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London midday: Stocks fall further as EC cuts growth forecasts

By Michele Maatouk

Date: Tuesday 07 Jul 2020

London midday: Stocks fall further as EC cuts growth forecasts

(Sharecast News) - London stocks had fallen further into the red by midday on Tuesday as the European Commission slashed its growth forecasts, with concerns about a rise in new coronavirus cases continuing to weigh on sentiment
The FTSE 100 was down 1.4% at 6,196.42.

Chris Beauchamp, chief market analyst at IG, said: "Stocks in London and on the continent are lower as the EU Commission issues a bleak outlook for GDP growth, pouring cold water on the economic recovery narrative that had held sway over the past few sessions thanks to data from the US and China. It expects a deeper recession this year and a weaker bounceback next year, which does at least set the bar relatively low and allows for the possibility of beating expectations if things go better than forecast.

"But with stocks having rallied sharply over the last few sessions the market is not in the mood to hear much bad news, and we have seen the Dax and FTSE 100 both move sharply lower in early trading."

Brussels cut its economic forecasts and warned the European Union will suffer a deeper-than-expected recession because of the Covid-19 crisis.

The European Commission said the lifting of sweeping lockdown measures across the continent was happening at a slower pace than assumed in its spring forecasts, published in May. It is therefore now predicting that the pandemic's impact on economic activity will be "more significant" than anticipated.

The eurozone is forecast to contract by 8.7% in 2020, compared to an earlier forecast for a decline of 7.7%, and grow by 6.1% in 2021. The wider EU economy is predicted to contract by 8.3% this year and grow by 5.8% next year; Brussels had initially predicted a decline of 7.4% for 2020.

As far as the UK is concerned, GDP is forecast to decline by 9.7% in 2020.

Worries about a resurgence of coronavirus also dented the mood amid a rise in new infections in the US in states such as Florida, Texas and Arizona. In Australia, meanwhile, Melbourne has been placed on a six-week lockdown after Victoria recorded 191 daily cases.

Spreadex analyst Connor Campbell said: "Elsewhere South Africa's total number of cases has passed 200,000, the highest figure in Africa.

"Of course then there's the US, the gold standard of coronavirus mismanagement. Between Friday and Sunday alone the country saw 200,000 fresh infections, with the number of cases in Florida alone doubling from 100,000 to 200,000 in less than a fortnight. All this before considering the impact the weekend's 4th July celebrations will have on the infection rate."

In equity markets, Premier Inn owner Whitbread was weaker as it said UK first quarter like-for-like sales slumped, reflecting the full impact of the coronavirus lockdown, although it reported good summer demand for tourist destinations. Like-for-like sales for the three months to May 28 fell 79.8% across Whitbread's British hotel and pub estate, while total group sales fell 79.4%.

Software company Micro Focus lost ground after saying it swung to an interim loss as it recorded a goodwill impairment charge related to the pandemic.

JD Sports Fashion reversed earlier gains as it said footfall was weaker in stores reopened after lockdown and called for "rental realism" from landlords but reported record profit for the year to the start of February.

On the upside, contracts-for-difference platform Plus500 surged after it appointed David Zruia as chief executive and reported bumper first-half trading and customer gains returned to normal levels after a costly spike.

Market Movers

FTSE 100 (UKX) 6,196.42 -1.42%
FTSE 250 (MCX) 17,382.26 -0.96%
techMARK (TASX) 3,729.72 -1.57%

FTSE 100 - Risers

GVC Holdings (GVC) 811.40p 2.84%
Barratt Developments (BDEV) 535.00p 1.06%
Persimmon (PSN) 2,421.00p 0.96%
Smiths Group (SMIN) 1,443.00p 0.77%
Aviva (AV.) 284.60p 0.42%
Tesco (TSCO) 219.80p 0.41%
Melrose Industries (MRO) 119.70p 0.38%
Flutter Entertainment (FLTR) 10,755.00p 0.23%
Berkeley Group Holdings (The) (BKG) 4,326.00p 0.05%
RSA Insurance Group (RSA) 426.90p -0.02%

FTSE 100 - Fallers

Whitbread (WTB) 2,328.00p -4.59%
Compass Group (CPG) 1,141.00p -3.39%
Standard Chartered (STAN) 442.90p -3.15%
Associated British Foods (ABF) 1,963.00p -3.11%
Smurfit Kappa Group (SKG) 2,552.00p -3.04%
Informa (INF) 457.90p -2.99%
Imperial Brands (IMB) 1,474.50p -2.90%
JD Sports Fashion (JD.) 655.80p -2.79%
Smith (DS) (SMDS) 280.30p -2.74%
Pennon Group (PNN) 1,075.50p -2.71%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 1,400.50p 4.91%
Apax Global Alpha Limited (APAX) 145.00p 2.98%
Crest Nicholson Holdings (CRST) 214.00p 2.88%
Euromoney Institutional Investor (ERM) 867.00p 2.60%
Scottish Inv Trust (SCIN) 768.00p 1.86%
Biffa (BIFF) 199.40p 1.53%
IMI (IMI) 961.50p 1.21%
888 Holdings (888) 174.60p 1.16%
XP Power Ltd. (DI) (XPP) 3,590.00p 1.13%
Signature Aviation (SIG) 245.80p 1.11%

FTSE 250 - Fallers

Micro Focus International (MCRO) 388.40p -11.47%
Hammerson (HMSO) 85.10p -5.84%
Drax Group (DRX) 255.40p -5.27%
Marshalls (MSLH) 603.50p -5.11%
TUI AG Reg Shs (DI) (TUI) 377.40p -4.09%
Ibstock (IBST) 179.00p -4.07%
Frasers Group (FRAS) 316.60p -4.06%
Babcock International Group (BAB) 303.00p -4.02%
Mitchells & Butlers (MAB) 169.40p -3.64%
Shaftesbury (SHB) 533.00p -3.18%

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