20th May 2020 08:46
(Alliance News) -Â Sentiment was subdued at the start of Wednesday's session after doubts were raised over biotech firm Moderna's encouraging early Covid-19 vaccine results.
Meanwhile, the pound softened as UK inflation fell further below the Bank of England's 2% target, reaching just 0.8% in April as oil prices collapsed.
Among the blue-chip fallers in London in early dealings was Rolls-Royce Holdings, after the jet engine maker unveiled plans to cut 17% of its workforce.
The FTSE 100 index was down 18.88 points, or 0.3%, at 5,983.35 early Wednesday. The mid-cap FTSE 250 index was down 55.33 points, or 0.3%, at 16,264.75. The AIM All-Share index was up 0.3% at 829.60.
The Cboe UK 100 index was down 0.4% at 10,111.83. The Cboe 250 was down 0.2% at 13,871.86, and the Cboe UK Small Companies down 0.2% at 8,844.71.
In mainland Europe, the CAC 40 in Paris was down 0.4% while the DAX 30 in Frankfurt was down 0.1% early Wednesday.
US biotech firm Moderna reported "positive interim" results on Monday in the first clinical tests of its vaccine against the new coronavirus performed on a small number of volunteers.
However, Naeem Aslam, chief market analyst at AvaTrade, noted: "A health publication report showed that the vaccine is still very much in its early stages, and there are considerable hurdles ahead.
"Experts still need to see more data from the company before they draw any firm conclusion, and this took the wind out of the US equity session yesterday."
The doubts over the vaccine trial came as the US recorded another 1,536 coronavirus deaths over the past 24 hours, the Johns Hopkins University tracker said.
That figure raises to 91,845 the total number of Covid-19 deaths in the US. The US tops the global rankings both for the highest death toll and the highest number of infections, with more than 1.5 million cases.
And US Covid-19 deaths are projected to surpass 113,000 by mid-June, a modelling average showed, underlining the country's status as the nation worst affected by the pandemic.
"The new forecast for cumulative US deaths by June 13 is about 113,000, with a 10% chance of seeing fewer than about 107,000 and a 10% chance of seeing more than 121,000," the Covid-19 Forecast Hub at the University of Massachusetts said on its website.
The latest projections come as most US states take steps – some minor, some more substantial – to re-open their shuttered economies and communities while facing the challenge of instilling confidence among Americans that it is safe to begin returning to normal.
The World Health Organization has agreed to launch an investigation into its coronavirus response, as Beijing accused Washington of shirking its responsibility after US President Donald Trump threatened to quit the UN agency. WHO Director-General Tedros Adhanom Ghebreyesus said dealing with the pandemic must come first, however.
On Monday Trump threatened to make permanent a temporary freeze on US funding to the body. Beijing hit back Tuesday, charging him with trying to "smear" China and damage the WHO for political ends.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.8%. In China, the Shanghai Composite ended down 0.5%, while the Hang Seng index in Hong Kong is down 0.1% in late trade.
At the top of the FTSE 100 in early dealings was credit checking firm Experian, up 3.0% after reporting a "strong" year as it delivered organic revenue growth at the top end of its guidance range, though profit did fall.
Revenue for the year to March 31 grew 7% to USD5.18 billion, with organic growth of 8%. Pretax profit fell 2%, however, to USD942 million.
"The Covid-19 crisis began to escalate late into our financial year with limited financial impact in FY20. We took swift action across our business in response to the unfolding crisis. We have operations in 45 countries and numerous industry segments, including in many of the societies hardest hit by the pandemic," said Chief Executive Officer Brian Cassin.
"We are confident that, once the crisis abates, we will be well placed to continue to deliver on our growth agenda," said Cassin. "Accordingly, we have held our second interim dividend level at 32.5 cents per share."
Just Eat Takeaway.com fell 2.2% after SM Trust sold 5.6 million shares in the online takeaway platform - its entire holding - at a price of EUR93.50 each. More positively, Goldman Sachs reinitiated the recently merged company's shares at Buy with a 11,500 pence price target, 37% above it price early Wednesday.
Rolls-Royce Holdings was down 3.3% after unveiling plans to cut 9,000 jobs and warning a long wait for aviation to bounce back fully.
