London close: Stocks finish lower after weak GDP data

Tue 30 Jun 2020

LONDON (SHARECAST) - (Sharecast News) - London stocks closed in the red on Tuesday, after the release of weaker-than-expected GDP figures and amid ongoing concerns about the coronavirus pandemic.
The FTSE 100 ended the session down 0.9% at 6,169.74, and the FTSE 250 was 0.46% weaker at 17,119.16.

Sterling was stronger on its major trading pairs, last rising 0.57% on the dollar to $1.2368, and advancing 0.6% against the euro to €1.1006.

Data released earlier by the Office for National Statistics showed the economy recorded its largest contraction in more than four decades in the first quarter of 2020, as consumers cut spending in the first few days of the coronavirus lockdown.

Gross domestic product fell by a more-than-expected 2.2% in the largest fall since the third quarter of 1979.

The ONS had previously estimated a 2% drop but revised its figure after data showed a record 6.9% plunge in March.

But with the data only showing nine days of the lockdown, the second quarter was expected to show the pandemic's full impact on the economy.

The Bank of England earlier this month warned the economy may have contracted by 20% in the first half of 2020.

EY ITEM Club chief economic adviser Howard Archer said it was "evident that the UK economy witnessed a record GDP contraction in the second quarter", forecasting a 17% slump quarter-on-quarter.

"The EY ITEM Club also expects the economy to return to clear growth in the third quarter with GDP expanding close to 10% quarter-on-quarter," Archer said.

"This assumes a further gradual easing of lockdown restrictions across the UK."

Meanwhile, worries about the Covid-19 crisis continued to weigh on investors' minds as Leicester became the first city in England to be put under a local lockdown after a surge in new coronavirus infections, with non-essential retailers and schools closed again.

"Sentiment in equities has been impacted by worries about the rising number of coronavirus cases, and the increase in localised lockdowns," said CMC Markets analyst David Madden.

"Recently various US states have witnessed a jump in the number of infections, which has prompted some states to row back on reopening their economies.

"There is a fear that governments can only loosen their restrictions so much before the infection rate jumps, so that is playing on traders minds'."

Madden also noted Prime Minister Boris Johnson's revealing of a 5bn infrastructure spending plan earlier in the day, saying the move was clearly aimed at stimulating the economy.

"In the current climate the UK economy can do with all the help it can get, but the sum of money in question is very small in the grand scheme of things - in 2018, the UK's total output was 2.2trn."

In equity markets, Shell was down 3.68% after saying it expects to take a $20bn to $27bn hit to second quarter pre-tax profits from impairments after revising its outlook for commodity prices and margin outlook amid the pandemic.

BP was also on the back foot, closing down 2.45%.

"In a world of falling oil demand and a bigger push towards renewables, these energy titans increasingly look like creatures from another era, something which should give investors pause for thought," said IG analyst Chris Beauchamp.

"While neither Shell nor BP will be going anywhere soon, their importance as dividend payers will likely diminish relative to other sectors, and yield-hungry investors need to be prepared for this eventuality."

InterContinental Hotels dipped 2.17% as it said revenue per available room fell 75% in the second quarter but that the trend was improving and 90% of its hotels were now open.

Housebuilder Redrow slid 6.83% as it said annual profits would be "substantially" lower after scaling back its London operations and factoring in the impact of Covid-19.

Rotork was under the cosh by 2.03% after it said group order intake in the first half will be between 16% and 18% lower than the previous year's 362m on an organic constant currency basis, while revenue will be 11% to 13% lower on the year.

Shares of gold miner Petropavlovsk fell 19.03% as it announced the appointment of four temporary directors to the board and a new chief executive officer.

In broker note action, Relx and Kingfisher were dented by rating downgrades at Exane and Investec, falling 1.76% and 1.03%, respectively.

On the upside, Smiths Group rose 8.78% as it said it would cut jobs as part of a plan to reduce costs by 70m as the engineering company reported a slowdown in business because of Covid-19.

CMC's David Madden said traders had welcomed "the proactive stance" the firm is taking.

Standard Life Aberdeen was up 2.77% after saying that chief executive officer Keith Skeoch was stepping down, to be replaced by Stephen Bird, who was CEO of global consumer banking at Citigroup.

Market Movers

FTSE 100 (UKX) 6,169.74 -0.90%
FTSE 250 (MCX) 17,119.16 -0.46%
techMARK (TASX) 3,705.31 -0.60%

FTSE 100 - Risers

Smiths Group (SMIN) 1,406.50p 8.36%
Ferguson (FERG) 6,656.00p 2.94%
Standard Life Aberdeen (SLA) 270.90p 1.88%
Burberry Group (BRBY) 1,611.00p 1.77%
Polymetal International (POLY) 1,615.50p 1.64%
Aveva Group (AVV) 4,119.00p 1.45%
M&G (MNG) 167.55p 1.36%
Informa (INF) 470.40p 1.27%
Avast (AVST) 529.00p 1.24%
Glencore (GLEN) 171.74p 1.24%

FTSE 100 - Fallers

Royal Dutch Shell 'A' (RDSA) 1,287.00p -3.94%
Royal Dutch Shell 'B' (RDSB) 1,224.00p -3.68%
International Consolidated Airlines Group SA (CDI) (IAG) 222.80p -3.38%
Hikma Pharmaceuticals (HIK) 2,206.00p -2.73%
Melrose Industries (MRO) 113.50p -2.62%
BP (BP.) 307.20p -2.45%
BAE Systems (BA.) 484.00p -2.36%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,442.00p -2.18%
InterContinental Hotels Group (IHG) 3,567.00p -2.17%
CRH (CRH) 2,750.00p -2.10%

FTSE 250 - Risers

Energean (ENOG) 610.00p 12.55%
Carnival (CCL) 985.80p 7.27%
Royal Mail (RMG) 182.80p 6.16%
Cineworld Group (CINE) 60.38p 5.34%
Centamin (DI) (CEY) 183.50p 4.95%
888 Holdings (888) 175.20p 4.91%
WH Smith (SMWH) 1,096.00p 4.58%
Spirent Communications (SPT) 241.00p 4.56%
Future (FUTR) 1,284.00p 4.39%
Kaz Minerals (KAZ) 501.40p 4.02%

FTSE 250 - Fallers

Petropavlovsk (POG) 25.10p -19.03%
Hammerson (HMSO) 80.26p -6.83%
Aston Martin Lagonda Global Holdings (AML) 49.40p -6.79%
Redrow (RDW) 432.80p -6.40%
PureTech Health (PRTC) 265.50p -6.02%
Euromoney Institutional Investor (ERM) 785.00p -5.42%
National Express Group (NEX) 186.20p -5.10%
Liontrust Asset Management (LIO) 1,305.00p -5.09%
Equiniti Group (EQN) 144.60p -4.99%
CLS Holdings (CLI) 185.00p -4.93%
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