19th May 2020 12:04
(Alliance News) -Â The FTSE 100 failed to maintain Tuesday's bright start as caution grew ahead of US Federal Reserve Chair Jerome Powell's appearance before Congress.
Also weighing London's blue-chip index down were intensifying US-China political tension, as well as share price declines for Compass, Imperial Brands and Antofagasta.
The FTSE 100 index was down 46.39 points, or 0.7%, at 6,002.20 on Tuesday. The FTSE 250 was up 129.23 points, or 0.8%, at 16,359.26, and the AIM All-Share was up 0.1% at 826.32.
The Cboe UK 100 was down 0.8% at 10,146.34, the Cboe UK 250 was up 1.2% at 13,931.11, and the Cboe UK Small Companies up 0.4% at 8,785.91.
In European equities on Tuesday, the CAC 40 in Paris was down 1.2%, while the DAX 30 in Frankfurt was down 0.8%.
"Benchmarks in Europe are struggling to extend yesterday's gains, which was sparked by optimism about a possible vaccine against Covid-19. However, yesterday's euphoria is now nuanced by today's uncertainty as investors brace themselves for the Fed Chairman Jerome Powell's speech, which will provide them with more clues on the state of the recovery and the next action to be taken by the US central bank," said Pierre Veyret, technical analyst at ActivTrades.
Veyret said: "We expect markets to stay volatile but without clear direction until Jerome Powell's speech."
US Fed Reserve Chair Powell will testify before Congress at 1500 BST.
Ahead of his appearance, Wall Street is set for a cautious start. The Dow Jones and S&P 500 are both called down 0.2% while the Nasdaq is seen flat.
Also keeping the mood subdued on Tuesday was more sparring between the US and China.
Beijing on Tuesday accused Donald Trump of smearing China and shirking American responsibilities to the World Health Organization, after the US president threatened to pull out of the UN health body.
Trump on Monday called the WHO a "puppet of China" before tweeting a letter he had sent to the organisation's chief Tedros Adhanom Ghebreyesus threatening to make permanent a temporary freeze on funding from the US.
China in response accused Trump of trying to "smear China" and "shirk responsibility and bargain over its international obligations to the WHO", foreign ministry spokesman Zhao Lijian said at a regular press briefing Tuesday.
In economic data Tuesday, the UK unemployment rate edged lower in the three months to March. 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%.
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.
"While claims data is not a perfect guide to unemployment, the over two million cumulative declarations we've seen over the past few weeks potentially points to an unemployment rate as high as 9%, which if it materialised, would be above the worst we saw following the financial crisis," said ING.
"Whichever way you look at it, these are undoubtedly shocking figures. But they are also in stark contrast to those in the US, where the unemployment rate looks set to reach 22% in May," ING added. "This is undoubtedly down to the UK government's Job Retention (furlough) Scheme, which at the latest count is now paying the wages of 7.5 million workers, or around a quarter of total employees."
The pound was quoted at USD1.2235 Tuesday midday, firm against USD1.2221 at the London close Monday.
The euro was trading at USD1.09454, up from USD1.0892.
Economic sentiment in Germany rallied for the second month in a row, numbers on Tuesday showed, amid optimism that conditions will improve come the summer.
The ZEW indicator of economic sentiment for Germany came in at 51.0 points in May, a 22.8 point climb from April. The indicator assessing current conditions slipped however, by 2.0 points to register minus 93.5 points in May.
"Optimism is growing that there will be an economic turnaround from summer onwards. This is also reflected in the significant improvement in expectations for the individual sectors. According to the financial market experts surveyed, economic growth is expected to pick up pace again in the fourth quarter of 2020," ZEW President Achim Wambach said.
Against the yen, the dollar was quoted at JPY107.59, up from JPY107.39.
Brent oil was quoted at USD34.66 a barrel Tuesday midday, lower than USD35.48 late Monday. Gold was at USD1,735.04 an ounce, up from USD1,729.70.
In London, Compass was the worst blue-chip performer in midday trade, down 9.0%.
The contract caterer launched 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.
Imperial Brands fell 7.4% 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.
Antofagasta dipped 3.9% after the Chilean miner decided 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, or a total of USD70.0 million, from 16.3 cents per share, or a total of USD160.7 million, from the previous recommendation. The total dividend payment for 2019 will therefore be 17.8 cents per share.
Meanwhile, DCC rose 5.8% 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, Beazley was up 8.9%. The insurer said it has raised GBP247 million through a share placing, the proceeds of which will go towards positioning the business for future growth opportunities as well as strengthening its balance sheet amid continued uncertainty.
The insurer issued 78.5 million shares at a price of 315p per share, reflecting a discount of 4.9% to the closing price on Monday of 331.4p. For the bookbuild process, Numis Securities and JP Morgan Cazenove acted as joint bookrunners.
By Lucy Heming;Â [email protected]
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