Rabu, 29 April 2020

FTSE 100 moves higher in late afternoon - Proactive Investors UK

  • FTSE 100 index adds 148 points
  • US GDP falls by 4.8%
  • Wall Street starts higher
  • Gilead reports upbeat data for potential coronavirus treatment

3.45pm: FTSE 100 moves higher in late afternoon

Into the final hour of trading, the FTSE 100 gained momentum following the strong open in the US and was up 148 points at 6,106 at 3.40pm.

Risk appetite has returned somewhat due to the positive news form Gilead about its coronavirus treatment, overshadowing dire US GDP data and the upcoming Fed meeting.

“Optimism is growing that [Gilead’s] Remdesivir will get fast track approval, but traders need to exercise some caution as it has yet to be proven safe nor effective in treating [coronavirus].  Dr. Fauci (Dir of National Institute of Allergy and Infectious Diseases) will hold a press conference later today regarding Remdesivir”, said Craig Erlam at OANDA.

However, while the Gilead news may be attracting attention today, the US GDP figure could be just a taste of the economic horror show predicted in the second quarter of this year.

“Despite rolling reopening optimism, the economy could still shrink between 30-40%.   Too much needs to go right for US economic activity to recover quickly and a lot of that will depend on the availability of rapid, widespread testing, approval of treatments, and the ability for drug companies to ramp up production domestically and internationally.   Optimism seems warranted, but it might best be placed for the third quarter”, Erlam said.

2.40pm: Wall Street starts higher

Wall Street has opened higher on Wednesday in spite of the looming US recession implied from this morning’s GDP figure.

Shortly after the opening bell, the Dow Jones Industrial Average was up 1.57% at 24,479 while the S&P 500 jumped 1.82% to 2,915 and the Nasdaq rose 2.06% to 8,784.

The surge appears to have been sparked partly by positive data from a trial of a potential coronavirus treatment by biotech firm Gilead Biosciences Inc (NASDAQ:GILD).

In London, the positive start in New York seemed to have lifted the FTSE 100, which was up 113 points at 6,072 at 2.40pm.

2.00pm: US GDP contracts by 4.8% in first quarter

The American economy shrank by 4.8% in the first quarter of 2020, worse than forecast and ending the country’s record run of uninterrupted economic growth.

The contraction is also the worst quarterly drop since the financial crisis, when in the fourth quarter of 2008 US GDP dropped by 8.4%, as the coronavirus pandemic caused falls in personal spending alongside declining exports and a lack of corporate investment.

However, analysts are expecting that the worst is yet to come with the second quarter GDP figures predicted to see an even steeper fall in production as lockdown measures bite harder.

In London, the FTSE 100 was up 108 points at 6,066 shortly before 2pm.

1.30pm: Wall Street expected to open higher

US markets are predicted to start Wednesday’s session on the front foot as traders seemed to have little anxiety about the upcoming US GDP data and the scheduled Fed meeting.

“Investors are showing no fear despite this being a blockbuster week in terms of earnings and central bank meetings. It's easy to be brave when big brother Fed is stood behind you and has committed to having your back for the foreseeable future”, said OANDA’s Craig Erlam.

“Big bro can't stand behind investors indefinitely though so the longer this goes on, the more chance there is of more carnage further down the road. If you looked at the markets, you'd swear the economy was going through a minor blip, not the worst recession in a century. Madness”, he added.

Regarding the Fed, Erlam said the central bank was unlikely to provide any surprises.

“I mean, what is there left for them to do? Their balance sheet has expanded at an eye-watering pace, increasing around 60% since late February to more than $6.5 trillion. Moreover, financial markets have calmed right down, giving investors trillions more reasons to buy those dips. It's far from healthy but compared to what was happening in late February/early March, it's the lesser of two evils. Either way, the Fed can afford to take it easy today”, he said.

Meanwhile, in London, the FTSE 100 was up 61 points at 6,019 in early afternoon trading.

11.50am: FTSE 100 trading sideways as morning ends

As the morning part of Wednesday’s session drew to a close, the FTSE 100 had lost some of its earlier gains and was hovering around 6,000, adding 43 points to 6001 at around 11.50am.

The index has been boosted by good performances from the UK’s major banks, with Barclays PLC (LON:BARC) rising 7.8% to 105.4p in late-morning trading while Standard Chartered PLC (LON:STAN) was up 3% at 401.5p.

