11th Aug 2020 09:00
(Alliance News) - Stock prices in London opened higher on Tuesday as investors remain optimistic over new stimulus for the US economy, while the pound fell as pandemic-sized cracks started to appear in the UK labour market.
US lawmakers remain deadlocked in their pursuit of a new stimulus package, though observers say that with an election around the corner, Democrats and Republicans will likely reach a deal. A Democrat decision to lower its proposal to USD2 trillion from a previous USD3.5 trillion indicated the two sides were going in the right direction.
In London early Tuesday, the blue-chip FTSE 100 index was up 77.72 points, or 1.0%, at 6,128.31. The mid-cap FTSE 250 index was up 173.65 points, or 0.9%, at 17,898.59. The AIM All-Share index was up 0.2% at 940.12.
The Cboe UK 100 index was up 1.2% at 609.69. The Cboe 250 was up 1.1% at 15,254.68, and the Cboe Small Companies was up 0.1% at 9,349.65.
In mainland Europe, the CAC 40 index in Paris was up 1.0%, while the DAX 30 in Frankfurt was up 1.1%.
In the FTSE 100, InterContinental Hotels Group was up 3.6%. The hotel operator said it saw signs of a tentative recovery in demand as Covid-19 lockdown restrictions eased in major markets.
For the half-year ended June 30, revenue almost halved to USD1.25 billion from GBP2.28 billion last year, as the company swung to a pretax loss of USD275 million from a profit of USD375 million last year. Global revenue per available room - a key metric in the hotel industry - declined by 52% in the first half and was down 75% in the second quarter, as occupancy at comparable hotels fell to 25%.
Looking ahead, IHG said "small but steady" improvements in occupancy and RevPAR through the second quarter continued into July, with RevPAR expected to be down 58% on a year before - compared to the second quarter's 75% - and occupancy rising to around 45%.
On a subsequent conference call, IHG Chief Financial Officer Paul Edgecliffe-Johnson told Alliance News he was optimistic over a recovery in demand, especially for business travel, as the coronavirus crisis eases and infection rates start to fall.
At the other end of the large-cap index, gold miners Polymetal International and Fresnillo were the worst performers, down 1.5% and 0.5% respectively, tracking spot gold prices lower.
Gold was priced at USD1,998.06 an ounce early Tuesday, down sharply from USD2,033.00 late Monday.
In the FTSE 250, Plus500 was the best performer, up 7.5% after the contract-for-difference provider said it delivered an "outstanding performance" in the first half across all metrics, prompting an increased shareholder return.
For the half-year ended June 30, revenue multiplied to USD564.2 million, from USD148.0 million last year and pretax profit to USD363.2 million from USD63.9 million the year before. Plus500 said customer deposits more than doubled to USD1.65 billion from USD467.1 million last year.
The online trading company declared a dividend of USD0.9531, up substantially from USD0.2734 last year.
In light of the strong performance, Plus500 approved a new programme to buy back up to an additional USD67.3 million of the company's shares, having completed the purchase of USD38.9 million in the first half.
The pound was quoted at USD1.3065 early Tuesday, down from USD1.3083 at the London equities close Monday, following the release of UK unemployment data.
The UK unemployment rate held steady in June, despite the biggest jump in people out of work in over a decade, with many workers electing not to actively seek employment, the Office for National Statistics said Tuesday.
The UK unemployment rate in the three months to June was 3.9%, unchanged from the three months to May, the ONS said. The market consensus forecast, cited by FXStreet, was for a rise to 4.2%.
The ONS said that in July 730,000 fewer people were in paid employment when compared with March and 114,000 fewer when compared with June. The decrease in employment in the quarter to June was the largest quarterly decrease since May to July 2009, the ONS said.
"The unemployment rate in Britain remains defiantly at the historic low levels of 3.9%, rather than ticking higher to 4.2% as expected. That's where the good news ends. Cracks are starting to appear in the UK labour market and they ain't small," commented City Index analyst Fiona Cincotta.
"Suddenly we are starting to see some of those who had been in the no man's land of furlough, start to appear in the statistics. This is a trend which is set to continue over the coming months as the government tapers its support from the job retention scheme," Cincotta added.
The Japanese Nikkei 225 index ended up 1.9%. In China, the Shanghai Composite closed down 1.2%, while the Hang Seng index in Hong Kong is up 2.5%. Financial markets in Japan reopened after being closed on Monday for a holiday.
The euro was priced at USD1.1753, soft from USD1.1761. Against the yen, the dollar was trading at JPY106.10 in London, up from JPY105.81.
Brent oil was trading at USD45.20 a barrel Tuesday morning, up from USD44.84 at the London equities close Monday.
By Arvind Bhunjun; [email protected]
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