19th Feb 2020 16:59
(Alliance News) - Stocks in London ended higher on Wednesday brushing off fears that the coronavirus epidemic in China would have a lasting economic impact.
Sentiment was buoyed after Chinese officials released a study showing most patients have mild cases of the coronavirus, and World Health Organization officials said the mortality rate was relatively low.
The FTSE 100 index closed up 75.01 points, or up 1.0%, at 7,457.02. The FTSE 250 ended up 172.40 points, or 0.8%, at 21,850.86, and the AIM All-Share closed up 8.72 points, or 0.9%, at 973.26.
The Cboe UK 100 ended up 1.1% at 12,527.78, the Cboe UK 250 closed up 0.6% at 19,673.24, and the Cboe Small Companies ended up 0.3% at 12,462.57.
In Paris the CAC 40 ended up 0.9%, while the DAX 30 in Frankfurt ended up 0.8%.
"The rate of new infections has fallen for a second day in a row, which has removed some of the fear surrounding the situation. Traders are buying into the markets with the view we are over the worst of the crisis, but that sort of thinking has caught out some dealers recently," CMC Markets analyst David Madden said.
On the London Stock Exchange, NMC Health ended the worst blue chip performer, down 7.3% after activist investor Krupa Global Investments said it would not be taking a strategic stake in the embattled UAE healthcare provider.
KGI said it is no longer interested in taking a "significant" stake in NMC following the resignation of Co-Chair Bavaguthu Raghuram Shetty and two other executives on Monday, as well as its executive vice-chairman Khalifa Al Muhairi last Friday.
In the FTSE 250, Hochschild Mining ended the best performer, up 13% after the gold miner said profit doubled in 2019 as it delivered "further strong progress".
The company said revenue rose 7% to USD755.7 million, compared to USD704.3 million in 2018. Pretax profit doubled to USD76.8 million from USD38.4 million a year ago. Hochschild said full-year attributable production was 477,400 gold equivalent ounces, exceeding guidance of 457,000 gold equivalent ounces.
The company said it would target production of 422,000 gold equivalent ounces in 2020. Hochschild said this was mostly due to the record performances at Inmaculada mine in Peru and San Jose mine in Argentina.
Hochschild proposed final dividend of 2.335 US cents, a 19% increase from 1.959 US cents a year ago.
The pound was quoted at USD1.2947 at the London equities close, down from USD1.3021 at the close Tuesday, as the European Union and UK continue to take hardline positions ahead of detailed trade talks, making the prospects of a smooth Brexit less likely.
UK Prime Minister Boris Johnson has been warned that the EU views negotiations with the UK as a "different ball game" to the trade talks which secured an agreement with Canada.
The PM wants a Canada-style trade deal which would leave the UK free to diverge from EU rules. Conversely, the EU insists that the UK is looking for single market access rights that go far beyond those which are used by other countries with which it has trade deals, including Canada and Japan.
In addition, the contentious issue of immigration to the UK after Brexit is another stumbling block, with the UK government announcing plans to close the door to non-English speakers and unskilled workers.
However, a key aide to Brussels' chief negotiator Michel Barnier said the EU would not budge from its insistence on a "level playing field" on state subsidies, environmental protections and workers' rights as the price of any deal.
Stefaan De Rynck said: "It's clear that for us it's a different ball game that we are playing with the UK to the one that we agreed with Canada in terms of the level playing field."
He was speaking after the UK prime minister's negotiator David Frost warned that "to think that we might accept EU supervision on so-called level playing field issues simply fails to see the point of what we are doing".
De Rynck said the UK's closeness to the EU in terms of both distance and trading relationships meant the level playing field conditions were more important than in other trade deals struck by Brussels.
The pound spiked to an intraday high of USD1.3024 against the greenback in the wake of strong UK inflation figures, released at 0930 GMT, but quickly surrendered its gains.
"The positive impact of the UK's CPI reading this morning is on the wane, as attention turns to the UK-EU trade negotiations. These are already descending into acrimony over the potential for the UK to be given an 'off the shelf' deal. Beyond the spike in inflation, it is this issue that will be the bigger sterling driver, and will keep the BoE from moving too hastily to raise interest rates," said IG Group's Chris Beauchamp.
The annual UK inflation rate accelerated sharply in January, data from the Office for National Statistics showed. Consumer prices rose 1.8% year-on-year in January, a far faster rate than the 1.3% growth recorded for December. Month-on-month, prices fell 0.3% after a flat reading in December.
It was the highest inflation has been for six months and ahead of the 1.6% that economists were predicting.
Analysts at FXPro said: "The comparatively strong UK labour market and inflation figures released on Tuesday and earlier today supported the British currency but were not strong enough for the pound to confidently withstand the growing demand for USD.
"There is an increased demand for dollar FX pairs, that are steadily strengthening against the yen and the euro this month."
The euro stood at USD1.0793 at the European equities close, down from USD1.0817 late Tuesday.
Against the yen, the dollar was trading at JPY110.93, sharply higher from JPY109.81 late Tuesday.
"Whether today's move in the Yen pairs is due to a stop run/short squeeze, a delayed reaction to poor data, or fears of the coronavirus, it doesn't matter. The reality is that the Yen pairs are moving higher. We need to look for confirmation in other correlated asset classes to determine if the move is 'real'. If it is, we should see stocks continue higher, while gold and the dollar index move lower. Keep an eye on these assets for conviction," said analysts at City Index.
Stocks in New York were higher at the London equities close, buoyed by strong housing data, brushing off concerns the epidemic in China would have a lasting economic impact.
The DJIA was up 0.5%, the S&P 500 index up 0.6% and the Nasdaq Composite up 0.7%.
US new housing construction contracted slightly but stayed remarkably strong in January, according to data released.
Homebuilders racing to catch up with pent-up demand had sent housing starts to a 13-year high in December, with apartment construction hitting its fastest pace in 33 years as low interest rates has spurred demand.
New construction started in January slowed but not nearly as much as economists had expected, boosted by an acceleration in apartment buildings.
Ahead, minutes from the US Federal Reserve's January meeting are released at 1900 GMT on Wednesday.
Brent oil was quoted at USD58.88 a barrel at the London equities close, up from USD57.08 at the close Tuesday.
Brent oil prices rose for a seventh consecutive day after demand worries eased with a slowing of new coronavirus cases.
Gold was quoted at USD1,605.82 an ounce at the London equities close, up against USD1,602.83 late Tuesday.
The economic events calendar on Thursday has Germany producer prices at 0700 GMT and UK retail sales figures at 0930 GMT.
The UK corporate calendar on Thursday has annual results from miner Anglo American, medical devices maker Smith & Nephew, lender Lloyds Banking Group and from defence giant BAE Systems.
By Arvind Bhunjun; [email protected]
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