The UK’s biggest drugmaker, AstraZeneca PLC (LON:AZN), also climbed 1% to 8,273p as it maintained its sales and earnings guidance after a strong opening three months.

On the way down was British Airways owner International Consolidated Airlines SA (LON:IAG), which dropped 2.1% to 213.4p following news overnight that it is planning to axe 12,000 BA staff amid a slump in demand for travel.

The outlook for the rest of the sector was just as grim after French aircraft maker Airbus warned in an outlook statement that the airlines may not see passenger levels recover to their pre-pandemic levels for another five years.

10.45am: Eurozone economic sentiment sees fastest drop ever

At around mid-morning, the FTSE 100 was slowly continuing it is ascent and was up 56 points at 6,018 shortly before 10.45am.

While things may be looking up for the market in London, across the Channel the picture was gloomier after the Eurozone recorded its fastest ever drop in economic sentiment in April.

The sentiment indicator for the bloc fell to 94.2 to 67, with analysts at ING saying the biggest concern was a “rapid decline in employment expectations for both industry and services”.

The bank also highlighted that hiring expectations were plummeting, a fact it said “does not bode well for the permanent fallout” of the pandemic.

“Prospects for the coming months are dismal despite announcements of cautious lockdown loosening”, they concluded.

The bleak forecast may make some traders nervous ahead of the US GDP data later today, which is also expected to report a sharp drop in output from the world’s largest economy.

9.50am: FTSE 100 passes 6,000 point mark

The FTSE 100 passed the 6,000 point mark at around 9.40am, adding 45 points to 6,003 as the morning session progressed.

The milestone is significant in the market recovery as it means the blue-chip index has managed to claw back all of its losses since the pandemic-inspired crash on 12 March, the worst day for the market since 1987.

AJ Bell’s Russ Mould provided some credit for the rise to Barclays PLC (LON:BARC), which rose 5.4% to 103p in early deals as the bumper performance form its investment banking arm helped overshadow some of the damage caused by a £2.1bn charge in anticipation of coronavirus loan losses.

”Although Barclays has attracted flak for its commitment to investment banking, this part of the business is actually performing well at a time when the retail bank is facing a significant increase in bad debts”, Mould said.

However, he added that the multi-billion pound provision reflected “the fragility of the UK economy amid the lockdown”.

8.45am: Surfeit of news to digest

The FTSE 100 made a quiet, but positive start to proceedings on Wednesday with traders keeping their powder dry ahead of US GDP numbers and the Fed’s monthly meeting later.

The index of UK blue-chips nudged just 21 points higher to 5,979.66.

The former is expected to be the more informative of the two events with the world’s largest economy expected to have shrunk by 4% in the first quarter. The true carnage from the coronavirus lockdown will be revealed three months from now.

While the Federal Reserve is meeting for the first time since its emergency rate, it is unlikely the central bank will deliver any telling insights or indeed additional financial help when its members gather.

British Airways owner IAG (LON:IAG) saw 7% wiped from its value after it told the market it will take “years” to recover from the coronavirus lockdown and announced plans to cut up to 12,000 jobs.

“Even without the sudden shutdown of the travel industry in the last month, the last two years have been a struggle for airlines and the wider sector, with multiple businesses failing, including Monarch Thomas Cook, and more recently FlyBe,” said Michael Hewson of CMC Markets.

“Apart from problems with overcapacity, the industry has had to contend with two high profile crashes of the Boeing 737 MAX, which caused that plane to be grounded indefinitely and increased the costs of a number of the airlines who used the plane and had to lease replacement aircraft to fill the gap

“Having grounded planes and furloughed staff in the face of the COVID-19 tsunami coming their way the industry is now set for another change and challenge.”

On the plus-side, quarterlies from Barclays (LON:BARC) – up 5.8% - and Standard Chartered (LON:STAN) – ahead 5.4% - were the antidote to HSBC’s poor performance Tuesday.

Proactive news headlines:

Power Metal Resources Plc (LON:POW) and Red Rock Resources PLC (LON:RRR) have begun a new joint venture partnership with the aim of building a strategic gold exploration portfolio in Australia. It sees Power taking a 49.9% interest in Red Rock Australasia, which as a joint venture vehicle will be renamed. This vehicle has now already applied for exploration license area EL007271, with Power covering the application fees (£1,125). This asset is being referred to as the ‘Blue Whale’ project. The area spans some 130 square kilometres in the south-western portion of the Victoria Goldfields.

