UK markets followed Europe’s sharp declines in early trade on Tuesday as investors mull job cuts, a clutch of lacklustre earnings reports and profit-taking.

The UK’s benchmark FTSE 100 was down 0.5% at 6,096.58 at 9am, with losses in energy, financial and industrial stocks pulling the index back from what had so far been its best month since April.

The mid-cap FTSE 250 bounced off earlier declines to nudge 0.1% into positive territory despite today’s 10.4% plunge for outsourcer Capita (CPI) to 32.14p. The share price fall came after the company posted a first-half loss due to a significant hit from the Covid-19 pandemic and said it would not generate sustainable cash flow for up to two years.

Capita reported a £28.5 million loss for the first half of 2020.

M&S TO SLASH WORKFORCE

British retailer Marks & Spencer (MKS) has unveiled plans to cut 7,000 jobs over the next three months as it streamlines the business for a post Covid-19 world. The massive consumer switch to online has forced changes to how M&S does business in another blow to the UK’s high street.

Investors initially welcomed the news but soon changed tack, marking the stock more than 2% lower at 111.08p as question start to be asked about how well equipped the marquee retail brand is to manage the offline to online shift.

Mining group BHP (BHP) on Tuesday said it expected most major world economies except China to bear the brunt of a coronavirus-led downturn this year, after reporting a 4% drop in annual profit that missed analyst estimates.

BHP has also cut its final dividend to $0.55 per share, down from $0.73 this time last year.

UK house builders were strong on Tuesday after Persimmon (PSN), one of the sector’s largest players, reinstated its dividend after reporting an ‘excellent start to the second half.’

That news lent sector investors confidence in the face of Persimmon’s first-half profit plunge, as it sold fewer homes due to coronavirus-driven disruptions to construction activity and transactions.

Persimmon stock rallied led the FTSE leader board on Tuesday, rallying nearly 5% to £27.38, while Barratt Developments (BDEV) and Taylor Wimpey (TW.) were also sharply higher.

ELSEWHERE AROUND THE MARKET

Engineering and consultancy company Wood Group (WG.) reported a 20.6% fall in first-half core earnings as the coronavirus-driven oil price crash dealt a major blow to its global energy clients.

Compass (CPG) named the former chief executive officer of Ferguson, Ian Meakins, as its non-executive chairman, replacing Paul Walsh who steps down in December.

Oil prices slipped on Tuesday, though they mostly held onto overnight gains after the OPEC+ group of producers said it is almost fully complying with output cuts to support prices amid a drop in demand for fuels due to the coronavirus pandemic.

Gold prices extended gains to inch closer to the $2,000 per ounce mark on Tuesday as the dollar weakened, with traders also focusing on minutes from the US Federal Reserve’s last policy meeting set to release this week.

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Issue Date: 18 Aug 2020