19th Aug 2020 17:00
(Alliance News) - The FTSE 100 ended Wednesday solidly green, despite a red open, with focus shifting away from tumultuous US-China relations and towards the US Federal Reserve's latest pen Market Committee meeting minutes.
In London, the blue-chip FTSE 100 index closed up 35.36 points, or 0.6%, at 6,111.98. The mid-cap FTSE 250 index, however, lost 39.63 points, or 0.2%, to finish at 17,583.39. The AIM All-Share index closed marginally higher at 960.43.
The Cboe UK 100 index closed up 0.7% at 608.71. The Cboe 250 closed down 0.3% at 14,982.71, and the Cboe Small Companies ended up 0.4% at 9,649.91.
In mainland Europe, the CAC 40 index in Paris closed up 0.8%, while the DAX 30 in Frankfurt advanced 0.7%.
"European equity markets are set to finish in positive territory. The bullish move in the S&P 500 last night helped sentiment in this part of the world today," CMC Markets David Madden said.
He continued: "Also, in the past 24 hours, there is increased optimism in relation to US lawmakers reaching an agreement with regards to the coronavirus stimulus package. Nancy Pelosi, form the Democrats, suggested her side might row back on some of their previous demands in an effort to try and reach a compromise with the Republicans."
Oanda's Craig Erlam added: "Broadly speaking, we're still very much consigned to the summer ranges in Europe and in most cases, we're still trading around the middle of them.
"That's despite the fact that Covid is wreaking less havoc here than in other parts of the world, although rising new cases in a number of countries is resulting in quarantine measures being applied once again, a huge blow to travel and tourism firms."
In London, British Airways parent International Consolidated Airlines Group added 7.6% - the best blue chip performer - amid plans by Heathrow airport for the development of a new coronavirus testing facility.
Heathrow hopes this could lead to the end of the mandatory 14-day quarantine for those returning from certain countries and "protect the economy". Arriving passengers will be able to book swab tests and have results sent to them in seven hours under the proposal, which is being used in Germany and Iceland.
Heathrow executives hope those who test negative could leave quarantine five to eight days after landing, though the airport's programme needs UK government approval before it can begin.
Associated British Foods gained 1.9% as RBC Capital raised the firm to Outperform from Sector Perform.
The Canadian bank expects AB Foods' Primark clothing chain will drive profitability as its low-cost products are ideal for fashion-conscious consumers during an economic downturn.
RBC thinks market sentiment on Primark has become more negative recently due to a lack of an online offering and pressure on city centre stores, which are more reliant on tourism and public transport, which have been severely affected by lockdown restrictions.
However, Primark's like-for-like sales are likely to be fairly stable going forward, with transaction numbers improving. Further, the analyst expects strong regions such as Ireland and the US, to offset weakness in some parts of Europe.
AB Foods in July reported a double-digit revenue fall for the past nine months and said it expects profit at Primark to be a third of what was achieved a year ago.
WM Morrison Supermarkets advanced 1.2% after the supermarket chain said it has launched a platform for its products on Amazon.co.uk, allowing customers to purchase products which will be picked directly from Morrisons stores.
Morrisons also operates a larger grocery delivery business directly through its own website, which is fulfilled through a distribution deal with Ocado Group.
At the other end of the large-cap index, Persimmon was the worst blue-chip performer, giving back 2.5%. The housebuilder was hit by profit-taking after reporting well-received interim results on Tuesday. The stock had closed up 8.0% on Tuesday.
Separately on Wednesday, Persimmon said its incoming chief executive Dean Finch is expected to take up the role earlier than originally planned. Finch will leave his role as CEO of FTSE 250 transport operator National Express Group on August 31. National Express was off 3.4%.
In the FTSE 250, Hochschild Mining ended the worst performer, down 8.3%, after the gold miner's profit sharply declined in the first half of 2020, as the Covid-19 pandemic resulted in stoppages at all mines between mid-March and late May.
Hochschild posted a USD6.5 million pretax profit for the six months ended June 30, a fraction of the previous year's USD29.5 million profit. Revenue dropped 35% year-on-year to USD232.0 million from USD354.5 million as production shrank 47% to 126,835 gold equivalent ounces from 239,090 gold equivalent ounces.