Argo Blockchain PLC (LON:ARB) has reported an eleven-fold increase in revenues for 2019 following a 306% increase in its cryptocurrency mining capacity. For the year ended December 31, 2019, the firm said that its operating loss had been reduced by 80% to £830,000 as its revenues rose to £8.62mln from £760,000 in 2018. The company also said it had mined around 1,330 Bitcoin (BTC) over the course of the year, while it had ended the period with 7,000 pieces of mining hardware which had increased to 17,000 in the first quarter of 2020.

Condor Gold PLC (LON:CNR) (TSE:COG) has landed an environmental permit for the development and exploitation of gold in the high-grade Mestiza open pit project, in Nicaragua. The pit project is host to more than 100,000 ounces of contained gold resources and it is described as complementary to the company’s flagship La India mine, also in Nicaragua."It is a significant development, after a 15-month process, that Condor has been granted the key environmental permit to develop and exploit gold from the high-grade Mestiza open pit,” Mark Child, Condor chief executive said in a statement.

Caledonia Mining Corporation PLC (LON:CMCL) (TSE:CAL) has declared a quarterly dividend of US$0.07 per share after having deferred the payment at the start of April. However, since then, the AIM-listed firm said, it has been “encouraged” by continued operations at its Blanket mine and the re-opening of important supply lines. The company said Blanket’s supply chain of consumables and spares parts was now “close to normal” and the mine was re-establishing full production after having operated at 93% of capacity during lockdown in Zimbabwe.

Falcon Oil & Gas Ltd (LON:FOG) highlighted its strong financial position as it released its results for the twelve months ended December 31, 2019. The exploration company noted that it had US$13.1mln of cash at the end of 2019 and it was debt-free. Its position was further strengthened recently by a new additional farm-out transaction with Beetaloo partner Origin Energy, which secured funding cover for an expanded phase of work. In the financial results, Falcon emphasised its continued focus on strict cost management. It also noted that general and administrative expenses decreased 7% year-on-year, to US$1.78mln.

Kavango Resources PLC (LON:KAV), the exploration company targeting the discovery of world-class mineral deposits in Botswana, has announced the publication of a new independent technical review on the exploration potential of its Kalahari Suture Zone (KSZ) Project. The group said the review concludes that the KSZ "is a prime setting for a magmatic Nickel-Copper-PGM deposit." Kavango is searching for ‘Norilsk-Style’ deposits in the KSZ. The review has been completed by Dr David Holwell, of D&D Geoconsultants using a Mineral Systems Approach. Dr Holwell is a leading authority on the development of Copper-Nickel-Platinum Group Metals (PGM) sulphide deposits associated with magmatic systems.

Honye Financial Services Ltd (LON:HOYE), the standard market listed company, said it continues to review possible acquisitions and hopes to identify a sufficiently attractive one in the coming months as it released half-year results. It said: “There is light at the end of the tunnel as we see China beginning to return to normal after several months and there are tentative steps in Italy, Austria and Denmark to slowly lift restrictions allowing people to return to work.” Honye's losses for the half-year to end January were £161,000, while the company had net cash of £1.7mln at the end of the period.

Pembridge Resources PLC (LON:PERE) has announced the first shipment to Japan of copper concentrate from the Minto mine in Yukon Canada has now left the port of Skagway. In a statement, the group said that the news is a major landmark since the re-opening of the Minto mine last year, with the copper concentrate shipment representing mine's production since re-opening until the end of March. Gati Al-Jebouri, Pembridge’s chief executive officer and chairman said: “This is an important event for the Minto mine, both commercially and symbolically.

Braveheart Investment Group PLC (LON:BRH) has raised £275,000 via a share placing to inject more capital into its strategic investments. The company said it had raised the funds through the placing of around 1.6mln new shares at a price of 17p each, a 24% discount to its closing price on Tuesday. Braveheart said the new funds will allow it to “continue to provide additional financial investment” into its portfolio firms, namely Paraytec, Pharm 2 Farm, Kirkstall, Gyrometric Systems, Phasefocus Holdings and Sentinel Medical.

C4X Discovery Holdings PLC (LON:C4XD) hailed a productive six months as it exited the first half in a strong financial position. Posting interim result, the group said its closely-watched NRF-2 activator programme for sickle cell disease and pulmonary arterial hypertension is “progressing” and it is down to a short-list of three molecules. Discussions with potential partners have persuaded the company to enhance its supporting data, it added.

