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(Correcting that Unilever said the Dutch exit tax bill, not its unification plans, would infringe tax treaties.)
(Alliance News) - Stock prices in London opened in the red on Thursday, amid a lack of progress in US stimulus talks, with a rising number Covid-19 cases and tumbling German consumer confidence also souring the mood in Europe.
On the London Stock Exchange, pest control and hygiene firm Rentokil said its annual results will be in-line with expectations. British Airways-parent International Consolidated Airlines Group warned of another capacity cut as Covid-19 infections rise, weighing on airline stocks across the LSE.
The FTSE 100 index was down 53.69 points, or 0.9%, at 5,722.81 early Thursday.
The mid-cap FTSE 250 index was down 102.25 points, or 0.6%, at 17,685.57. The AIM All-Share index was down 0.2% at 970.47.
The Cboe UK 100 index was down 0.9% at 568.41. The Cboe 250 lost 0.7% at 14,939.24, and the Cboe Small Companies was down 0.1% at 9,395.85.
In mainland Europe, the CAC 40 index in Paris was down 1.0%. The DAX 30 in Frankfurt was faring worse than European counterparts, amid a troubling consumer confidence report and a record number of Covid-19 cases. The German blue chip index was down 1.4%.
"Wall Street closed lower, Asian markets followed the trend southwards and Europe looks set to open in the same fashion as the lack of progress towards additional US stimulus frustrates and unnerves investors. The bottom line is that even if a deal was agreed on a high level, it would be unlikely to clear the Republican dominated senate, who are after a much smaller bill," Gain Capital's Fiona Cincotta explained.
The Shanghai Composite ended down 0.4% on Thursday afternoon in China. The Hang Seng Index in Hong Kong spent much of the afternoon in the green but was marginally lower shortly before the final bell. In Tokyo, the Nikkei 225 closed down 0.7%.
"Deteriorating German consumer confidence is adding to the downbeat mood in Europe. Consumer morale for November declined -3.1 worse than a downwardly revised -1.7 in October and the -2.8 expected. The worsening outlook in Europe's largest economy comes as the number of Covid cases in Germany hits a record high and as a report indicates that half of Europe's small businesses risk bankruptcy within a year. Whilst the EUR is holding its ground the DAX is leading the charge southwards," Cincotta added.
"Around three quarters of consumers currently assume that Covid-19 poses a major or very major threat, and about half are concerned or very concerned about their personal future," GfK said.
Germany also posted its largest day of infections since the pandemic began. It reported 11,287 new cases in 24 hours, soaring past the previous high of just over 7,800 set last Friday.
Meanwhile, Spain announced 16,973 cases, taking it to more than a million since its first diagnosis on January 31, in the Canary Islands.
The UK, with Europe's largest death toll of 44,000, said more than a million people in the north would be banned from mixing with other households. Ireland became the first European country to enter a full lockdown for the second time.
The pound was quoted at USD1.3134 on Thursday morning in London, flat from its level at the UK equities close Wednesday. The pound held above the USD1.31 marker ahead of a resumption of Brexit trade talks on Thursday.
The euro stood at USD1.1855, down from USD1.1868 at the European equities close Wednesday.
Airline firm IAG lost 4.2%. It said Thursday "recent overall bookings have not developed as previously expected" as Europe as imposed additional curbs in response to the second wave of the virus. Local lockdowns, extensions of quarantine requirements and a lack of pre-departure testing or air corridors have not been adopted as "quickly as anticipated" either.
"In response to the high uncertainty of the current environment, IAG now plans for capacity in fourth quarter 2020 to be no more than 30% compared to 2019. As a result, the group no longer expects to reach breakeven in terms of net cash flows from operating activities during fourth quarter 2020," IAG cautioned.
IAG back in September said it expected fourth-quarter capacity to decline by 60% compared to 2019, so Thursday's announcement puts that at 70%.
Total revenue in the third quarter ended September 30 fell 83% annually to EUR1.2 billion, and IAG swung to an operating loss of EUR1.3 billion from EUR1.4 billion profit a year earlier, figures showed on Thursday. IAG will report detailed third-quarter results on October 30.
easyJet fell 3.0% and Irish carrier Ryanair dropped 2.4%. Jet engine maker Rolls-Royce also lost 2.4%. Melrose Industries, which like Rolls-Royce has exposure to the aviation sector, shed 2.0%.
Consumer goods giant Unilever posted underlying sales growth of 4.4% in the third quarter, though total revenue slipped 2.4% annually to EUR12.9 billion. For the first nine months of 2019, revenue was 1.8% lower at EUR38.6 billion.
Unilever's stock was up 0.2% in early dealings.
Unilever continued to see "elevated levels" of sales of hand and home hygiene products, as well as of foods consumed at home. Its ice cream business - which houses the Ben & Jerry's brand - continued to struggle, though its decline eased in third quarter.
The company's unification earlier in October received the thumbs up from its UK shareholders, but Unilever warned Thursday the deal remains threatened by a proposed Dutch exit tax.
Referring to an exit tax bill tabled in the Dutch Parliament earlier this month, Unilever noted changes had been made compared to the initial proposal in July, but risks remained for its unification plans.
Unilever argued the Dutch bill in its current form will "infringe" several tax treaties.
Referring to an exit tax bill tabled in the Dutch Parliament earlier this month, Unilever noted changes had been made compared to the initial proposal in July, but risks remained for its unification plans.
"Despite the amendments made, Unilever has received legal advice that, if the bill were enacted in its current form with retroactive effect and were applied to unification, it should infringe the Dutch UK tax treaty, other tax treaties which the Netherlands has concluded with states in which shareholders of Unilever PLC or Unilever NV reside, primary and secondary EU law and the First Protocol to the European Convention on Human Rights," Unilever cautioned.
Also among the blue-chips updating on the third quarter was Rentokil, up 2.4% after it posted a 4.3% revenue hike, or 8.5% in constant currency.
Revenue came in at GBP758.1 million during the period, with "all core categories delivering performance improvements".
The FTSE 100 firm reiterated its plan to pay a dividend for 2020 and said annual results will be at least "in line with expectations".
It also reported a "return to M&A" action, sealing six acquisitions during the quarter, five in pest control.
Among the FTSE 250s, Travis Perkins rose 2.8%. The builders' merchant total sales slipped 3.4% in the third quarter, but climbed 3.9% on a like-for-like basis.
"We have reported a positive overall like-for-like sales performance in the quarter as our markets have continued to recover following the impact of the national lockdown earlier this year," Chief Executive Nick Roberts said.
Against the yen, the dollar was trading at JPY104.48, down from JPY104.53 at the London equities close Wednesday.
Brent oil was priced at USD41.82 a barrel, down from USD41.95. An ounce of gold fetched USD1,918.26, down from USD1,922.40.
Still the come on Thursday are US jobless claims at 1330 BST.
By Eric Cunha; ericcunha@alliancenews.com
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