19th May 2020 16:57
(Alliance News) - The FTSE 100 eased back slightly on Tuesday after a strong start to the week, with caution dominating as the head of the US central bank testified in front of a Senate committee.
The FTSE 100 index closed down 46.36 points, or 0.8%, at 6,002.23 on Tuesday - pulling back after a sharp 4.3% gain on Monday.
The FTSE 250 ended up 90.05 points, or 0.6%, at 16,320.08, and the AIM All-Share closed up 1.02 points, or 0.1%, at 826.75.
The Cboe UK 100 ended down 0.7% at 10,153.01, the Cboe UK 250 closed up 1.0% at 13,898.45, and the Cboe Small Companies ended up 1.3% at 8,858.78.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.9%, while the DAX 30 in Frankfurt ended up 0.2%.
"In the past 24 hours the outlook hasn't really changed, but equities have handed back some of the ground that was made yesterday. Economies around the globe are still being reopened, and hopes remain high for a potential Covid-19 vaccine, but it seems like the bulls have decided to take a breather today. It might transpire that today's negative move was just a slight retracement before the next leg higher," said David Madden at CMC Markets.
Madden added: "The mood in New York is muted as traders are paying close attention to the testimony of Fed Chair Jerome Powell, and Steve Mnuchin – the US Treasury Secretary."
Stocks in New York were cautious at the London equities close, with the Dow Jones down 0.1% and the S&P 500 index up 0.2% while the Nasdaq Composite outperformed, rising 0.7%.
The US economy risks suffering "permanent damage" the longer the lockdown to contain the Covid-19 pandemic drags on, Mnuchin told the Senate Banking committee in a hearing on US pandemic stimulus packages.
American families and businesses are suffering amid the nationwide shutdowns, Mnuchin said, but reopening the economy will need to be done with caution.
"We're conscious of the health issues and we want to do this in a safe way," he said of efforts to restart the economy.
Meanwhile, US Federal Reserve Chair Jerome Powell said the central bank will keep interest rates at near-zero until it is "confident" the economy is in recovery and on track towards a return to low unemployment rates.
In written remarks for the Senate committee, Powell said the Fed was using emergency authorities to make market interventions, including to ensure the smooth functioning of debt markets, and indicated it would not quickly unwind its moves.
"When economic and financial conditions improve, we will put these tools back in the toolbox," according to Powell's remarks.
And over in the UK, Chancellor Rishi Sunak said the economy may not bounce back straight away from the massive crisis caused by the coronavirus pandemic.
Sunak said he is not counting on the "V-shaped" recovery many had been hoping for when the country was locked down to prevent the spread of the virus.
"It is not obvious that there will be an immediate bounceback," Mr Sunak told the Lord's Economic Affairs Committee, adding that the economy is likely to see a huge downturn.
"Obviously the impact will be severe," he said. "We are likely to face a severe recession the likes of which we have never seen."
His comments came after data showed the UK unemployment rate edged lower in the three months to March.
However, in a sign the worse is yet to come, the number of people claiming jobless benefits jumped by 69% to 2.1 million in April from 1.2 million in March, according to the Office for National Statistics.
Joblessness decreased to 3.9% in three months to March, as the lockdown in the UK came into effect, down from the three months to 4.0% in February. Market consensus estimates had expected the latest jobless rate to rise to 4.4%.
The pound was quoted at USD1.2245 at the London equities close Tuesday, higher compared to USD1.2221 at the close on Monday.
The euro stood at USD1.0930 at the European equities close Tuesday, against USD1.0892 at the same time on Monday. Against the yen, the dollar was trading at JPY107.94 compared to JPY107.39 late Monday.
Brent oil was quoted at USD34.56 a barrel at the London equities close Tuesday, down from USD35.48 late Monday.
Gold was quoted at USD1,740.26 an ounce at the London equities close Tuesday, up against USD1,729.70 at the close on Monday.
In London, Imperial Brands ended the session as the worst blue-chip performer, shares sliding 6.5%, after the tobacco firm cut its dividend and warned on the impact of Covid-19.
For the half-year ended March 31, the Davidoff cigarette maker's revenue rose 2.0% to GBP14.67 billion from GBP14.39 billion last year, but pretax profit fell 23% to GBP785 million from GBP1.02 billion. Operating profit fell 20% to GBP925 million.
Imperial Brands, which also owns cigarette brands such as Winston and Gauloises, cut its interim dividend by 33% to 41.70p from 62.56p last year.
Looking ahead, Imperial Brands warned that the Covid-19 pandemic is expected to have a "more pronounced" impact in the second half of financial 2021. It expects coronavirus-related factors to have a low single-digit impact on annual earnings per share in addition to current market expectations of a 2% fall in constant currency earnings per share.
Compass shed 3.4% after launching a GBP2.0 billion share placing, subscription and retail offer after reporting a double-digit profit decline in the first half of its current financial year.
Compass reported revenue of GBP12.5 billion for the six months to the end of March, up 1.2% from GBP12.3 billion reported a year earlier. Organic revenue increased by 1.6% in the first half.
For the five months to the end of February, organic revenue growth was around 6%, the company noted, before a 20% fall in March and a 46% slump in April.
Compass said the duration of the Covid-19 pandemic makes it a challenge to reliably assess the impact across markets in which it operates. Therefore, it has withdrawn its previous growth and margin outlook for 2020.
Antofagasta finished down 2.1% after deciding to reduce its previously declared final dividend payout for 2019 due to "heightened uncertainty" created as a result of a significant increase in the number of new Covid-19 cases in Chile and a total quarantine over the greater Santiago area of the country.
Antofagasta, in order to conserve cash, has decided to lower its 2019 final dividend to 7.1 US cents per ordinary share from 16.3 cents per share, the previous recommendation. The total dividend payment for 2019 will therefore be 17.8 cents per share.
Rolls-Royce Holdings fell 1.7% after Credit Suisse cut the jet engine maker to Underperform from Outperform.
DCC gained 2.3% after the Irish support services firm raised its payout, despite earnings falling during a year which it said presented "challenging market conditions", Brexit uncertainty, and now the Covid-19 outbreak.
In the year ended March 31, revenue inched 3.1% lower to GBP14.76 billion from GBP15.23 billion. Pretax profit was down 4.9% to GBP311.5 million from GBP327.4 million.
DCC raised its dividend by 5.0% to 145.27 pence from 138.35p. The move comes at a time when many other companies have decided against payouts due to the Covid-19 pandemic.
In the FTSE 250, Greencore slumped 7.2% after reporting a drop in demand over the past six weeks.
The manufacturer of convenience food in the UK reported pretax profit of GBP27.3 million for the 26 weeks ending March 27 compared to just GBP5.7 million reported for the same period a year ago. Revenue, meanwhile, grew by 1.6% to GBP712.7 million from GBP701.4 million year-on-year.
The company explained that since the start of the second half of its current financial year the Covid-19 pandemic has had a "dramatic and volatile" impact on the shape of UK food consumption.
Weekly demand in Greencore's food-to-go categories declined by as much as 70% but more recently is less than 60% below prior year levels.
The UK corporate calendar for Wednesday has full-year results from food and clothing retailer Marks & Spencer, consumer credit data provider Experian, water firm Severn Trent and property investor Great Portland Estates.
In the economic calendar on Wednesday, there is UK inflation at 0700 BST and eurozone inflation at 1000 BST. Minutes from the US Federal Reserve's last meeting are at 1900 BST.
By Lucy Heming; [email protected]
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