Zoetic International PLC (LON:ZOE) has appointed Trevor Taylor and Antonio Russo as its co-chief executives as the group re-affirmed its commitment to exit natural resources and focus on its cannabidiol (CBD) business. The company said Taylor and Russo, who previously served as its chief strategy officer and chief revenue officer respectively, were “instrumental” to the success of its US CBD business and that it was “an appropriate time to implement these changes to the management structure”. Meanwhile, the company’s CEO Nick Tulloch and chairman Paul Mendell have both resigned, although Tulloch will continue to partner with Zoetic by leading a new joint venture in the UK. In a trading update, Zoetic also said it had received approval for loans from the US government totalling US$290,000 and expected to receive the funds this week. The company has also received a UK government grant of £10,000.

6.40am: Positive start predicted

The FTSE 100 is expected to start higher on Wednesday as markets nervously await the latest gross domestic product (GDP) data from the US.

Spread-better IG expects the FTSE 100 to open around 38 points higher after ending Tuesday’s session up 111 points at 5,958.

While market sentiment has been stabilised somewhat thanks to trillions in stimulus from central banks around the world, economic data reflecting the true impact of the coronavirus pandemic on the economy threatens to put a dent in risk appetite.

The US GDP figure for the first quarter will provide an indication of what is to come, however, even this may underestimate a much worse figure expected for the second quarter. Forecasts are for a first quarter decline of around 4%, almost entirely due to the slowdown in March.

The data will also be taken into account as the Federal Reserve prepares to meet for the first time since its emergency interest rate cuts last month, although the scheduled meeting is not expected to provide any major announcements with the outlook likely to receive the most attention.

US markets ended their session lower overnight, with the Dow Jones Industrial Average closing down 0.13% at 24,101 while the S&P 500 was 0.52% lower at 2,863 and the Nasdaq Composite fell 1.4% to 8,607.

Market sentiment in the US may have been dampened by warnings on Tuesday from Anthony Fauci, a top White House health advisor, that reopening US states too early could lead to worse impacts without effective treatment, while other investors are likely to be keeping one eye on the continuing turmoil in the oil markets.

Asian markets were more positive today as traders awaited the news from the Fed, with Hong Kong’s Hang Seng rising 0.17%. The Japanese Nikkei 225 is closed for a holiday.

On currency markets, the pound was up 0.45% at US$1.2478 against the dollar, with the economic data due later potentially providing some catalysts for movement.

Significant announcements expected on Wednesday:

Fed interest rate decision

Trading announcements: Barclays PLC (LON:BARC), Standard Chartered PLC (LON:STAN), AstraZeneca PLC (LON:AZN), GlaxoSmithKline PLC (LON:GSK), Next PLC (LON:NXT), WPP PLC (LON:WPP), Elementis plc (LON:ELM), Fresnillo Plc (LON:FRES), Synthomer PLC (LON:SYNT)

Finals: Allied Minds PLC (LON:ALM), Bank of Cyprus Holdings PLC (LON:BOCH)

Interims: Proactis Holdings PLC (LON:PHD), C4X Discovery Holdings PLC (LON:C4XD)

AGMs: Persimmon PLC (LON:PSN)

Economic data: US GDP

Around the markets:

  • Sterling: US$1.2478, up 0.45%
  • Brent crude: US$21.20 a barrel, up 3.6%
  • Gold: US$1,712.96 an ounce, up 0.39%
  • Bitcoin: US$7,872.34, up 2.2%

City headlines:

  • British Airways is to slash nearly 30% of its 42,000 workforce as the coronavirus crisis wreaks more damage on the battered aviation sector – Financial Times
  • Senior management at John Lewis have started discussions on which department stores should not reopen once lockdown ends – Telegraph
  • Lufthansa is preparing to file for bankruptcy as talks intensify over an €8 billion German government rescue – Telegraph
  • The British Property Federation, Britain’s biggest lobby group for property companies, is in talks with the Treasury to secure support for landlords facing billions of pounds in lost or deferred rents – Times
  • Google revealed that its internet search business stabilised in April after a sharp downturn at the end of last month and has seen the first signs of a recovery, lifting its shares by around 8 per cent in after-market trading on Tuesday – FT
  • Britain’s economy is likely to lose out on £800bn of income over the next 10 years as the lockdown and a spike in unemployment leave deep scars on the private sector – Guardian

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2020-04-29 14:55:36Z
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By di

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