- FTSE 100 index jumps 112 points
- Barratt Developments tops the Footsie leaderboard after trading update
- The UK Construction PMI rebounds to 55.3 in June from 28.9 in May
12.05pm: Barratt's trading update lifts the housebuilding sector
After a strong start, the FTSE 100 shuffled sideways for the rest of the morning.
The FTSE 100 index was up 112 points (1.8%) at 6,269, with Barratt Developments PLC (LON:BDEV), up 7.5% at 527.2p, leading the way, after its trading update with sector peers Persimmon PLC (LON:PSN) and Taylor Wimpey PLC (LON:TW.) not far behind.
“As investors search for rays of light in the current economic fog, Barratts has provided a glimpse of cautious optimism,” said Richard Hunter, the head of markets at interactive investor.
“Visibility on the road ahead remains murky, however. It is too early to quantify the full economic impact of the pandemic on the UK, let alone consumer confidence, and any recovery could be drawn out. The resumption of Brexit talks could also weigh generally on the sector, while the Help to Buy scheme which has been such a boon is currently due to expire in March next year. This could punch a further hole in profits unless an extension to the scheme is announced,” he cautioned.
“In the meantime, generally good mortgage availability, historically low-interest rates and a housing shortage all play into the bull case for the sector,” Hunter noted.
This morning’s Construction Purchasing Managers’ Index (PMI) won’t have done sentiment towards the sector any harm, either.
The PMI rose to 55.3 in June, from 28.9 in May, above the consensus, 46.0.
“The jump in the PMI above 50 makes sense, given that it should simply be an indicator of month-to-month growth in construction output. A similar picture was presented by the ONS' Business Impact of Covid-19 survey, which showed that the proportion of construction companies reporting that they are actively trading rose to 87.4% in the first half of June, from 82.6% in the second half of May,” explained Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“The rebound in the PMI was driven by the housing sector—its activity index rose to 59.0, from 30.9—but the commercial and civil engineering activity indices also recovered, to 53.8 and 52.4, respectively. Nonetheless, the new orders balance rose only to 50.4, from 25.4, and the employment index increased merely to 41.5, from 31.2, suggesting that construction firms are preparing for demand to remain well below pre-COVID levels later this year.
“Admittedly, the recovery in construction activity should be stronger than after the 2008-to-09 recession, given that banks are better placed to supply credit through the recovery, and public sector investment will be increased, not squeezed. Nonetheless, a full V-shaped recovery is not on the cards, given that the future occupancy rates of office and retail space are highly uncertain, and lenders have pulled back from high LTV [loan-to-value] lending which supports first-time buyers to purchase new homes. Accordingly, we currently expect construction output to be about 5% below its pre-COVID level in the fourth quarter of this year,” Tombs revealed.
9.50am: Builders "the stars of the UK economy in June"
The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) bounced back strongly in June.
The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index jumped to 55.3 in June, from 28.9 in May; a reading above 50 indicates an expansion in activity.
Higher levels of business activity were overwhelmingly linked to the reopening of the UK construction supply chain following stoppages and business closures during the early stages of the coronavirus disease 2019 (COVID-19) pandemic, said IHS Markit.
“June's survey data revealed a steep rebound in UK construction output as more sites began to reopen and the supply chain kicked into gear. House building led the way with the fastest rise in activity for nearly five years, while commercial and civil engineering also joined in
the recovery from the low point seen in April,” said Tim Moore, the economics director at IHS Markit, which conducts the survey.
"As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period. While it has taken time for the construction supply chain to adapt and rebuild capacity after widespread business closures, there is now clear evidence that a return to growth has been achieved,” he added.
Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said builders were the stars of the UK economy in June.
"As business confidence improved to its largest extent since February, companies were buying up materials and laying the groundwork for a stronger summer’s end. This resulted in the highest input price inflation since the start of the year as supply chains creaked under the strain of increased shortages. Building performance is dependent on other sectors recovering at a similar pace, and as businesses were opening up, some fell short of their usual delivery capacity,” Brock said.
"Only two months ago the construction sector produced the worst results in the history of the PMI, and there are still some potholes to navigate around as Government support for jobs is stripped away. Employment levels remained deflated, with reports of redundancies,
furloughed staff and a reluctance to boost staff numbers when new order levels remained so flat but with a significant rise in the headline output number, it looks as though all the building blocks are there for the sector’s increasing health," Brock suggested.
The FTSE 100 was up 106 points (1.7$) at 6,266.
8.45am: Strong start to the new week
The FTSE 100 got off to a strong start on Monday with financial support for the coronavirus recovery rather than the toxic impact of the outbreak itself powering positive sentiment.
The index of UK blue-chip shares rocketed 144 points higher to 6,301.17.
