Monday, June 1: European indices were higher at the open, lifted on hopes of a global recovery post-coronavirus and a sanguine response from the US in response to China’s national security law on Hong Kong .
POTUS Trump began the winding down of special treatment for Hong Kong in order to punish China late last week, but gave no indication of actions which could be seen as reneging on the agreed Phase One trade deal.
Associated British Foods(+8.02%) led the FTSE 100(+1.48%) higher as it announced that discount fashion retailer Primark would be re-opening stores for business in its Covid-19 update. The Group has already re-opened more than 100 stores, and will use this experience to inform the opening of the remainder of its estate. As of today’s date, Primark is trading in 112 stores(34% of total selling space), and the aim is to get all stores operational in England in June 15. By this stage the retailer expects to be operating from281 stores(7 9% of total selling space). In the intervening period, the Group incurred a loss of £650 of sales/month whilst inventories essentially doubled relative to a typical stockholding of £0.9bn. However, the Group believes it can avoid excessively discounting stock by deferring some stock until SS21, with a majority of remaining stock deemed continuity lines. Early indications signal strong pent-up demand for clothing, with a higher average basket value vs. before the shutdown. On the food side, production was maintained at all facilities, assuring the continued supply of essential products for the food, animal feed, and pharmaceutical supply chains. The Group did not give guidance for the remainder of the financial year.
Business activity indicators across the globe largely illustrated that select sectors in economies were starting to pull away from lows as businesses emerged from lockdowns, but that there was lots of work ahead. Surveys in China illustrated that China’s factory activity grew at a slower pace in May, whilst momentum in services & construction sectors accelerated. Slumps in manufacturing activity eased in France & Spain, though data indicated Germany’s manufacturing sector continued to contract.
European markets were higher at the close, with the FTSE 100 +1.48%, the CAC 40 +1.43% with the DAX 30 closed for Whit Monday.