FTSE 100 dips slightly as UK government reaffirms reopening target for pubs

The FTSE 100 eased back 0.18% to close at 6,472.59 today, following Friday’s ferocious rally after a blowout US jobs report, amid UK government affirmations that it will stick to its target to gradually reopen pubs and restaurants from 4th July, which have been closed since late-March.

Although US equities saw another strong day of gains with the S&P 500 turning positive for the year and closing up 1.2% at 3,232.39, the story in Europe was rather sombre.

Germany’s industrial production figures, released by the Federal Statistics Office today, showed a 17.9% overall decline in April and a jaw-dropping 74.6% decline in automotive production. These figures out of the eurozone’s largest economy set a downbeat tone for markets across Europe.

The 10 year bund fell 4bps to -0.32% which is only 3bps away from completely giving back all of its gain in yield following the US’s non-farm payrolls report.

Rolls-Royce (Ticker:RR), the British engineering giant, continued to steam ahead following Friday’s stellar 7.4% gain. Shares have climbed 11.94% as investor optimism grows over a faster-than-expected recovery in air travel.

One of the hardest hit companies from the pandemic, Rolls-Royce has seen its year-to-date losses trimmed from 63% down to 41% down. Investors seem pleased with steps taken by management to reduce production capacity in its aerospace division, whilst demand is increasingly showing signs of a slow return.

Some countries have entered into bilateral pacts to allow air travel between them, whilst others have opened themselves up almost completely, albeit with mandatory quarantine rules for those arriving.

This positive vibe has extended to the wider travel and leisure space with most stocks in this sector enjoying double-digit gains in the last week, although these were the hardest hit going into the lockdown period. Embodying this theme, Carnival (Ticker:CCL), the cruise-line operator has risen 27.41% since Friday’s open, closing up 9.92% to £15.735 today.

The worst performer on the index today, Ocado (Ticker:OCDO), the British online supermarket, fell 6.57% today to close at £19.84. This was despite news that they had signed agreements with Kroger, the US grocer, to use its automation expertise at three customer fulfilment centres (CFCs).

Ocado shares have rallied hard over the lockdown period rising by over 100% between 28th February and 1st June, however, concerns over its capacity to keep up with demand has weighed on investors’ enthusiasm over the stock lately.

Furthermore, as pubs and restaurants are set to reopen in the coming weeks in the UK, investors are questioning whether the recent acceleration of growth in online grocery shopping can be sustained. Today’s deals seem to have underwhelmed market expectations for a jump in both the scale and number of partnerships.