12th Aug 2020 12:16
Alliance News) - Stocks in London were mixed at midday on Wednesday as investors looked past the UK's sickening plunge into recession, electing instead to focus on signs of returning health and hopes of a coronavirus vaccine.
In London, midday Wednesday, the blue-chip FTSE 100 index was up 55.02 points, or 0.9%, at 6,209.37. The mid-cap FTSE 250 index was down 24.91 points, or 0.1%, at 17,972.31. The AIM All-Share index was up 0.1% at 947.95.
The Cboe UK 100 index was up 1.1% at 618.69. The Cboe 250 was down 0.2% at 15,370.68, and the Cboe Small Companies was down 0.1% at 9,430.65.
In mainland Europe, the CAC 40 index in Paris was up 0.3%, while the DAX 30 in Frankfurt was down 0.1%.
"Continuing hopes for a vaccine and the prospect of a big stimulus package in the US are enabling investors to look past the global coronavirus crisis to the sunny uplands of recovery. The worst quarterly fall in output since records began in the UK and the resulting slide into a deep recession was met with a shrug - the pound pretty stable against other major currencies - as it had been widely anticipated," AJ Bell's Russ Mould said.
In the FTSE 100, Admiral Group was the best blue-chip performer, up 5.1% after the motor insurer lifted its shareholder payout as lower insurance claims boosted first-half performance.
For Admiral, strong prior-year reserve releases at home and outside the UK, along with some non-recurrence of negative items in 2019 - including a GBP33 million Ogden discount rate impact - helped push pretax profit for the six months to June 30 up 31%, to GBP286.1 million from GBP218.2 million recorded a year ago. Operating profit increased 30% to GBP292.3 million.
The Wales-based company declared a dividend payment of 70.5 pence per share, including a special 15.5p per share payment, together 12% higher than the 2019 interim dividend of 63.0p per share. In addition, Admiral said it will pay the previously deferred 2019 special dividend of 20.7p alongside the 2020 interim dividend.
Just Eat Takeaway.com was up 4.4%. The online takeaway platform said revenue rose as demand increased for food deliveries while people were deprived of eating out due to lockdown restrictions.
Just Eat Takeaway reported revenue for the half-year ended June 30 multiplied to EUR675 million from EUR179 million last year, while orders increased 32% to 257 million during the period. The figures are presented as if the combination was completed on January 1, 2019 to provide comparable information for the full six-month period, the company said. Like-for-like revenue grew by 44% to EUR1 billion from EUR715 million a year ago.
However, Just Eat Takeaway, recorded a loss of EUR158 million compared to EUR127 million a year prior, as a result of amortisation, advisory, transaction and integration-related expenses of the integration of the firm with Takeaway.com, plus the proposed takeover of GrubHub in the US.
M&G was up 4.0%. The savings and investments business said first-half performance was "resilient" amidst the global economic impact of the Covid-19 pandemic, but the company does not intend to raise shareholder payouts while the "threat of Covid-19 remains".
M&G, which was demerged from Prudential in 2019, however, added that it remains committed to its dividend policy of stable or increasing payouts. It declared an interim dividend of 6.0 pence per share, in line with its policy of paying one-third of the previous year's final dividend.
The London-based company posted pretax profit of GBP665 million for the six months to June 30, down 53% from GBP1.43 billion profit recorded a year ago. Gross premiums fell year-on-year to GBP3.46 billion from GBP5.91 billion. First-half adjusted operating profit before tax - the company's preferred profit measure - totalled GBP309 million, down 57% from GBP714 million a year ago.
"All-in-all M&G is a bit of a 'wait and see' story at the moment. But with the dividend now looking set to remain intact this year, investors prepared to back the group are being richly rewarded for their patience," said analysts at Hargreaves Lansdown.
At the other end of the large-cap list, Spirax-Sarco Engineering was down 2.5%. The thermal energy management company was more pessimistic about the pace of recovery in rest of the year but maintained expectations after a good first half.
The company reported a GBP106.3 million pretax profit for six months ended June 30, down 1.7% from GBP108.1 million a year before. Revenue fell 3.6% to GBP569.7 million from GP591.2 million with all three of its segments posting lower revenue, including a 9.3% revenue drop from largest segment Steam Specialties to GBP331.7 million.
The company increased its dividend per share by 4.7% to 33.5 pence from 32.0p a year before.
