London close: Stocks end short week in the green
London stocks managed to finish the last session of a truncated week in the green on Thursday, as investors spent the afternoon digesting the latest US jobless claims data.
The FTSE 100 ended the session up 2.9% at 5,842.66, and the FTSE 250 was ahead 3.44% at 16,407.92, even as the number of Americans filing for unemployment benefits came in much higher than expected last week.
Sterling was stronger against the dollar, last trading up 0.62% at $1.2460, while it slipped 0.05% against the euro to €1.1399.
According to the Labor Department, US initial jobless claims fell by 261,000 from the previous week’s revised level to 6.6 million, coming in above expectations for 5.3 million, while the previous week’s level was revised up by 219,000.
The latest data takes the total over the last three weeks to 16.8 million, with California experiencing the highest number of initial claims, up to 925,000 from 879,000 the week before.
Meanwhile, the four-week moving average came in at 4.3 million, up 1.6 million from the previous week’s level, which was revised up by 54,750.
Paul Ashworth, chief US economist at Capital Economics, said the fact that claims were down only trivially on the week before suggests that his forecast for the unemployment rate to peak at 12.5% could turn out to be too optimistic.
“That means more than 15 million claims have been made in the past three weeks alone.
“At this stage a 20% unemployment rate is no longer out of the question," he said.
Ashworth said the only silver lining was that the March employment report revealed that a much higher share of the unemployed were on temporary layoff, rather than being permanent job losses.
“That makes us hopeful that, once the lockdowns ease, the unemployment rate will come back down more quickly than in a normal economic cycle.”
Earlier, it emerged that the UK lockdown was set to be extended by three weeks as the Covid-19 coronavirus pandemic continued to infect Britons.
“The mood in markets continues to improve but it’s patchy,” said London Capital Group analyst Jasper Lawler.
“Virus cases continue to rise at a rapid clip but markets are extrapolating the data forward and hoping we’re close to a peak.”
Lawler described the lockdown extension as a downside risk.
“The FTSE 100 is pushing higher even as it becomes clear that the UK lockdown will need to be extended.
“The incapacity of the prime minister only heightens the concern that there is just no exit strategy.”
Lawler also questioned the efficacy of lockdowns, asking if lockdowns would only be fully eased once virus cases drop to zero.
“How long will that take? Will testing capabilities and hospital resources be good enough to mean lockdowns can be avoided if there is a second wave?”
Meanwhile, Spreadex analyst Connor Campbell pointed to something that could “derail Thursday’s lovefest", however.
“OPEC and its fellow oil producing countries are set to meet, in a get-together that could produce a price war-ending agreement between Russia and Saudi Arabia.
“A lack of deal could really harm the market’s, and especially [the] FTSE’s, hopes of ending this abbreviated week on the front foot.”
On home shores, investors were leafing through the suggestion that the UK economy could contract by between 15% and 25% in the second quarter if the lockdown continues.
According to the National Institute of Economic and Social Research (NIESR), the current "once in a century event poses a major threat to UK growth”, with the economy at risk of contracting by 5% in the first quarter.
It noted figures out earlier from the Office for National Statistics, which showed the UK economy expanded 0.1% in the three months to February, which was only marginally weaker than NIESR had forecast last month.
Output declined in February itself, mainly due to a large fall in the construction sector.
"The lockdown is causing the largest contraction in economic activity since 1921," NIESR said, adding that lockdowns reduce overall activity by around 20% each month they are in place.
Those figures from the Office for National Statistics showed the UK economy shrank in February, even before the full effects of the pandemic began to hit businesses and consumers.
Earlier, the Bank of England confirmed it had agreed to directly finance extra spending imposed on the government by the Covid-19 crisis, allowing the Treasury to raise funds outside the bond market.
In equity markets, Just Eat Takeaway was ahead 11.14%, after it said orders jumped 50% in the first quarter as food deliveries boomed during the virus outbreak crisis after an initial drop.
FTSE 250 housebuilder Redrow racked up gains of 9.58% after saying it is eligible for access to £300m funding from the government’s Covid Corporate Financing Facility and that it has furloughed 80% of its staff due to the outbreak.
FTSE 100 peers Barratt Developments, Taylor Wimpey and Persimmon were ahead 5.43%, 7.42% and 2.93%, respectively.
Diageo rose 4.4% after saying it would pay its interim dividend as planned but the drinks company put on hold the next phase of its three-year share buyback as Covid-19 restrictions took a significant toll on its business.
In broker note action, William Hill was boosted 12.64% by an upgrade to ‘outperform’ at RBC Capital Markets, while Hammerson reversed earlier losses to close up 4.38%, even after a downgrade to ‘hold’ at HSBC.
FTSE 100 - Risers
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,518.00p 13.36%
Next (NXT) 4,644.00p 10.13%
Carnival (CCL) 972.60p 9.95%
Legal & General Group (LGEN) 213.90p 9.10%
ITV (ITV) 76.64p 9.02%
Fresnillo (FRES) 714.40p 8.84%
CRH (CRH) 2,399.00p 8.31%
Land Securities Group (LAND) 677.00p 7.63%
JD Sports Fashion (JD.) 564.60p 7.58%
Taylor Wimpey (TW.) 141.90p 7.42%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 246.70p -1.24%
Antofagasta (ANTO) 762.20p -1.19%
Aveva Group (AVV) 3,577.00p -1.08%
Auto Trader Group (AUTO) 414.00p -0.65%
Bunzl (BNZL) 1,684.00p -0.21%
RSA Insurance Group (RSA) 381.10p -0.03%
NMC Health (NMC) 938.40p 0.00%
Mondi (MNDI) 1,350.00p 0.11%
BP (BP.) 335.75p 0.12%
Reckitt Benckiser Group (RB.) 6,146.00p 0.23%
FTSE 250 - Risers
Hyve Group (HYVE) 28.50p 31.64%
Cineworld Group (CINE) 77.24p 27.42%
Elementis (ELM) 62.60p 21.55%
Capita (CPI) 39.39p 19.26%
Network International Holdings (NETW) 430.80p 16.43%
National Express Group (NEX) 259.00p 16.04%
Stagecoach Group (SGC) 86.80p 14.21%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,518.00p 13.36%
Watches of Switzerland Group (WOSG) 257.50p 12.94%
William Hill (WMH) 106.40p 12.64%
FTSE 250 - Fallers
BMO Commercial Property Trust Limited (BCPT) 80.00p -5.10%
Aston Martin Lagonda Global Holdings (AML) 70.05p -4.43%
Rank Group (RNK) 171.40p -4.03%
3i Infrastructure (3IN) 250.00p -3.85%
Spirent Communications (SPT) 225.50p -3.63%
Barr (A.G.) (BAG) 494.00p -3.52%
Avast (AVST) 389.40p -3.28%
Greggs (GRG) 1,791.00p -3.14%
Cairn Energy (CNE) 106.70p -3.00%
Just Group (JUST) 54.05p -2.88%