25th Mar 2020 08:44
(Alliance News) -Â London share prices surged at the open on Wednesday, buoyed by US lawmakers agreeing on a USD2 trillion stimulus package to boost the world's biggest economy.
The FTSE 100 index was up 122.54 points, or 2.3%, at 5,568.55 early Wednesday, having already soared 9.1% on Tuesday.
The mid-cap FTSE 250 index was up 509.94 points, or 3.6%, 14,682.67. The AIM All-Share index was up 2.2% at 645.45.
The Cboe UK 100 index was up 3.6% at 9,425.43. The Cboe 250 was up 3.7% at 12,617.97, and the Cboe Small Companies up 0.8% at 7,749.94.
In mainland Europe, the CAC 40 in Paris was up 2.1% while the DAX 30 in Frankfurt was up 2.4% early Wednesday.
"The deal is here finally. Democrats and Republicans have agreed on a massive stimulus aid package. Traders have been eagerly waiting for this USD2 trillion aid package that is likely to bolster the US economy. There is no doubt the US desperately needed this aid package to stem the outbreak of coronavirus," said Naeem Aslam at AvaTrade.
The deal aims to buttress the teetering economy by giving roughly USD2 trillion to health facilities, businesses and ordinary Americans buckling under the strain of the coronavirus pandemic.
"At last, we have a deal," Senate Majority Leader Mitch McConnell said, hailing the massive "wartime level of investment into our nation" reached after five days of arduous and tense negotiations.
"We have a bipartisan agreement on the largest rescue package in American history," top Senate Democrat Chuck Schumer said shortly after McConnell spoke. "So many people are being put out of work through no fault of their own. They don't know what their future is going to be like, how are they going to pay the bills," Schumer added.
The Senate and House of Representatives still need to pass the legislation before sending it to President Donald Trump for his signature. McConnell said the Senate will vote on the measure later Wednesday.
It will also inject some USD130 billion into what Schumer calls "a Marshall Plan for hospitals" and health care infrastructure, referring to the huge American aid program to rebuild Europe after World War II.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 8.0%. In China, the Shanghai Composite ended up 2.2%, while the Hang Seng index in Hong Kong closed up 3.8%.
Gold was priced at USD1,600.81 an ounce early Wednesday, lower than USD1,623.30 late Tuesday. Brent oil was trading at USD27.62 a barrel, firm on USD27.55.
The euro traded at USD1.0818 early Wednesday, up from USD1.0792 late Tuesday. Against the yen, the dollar was quoted at JPY111.20, slightly down from JPY111.49.
"The US dollar has been under pressure this week since the recovery of broader risk appetite. Whether that will continue is an open question, given ongoing uncertainties on the severity of the coronavirus outbreak and its economic impact," said Lloyds Bank.
The pound remained firmer despite data - released earlier in the day than normal - showing UK inflation weakened in February.
Consumer prices were up 1.7% year-on-year in February, following a 1.8% rise in January. This did matched consensus expectations, according to FXStreet. Month-on-month, consumer prices in the UK rose 0.4% after a 0.3% decrease in January.
In a separate release, the ONS showed producer price growth weakened in February. Output producer price inflation was 0.4% year-on-year in February, a sharp deceleration from 1.0% in January. Input prices fell 0.5%, swinging from January's 1.6% rise.
Sterling was quoted at USD1.1830 early Wednesday, up from USD1.1743 at the London equities close on Tuesday.
Amid broad-based gains in London early Wednesday, JD Sports Fashion was the top performer in the FTSE 100, up 18% as it added to Tuesday's 19% rise.
The athleisurewear retailer on Tuesday said that that while its websites continue to accept and fulfil orders, it believes the closure of its stores in the UK, Europe and US will hurt profit for financial 2021. The FTSE 100-listed company said that it believes its strong balance sheet, net cash resources and substantial working capital facilities will be adequate to meet any cash deficiencies during the period of disruption.
Bucking the positive trend was Rentokil Initial, slumped 14%. The pest control and hygiene firm withdrew its final dividend and full-year guidance due to the "unprecedented uncertainty" caused by the Covid-19 outbreak.
The company said that it was only in the last ten days that its trading has been hampered by the virus. Until mid-March, its performance "was not materially impacted".
Rentokil reported mixed demand for its products and services. With hotels, restaurants and catering sectors being forced to close due to government lockdown measures, demand has fallen, though it has been "strong" in hygiene services and food production markets.
In the FTSE 250, SSP was up 8.9% despite planning an equity raise in order to ensure sufficient liquidity amid Covid-19 disruption.
Since its February update, the travel concessions operator said it has seen "an unprecedented and rapidly escalating impact of the Covid-19 virus on the travel operating environment, particularly in airports".
SSP operates a number of food and drink brands at travel destinations such as train stations and airports, such as Upper Crust and Cafe Ritazza.
Like-for-like sales are running around 80% to 85% lower in the UK and continental Europe year-on-year. In North America, sales are around 80% lower.
SSP said it will defer the payment date of its final dividend, and it does not intend to pay an interim dividend for 2020. It has also suspended its share buyback.
The firm said it thinks trading conditions will "deteriorate further" and has considered a "very pessimistic scenario" assuming an almost total shutdown of the travel market for the whole of the second half of the financial year, which ends on September 30. This could see revenue slump as much as 85% in the second half on a year ago.
To "to preserve cash and ensure sufficient liquidity", SSP has agreed a new 18-month committed bank facility up to GBP112.5 million, and intends to launch a share placing and subscription. This will not exceed 19.99% of the company's existing share capital.
"The net proceeds of the equity placing will be used to strengthen the company's balance sheet, working capital and liquidity position during this period of unprecedented disruption in the global travel market as a result of the Covid-19 outbreak," said SSP.
In Wednesday's economic calendar, there is Germany's Ifo business climate survey due at 0900 GMT with US durable goods orders at 1230 GMT.
By Lucy Heming;Â [email protected]
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