25th Mar 2020 12:03
(Alliance News) -Â European stocks remained broadly higher at midday on Wednesday, though market vigour was starting to flag as the boost from a USD2 trillion US stimulus package began to wear off.
The FTSE 100 index was up 13.91 points, or 0.3%, at 5,459.92, easing back after having traded above 5,700 earlier in the session. The mid-cap FTSE 250 index was up 202.59 points, or 1.4%, at 14,375.32. The AIM All-Share index was up 3.6% at 654.31.
The Cboe UK 100 index was up up 1.9% at 9,270.42. The Cboe 250 was up 2.5% at 12,476.20, and the Cboe Small Companies up 2.8% at 7,904.08.
In mainland Europe, the CAC 40 in Paris was up 0.8% while the DAX 30 in Frankfurt was down 0.8% early afternoon.
"Markets reacted positively to the latest news of a deal being struck between the White House and Congress for an economic aid package of USD2 trillion aimed at mitigating the fallout from the coronavirus crisis on the economy of the United States. Risk related assets recorded gains and the pound joined the bandwagon," said Ricardo Evangelista, senior analyst at ActivTrades.
"The question now is, will this risk rally be sustainable or will it be diluted amidst the expected torrent of negative economic performance indicators investors will soon be presented with?" Evangelista asked.
Stocks have been boosted the past two days by hopes that the US would launch a USD2 trillion stimulus package, on which the Senate and the White House have now reached agreement.
"At last, we have a deal," Senate Majority Leader Mitch McConnell said on Wednesday, hailing the massive "wartime level of investment into our nation" reached after five days of arduous and tense negotiations.
"We have a bipartisan agreement on the largest rescue package in American history," top Senate Democrat Chuck Schumer said shortly after McConnell spoke.
However, share buying - which had been fuelled overnight by the prospect of US stimulus - was starting to flag again.
In the US, stocks are set to pull back from Tuesday's substantial rally. The Dow Jones is set to slip 0.4% - after an 11% surge on Tuesday. The S&P 500 and Nasdaq Composite both are called down by 1.1%.
Meanwhile, the pound remained stronger despite data - released earlier in the day than normal - showing UK inflation weakened in February.
Consumer prices were up 1.7% year-on-year in February, following a 1.8% rise in January. This did matched consensus expectations, according to FXStreet. Month-on-month, consumer prices in the UK rose 0.4% after a 0.3% decrease in January.
In a separate release, the ONS showed producer price growth weakened in February. Output producer price inflation was 0.4% year-on-year in February, a sharp deceleration from 1.0% in January. Input prices fell 0.5%, swinging from January's 1.6% rise.
Sterling was quoted at USD1.1896 on Wednesday, up from USD1.1743 at the London equities close on Tuesday.
In Germany, the Ifo's business climate index recorded its steepest fall since the country reunified in the 1990s.
The business climate index fell to 86.1 in March from 96.0 in February.
"This is the steepest fall ever recorded since German reunification and the lowest value since July 2009. Companies' expectations in particular have darkened as never before. Assessments of the current situation have also worsened considerably. The German economy is in shock," Ifo said.
The preliminary reading last week had shown a reading of 87.7 points for March.
The euro traded at USD1.0823 at midday, up from USD1.0792 late Tuesday. Against the yen, the dollar was quoted at JPY111.10, slightly down from JPY111.49.
Gold was priced at USD1,617.00 an ounce on Wednesday, lower than USD1,623.30 late Tuesday. Brent oil was trading at USD26.48 a barrel, down from USD27.55.
In London, stocks that have been battered by Covid-19 worries the past few weeks were among the risers. Travel stocks, such as British Airways parent International Consolidated Airlines and easyJet, were up 9.7% and 7.3% respectively.
Housebuilder Persimmon was up 6.1% after deciding to cancel its interim dividend and postpone the payment of its final distribution in preparation for completions delays, cancellations and a slowdown in new sales due to the virus outbreak.
Persimmon entered 2020 with a strong balance sheet, it said, including cash holdings of GBP844 million, land creditors of GBP435 million and land holdings of 93,246 plots owned and under control.
However, Persimmon is now preparing for a "significant" delay in the timing of legal completions, a rise in cancellation rates, and a material slowdown in new sales.
Persimmon said conserving cash and maximising financial flexibility is in the long-term best interests of the business and all its stakeholders.
Thus, the company said it has decided to cancel the proposed 125 pence per share interim dividend payment, which was expected to be paid on Thursday next week. In addition, Persimmon said it will postpone the proposed final dividend payment of 110p per share, which was expected to be paid on July 6.
The worst blue-chip performer was Rentokil Initial, down 16%. The pest control and hygiene firm withdrew its final dividend and full-year guidance due to the "unprecedented uncertainty" caused by the Covid-19 outbreak.
The company said that it was only in the last ten days that its trading has been hampered by the virus. Until mid-March, its performance "was not materially impacted".
Rentokil reported mixed demand for its products and services. With hotels, restaurants and catering sectors being forced to close due to government lockdown measures, demand has fallen, though it has been "strong" in hygiene services and food production markets.
In the FTSE 250, Biffa was down 14% after the waste business warned it will be seeing a steep fall in demand from commercial customers due to Covid-19.
High Wycombe-based Biffa said the disruption from Covid-19 will not have too much of an impact on its financial year ending on Friday. However, no final dividend will be declared for the year.
However, it now expects "significant disruption" to operations over the next few months. The main impact will be on the Industrial & Commercial business which will see "very significant" reduced demand as customers are forced to stop operations.
By Lucy Heming;Â [email protected]
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