28th May 2020 11:55
(Alliance News) -Â London stocks remained in the green at midday on Thursday in a third consecutive session of gains, with markets shaking off China's controversial security law for Hong Kong.
easyJet was among the best blue-chip performers, while Cineworld helped to push up the mid-caps and boohoo surged on AIM.
The FTSE 100 index was up 40.96 points, or 0.7%, at 6,185.21 midday Thursday. The mid-cap FTSE 250 index was up 150.67 points, or 0.9%, 17,294.29. The AIM All-Share index was up 2.1% at 869.79.
The Cboe UK 100 index was up 0.8% at 10,459.62. The Cboe 250 was up 0.9%, at 14,790.60, and the Cboe Small Companies up 1.2% at 9,152.75.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both 0.6% and 0.3% higher respectively.
"After a solid rebound in US stocks last night and a positive session in Asia outside of Hong Kong, European markets are making modest gains," said Chris Beauchamp, chief market analyst at IG.
"Resilience in equities comes at an odd time however, as data begins to worsen as we head further into Q2 and US-China tensions begin to rise, but overall investors continue to look beyond the second quarter, hoping for growing signs of a rebound in the third quarter and a full-blown upturn in the final three months of the year," he said.
Stocks continued to rise on Thursday despite China's parliament adopting a controversial national security law for Hong Kong in a move expected to spur protests in the financial hub and heightened tensions with the US.
The law bypasses Hong Kong's internal legislature to punish acts seen as endangering national security and subverting state power in the semi-autonomous Chinese territory.
Beijing may also set up outposts of mainland agencies in Hong Kong to curb violent protests and what it describes as interference by foreign countries.
In the last week the law has spurred renewed anger and protests in Hong Kong, a former British colony where people have enjoyed a degree of freedom not seen on the mainland. Critics and rights activists fear the law will be used to quash political dissent.
The law could significantly change US relations with Hong Kong and the government in Beijing.
US Secretary of State Mike Pompeo said on Wednesday that Hong Kong cannot be considered to have a high degree of autonomy from China once the law is passed and therefore will not continue to warrant special treatment under US law.
Naeem Aslam at AvaTrade commented: "China approving this legislation has put the US trade deal in jeopardy...The bigger question for the market is if the US is going to go ahead and put sanctions on China. A key factor to keep in mind is that China will retaliate and it will slap similar sanctions on the US and this will drag the economic growth even lower".
In the wake of China's move, Wall Street is on course for a mixed start. The Dow Jones is seen up 0.4%, the S&P 500 up 0.1% and the Nasdaq down 0.3%.
In Europe, the European Commission showed economic sentiment in the eurozone showed the first shoots of recovery in May after the onset of Covid-19 two months ago.
The economic sentiment indicator edged up by 2.6 points to 67.5 in the eurozone in May, a minor rebound after two sharp drops in March and April. The index printed 103.5 in February, slumping to 94.2 in March and then collapsing to 64.9 in April.
May's rebound was led by the employment expectations monitor, which bounced up 11.3 points to 70.2, though remains around historical lows.
The euro traded at USD1.1006 on Thursday after the data, up from USD1.0977 late Wednesday.
To come in the economic events calendar on Thursday are German inflation figures at 1300 BST and US GDP and initial jobless claims readings at 1330 BST.
Sterling was quoted at USD1.2238, firm on USD1.2217 at the London equities close on Wednesday.
Against the yen, the dollar was quoted at JPY107.75, down against JPY107.80.
Gold was priced at USD1,723.90 an ounce on Thursday, sharply higher than USD1,701.04 on Wednesday. Brent oil was trading at USD34.28 a barrel, soft on USD34.43.
In London, easyJet shares were up 4.2% after the airline said it expects demand for the next three years to be lower than in 2019, as it announced plans to cut the number of people it employs and the number of planes it flies.
The low-cost airline confirmed its plans to resume flights on June 15, adding that booking trends on the scheduled flights have been encouraging with the demand indications for summer 2020 showing improvement, albeit from a low base. Bookings for winter are well ahead of the equivalent point last year, including customers who are rebooking coronavirus-disrupted flights for later dates.
easyJet said that in its financial fourth quarter to the end of September, it expects to fly around 30% of the planned capacity flown in the comparative period a year ago.
"The levels of market demand seen in 2019 are not likely to be reached again until 2023," the company said.
In an effort to cut spending, easyJet said it plans to reduce staff numbers by up to 30%.
In the FTSE 250, Cineworld shares surged 23%. The firm said its lenders have agreed to waive the leverage covenant for the June testing date, as it announced plans to reopen cinemas in July.
The FTSE 250-listed movie house chain said its lenders also agreed to increase the leverage covenant for the December test to 9.0 times net debt to earnings before interest, tax, depreciation and amortisation.
IWG was up 14% after raising GBP320 million through a share placing and retail offer.
The company, which trades under Regus brand name, issued 133.9 million new shares under the share placing and retail offer at 239 pence each, a 8.1% discount to 260.2p price on Wednesday.
CEO Dixon bought 38.2 million shares, around 29% of the placing and retail offer. Shareholder Toscafund also subscribed 24.8 million placing shares, worth GBP59.4 million.
The FTSE 250-listed firm on Wednesday had said it would raise GBP315 million through a share placing and retail offer in order to take advantage of its "pipeline of active opportunities".
The company also had reported a first-quarter revenue rise and predicted a "greater impact" from lockdown measures on its second quarter. Revenue in the three months to March 31 was 12% higher year-on-year at GBP692.6 million from GBP619.9 million.
On AIM, boohoo shares climbed 16% after the online fashion retailer said it has bought the remaining stake in PrettyLittleThing from the co-founder's son, a day after defending itself over the issue against a short seller.
boohoo said it is buying the remaining 34% stake in PrettyLittleThing from minority shareholders Umar Kamani and Paul Papworth for an initial consideration of GBP269.8 million, potentially rising to GBP323.8 million including a potential further contingent payout of GBP54 million.
The initial GBP269.8 million consideration will be settled through a combination of shares in boohoo totalling GBP107.9 million and an up-front cash payment of GBP161.9 million, funded from the GBP240.7 million of net cash that the company had on its balance sheet at February 29.
boohoo's purchase comes a just a day after it "strongly" refuted allegations made by short seller ShadowFall.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, commented: "Even if this sum rises to the maximum consideration of GBP323.8 million, it would appear boohoo's taking the new assets home at a decent price".
By Lucy Heming;Â [email protected]
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