Market report: Cautious investors deflate bond yields
The yield on UK two-year bonds dropped to a fresh record low on Tuesday as a risk-off mood on global markets drove investors towards haven assets such as bonds.
Key European markets Frankfurt and Paris closed around 1pc lower as fears resurfaced over a spike in coronavirus infections and renewed lockdowns. Fiona Cincotta, City Index analyst, said: “The shutdown fuels fears that the growing number of coronavirus cases will hamper the fragile economic recovery.”
However, rises for some of London’s biggest listed groups – including energy giants Shell and BP – helped the FTSE 100 outperform its continental peers. The benchmark index closed 0.06pc higher at 6,179.75, also thanks to a weaker pound after data showed that the UK economy shrank by almost a fifth in the three months to April. The more domestically focused FTSE 250 slumped 1.21pc to 17,174.69.
Telecoms groups BT and Vodafone jumped 4.05pc and 1.66pc respectively, after the Government set out a seven-year timetable for the removal of Huawei equipment from Britain’s fledgling 5G infrastructure. The window gives them more time than had been expected to pull the Chinese group’s tech out of their networks. The decision is likely to benefit European rivals such as Nokia and Ericsson.
Meanwhile, hazard detection firm Halma was among the FTSE 100’s biggest fallers, dropping 104p, or 4.5pc, to £21.87 after analysts warned of the pandemic’s impact on the group.
It reported an adjusted full-year pre-tax profit of £267m, in line with expectations, but Stifel’s Mark Davies Jones said the outlook was weaker than expected. “Halma’s numbers look relatively resilient but not immune – indeed it appears that the pandemic impact is set to be greater than we had allowed for,” he wrote.
Scottish Mortgage Trust was the biggest faller on the blue-chip index, dropping 66p to 893p after an overnight sell-off in US tech stocks. Its share price had hit a record high last week.
On the FTSE 250, intellectual property investor IP Group climbed 1.2p to 66.2p after netting £53.6m for the sale of a 5.6pc stake in Ceres Power Holdings, a clean energy company.
The group is pursuing a scheme of divestments and sales that has so far raised more than £160m.
Elsewhere, online white goods retailer AO World reversed early gains after cautious analyst commentary.
The group said UK sales had jumped more than 20pc as lockdown forced customers online – cutting its full-year operating losses to £3.8m, from £13m the prior year. But Shore Capital analysts cautioned shoppers may delay big-ticket purchases as a result of the current economic uncertainty. Shares ended 23p lower at 141p, a fall of 14pc.