Earlier Asia’s main markets kicked off in fine fettle with China leading the way following a raft of encouraging data in recent days suggesting the world’s second-largest economy may bounce back to life more quickly than predicted. Even the usually slow-to-respond Japanese stock market appeared to have a little buoyancy Monday.
Closer to home, sentiment was aided by news of £1.57bn of support for the arts in what is expected to be a much larger injection to save jobs. Also being mooted is a trainee scheme aimed at getting young people back to work, and a potential stamp duty hiatus.
On the market, Boohoo (LON:BOO) made a formal response to a newspaper investigation into the pay and conditions of one of the online fashion retailer’s major suppliers - one which City broker Liberum said didn’t go far enough.
“[It] only really speaks of investigating the particular factory in question and raises the question of how many other breaches management is potentially unaware of,” Liberum's analysts said in a note to clients.
“The rest of the statement speaks of procedures and checks that management has already put in place, which if the allegations are true, have clearly not been robust enough to stop significant breaches happening," the analysts added, having downgraded their rating for Boohoo to 'hold' from 'buy' on the reports at the weekend.
Boohoo’s share fell 12% early on, wiping £577mln from the value of the business.
On the Footsie, the housebuilders were in rude health amid reports that chancellor Rishi Sunak may be willing to sanction a stamp duty holiday for up to six months. Taylor Wimpey (LO:TW.) and Persimmon (LON:PSN) advanced 6.5% each.
Rolls Royce (LON:RR.) was up 6% amid reports it may shut its pension scheme early to alleviate the financial pressure applied because of the coronavirus outbreak, which has decimated its main customer, the airline industry.
Proactive news headlines:
4D pharma plc (LON:DDDD) has said the crucial next stage of a cancer clinical study is underway with four new sites added in the US to accelerate patient recruitment. Up to 30 people per tumour type will participate in Part B of the company’s phase I/II trial to assess its live biotherapeutic, MRx0518, in combination with immune checkpoint inhibitor Keytruda. The assessment will look for a meaningful clinical impact on cancer patients that have become resistant to this type of therapy. Researchers are looking for a complete or partial response or stable disease for six months or longer.
i3 Energy PLC (I3E) has signed a binding agreement to acquire private Canadian oil and gas company Gain Energy through a reverse takeover for US$58.8mln. AIM-listed I3 had flagged the deal two weeks ago, but not named the target. Gain operates in the Western Canadian Sedimentary Basin, the same area of operation as Toscana, another Canadian company I3 agreed to buy two weeks ago. Gain produced at a rate of around 11,000 barrels per day equivalent throughout 2019 and generated around US$34mln in underlying profits.
Zoetic International PLC (LON:ZOE) has announced its first international distribution contract, with a deal in the Czech Republic and Slovakia for its Chill brand tobacco alternative CBD products. The company noted that Chill branded products now have a ‘clear roadmap’ for distribution and sale across filling stations and tobacco retailers in the two countries. Further discussions are ongoing with distributors in other territories, it added
OptiBiotix Health PLC (LON:OPTI) has extended its distribution agreement with a company called CTC Holding to include an additional product. CTC will now sell WellBiome in Philippines, Vietnam, Indonesia, Colombia, the Dominican Republic and Guatemala in addition to OptiBiotix weight management products SlimBiome, SlimBiome Medical and GoFigure. WellBiome is a blend of prebiotic functional fibres, functional dietary fibres and mineral that promote the diversity of the gut microbiome.
Supermarket Income REIT PLC (LON:SUPR) has entered into a £74.1mln sale and leaseback transaction with supermarket group, Waitrose & Partners, part of the John Lewis Partnership. The acquired portfolio comprises six freehold supermarkets with an average gross internal area of 32,000 square feet. The stores are let to Waitrose on new 20-year leases with a tenant-only break option in year 15 and are subject to five-yearly, upward-only, CPIH inflation-linked rent reviews; the rent will go up by a minimum of 1% each year and a maximum of 3%.
Frontier IP Group PLC (LON:FIPP) said its portfolio firm, Fieldwork Robotics has signed an agreement with German engineering group Bosch to accelerate the development of its robot technology to harvest soft fruit and vegetables. The intellectual property investor said Bosch UK will collaborate with Fieldwork’s engineers to optimise its soft robotic arms and develop software to reduce the arms’ cost and increase their speed. Fieldwork is currently focused on developing robots to harvest raspberries, which are more delicate and more easily damaged than other soft fruits and grow on bushes with complex foliage and berry distribution. Frontier, which holds a 26.9% stake in Fieldwork, said the deal with Bosch was “a significant step forward” in commercialising the robotics group’s technology.
Thor Mining PLC (LON:THR) (ASX:THR) said its Molyhil tungsten project has been awarded Major Project status by the government of the Northern Territory in Australia. The chief minister of the Northern Territory, the Honourable Michael Gunner MLA and Thor Mining chairman, Mick Billing, announced a Project Facilitation Agreement (PFA) between the government and the company on Saturday, July 4. The company is currently pursuing US$43mln in project finance for the development-ready Molyhil project.