The jet engine maker proposed a major restructuring in light of the "unprecedented" impact of Covid-19 on its business and the whole of aviation industry.
Rolls-Royce expects to cut at least 9,000 roles from its workforce of 52,000. In addition to the savings generated from its headcount reduction, it will cut spending across plant and property, capital and other "indirect" cost areas.
The proposed reorganisation is expected to generate annualised savings of more than GBP1.3 billion, of which headcount is expected to contribute around GBP700 million. Cash restructuring costs are likely to be around GBP800 million, with outflows incurred across 2020 to 2022.
The reorganisation will predominantly affect the Civil Aerospace business, where Rolls-Royce will carry out a "detailed review" of its facility footprint.
"Governments across the world are doing what they can to assist businesses in the short-term, but we must respond to market conditions for the medium-term until the world of aviation is flying again at scale, and governments cannot replace sustainable customer demand that is simply not there," said Chief Executive Warren East.
In the FTSE 250, Marks & Spencer rose 5.2%. The food and clothing retailer reported a fall in profit for its recently ended financial year as it took costs and stock write-downs due to Covid-19.
Revenue for the year to March 28 was down 1.9% to GBP10.18 billion and pretax profit slumped 20% to GBP67.2 million. The pretax profit figure included adjusting items of GBP335.9 million, with GBP212.8 million of this for costs and stock write-downs due to Covid-19.
Food like-for-like sales were up 1.9% while clothing sales fell 6.2% - the latter including an estimated 2.2% hit from Covid-19 in March.
CEO Steve Rowe said the results reflect a year of "substantial progress" with some "green shoots" in its clothing arm in the second half.
"However, they now seem like ancient history as the trauma of the Covid crisis has galvanised our colleagues to secure the future of the business," said Rowe.
The Covid-19 crisis started to impact the business in the first week of March with reductions in Clothing & Home sales across all its markets. While Food sales were resilient, "we did not experience the stockpiling performance of the supermarkets", M&S noted.
M&S in a 'Covid-19 scenario' is assuming a 70% decline in UK Clothing & Home revenue for the four months to July and only a gradual return to original budgeted levels by February 2021, which will hit annual revenue by GBP1.5 billion. In UK Food, it expects a 20% decline in revenue in the period to July with sales "level" thereafter.
"This scenario has been stress tested and even in the event of a longer and deeper impact on trading, the group maintains sufficient liquidity. Although we will be drawing on our available credit facilities in the coming year, under the scenario the business will have significant liquidity headroom throughout the next 18 months. We are pleased to note that in the first 6 weeks of the new year, sales and cash have substantially outperformed the scenario," M&S said.
M&S decided against paying a final dividend, and does not anticipate making any payout in its 2021 financial year.
In the economic calendar on Wednesday, there is eurozone inflation at 1000 BST. Minutes from the US Federal Reserve's last meeting are at 1900 BST.
Already out, data showed UK consumer prices fell on a monthly basis in April and the annual inflation rate softened considerably.
Month-on-month, prices fell 0.2% in April after a flat reading the month before. Annually, the inflation rate was 0.8%, notably slower than the 1.5% recorded for March and the 1.7% recorded in February.
Year-on-year, liquid fuels prices slumped 42% and gas prices were down 12% amid a collapse in international oil prices, bringing the broader electricity, gas & other fuels category 6.8% lower as a whole.
Clothing prices fell 3.1% while food prices were up 1.3%.
Sterling dipped after the data to be quoted at USD1.2237 early Wednesday after the data, soft against USD1.2245 at the London equities close on Tuesday.
"The Bank of England will have been watching these figures closely. Whilst Andrew Bailey has left the door wide open for further bond buying, this has already been priced into the pound. With inflation significantly below the BoE's 2% target, we can expect negative rates discussion to pick up at the June monetary policy meeting," said Fiona Cincotta at City Index.
The euro traded at USD1.0954 early Wednesday, firm on USD1.0930 late Tuesday. Against the yen, the dollar was quoted at JPY107.68 versus JPY107.94.
Gold was priced at USD1,748.84 an ounce early Wednesday, higher than USD1,740.26 on Tuesday. Brent oil was trading at USD34.66 a barrel early Wednesday, up from USD34.56 late Tuesday.
By Lucy Heming;Â [email protected]
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