UK blue-chips rise with European peers; Royal Mail drags mid caps lower

London’s blue-chip FTSE 100 ended higher on Thursday as banks and energy stocks climbed, while the domestically focused mid-caps index slipped amid worries over the economic damage being wrought by the coronavirus pandemic.

The FTSE 100 rose 0.4%, in line with the main European bourses, after the European Central Bank said it will offer euro loans against collateral to central banks outside the euro area to backstop funding markets amid the pandemic.

Banks led gains followed by healthcare stocks, while a rise in oil prices buoyed energy stocks.

The FTSE 250 ended 0.2% lower with Royal Mail and pandemic-pressured travel and leisure stocks leading losses.

The postal company slipped 12.4% after it reported a 31% fall in profits and scrapped dividend payouts for 2020-2021, while also announcing a restructuring plan that includes 2,000 job cuts.

“We have seen a major focus on the international outlook, with ongoing improvements in the (domestic) COVID trajectory and impending easing of lockdown measures doing little to bolster (UK) stocks,” said Joshua Mahony, senior market analyst at IG.

Broader sentiment remained fragile, with surging numbers of new coronavirus cases and high levels of jobless claims in the United States signaling a prolonged period of economic distress.

“In particular, domestic travel groups such as Trainline , Go-Ahead Group, and National Express are seeing sharp downside as doubt creeps in despite the proposed reopening of the UK.”

Low-budget airline easyJet shed 9.5% a day after reporting a bigger loss for the first half of the year. Among other decliners, subprime lender NSF tumbled 32.2% on flagging risks to its going concern status.

Focus is also returning to the UK’s trade negotiations following its exit from the European Union.

“Trade issues (are) a major downward factor for markets going ahead, considering the FTSE 100 is highly export-driven,” said Roland Kaloyan, equity strategist at Societe Generale. (Reporting by Shashank Nayar and Sagarika Jaisinghani in Bengaluru; editing by Uttaresh.V and Hugh Lawson)