6th Feb 2020 08:38
(Alliance News) - London stocks opened in the green on Thursday, on course for a fourth straight session of gains, bolstered by China deciding to slash tariffs on USD75 billion of US goods.
Compass was among the top performers in the FTSE 100, while Beazley and Royal Mail topped and tailed the FTSE 250.
The FTSE 100 index was up 28.17 points, or 0.4%, at 7,510.65 early Thursday, the index around 3% higher since the week began.
The mid-cap FTSE 250 index was up 89.30 points, or 0.4%, at 21,609.30. The AIM All-Share index was up 0.1% at 961.29.
The Cboe UK 100 index was up 0.4% at 12,722.67. The Cboe 250 was up 0.2% at 19,468.61, and the Cboe Small Companies down 0.1% at 12,486.78.
In mainland Europe, the CAC 40 in Paris was up 0.9% while the DAX 30 in Frankfurt was 0.7% higher early Thursday.
"The positive sentiment in global equity markets continued this morning as China cut tariffs on some US goods. Furthermore, efforts continue to halt the spread of the coronavirus. Hence, we are seeing further reversal in global fixed income markets and currencies, where yields are rising, while the yuan is strengthening and the yen is weakening," commented Danske Bank.
China overnight said it will halve punitive tariffs on USD75 billion in US imports from February 14, a month after Beijing and Washington signed a truce in their long-running trade war.
The reduction will apply to levies of 5% and 10% that were imposed on more than 1,700 items in September, according to the State Council Tariff Commission. The move is aimed at "promoting the healthy and stable development of China-US economic and trade relations", the Commission said in a statement.
Against the yen, the dollar was quoted at JPY109.93 Thursday morning, up from JPY109.70 on Wednesday.
Asian stocks rallied overnight following the tariff news from China. Tokyo's Nikkei 225 index closed up 2.4% while in China, the Shanghai Composite closed up 1.7%, and the Hang Seng index in Hong Kong finished 2.6% higher.
"On the data front, traders have ignored the feeble German economic numbers," said Naeem Aslam, chief market analyst at AvaTrade.
Month-on-month, German factory orders were down 2.1%, sharper than the 0.8% decline posted for November. On a year earlier, orders sank 8.7%, again steeper than the 6.0% fall seen in November.
Consensus, according to FXStreet, was for a monthly rise of 0.6%, and a year-on-year fall of 6.0%.
ING said: "As hard and as much as we try, we cannot make the short-term outlook for the German industry look any better than it currently is: dire."
The euro was trading at USD1.1100 early Thursday, firm against USD1.1002 late Wednesday following the data.
Elsewhere in forex, sterling was quoted at USD1.2984 early Thursday, soft compared to USD1.2990 at the London equities close on Wednesday.
Gold was quoted at USD1,559.20 an ounce early Thursday, softer than USD1,557.60 on Wednesday. Brent oil was at USD55.92 a barrel early Thursday, firm versus USD55.86 late Wednesday.
In London's FTSE 100, Compass was the second-best performer, up 2.5% as it reported a good start to the financial year.
In the three months to December 31, the contract caterer told its annual general meeting that organic revenue grew 5.3%, driven by strong levels of new business wins and good retention rates, particularly in North America.
"The cost action programme, which was announced in November, is progressing as expected and the benefits are offsetting the anticipated impact of lower Business & Industry volumes in Europe," said Compass.
Across geographies, organic revenue in North America surged 7.5%, while Europe, as expected, was flat. Rest of World increased by 4.7%, supported by "good levels of growth" in Australia and Latin America.
Beazley was the top mid-cap performer, up 6.4% as profit surged in 2019.
Gross premiums written were up 15% to USD3.00 billion in the year, while net premiums grew 11% to USD2.50 billion. Pretax profit surged to USD267.7 million from USD76.4 million.
Profit was boosted as net investment income jumped to USD263.7 million from just USD41.1 million in 2018.
The insurer's combined ratio rose to 100% from 98% in 2018, due to an "adverse claims experience". A combined ratio below 100% means an insurer made a profit from its underwriting.
"An adverse claims experience across several lines of business, leading to reduced prior year reserve releases, meant that our combined ratio rose to 100% for 2019. Despite this, we are optimistic that the remedial action that we have been taking across several lines of business in recent years, alongside the expected continued premium rate increase, will favour us as we move into 2020," said Chief Executive Andrew Horton.
Royal Mail sank 7.6% in early trade as it held its profit forecast for the current financial year but warned it will miss its productivity target, and cautioned that its core UKPIL business could be loss-making in the upcoming 2021 financial year.
Revenue was up 3.7% for the nine months to December 29.
In Royal Mail's UK parcels, international & letters unit, UKPIL, revenue was up 1.0%, led by parcels which saw revenue growth of 3.7% and volume growth of 3.0%. Letter volumes, meanwhile, sank 9% - excluding election-related material - and revenue fell 1.5%.
GLS - General Logistics Systems - volumes were up 5%, and revenue up 11%.
For the current financial year, Royal Mail said it expects productivity improvement of 1.5%, against its 2% target. All other guidance, including an adjusted operating profit between GBP300 million to GBP340 million, was confirmed.
Looking even further out, things appear "challenging". The third-quarter run rate for addressed letter volumes "has not shown the expected level of recovery", the postal operator said.
"This, coupled with the ongoing uncertain business environment, means that we now expect a 1 percentage point increase in the decline, to 7-9% for 2020-21," said Royal Mail.
Further, the "ongoing industrial relations environment" and economic uncertainty increases the likelihood that UKPIL will be loss making in the 2021 financial year.
By Lucy Heming; [email protected]
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