The company, which is headquartered in Cheltenham, noted that 85% of its demand is from customers' operating budgets, rather than more under-pressure capital budgets, with a high proportion of its revenue coming from sectors less hurt by the pandemic, such as water treatment of healthcare.
In the FTSE 250, Dunelm was up 4.5% after Barclays started coverage on the homewares retailer with an Outperform rating.
On AIM, ASOS was up 4.2% after the online-only clothing retailer said annual sales and profit results are likely to be "significantly ahead of market expectations", as customer returns have remained low. even following the end of lockdown. The online-only clothing retailer's revenue growth is now expected to be between 17% and 19%, with pretax profit in the region of GBP130 million to GBP150 million.
In its financial year ended August 2019, ASOS reported pretax profit of GBP33.1 million on GBP2.73 billion in revenue. Assuming a 19% increase, that would mean an annual pretax profit for ASOS of around GBP39.4 million on revenue of roughly GBP3.25 billion for financial 2020.
In addition, ASOS said higher expectations are driven by better than expected underlying demand amid the lockdown, with more people shopping at home, as well as the continuation of its "beneficial returns profile", meaning customers returning fewer purchases for refund.
The retailer, however, added it is cautious on the year's remaining outlook as it is "unclear how long the current favourable shopping behaviour will persist".
The pound was quoted at USD1.3044 Wednesday midday, down from USD1.3084 at the London equities close Tuesday. Sterling picked up from an overnight low of USD1.3017 versus the greenback, however.
The UK economy entered into recession for the first time since the 2008-09 financial crisis with the sharpest quarterly decline in economic activity in at least 65 years, according to figures the Office for National Statistics on Wednesday.
On an annual basis, UK gross domestic product fell 21% in the three months to June, having contracted 1.7% in the first quarter of 2020. Market forecasts, cited by FXStreet, was for an annual contraction of 22%.
On a quarterly basis, UK GDP shrank by 20% having contracted 2.2% in the first three months of 2020. The quarterly change was in line with the consensus estimate.
The grim second-quarter figures showed the UK suffered one of the biggest economic hits from the pandemic in western Europe, ignobly besting the eurozone's 15% drop and France's 19% contraction.
However, monthly figures showed the UK economy bounced back by a slightly better-than-expected 8.7% in June, following upwardly revised growth of 2.4% in May, as lockdown restrictions eased.
Commenting on the GDP data, UK Chancellor of the Exchequer Rishi Sunak said that the ONS figures "confirm that hard times are here".
"Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will," Sunak said. "But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity."
The UK government's furlough scheme, which has been supporting the economy since the coronavirus crisis began, is set to end in October.
ONS data on Tuesday showed around 730,000 UK workers have been removed from the company payrolls since March, while employment also dropped by the largest amount in a quarter since 2009 between May and June.
"The figure for June is key, as we all knew that lockdown measures would have a big impact on the economy but what we still don't know is how quickly the UK will rebound," said AJ Bell's Laura Suter.
"The biggest impact of any recession on households will be job losses. Unemployment figures released yesterday showing that three-quarters of a million fewer people were working in July compared to March confirm that the crunch of the recession is already being felt by many. The Bank of England expects this figure to jump further as the government's furlough scheme is unwound and estimates around 2.5 million people will be unemployed by Christmas, meaning more pain is still to come," Suter added.
The euro was changing hands at USD1.1767, flat from USD1.1770 late Tuesday. Against the yen, the dollar was quoted at JPY106.75, firm from JPY106.49 in London.
Gold was trading at USD1,949.31 an ounce midday Wednesday, flat from USD1,947.40 at Tuesday's equities close in London. The precious metal's price has collapsed from the USD2,026 mark at the start of the week, however, as the dollar has firmed.
Brent oil was priced at USD45.22 a barrel Wednesday morning, flat from USD45.12 a barrel at Tuesday's close.
US stock market futures were pointed higher as vaccine hopes offset the deadlock over a US stimulus package on Capitol Hill.
The DJIA was called up 0.9%, the S&P 500 index up 0.7% and the Nasdaq Composite up 0.8%.
US President Donald Trump on Tuesday announced a USD1.5 billion contract with biotech company Moderna for 100 million doses of an eventual coronavirus vaccine, the sixth such deal reached since May.
Moderna shares were up 9.5% in pre-market trade in New York.
By Arvind Bhunjun, [email protected]; and Neetika Kurup, [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
AdmiralDunelmASOSSpirax-SarcoJust Eat TakeawM&G