Iconic Labs PLC (LON:ICON) has updated on its support for a bid by Greencastle Capital to acquire Maximum Media Limited and for the assets of Joe Media Limited, the owner of the JOE social media publishing brand. In an announcement after Friday’s close, the media technology group said, following its initial announcement of the bid on June 16, Greencastle is in “continued discussions” with Joe Media and should the bid be successful it will enter a management services agreement with Greencastle to manage the JOE assets. Meanwhile, Iconic said its planned acquisition of Social Alchemist, which was planned to complete in the first quarter of 2020, has been delayed by the coronavirus pandemic and that it is in talks to renegotiate the terms of the agreement to provide “maximum flexibility”.
Collagen Solutions PLC (LON:COS), the developer and manufacturer of biomaterials and regenerative medicines, has altered the repayments scheme on bonds it issued to Norgine Ventures. The company and Norgine have hammered out an amendment on the timing of principal repayments on the Tranche A and Tranche B Bonds. The variation provides for a reduction in the capital payments from July 1 and delays the balloon payments (a large payment due at the end of a loan) on the redemption of the bonds. Prior to this agreement, the company had repaid £1.96mln of the principal, having drawn down £3mln in total.
Galantas Gold Corporation (CVE:GAL) (LON:GAL) has increased the size of the private placement it first announced in June. The money raised will now amount to C$637,454, or £376,240. The placement price is £0.1328p per share. The net proceeds will be used to support mine operations and provide general working capital for the company.
Touchstone Exploration Inc. (LON:TXP) (TSX:TXP) announced that Dr Harrie Vredenburg, a non-executive director of the company exercised share options representing a total of 80,000 common shares of no par value on June 29, 2020, at a price of C$0.33 (approximately 19.5p) per Common Share. It also noted that, on July 3, 2020, Vredenburg sold 38,282 common shares at a weighted average price of C$0.90 (approximately 53.2p) per common share on the Toronto Stock Exchange.
6.35am: Rip-roaring start predicted
The FTSE 100 looks set for a rip-roaring start on Monday, dragged higher by buoyant Asian markets, which appeared determined to accentuate the positives and ignore the still-potent threat from the coronavirus (COVID-19) spread.
Allowing equities to defy gravity was the prospect of further intervention from governments around the world to stave off the threat of a deep and prolonged global recession.
Here at home chancellor Rishi Sunak is expected to unveil a raft of job-saving initiatives, which were heavily trailed at the weekend, while support from other sources globally is expected to come from increased liquidity.
This perhaps explains why when Covid cases hit a daily record, China’s stock market surged 4% higher with the recent batch of economic data from the People’s Republic suggestive of a v-shaped recovery.
Closer to home, this week will provide some granular detail on how lockdown is affecting the economy and the companies worst hit.
Budget hotelier Whitbread (LON:WTB), Rolls Royce (LON:RR.), the aero engines giant, and retailers JD Sport (LON:JD.) and Halfords (LON:HFDS) each have updates that will help us assess the impact of the shutdown, though nothing much is scheduled corporately today.
Around the market:
- Pound worth US$1.2495, up 0.1%
- Gold US$1,780.90 an ounce, down US$9.10
- Brent crude US$43.11 a barrel, up 31 cents
Significant events expected on Monday:
Economic data: UK construction PMI, US services PMI
City headlines:
Financial Times
- Wirecard’s core business has been lossmaking for years, audit shows
- UK imposes sanctions on Russians and Saudis over human rights
- Sunak gives £1.5bn lifeline to struggling arts sector
Times
- Shell chief hints at relocating headquarters to Britain
- Construction delays put Help to Buy loans at risk
- Pressure on Boohoo over slave wages allegation
- One in ten Pret stores will not survive
Telegraph
- Bankers gorge on £11bn of Covid debt fees
- Rolls-Royce aiming to shut pension plan four years early to ease Covid pressure
- Mystery as Essar Oil boss quits after just six months
Guardian
- Boris Johnson pledges £1.5bn lifeline to keep UK's arts sector afloat
https://news.google.com/__i/rss/rd/articles/CBMic2h0dHBzOi8vd3d3LnByb2FjdGl2ZWludmVzdG9ycy5jby51ay9jb21wYW5pZXMvbmV3cy85MjM0MzcvZnRzZS0xMDAtaW4tdG9uLXVwLW1vZGUtbGVkLWJ5LWhvdXNlYnVpbGRlcnMtOTIzNDM3Lmh0bWzSAT5odHRwczovL3d3dy5wcm9hY3RpdmVpbnZlc3RvcnMuY28udWsvY29tcGFuaWVzL2FtcC9uZXdzLzkyMzQzNw?oc=5
2020-07-06 11:14:00Z
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