In addition, Hochschild has decided not to reinstate its dividend.
Frasers Group added 8.1% after news broke about the firm's chair accidentally purchasing nearly 4,000 shares in the company.
On Tuesday Frasers, part of Mike Ashley's business empire, said that Chair David Daly had bought around GBP11,000 worth of shares "in error", a day before the company is set to present its annual results.
People who are likely to have access to information from inside a company are banned from trading in its shares 30 days before it releases any financial results. This is known as a close period.
Frasers said that Daly sold the shares in his company just 15 minutes after buying them, as soon as the company noticed.
The approximately GBP150 profit he made from the sale has been donated to charity.
The pound was quoted at USD1.3190 at the London equities close Wednesday, down from USD1.3225 late Tuesday. Sterling hit an intraday high of USD1.3267 against the greenback following the release of UK inflation figures but then retreated.
The UK inflation rate rose in July as the country continued its emergence from coronavirus lockdown measures, according to the latest figures from the Office for National Statistics.
The annual UK inflation rate was 1.0% in July, accelerating from 0.6% in June. The figure beat consensus, cited by FXStreet, for an 0.6% rise.
Rupert Thompson, chief investment officer at Kingswood, added: "Core inflation is now at its highest level in a year and only slightly below the BoE's 2% target which will be a relief for the MPC and take some of the pressure off for further policy easing.
"Both the demand and supply side of the economy have seen sizeable shocks in recent months which is feeding through into increased volatility in the inflation numbers and therefore not too much should be read into this latest rise. Still this increase follows hard on the heels of last week’s similarly unexpected pick-up in inflation in the US and highlights the fact that just as the outlook for growth remains quite uncertain across much of the world, so does the outlook for inflation."
The euro was priced at USD1.1896, down from USD1.1924. Against the yen, the dollar was trading at JPY105.73, up from JPY105.45.
In economic news from the continent, the annual inflation rate in the eurozone edged upwards in July as Covid-19 containment measures continued to ease, Eurostat reported.
The euro area annual inflation rate was 0.4% in July, picking up from 0.3% in June. However, in July 2019, the annual inflation rate was 1.0%.
In commodities, Brent oil was quoted at USD45.26 a barrel Wednesday evening, lower than USD45.34 late Tuesday. Gold was trading at USD1,958.00 an ounce, down from USD2,000.34.
Stocks in New York were green the London equities close on Wednesday. The DJIA was up 0.3%, the S&P 500 index was 0.2% higher, and the Nasdaq Composite was up 0.2%.
US President Donald Trump on Tuesday said he has cancelled trade talks with Beijing days after a scheduled review of the initial Phase One trade agreement was postponed.
Relations between Washington and Beijing have been tense since Trump took office, initially largely over trade and intellectual property disputes, and spiralling downwards as the coronavirus pandemic worsened.
Additionally, investors are holding out hope over a possible breakthrough in deadlocked US economic stimulus talks.
House Speaker Nancy Pelosi provided a ray of optimism by saying her party could be willing to make cuts to its offer in order to seal a deal, then return to thrash out other issues after November's elections.
Still to come Wednesday, the minutes from the US Federal Reserve's latest Open Market Committee meeting will be published.
IG's Mahony commented: "There is a feeling that the Fed are temporarily giving the stage to the government for the time being. However, markets will be watching intently as the Fed seeks to establish exactly what their next move will be."
CMC's Madden said it is worth noting that since the last Fed meeting, the US unemployment rate has fallen to 10.2%.
The minutes will be posted at 1900 BST.
In the economics calendar Thursday, Germany producer prices are due at 0700 BST, followed by eurozone construction output due at 1000BST, with US initial jobless claims at 1330 BST.
In the UK corporate calendar, Irish building materials firm CRH and Chilean miner Antofagasta will issue half-year results. Midcap retailer Frasers Group is expected to publish full-year results, and midcap privately financed, public sector infrastructure projects investor John Laing will publish half-year results.
By Paul McGowan; [email protected]
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