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London midday: Stocks drop as investors keep an eye on Covid-19 risks in US

By Alexander Bueso

Date: Wednesday 01 Jul 2020

London midday: Stocks drop as investors keep an eye on Covid-19 risks in US

(Sharecast News) - London stocks were lower at the start of the second quarter amid ongoing concerns about the coronavirus pandemic, especially in the States, and as investors eyed the latest readings on the UK's housing and manufacturing sectors.
At noon, the FTSE 100 was down 1.14% at 6,099.07.

Overnight, the US government's top epidemiologist, Anthony Fauci, warned of the risk that the daily rate of new Covid-19 infections might reach 100,000 in the near future.

However, he also sounded a "cautiously optimistic" note around prospects for a vaccine while calling attention to the fact that approximately half of new cases were centred in only four states, Arizona, California, Florida and Texas.

IG analyst Josh Mahony said: "The US remains the key hotspot for investors, with Florida and Texas potentially the first of many states that will require another a second bout of restrictions if the virus is to be brought under control.

"While traders have largely targeted US shares given the expectation of huge stimulus measures from Trump and Powell, we are now likely to see European markets outperform as a united front on financial support bolsters the impressive virus response seen over recent months."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, concurred with Fauci's assessment, estimating that the rate of daily new infections in the US might reach 100,000 by 23 July.

However, he added that he was increasingly hopeful that might not come to pass, pointing to a slowdown in the rate of new infections last week to 27.2% - the least since 19 June.

That, he said: "suggests that changes in people's behaviour in the worst-hit states, even before restrictions on bars and restaurants were reimposed, are starting to suppress the spread of the virus."

On home shores, the latest survey from Nationwide showed house prices fell in June for the first time since 2012 as the pandemic took its toll.

On an yearly basis, house prices dipped 0.1% following a 1.8% increase in May and versus expectations of 1% growth.

On the month, prices were 1.4% lower, which was an improvement on the 1.7% drop seen in May but worse than the 0.7% decline expected.

Nationwide's chief economist Robert Gardner the drop was to be expected given the "unprecedented" 25% fall in economic output over March and April.

"Housing market activity also slowed sharply as a result of lockdown measures implemented to control the spread of the virus," he added.

"While latest data from HMRC showed a slight pickup in residential property transactions from April's low, in May they were still 50% lower than the same month in 2019."

Also on the economic front, IHS Markit confirmed a rebound in its manufacturing Purchasing Manager' Index from a reading of 40.7 for May to 50.1 in June.

However, the survey compiler sounded a note of caution due to the risk of job losses once government support measures start to be phased out.

In equity markets, John Laing was in the red as it said first-half net asset value before deducting dividends was expected to show a single-digit decline as investment activity was hampered by the coronavirus lockdown.

SSP lost ground after saying it was looking to slash 5,000 jobs in the UK as it dealt with the collapse in air travel due to the pandemic. The company, which operates food outlets at airports and train stations, said it expected only 20% of stores to be open by the autumn.

But it was IAG that was at the bottom of the pile on the top-flight index, dragged down by the risk of a second wave of Covid-19 in the US.

On the upside, Smith & Nephew was a high riser as it said it expects second-quarter revenue to drop around 29% but noted an improving performance as the quarter progressed.

Sainsbury's was also up after supermarket chain reported an 8.2% rise in first-quarter like-for-like sales driven by groceries as Britons stocked up during the coronavirus lockdown.

B&M European Value Retail gained as it hailed a "strong" first quarter, with a particularly pleasing performance in the UK, where revenue rose 33.7%.

In broker note action, Hargreaves Lansdown was knocked lower by a downgrade to 'sell' at Citi but Close Brothers was boosted by an upgrade to 'outperform' at RBC Capital Markets.

Market Movers

FTSE 100 (UKX) 6,089.21 -1.31%
FTSE 250 (MCX) 17,036.87 -0.48%
techMARK (TASX) 3,691.98 -0.36%

FTSE 100 - Risers

Smith & Nephew (SN.) 1,560.50p 3.65%
Fresnillo (FRES) 850.00p 1.02%
Melrose Industries (MRO) 115.15p 1.01%
DCC (DCC) 6,784.00p 0.80%
Bunzl (BNZL) 2,178.00p 0.55%
Rentokil Initial (RTO) 511.80p 0.43%
SEGRO (SGRO) 898.80p 0.42%
Experian (EXPN) 2,829.00p 0.35%
Berkeley Group Holdings (The) (BKG) 4,178.00p 0.31%
Intertek Group (ITRK) 5,438.00p -0.04%

FTSE 100 - Fallers

ITV (ITV) 71.12p -4.77%
Rolls-Royce Holdings (RR.) 272.20p -4.63%
International Consolidated Airlines Group SA (CDI) (IAG) 212.70p -4.28%
Informa (INF) 451.10p -4.10%
Evraz (EVR) 277.10p -3.92%
Hargreaves Lansdown (HL.) 1,568.50p -3.68%
Standard Life Aberdeen (SLA) 259.40p -3.06%
Next (NXT) 4,761.00p -2.72%
Anglo American (AAL) 1,819.80p -2.65%
BT Group (BT.A) 111.05p -2.63%

FTSE 250 - Risers

Spirent Communications (SPT) 258.50p 7.26%
B&M European Value Retail S.A. (DI) (BME) 414.80p 4.35%
Scottish Inv Trust (SCIN) 773.00p 3.07%
Safestore Holdings (SAFE) 747.50p 2.96%
PayPoint (PAY) 616.00p 2.84%
Rotork (ROR) 287.60p 2.71%
Babcock International Group (BAB) 318.40p 2.64%
Beazley (BEZ) 420.40p 2.54%
RIT Capital Partners (RCP) 1,830.00p 2.46%
Oxford Biomedica (OXB) 718.00p 2.43%

FTSE 250 - Fallers

John Laing Group (JLG) 310.00p -11.02%
Energean (ENOG) 575.00p -6.50%
SSP Group (SSPG) 241.80p -5.99%
Cineworld Group (CINE) 57.28p -5.38%
Carnival (CCL) 934.00p -5.25%
William Hill (WMH) 108.15p -4.96%
easyJet (EZJ) 646.60p -4.91%
Provident Financial (PFG) 168.20p -4.54%
TUI AG Reg Shs (DI) (TUI) 364.20p -4.38%
Royal Mail (RMG) 174.40p -4.31%

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