FTSE ends lower as US-China tensions offset positive data

Published On: July 25, 2020Categories: Stocks & Shares3 min read

Continuing geopolitical tensions between the US and China offset the positive news that UK retail sales bounced back faster than expected in June

UK stocks were weaker on Friday with the FTSE 100 index closing near its lows for the day, down 88 points or 1.4% to 6,124.

Weighing on the benchmark were travel and leisure stocks and large insurers such as Legal & General (LGEN), M&G (MNG) and Prudential (PRU).

Continuing geopolitical tensions between the US and China offset the positive news that UK retail sales bounced back faster than expected in June and industrial confidence soared the most in five years this month.

US-Sino relations hit a new low after China ordered the US to shut a consulate in Chengdu, in retaliation for being ordered to shut a consulate in Houston, sending the US dollar and crude oil prices down and the gold price towards a new record above $1,900 per ounce.

Energy giant Centrica (CNA) surged 17% higher to 47.2p after agreeing to sell North American business Direct Energy to NRG Energy for $3.625 billion, with the proceeds earmarked for debt reduction and to contribute to the British Gas owner’s defined benefit pension schemes.

Investors were also encouraged as Centrica reported narrowed first-half losses and said it expected a recovery in energy demand to continue into the second half of the year.

Chief executive Chris O’Shea said his charge had delivered ‘a resilient performance against the unprecedented backdrop of the COVID-19 crisis during the first half of the year. Our mission now is to turn around the company by putting customers at the heart of everything we do and creating a simpler, leaner, more modern and more sustainable company. The sale of Direct Energy is a fundamental step towards this.’

Mobile phones network giant Vodafone (VOD) cheapened 4.7% to 122.7p after it reported a 1.4% decline in first-quarter revenue, citing impacts from the COVID-19 crisis.

Vodafone said it still expects its annual adjusted operating earnings to be flat or slightly lower, although an initial public offering (IPO) of the Vantage Towers infrastructure business remains on track for early 2021.

Plumbing and heating supplies company Ferguson (FERG) firmed 1.7% to £69.92 on reporting that its performance had steadied in the fourth quarter as lockdown measures eased. For the period from 1 May to 21 July, Ferguson’s revenue fell 3.6% versus a 15.3% fall in April.

Educational publisher Pearson (PSON) dipped 1% to 544p, despite posting a rise in first-half profit, as the company said it remained difficult to predict the ultimate disruptive impact of the pandemic on its performance for the full year.

However, the firm said it expected to deliver annual operating earnings in line with guidance and it kept its interim dividend flat at 6p per share.

Posh chocolates maker Hotel Chocolat sweetened 9% to 305p on news digital growth remains very strong and sales in the second half of the year to June only fell 14% overall.

That was despite more than 70% of sales usually coming from physical stores which were all closed for Mother’s Day and Easter. Hotel Chocolat’s board remains ‘confident in the resilience of the brand, and the potential for growth and success in the future’, albeit mindful there is less visibility than usual ‘given the uncertain severity and duration of the COVID-19 impact’.

Investors helped themselves to on online wine purveyor Naked Wines after news that sales surged 67% in June, bringing growth for the first quarter to a palate-pleasing 77%.

The board continues to believe that Naked is ideally positioned to be a long-term winner from the inflection in consumer demand for online wine as a result of the COVID-19 pandemic, said the retailer. Shares added 0.3% to 406p.

Fashion retailer French Connection (FCCN) was the star turn, however, rallying more than 100% at one stage after it said it had seen a revival in sales, having reopened its physical stores on 15 July.

The firm admitted that sales remained low, but it was seeing a gradual week-on-week improvement. Investors chased the stock up 63% by the close to 8.2p.

About the Author: Jonathan Adams

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