UK markets were dragged lower in early trade on Tuesday by worries of investor over-exuberance after another surge for Wall Street overnight.

Monday’s rally in US stocks pushed the S&P 500 back into the green for the year as easing lockdowns bolstered optimism on an economic rebound. The benchmark closed at a 15-week high, bringing its rally from the March low to almost 45%, while the Nasdaq 100 rose to a 9,924.75 record.

The benchmark FTSE 100 fell 0.7% to 6,427.72 at 9am, while the mid cap FTSE 250 plunged even further, down 1.5% at 17,858.11.

Airlines and industrials were again near the top of the FTSE 100 loser board, while the UK’s heavyweight drug firms, including GlaxoSmithKline (GSK) and AstraZeneca (AZN) provided a level of counterweight.

Investors will also be closely watching debt markets today with the sale of 30-year bonds via banks on Tuesday expected to pull in investors keen on locking in appealing rates. That’s after a near 20 basis point rise for the yield on these gilts this month. Next week the Bank of England is due to meet and could boost its quantitative easing program, spurring yields to fall back.

LOCKDOWN TOBACCO HIT

Losses in British American Tobacco (BAT) added extra ballast for UK shares after the company cut its annual profit and revenue forecasts. The cigarette maker saw its share price fall 2.5% to £30.445 after it flagged a demand hit due to prolonged lockdowns in South Africa and Mexico and weak sales in countries including Bangladesh and Vietnam.

The lockdown curbs also impacted housebuilder Bellway (BWY), which dropped 2% to £28.98, as it sold fewer homes between August and May.

Engineering software supplier Aveva (AVV) rallied nearly 4% to £41.645, having held its dividend steady at 29p per share after it nearly doubled annual profit on higher revenue and margins.

Self-storage group Big Yellow (BYG) rose 0.3% to £10.56 as it became one of few companies to up its dividend during the Covid-19 crisis, after stronger sales helped underpin a rise in its annual earnings.

Scientific and medical equipment provider Oxford Instruments (OXIG) firmed 1.1% to £12.7133 on reporting a 13% rise in annual profit, even as sales weakened in the latter part of its financial year due to the Covid-19 crisis.

SMALL CAP WRAP

Disease and allergy test kit supplier Omega Diagnostics (ODX:AIM) fell 4.8% to 59p, despite it forecasting a slight annual earnings beat and broadening a Covid-19 antibody test arrangement with Mologic.

Online women's fashion retailer Sosandar (SOS:AIM) jumped 35% to 11.78p, even as it warned of a deeper-than-expected annual loss owing to margin contraction.

Sosander also said its revenue for the year through March had more than doubled. In the new financial year, sales had risen 62% over April and May, helping to trim losses.

Personal care distributor Venture Life (VLG:AIM) rallied 9.2% to 71.5p on announcing that it would 'comfortably exceed' market expectations for the current year.

Language and intellectual property support services group RWS (RWS:AIM) was unchanged at 626p after it booked a 6.3% fall in first-half profit but held its dividend steady amid a 'limited' impact from the Covid-19 crisis.

RWS also announced that it had acquired Dublin-based machine translation group Iconic Translation Machines for $10m, plus additional deferred consideration of up to $10m in shares, plus Indian counterpart Webdunia.com, for $21m.

Heavy construction materials group SigmaRoc (SRC:AIM) added 4.7% to 43.44p on announcing that it recorded positive earnings during each of the first five months of the year, and that sales had bounced back in May.

Semiconductor company CML Microsystems (CML:AIM) shed 3.2% to 272p after it cut its dividend as its profit more than halved.

Internet of things group Telit Communications (TCM:AIM) rose 1.3% to 128p after Britain's Financial Conduct Authority decided to not take enforcement action against the company after probing its market disclosures.

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Issue Date: 09 Jun 2020