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London midday: Stocks extend gains; mortgage approvals tumble

By Michele Maatouk

Date: Tuesday 02 Jun 2020

LONDON (ShareCast) - (Sharecast News) - London stocks had extended gains by midday on Tuesday amid optimism over lockdown easing.
The FTSE 100 was up 1.1% at 6,234.36, while sterling was 0.6% higher against the dollar at 1.2566.

Chris Beauchamp, chief market analyst at IG, said: "For a second day the FTSE 100 is dominated by stocks finding strong inflows thanks to a more optimistic outlook on the global economy. Airlines, travel, engineering, oil and luxury retail are all featured in the big gainers in London this morning, continuing yesterday's bounceback theme."

The positive tone came despite growing unrest in the US over the killing of George Floyd as President Trump threatened to send in the army.

On home shores, a survey released earlier by Nationwide showed that UK house prices fell 1.7% in May in the steepest drop since the financial crisis.

The month-on-month decline was the biggest since February 2009 and followed the near shutdown of the property market during the Covid-19 crisis. The annual rate of house-price growth more than halved to 1.8% from 3.7% a month earlier and was well below expectations for a 2.8% drop.

The average house price fell to 218,902 from 222,915 in May even though the government eased restrictions to allow the market to reopen in the middle of the month. Nationwide, the UK's biggest building society, said transactions would be affected for some time with potential buyers wary during what is expected to be a deep recession.

The UK housing market was showing signs of revival in early 2020 after years in the doldrums caused by uncertainty over Brexit. The Covid-19 restrictions forced estate agents to close and barred physical house viewings, effectively closing the market.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures suggested weak confidence would lead to further declines.

"The big month-to-month drop ... surely is just the start of a protracted decline over the remainder of this year," Tombs said. "The huge size of the blow from Covid-19 to households' incomes and the deterioration in consumers' confidence suggests that house prices must drop: we look for a 5% decline in prices by the end of Q3."

Figures from the Bank of England showed mortgage approvals tumbled to a near 30-year low in April as the pandemic and lockdown measures brought the UK property market to a halt.

According to the Bank of England, the number of mortgage approvals for house purchase was 15,800 in April, down on March's figure of 56,100 and around 80% lower than February. It is the lowest level since the series began in 1993, and around half the number of approvals seen during the trough of the 2008/09 financial crisis.

Analysts had been expecting a fall, but most had pencilled in a less severe decline, with consensus for around 24,000 mortgage approvals.

Consumer credit also took a hit, as households reduced the amount they borrowed. New gross borrowing was 11.8bn in April, around 50% down on February. Repayments also fell sharply, by 19% since February, which was attributed to repayment holidays.

In equity markets, Meggitt, Rolls-Royce and Melrose Industries all rallied, with traders pointing to the fact that Boeing has resumed production of the 737 MAX.

Meanwhile, budget airlines easyJet, British Airways owner IAG and cruise operator Carnival also rose.

Elsewhere, miner Glencore was lifted by an upgrade to 'buy' at Renaissance Capital.

Shopping centre owner Hammerson surged following an upbeat update from Westfield owner Unibail-Rodamco.

Industrial products distributor Electrocomponents was in the black even after it deferred its final dividend until it had a clearer view of the coronavirus pandemic's impact as sales fell 14% in the first eight weeks of the current year.

Private hospital operator Mediclinic was up after it reported a widening of its full-year losses due to impairment charges but noted improving trends in May.

Retirement housebuilder McCarthy and Stone was also trading higher after saying its sales offices and construction sites would start to reopen from the Covid-19 lockdown on 8 June and that fewer of its residents had died than in the wider older population.

On the downside, Tesco fell after saying it is looking for a new chief financial officer after Alan Stewart decided to retire from the supermarket group.

Market Movers

FTSE 100 (UKX) 6,234.36 1.10%
FTSE 250 (MCX) 17,502.56 1.30%
techMARK (TASX) 3,769.90 0.47%

FTSE 100 - Risers

Meggitt (MGGT) 311.60p 8.91%
Melrose Industries (MRO) 127.05p 6.32%
Rolls-Royce Holdings (RR.) 303.90p 6.07%
British Land Company (BLND) 427.60p 5.06%
Centrica (CNA) 39.86p 4.95%
Royal Bank of Scotland Group (RBS) 120.60p 4.55%
BP (BP.) 325.05p 4.52%
Johnson Matthey (JMAT) 2,185.00p 4.50%
Lloyds Banking Group (LLOY) 32.16p 4.23%
Compass Group (CPG) 1,246.50p 4.22%

FTSE 100 - Fallers

Ocado Group (OCDO) 2,187.00p -1.88%
Morrison (Wm) Supermarkets (MRW) 185.65p -1.75%
Tesco (TSCO) 227.90p -1.72%
Hikma Pharmaceuticals (HIK) 2,455.00p -1.52%
Hargreaves Lansdown (HL.) 1,807.00p -1.34%
AstraZeneca (AZN) 8,592.00p -1.29%
Informa (INF) 474.60p -1.21%
Spirax-Sarco Engineering (SPX) 9,716.00p -1.18%
Rightmove (RMV) 583.40p -1.12%
Admiral Group (ADM) 2,279.00p -0.74%

FTSE 250 - Risers

Hammerson (HMSO) 100.15p 21.42%
Airtel Africa (AAF) 41.90p 9.11%
Electrocomponents (ECM) 690.50p 8.23%
Fisher (James) & Sons (FSJ) 1,336.00p 6.88%
Ibstock (IBST) 197.30p 6.59%
Just Group (JUST) 57.00p 6.54%
Senior (SNR) 65.00p 6.04%
TUI AG Reg Shs (DI) (TUI) 468.50p 5.95%
McCarthy & Stone (MCS) 75.90p 5.86%
Countryside Properties (CSP) 309.40p 5.81%

FTSE 250 - Fallers

Sanne Group (SNN) 645.00p -2.27%
Future (FUTR) 1,280.00p -1.84%
Royal Mail (RMG) 174.10p -1.75%
Ascential (ASCL) 275.20p -1.57%
Sirius Real Estate Ltd. (SRE) 77.30p -1.53%
IG Group Holdings (IGG) 779.50p -1.52%
Convatec Group (CTEC) 202.00p -1.46%
Dechra Pharmaceuticals (DPH) 2,746.00p -1.44%
GCP Infrastructure Investments Ltd (GCP) 114.40p -1.38%
ICG Enterprise Trust (ICGT) 740.00p -1.33%