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London midday: Stocks maintain moderate losses after construction data

By Michele Maatouk

Date: Thursday 04 Jun 2020

London midday: Stocks maintain moderate losses after construction data

(Sharecast News) - London stocks were still moderately lower by midday on Thursday following three days of gains, as investors mulled the latest reading on the UK construction sector and looked ahead to a policy announcement from the European Central Bank.
The FTSE 100 was down 0.3% at 6,363.79.

Sino-US relations were in focus again after the Trump administration said it was barring Chinese airlines from flying to the US from 16 June. The decision, which was made by the US Department of Transportation, is understood to have been a response to Beijing forbidding US air carriers from resuming flights to China amid the Covid crisis.

China's civil aviation regulator subsequently issued a notice allowing US carriers to resume limited services into the country.

Investors were also eyeing the latest policy announcement from the European Central Bank, due at 1245 BST.

Deutsche Bank analyst Jim Reid said: "Investors are hoping that the central bank will add further monetary stimulus, which alongside the switch back into value over growth has perhaps been helping to support the rally over recent days."

Economists expect the €750bn pandemic emergency purchase programme announced in March to be doubled in size and extended to mid-2021, Reid said.

"However our economists also expect large downward revisions to the staff forecast which may give them cover to act further, with President Lagarde having already indicated that their forecast is between the 'middle' and the 'severe' scenarios the ECB had previously discussed, implying GDP growth this year between -8% and -12%.

"The other interesting aspect to watch out for today will be how Lagarde responds to questions on the German constitutional court ruling, which challenged the ECB's previous public sector purchase programme in a court ruling last month."

On home shores, a survey released earlier showed the downturn in the construction sector eased last month as sites started to reopen, but output remained at record lows.

The IHS Markit CIPS UK construction total activity index was 28.9 in May, the second-lowest since February 2009 and well below the neutral 50.0 point. Anything above that signals growth, anything below indicates contraction. It was, however, a marked improvement on April's historic low of 8.2.

The construction sector has been hit hard by the Covid-19 pandemic, with the lockdown closing sites and companies across the supply chain temporarily shutting down and furloughing staff.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "A complete recovery in activity to pre-virus levels in the second half of this year remains highly unlikely.

"Many building sites reopened during the month to complete projects underway before the lockdown. Output likely will rise further in June, as shortages of raw materials and protective equipment ease, and the labour supply improves now that some workers can send their children to school again. Nonetheless, the relatively modest rise in new orders index - to 25.1 in May from 10.4 in April - suggest clients remain reluctant to commission new projects while the economic outlook is very uncertain."

In UK equity markets, Rolls-Royce was under the cosh after the aerospace and defence giant said it was cutting 1,500 jobs at its base in Derby and 700 at its Renfrewshire plant in Scotland. It had already announced last month that it would be axing 9,000 jobs.

Shares of Aston Martin slid after the luxury car maker said it was axing up to 500 jobs as it cut back production of front-engined sports cars and focus on its DBX sports utility model.

Pennon was in the red after it increased its annual dividend by 6.6% but halved its target for dividend growth as the water company set aside almost £9m for bad debts from Covid-19.

Elsewhere, office space provider IWG was hit by a downgrade to 'sector perform' at RBC Capital Markets, while Electrocomponents was lower after a downgrade to 'neutral' at JPMorgan.

Market Movers

FTSE 100 (UKX) 6,363.79 -0.29%
FTSE 250 (MCX) 17,824.32 -0.41%
techMARK (TASX) 3,848.50 0.56%

FTSE 100 - Risers

easyJet (EZJ) 807.60p 2.96%
Fresnillo (FRES) 763.80p 2.28%
AstraZeneca (AZN) 8,747.00p 1.76%
Ocado Group (OCDO) 2,218.00p 1.51%
Ashtead Group (AHT) 2,515.00p 1.45%
Flutter Entertainment (FLTR) 11,425.00p 1.20%
Aveva Group (AVV) 4,144.00p 0.93%
Experian (EXPN) 2,913.00p 0.90%
Standard Chartered (STAN) 431.10p 0.89%
Spirax-Sarco Engineering (SPX) 10,040.00p 0.86%

FTSE 100 - Fallers

Informa (INF) 481.90p -4.88%
Evraz (EVR) 296.00p -3.93%
Intermediate Capital Group (ICP) 1,336.00p -3.61%
Rolls-Royce Holdings (RR.) 317.20p -3.35%
Whitbread (WTB) 2,563.00p -3.32%
Carnival (CCL) 1,136.50p -3.24%
Melrose Industries (MRO) 128.40p -3.09%
Pennon Group (PNN) 1,156.50p -3.06%
Standard Life Aberdeen (SLA) 264.90p -2.61%
Barclays (BARC) 122.06p -2.60%

FTSE 250 - Risers

Senior (SNR) 88.40p 14.06%
Euromoney Institutional Investor (ERM) 862.00p 11.37%
Hyve Group (HYVE) 113.00p 7.93%
Helios Towers (HTWS) 167.80p 3.71%
Softcat (SCT) 1,116.00p 3.24%
IMI (IMI) 976.00p 2.85%
Coats Group (COA) 56.70p 2.72%
Stagecoach Group (SGC) 76.50p 2.68%
Victrex plc (VCT) 2,080.00p 2.36%
Kainos Group (KNOS) 883.00p 2.32%

FTSE 250 - Fallers

Hammerson (HMSO) 123.50p -10.34%
Aston Martin Lagonda Global Holdings (AML) 65.10p -5.45%
Cineworld Group (CINE) 84.54p -4.67%
Marston's (MARS) 66.40p -3.91%
Workspace Group (WKP) 780.50p -3.58%
Bank of Georgia Group (BGEO) 996.00p -3.49%
WH Smith (SMWH) 1,147.00p -3.37%
Wizz Air Holdings (WIZZ) 3,538.00p -3.23%
TBC Bank Group (TBCG) 900.00p -3.23%
Elementis (ELM) 74.05p -3.20%


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