ADVFN Morning London Market Report: Friday 12 June 2020

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London open: Stocks fall after dismal GDP data

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London stocks fell in early trade on Friday following a dire session on Wall Street and after data showed the UK economy suffered a record collapse in April as the coronavirus lockdown took its toll.

At 0835 BST, the FTSE 100 was down 0.4% at 6,053.55, after data from the Office for National Statistics showed the economy contracted by a record 20.4% on the month in April.

This followed a 5.8% drop in March and was worse than the 18.4% decline expected by economists. It also marked the worst monthly fall since records began in 1997.

Manufacturing production fell 24.3% in April, while industrial production was down 20.3% and construction output slid 40.1%.

Andrew Wishart, UK economist at Capital Economics, said: “Given the lockdown started to be eased in May, April will mark the trough in GDP. So we are past the worst. But the recovery will be a drawn-out affair as restrictions are only lifted gradually and businesses and consumers continue to exercise caution.

“And while the trough in activity is now behind us, the fiscal cost of the collapse and the rise in the unemployment rate to over 8% that will result are only just starting to emerge.”

Meanwhile, concerns about a second wave of coronavirus infections – which meant US stocks suffered their worst fall in 12 weeks on Thursday – continued to plague investors.

“Reports from Texas and California, and a number of other US states, showed the recent loosening of restrictions has led to a jump in the number of new Covid-19 cases, which sparked a brutal round of selling yesterday,” said CMC Markets analyst David Madden.

In equity markets, precious metals miners Fresnillo and Polymetal were the worst performers, having surged in the previous session as gold prices rallied on the back of dovish outlook comments from the US Federal Reserve.

On the upside, education publisher Pearson surged amid reports it’s in talks with Cevian Capital after the activist investor took a 5.4% stake in the company.

Events and publishing company Informa was a high riser even as it warned revenue was likely to fall by almost a third in 2020, with physical events unlikely to run in the US until September and other markets taking time to recover from Covid-19 restrictions.

Pub and restaurant operator Mitchells & Butlers gained as it said it had agreed £250m in unsecured lending with its banks and waivers on secured loans in return for a pause on dividends until the end of the financial year to September 2021.

Miniature wargames manufacturer Games Workshop advanced after saying that its recovery since re-opening has been better than expected.

Travel stocks were also in the black after falling sharply on Thursday, with cruise operator Carnival, budget airline easyJet and InterContinental Hotels all up.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Pearson Plc +11.62% +59.60 572.60
2 Carnival Plc +10.46% +124.50 1,314.50
3 Informa Plc +10.25% +44.50 478.70
4 Easyjet Plc +8.52% +64.80 825.00
5 International Consolidated Airlines Group S.a. +8.33% +21.90 284.80
6 Rolls-royce Holdings Plc +6.31% +20.30 341.90
7 Tui Ag +6.28% +27.90 472.50
8 Melrose Industries Plc +5.49% +6.10 117.25
9 Itv Plc +5.26% +4.00 80.00
10 Marks And Spencer Group Plc +4.85% +5.00 108.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Pearson Plc +11.62% +59.60 572.60
2 Carnival Plc +10.46% +124.50 1,314.50
3 Informa Plc +10.25% +44.50 478.70
4 Easyjet Plc +8.52% +64.80 825.00
5 International Consolidated Airlines Group S.a. +8.33% +21.90 284.80
6 Rolls-royce Holdings Plc +6.31% +20.30 341.90
7 Tui Ag +6.28% +27.90 472.50
8 Melrose Industries Plc +5.49% +6.10 117.25
9 Itv Plc +5.26% +4.00 80.00
10 Marks And Spencer Group Plc +4.85% +5.00 108.00

 

US close: Stocks sink as Covid infections surge

Wall Street stocks closed sharply in the red on Thursday, amid an increased number of new Covid-19 cases in states emerging from lockdowns.The Dow Jones Industrial Average ended the session down 6.9% at 25,128.17, the S&P 500 lost 5.89% to 3,002.10, and the Nasdaq Composite was 5.27% weaker at 9,492.73.At the open, the Dow lost 846.58 points earlier on Thursday, continuing on from losses recorded in the previous session after the Federal Open Market Committee said it expects the US economy to shrink by 6.5% this year.However, the Fed had said it anticipated that the US economy will return to growth in 2021, with unemployment falling to 9.3% and GDP increasing 5%.”The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” it said on Wednesday.Treasury Secretary Steven Mnuchin also said on Wednesday that he would seriously consider more direct payments to US citizens in the next phase of the White House’s Covid-19 rescue package, stating that funds should also be targeted to help sectors struggling to reopen – including hospitality and tourism.But despite support from the White House and the Fed, concerns regarding a second wave of Covid-19 cases were weighing heavily on sentiment on Thursday after Texas, one of the first states to exit lockdowns, reported a third straight day of record-breaking coronavirus hospitalisations.Nine of California’s 58 counties have also reported a spike in new confirmed cases and the overall number of cases in the US has now topped two million.Donald Trump stated he would resume hosting of election rallies from 19 June and was said to not be planning to enforce social distancing measures at such events.Also in focus on Thursday, the number of Americans filing for unemployment claims continued to fall back last week.According to the Department of Labor, initial jobless claims fell by 355,000 during the week ending on 6 June to reach a pace of 1.542 million, slightly higher than consensus forecasts for 1.45 million.Still on the macro front, producer prices increased more than expected in May due to rising meat costs, but the underlying trend in producer inflation continued to be subdued.The Labor Department’s producer price index for final demand rebounded 0.4% last month after plunging 1.3% in April – the biggest decrease since the series was revamped in December 2009.On the corporate side of things, shares in United Airlines slid 16.11%, Delta Air Lines lost 14.03%, American Airlines tumbled 15.51%, and Southwest Airlines was down 11.6%, while Carnival was 15.3% weaker and Norwegian Cruise Line was off 16.46%.The increased number of new Covid-19 hospitalisations causing concerns about future travel.GrubHub shares managed gains of 4.64%, after the firm agreed to be acquired by the London-listed Just Eat Takeaway, while Oneok slumped 15.84% after launching a public offering of 26 million shares.

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