12th Nov 2020 08:58
(Alliance News) - Stock prices in London opened lower on Thursday as the week's rally inspired by hopes for a coronavirus treatment faltered, with safe-haven assets such as gold and the dollar in favour as infections remain stubbornly high.
Markets rejoiced earlier this week after US pharma company Pfizer said its vaccine candidate had proved to be 90% effective. However, a worrying spike in new infections in the US and Europe has fanned concerns about a deadly winter in the northern hemisphere with a number of countries already in lockdown.
Several major economies in Europe have shut down or have imposed strict containment measures, while a number of US cities including New York have been forced to act to contain the spread. With infection and death rates continuing to spike there are concerns the crisis will extend into the new year.
After several weeks of rapidly rising coronavirus cases, hospitals around the US are once again overwhelmed, forcing local authorities to take new measures to cope with the pandemic. On Wednesday a record 65,368 people were in the hospital with Covid-19 across the country, marking the second day in a row and second time ever that the tally passed the 60,000 mark, according to the Covid Tracking Project.
In London, the FTSE 100 index was down 61.62 points, or 1.0%, at 6,320.48. The FTSE 250 was down 65.99 points, or 0.3%, at 19,274.20. The AIM All-Share was down 0.2% at 993.95.
The Cboe UK 100 index was down 1.2% at 628.08. The Cboe 250 was down 0.7% at 16,542.22. The Cboe Small Companies down up 0.1% at 10,591.86.
The CAC 40 index in Paris was down 0.6% and Frankfurt's DAX 30 down 0.8%.
In the FTSE 100, Rolls-Royce was the best performer, up 5.2%. The jet engine maker said it received valid acceptances in respect of 6.1 million shares for its GBP2 billion 10-for-3 rights issue. The underwriters - a who's who of investment banks - will find subscribers for the remaining 375.1 million shares.
Burberry Group was up 4.3% despite the fashion house reporting a drop in first-half earnings as 60% of stores were closed globally due to the coronavirus pandemic during the period.
For the half-year ended September 26, revenue was down 31% at GBP878 million from GBP1.28 billion the year before. However, the revenue figure beat market estimates of GBP849 million. Pretax profit was down 62% at GBP73 million from GBP193 million.
Burberry declared no interim dividend, having paid out 11.3 pence last year.
More positively, Burberry said a recovery was "underway" with a sequential improvement in comparable store sales which fell 6% in the second quarter, easing sharply from a 45% drop in the first quarter.
"The outlook remains chequered for Burberry as the pandemic rumbles on, but the company has made some progress of late. A vastly improved second quarter improved the overall half-year numbers, where store sales and revenues exceeded expectations, but this was not enough to repair the damage which had already been caused," said Interactive Investor's Richard Hunter.
At the other end of the large caps, J Sainsbury was the worst performer, down 5.0%, after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.
Croda International was down 3.0% after Barclays downgraded the speciality chemicals company to Underweight from Equal Weight.
The Japanese Nikkei 225 index ended up 0.7% on Thursday. In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong finished 0.2% lower.
The pound was quoted at USD1.3182 on Thursday morning in London, lower from USD1.3199 at the London equities close Wednesday.
On the economic front, the UK economy returned to growth on a quarterly basis in the third quarter as lockdown measures eased, according to figures from the Office for National Statistics.
On an annual basis, UK gross domestic product fell 9.6% in the three months to September, the economy's contraction slowing from 21.5% in the second quarter of 2020. The third-quarter reading was slightly worse than market forecasts, cited by FXStreet, for an annual contraction of 9.4%.
However, on a quarterly basis, UK GDP grew by 15.5% in the third quarter, having shrunk by 19.8% in the second quarter. The quarterly figure also slightly missed the consensus estimate, which called for 15.8% growth.
"A strong rebound in the economy is clearly positive, but we should keep the champagne on ice for now. The summer boom was turbo-charged by the Eat Out to Help Out scheme, while the furlough scheme worked its magic by keeping unemployment under wraps. But if you shut down an economy and then open it up, it's not hugely surprising that you get a huge seesaw effect in quarterly GDP numbers," commented AJ Bell analyst Laith Khalaf.
"The real litmus test for the economy going forward is how soon it can return to pre-pandemic levels. News of a potential vaccine makes the climb back look a lot less daunting, not only because it offers the prospect of a brighter future, but also because it gives businesses and individuals greater confidence in the here and now," Khalaf added.
The euro stood at USD1.1782, up from USD1.1763 late Wednesday in London. Against the yen, the dollar was trading at JPY105.35, down from JPY105.57.
Brent oil was quoted at USD43.88 a barrel Thursday morning, down from USD44.30 at the London equities close Wednesday. Gold was trading at USD1,870.35 an ounce, firm against USD1,863.53.
"Rising Covid cases and tighter and more widespread lockdown restrictions are prompting a risk off trade sending riskier assets such as stocks lower, whilst safe haven such as the US dollar and gold are back in favour," said City Index analyst Fiona Cincotta.
The economic calendar Thursday has Ireland's consumer price index reading at 1100 GMT and EU industrial production at 1000 GMT. The afternoon sees US initial jobless claims out at 1330 GMT.
By Arvind Bhunjun; [email protected]
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