ADVFN Morning London Market Report: Monday 15 June 2020

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London open: Stocks fall sharply amid second wave concerns

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London stocks fell sharply in early trade on Monday amid worries about a second wave of coronavirus infections, as non-essential shops in the UK opened their doors for the first time in nearly three months.

At 0830 BST, the FTSE 100 was down 2.2% at 5,968.35.

Oanda analyst Jeffrey Halley said: “Weekend headlines were dominated by fears of secondary outbreaks of Covid-19, especially in Beijing, where part of the city has been locked down to contain a localised outbreak. South Korea and Japan to play whack-a-mole controlling their own outbreaks, highlighting what a persistent little beast Covid-19 really is.

“Elsewhere, cases in the US continued to climb. Most notably, and perhaps unsurprisingly, in States that never bought in strong control measures, such as Arizona and Texas. Across the globe, from Brazil to India, to Pakistan, to Iran, cases continued climbing, in many places, alarmingly.”

Investors were also mulling the latest data out of China, which showed that fixed asset investment fell 6.3% in May versus consensus estimates for a 5.9% decline and a 10.3% drop in April.

Industrial production rose 4.4%, up from a 3.9% rise the month before but below consensus expectations for a 5% increase. Retail sales fell 2.8% in May, which was an improvement on the 7.5% slump seen the month before and better than expectations of a 2% rise.

In equity markets, oil giant BP suffered heavy losses as it said it expects to take $13bn-$17.5bn in impairment charges and exploration write-offs in the second quarter after it cut long term oil and gas price assumptions based on the likely enduring impact of Covid-19 and weaker demand for a sustained period.

BP’s revised long-term price assumptions were now an average of around $55 per barrel for Brent and $2.90 per million British thermal units for Henry Hub gas from 2021-2050.

Miners were also in the red, with BHPGlencore and Antofagasta all weaker.

Mike Ashley’s Frasers Group, formerly Sports Direct, was under pressure after announcing late on Friday that it had taken a 5.1% stake in luxury fashion brand Hugo Boss through stocks and derivatives.

Capita shares slid following a Guardian report over the weekend the outsourcer is planning to cut at least 200 jobs due to the coronavirus pandemic.

On the upside, international distribution group Bunzl surged after saying it planned to repay employee-related government support packages and bring forward the settlement of tax deferrals after as increased deliveries of food and medical products during the pandemic drove higher first half revenues.

The company said revenue was expected to increase by approximately 6% at both actual and constant exchange rates.

Cineworld was higher after pulling out of its $2.1bn (£1.7bn)) acquisition of Canadian movie theatre chain Cineplex, citing breaches of the companies’ agreement and a “material adverse effect”.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Bunzl Plc +6.05% +114.00 1,998.00
2 Centrica Plc +0.09% +0.04 43.20

Top 10 FTSE 100 Fallers

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76.4% of retail CFD accounts lose money.

 

# Name Change Pct Change Cur Price
1 Melrose Industries Plc -6.79% -8.05 110.50
2 Tui Ag -5.64% -25.60 427.90
3 Fresnillo Plc -5.49% -43.60 750.60
4 Bp Plc -4.61% -14.90 308.15
5 Compass Group Plc -4.22% -48.50 1,101.50
6 Bhp Group Plc -4.04% -67.40 1,600.00
7 Carnival Plc -3.94% -50.00 1,219.00
8 Anglo American Plc -3.90% -71.20 1,754.00
9 Glencore Plc -3.83% -6.60 165.74
10 Evraz Plc -3.68% -10.60 277.20

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.

 

Monday newspaper round-up: Retailers, UK economy, Travelodge

The Treasury should act to help more than a million people who have fallen through the cracks in the government’s Covid-19 income support schemes, according to a report by an influential group of MPs. The all-party Treasury select committee said large numbers of people are enduring financial hardship and are unable to benefit from the chancellor’s schemes for salaried employees and the self-employed. – Guardian

Retailers are appealing to customers to support their local shops to help them survive the coronavirus pandemic, which has devastated high street trade. “It’s really important people go back to using their high street,” said Gary Grant, the owner of toy chain The Entertainer. “We employ local people in local towns and if I want to hold on to my staff I need turnover.” – Guardian

The scale of the challenge facing retailers opening their doors for the first time since March is laid bare today by worrying new evidence suggesting half of shoppers could stay away. The exclusive YouGov poll for The Daily Telegraph also suggests that four in ten consumers will cut spending below pre-lockdown levels as the economic havoc wrought by Covid-19 raises fears over mass unemployment. – Telegraph

Britain’s economy will shrink by 8 per cent this year but it should rebound faster than initially expected, according to the EY Item Club. After official figures released last week showed that the economy shrank at its fastest pace on record in April, the forecasting body downgraded its predictions for the year from a previous estimate of a 6.8 per cent contraction. – The Times

Landlords to the hotel chain Travelodge have warned they may reject its restructuring plan this week if they do not get clarity about a £40 million investment by its owners. The group of landlords demanded more details yesterday about the proposed investment before deciding how to vote at a meeting on Friday. – The Times

 

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