23rd Oct 2020 08:38
(Alliance News) - Stock prices in London were higher early Friday with lenders among the early gainers on the FTSE 100, encouraged by a third-quarter update from Barclays.
But traders are "still concerned" about the lack of agreement on a US stimulus deal, as well as rising virus cases in Europe, noted AvaTrade analyst Naeem Aslam.
"Investors are worried about the surge in coronavirus in Europe. France reported over 40,000 new cases for the first time yesterday. Overall, daily Covid-19 cases are reaching their record number in Europe. The situation is not getting out of control yet, but alarm bells have started to ring for sure," Aslam explained.
"There are also rumours in the market that Italy, the third-largest economy in Europe, could very soon be implementing a national curfew. This will be a real blow to its economy. Overall, this may be a good strategy to circuit break the surge in coronavirus cases, but this is coming at a very high economic cost that most countries cannot afford to pay."
The FTSE 100 index was up 36.28 points, or 0.6%, at 5,821.93 early Friday.
The mid-cap FTSE 250 index was up 86.44 points, or 0.5%, at 17,980.85. The AIM All-Share index inched up 0.1% to 969.93.
The Cboe UK 100 index climbed 0.6% to 578.71. The Cboe 250 rose 0.5% to 15,194.94, and the Cboe Small Companies was up 0.1% at 9,503.24.
The CAC 40 in Paris was up 0.3% but the DAX 30 in Frankfurt was flat.
The pound was quoted at USD1.3070, down from USD1.3095 at the London equities close on Thursday.
The euro stood at USD1.1804, down from USD1.1825.
In London, Barclays rose 3.6% early Friday. The lender's third-quarter update was mixed, but it said credit impairment costs will be much lower in the second half of the year than in the first.
Barclays said pretax profit for the three months ended September came in at GBP1.1 billion, up sharply from GBP200 million a year earlier, bumping up its return on tangible equity to 5.1% from 2.4%. Third-quarter group income declined 6% to GBP5.2 billion, however.
For the first nine months of 2020, pretax profit is down 26%, highlighting just how much the banking sector has been hit by Covid-19 so far this year.
Lower risk-weighted assets, however, meant Barclays' CET1 ratio improved to 14.6% from 13.8% at the end of December and 13.4% in September 2019.
Barclays booked a credit impairment charge of GBP600 million, up 32% annually but down 63% quarterly. It expects impairment charges to be "materially" lower in the second half of 2020 compared to the first and to be lower again in 2021 from 2020.
The lender did not declare a dividend, though Chief Executive Officer James Staley said he recognises "the importance of capital returns to shareholders and will provide an update on its policy and dividends at full year results".
The update from Barclays offered a shot in the arm to the FTSE 100's other lenders. HSBC was up 2.8%, Lloyds Banking Group climbed 2.7% and NatWest was up 1.6%.
"It's been a difficult time for UK banks this year, though Barclays share price has held up much better than its peers. Having seen US banks cut back their loan loss provisions in Q3 we've seen Barclays do the same thing this morning. These loan loss provisions were one of the most notable characteristics of the numbers that we saw in Q2, particularly in the context of the impact the economic slowdown the coronavirus pandemic had on bank profit margins, as well as the rise in non-performing loans," CMC Markets UK Chief Market Analyst Michael Hewson said.
"This could get worse in the coming months as lockdown measures get tightened in various local areas, and unemployment levels start to rise. This is why it was a little surprising to see US banks slow sharply the level of their Q3 provision when they reported a couple of weeks ago."
HSBC follows Barclays in reporting results on Tuesday next week, followed by Bank of Ireland on Wednesday, and both Lloyds Banking and Standard Chartered on Thursday.
London Stock Exchange Group shares gave back 0.1%. LSEG boss David Schwimmer hailed the firm's "resilient" third-quarter, which also saw it make "good progress on the highly attractive Refinitiv transaction".
In the three months ended September, revenue climbed 1% yearly to GBP524 million. Total income, including its CCP business, climbed 2% to GBP600 million. Gross profit was up 4% to GBP551 million.
"We continue to engage constructively with the European Commission and believe the potential divestment of the Borsa Italiana group will contribute significantly to addressing the EU's competition concerns," Schwimmer added.
LSEG agreed to sell the unit that owns the Milan stock exchange to rival Euronext for EUR4.33 billion earlier in October.
Elsewhere on the FTSE 100, Holiday Inn owner InterContinental Hotels Group said trading improved in its third-quarter, with the decline in revenue per available room, a crucial performance marker for hotel firms, easing quarter-on-quarter.
InterContinental Hotels said its decline in RevPAR eased to 53% in the third quarter, compared to 75% in quarter two, leaving the year-to-date figure down 52%. Occupancy climbed to 44% from 25%.
"Trading improved in the third quarter, although progress continues to vary by region," Chief Executive Officer Keith Barr said.
"Domestic mainstream travel remains the most resilient, and our industry-leading Holiday Inn brand family positions us well to meet that demand as it slowly returns."
The stock fell 0.7% but peer Whitbread rose 0.2%.
Carnival was up 2.6%, among the best performing mid-caps. The stock has surged 11% over the past week.
"Cruise stocks are back in demand as there is a lot of hope among investors that the ban will be lifted soon. There is no doubt that all cruise stocks have taken a massive beating, and some of them even sold their cruises for scrab just to cut down the cost," AvaTrade's Aslam explained.
"But this week, we have seen a decent turnaround in cruise stocks, and names like Royal Caribbean and Norwegian have bounced back up. If the White House lifts the bans, these stocks can really see some wild moves in the coming days, and that could be an opportunity for investors. Even if Donald Trump doesn't open the cruises in the US for another month, companies like Carnival have already volunteered to suspend the travel until the end of November.
The US Centers for Disease Control & Prevention extended its no-sail order at the end of September, though the measures expire at the end October and it is not yet known whether the ban will be prolonged further.
In New York, Carnival peer Royal Caribbean Cruises rose 4.4% on Thursday.
Flash manufacturing and services data will be in focus on Friday morning in Europe.
PMI readings from the eurozone are released at 0900 BST. The UK print is at 0930 BST before the US counterpart at 1445 BST.
Already out, the German flash composite reading for October was 54.5 points, slightly down from 54.7 in September but still indicating expansion. Manufacturing led, coming in at 58.0 points, up from 56.4 in September, while services read 48.9, down from 50.6 and back in contraction.
"The eurozone recovery has hit a wall of new Covid-19 restrictions. The flash readings for October will be the first glimpse at how local lockdowns across the continent has affected economic activity. Manufacturing is holding up much better than services, which entail the hardest hit retail, travel and leisure categories," London Capital Group's Jasper Lawler said.
Against the yen, the dollar was trading at JPY104.77 early Friday in London, down from JPY104.83 at the London market close on Thursday.
Brent oil was quoted at USD42.22 a barrel, down from USD42.70 at the London equities close Thursday.
Gold fetched USD1,906.77 an ounce, up from USD1,898.00.
By Eric Cunha; [email protected]
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