak UK services PMI, one that is expected to see the final reading for May revised marginally higher, from 27.8 to 27.9.”

The UK services PMI for May is due out at 0930 BST.

In equity marketsChemring surged after the defence firm backed its full-year expectations and posted a rise in interim profit thanks to strong performances in both of its segments.

Travel company TUI racked up healthy gains as it reached a compensation agreement with Boeing over the grounding of 737 Max planes.

Drinks company C&C Group was also in the black as it reported a 7.8% jump in full-year net revenue.

On the downside, Ibstock lost ground as the maker of clay bricks and concrete products said sales volumes slid from late March after the coronavirus lockdown was imposed, and announced it could cut around 15% of its workforce.

SSP was lower after the transport catering firm said it swung to a £34m half-year loss from a profit of £53m a year earlier and pulled its interim dividend as international travel collapsed amid the Covid crisis.

In broker note action, Marks & Spencer was lifted by an upgrade to ‘buy’ at Jefferies, while B&M European Value Retail was dented by a downgrade to ‘hold’ by the same outfit.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 British Land Company Plc +8.35% +34.00 441.00
2 Melrose Industries Plc +7.87% +9.40 128.90
3 Land Securities Group Plc +6.02% +37.20 655.40
4 Bp Plc +5.66% +17.60 328.60
5 Next Plc +5.47% +280.00 5,402.00
6 Rolls-royce Holdings Plc +4.85% +13.90 300.40
7 Hiscox Ltd +4.79% +35.80 782.80
8 Royal Bank Of Scotland Group Plc +4.51% +5.20 120.55
9 Compass Group Plc +4.43% +53.00 1,249.00
10 Smiths Group Plc +4.06% +53.50 1,370.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Hargreaves Lansdown Plc -4.53% -83.00 1,748.50
2 Hikma Pharmaceuticals Plc -2.73% -68.00 2,425.00
3 Ocado Group Plc -2.56% -57.00 2,172.00
4 Fresnillo Plc -1.95% -15.80 793.60
5 Astrazeneca Plc -1.86% -162.00 8,542.00
6 Halma Plc -1.66% -38.00 2,254.00
7 Morrison (wm) Supermarkets Plc -1.56% -2.95 186.00
8 Smurfit Kappa Group Plc -1.27% -34.00 2,636.00
9 Bt Group Plc -1.26% -1.50 117.60
10 Tesco Plc -1.21% -2.80 229.10

 

US close: Stocks close higher as investors remain optimistic about reopening economy

US stocks closed higher on Tuesday as market participants remained optimistic about the reopening of the US economy despite a wave of civil unrest spreading across the country.

At the close, the Dow Jones Industrial Average was up 1.05% at 25,742.65 and the S&P 500 was 0.82% firmer at 3,080.82, while the Nasdaq Composite was 2.02% stronger at 9,608.37.

The Dow Jones closed 267.63 points higher on Tuesday, extending gains recorded on Monday that came after major averages registered their first back-to-back monthly advances since late 2019.

While futures briefly fell after Donald Trump threatened to deploy the US military to silence protesters if states and cities failed to do so, investors seemingly shrugged off their concerns at the opening bell and continued to focus on the reopening of the nation’s economy.

Heightened tensions between Washington and Beijing were also in focus as China requested state-owned companies to cease purchases of soybeans and pork from the US after the President said the White House would seek to revoke Hong Kong’s favoured trade status due to a new security law passed by the Chinese parliament.

However, a report that Chinese companies had purchased at least three cargo loads of US soybeans boosted sentiment later on.

In corporate news, the likes of American AirlinesUnited Airlines and Southwest were all up on Tuesday, as were shares in major US banks, while MoneyGram shares surged on reports of a potential acquisition by Western Union.

 

Wednesday newspaper round-up: UK car industry, retailers, Travelodge

The UK automotive industry has been in confidential talks with the government over a possible £1.5bn scrappage scheme or “market stimulus package” that it insists should encourage the purchase of diesel and petrol cars on an equal footing with cleaner vehicles. The plans under consideration by industry and government would take £2,500 off the price of a car and put a further 600,000 new vehicles on the road. – Guardian

British retailers struggling during the coronavirus pandemic have cut their prices by the most in a month since 2006, according to industry figures revealing the scale of the economic fallout. The British Retail Consortium (BRC) and Nielsen said shop prices fell by 2.4% in May following a decline of 1.7% in April as people continued to stay away from the high street during lockdown. – Guardian

Travelodge will launch a radical overhaul of its business on Wednesday in a bid to force landlords to swallow rent cuts of more than £140m. The beleaguered hotel firm is hiring accountant Deloitte to oversee a company voluntary arrangement (CVA) with creditors, marking the latest twist in an acrimonious battle between Travelodge’s hedge fund shareholders and the owners of its hotel sites. – Telegraph

Urgent action is needed to save firms from the post-Covid debt mountain that will awaits them when taxpayer support comes to an end, the Institute of Directors (IoD) has warned. Debt doled out to small companies during the crisis should be treated like student loans are, the IoD said, with repayments only taken when businesses have started turning a profit and stretched over a period of time based on earnings. – Telegraph

Households repaid a record £7.4 billion of unsecured debt in April as business borrowing remained near record highs, according to official data that revealed the dramatically different experiences of individuals and companies during lockdown. Consumers paid off £5 billion of credit card debt and £2.4 billion of personal loans over the month, a rate of repayment never seen before, Bank of England figures showed. – The Times

 

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