FTSE 100 closes in red as ECB fails to cheer and markets fear second coronavirus wave

  • FTSE 100 closes 41 points lower
  • ECB beefs up its bond-buying programme by €600bn
  • US benchmarks in red

5.00pm: FTSE 100 closes lower

FTSE 100 index closed in the red on Thursday despite the European Central Bank's (ECB) bid to ride to the rescue.

Footsie closed the afternoon session down almost 41 points at 6,341 as fears off a second wave of coronavirus deaths are also circulating.

FTSE 250 was also off, shedding over 71 points at 17,825.

The UK's death toll from the virus hit 39,843 on Thursday after 115 more deaths were recorded in the last 24 hours.

The ECB ramped up its Pandemic Emergency Purchase Plan (PEPP) by €600 billion, so it now stands at €1.35 trillion, which was over and above market expectations and helped to propel the Euro higher.

On Wall Street, the Dow Jones Industrial Average fell nearly 18 points to 26,252, while the S&P 500 lost over 11 at 3,111.

4.00pm: Bulls take a breather

Even stock market bulls have to take a day off occasionally and today was that day.

The FTSE 100 was down 33 points (0.5%) at 6,351, with Intermediate Capital Group PLC (LON:ICP) the worst-performing blue-chip.

The fund managers shares slid 6.2% to 1,300p after it revealed profit before tax fell by 37% to £114.5mln from the year before, although assets under management at the end of March stood 22% higher than a year earlier at €45.3bn.

3.10pm: US indices open mixed

US indices dipped as expected before recovering to be little changed.

The Dow Jones industrial average was up 5 points (0.0%) at 26,274 while the S&P 500 was off a couple of points (0.1%) at 3,121.

“US initial jobless claims fell to 1.9m but the key continuing claims number rose 650k from last week to 21.5m, which was ahead of expectations. Its a worry that we are not seeing this number coming down as it suggests employers are not calling their staff back as quickly as had been hoped. Tomorrow is nonfarm payrolls day, of course, with expectations for the headline print to come in at –8m jobs but we note the ADP number yesterday was just –2.76m vs –9m expected,” said Neil Wilson at markets.com.

Roiana Reid at Berenberg Capital Markets reckons the non-farm payrolls number will have declined by 6mln in May, while the unemployment rate is tipped to rise to 18.7% from 14.7% in April.

“As the economy reopens, employment will jump initially as businesses rehire furloughed and laid-off workers, but it will take years for employment to return to pre-crisis levels as some firms permanently close and as others operate at reduced capacity. We expect the unemployment rate to fall to 9.6% at the end of 2021, which would be almost three times the pre-crisis rate,” Reid said.

“High unemployment and slack in labour markets will put downward pressure on wages, despite pockets of wage increases,” Reid added.

In European, its all about the European Central Bank (ECB), which has thrown the kitchen sink at the Eurozone economy with a near doubling of its quantitative easing programme.

Claus Vistesen, the chief Eurozone economist at Pantheon Macroeconomics, does us all a favour by telling us not to bother watching the recording of the press conference that followed the ECBs big fiscal stimulus move.

“Ms. Lagarde [the ECB governor] didnt say anything in terms of actual policy that wasnt already covered in the initial announcement. As for the new staff projections—released on the ECB website as we type—they contain significant downward revisions of both GDP and inflation forecasts through 2022, as expected,” Vistesen said.

In London, the Footsie went into a funk following the ECBs announcement, which sent forex markets doolally for a while, but the index of leading shares has now recovered some equilibrium at 6,362, down 20 points.

2.00pm: ECB gets out the bazooka

“Finally the ECB has taken off the inflationary brakes,” was the reaction of one trader to the European Central Banks (ECB) big move on quantitative easing.

The ECB has boosted the size of its QE bond purchase programme by €600bn to €1350bn and extended its operation until at least June 2021.

“The Banks decision to nearly double the size of its emergency funding programme for the battered Eurozone is a case of better late than never,” griped Ulas Akincilar, the head of trading at INFINOX.

“Pumping well over a trillion Euros into the Eurozone economy, over and above its ongoing money-printing programme, risks stoking runaway inflation – something the influential Germans have traditionally been allergic to but the Banks monetary policy grandees have clearly decided that worries about inflation must wait for another day. Now their focus is entirely on seeing off the existential crisis that Europes looming depression poses,” he added.

Carsten Brzeski, the chief economist covering the Eurozone at ING, said todays move by the central bank “should dent any future speculation about whether or not the ECB is willing to play its role as the lender of last resort for the Eurozone”.

All eyes and ears are now on the banks press conference, which started at 1.30pm.

In London, the Footsie reversed course sharply after the announcement and only now is it beginning to recover some of its composure, down 53 points at 6,330.

1.35pm: European Central Bank earmarks another €600bn for QE

US indices were expected to take a small step back today in the wake of the latest US weekly jobless claims.

Spread betting quotes point to the Dow opening at around 26,200, down 70 points, and the S&P 500 kicking off at 3,109, down 14 points.

US initial jobless claims eased to 1.88mln last week from 2.12mln the week before; economists had expected a figure of around 1.83mln.

Continuing jobless claims rose to 21.5mln million from 21.1mln the previous week.

US Weekly Initial Jobless Claims Report – DOLhttps://t.co/tRHpu7676z pic.twitter.com/vBiB2dNa21

— LiveSquawk (@LiveSquawk) June 4, 2020

In London, the Footsie had fought its way back almost to 6,400 before falling back to 6,344, down 38 points (0.6%) after the European Central Bank (ECB) expanded its bond buying programme (quantitative easing).

The ECB announced an expansion of €600bn in the programme, which was larger than the €500bn the market had expected.

12.35pm: "Huge number of job losses are still on the way"

Londons blue-chips were little changed despite a slew of economic data released today that laid bare the impact the coronavirus has had on the economy.

The FTSE 100 was off 24 points (0.4%) at 6,359.

Commenting on todays Bank of England survey of chief financial officers, Sarah Coles, a personal finance analyst at Hargreaves Lansdown, warned that government schemes have only held back a wave of redundancies.

“At the moment, with a third of the workforce furloughed, jobs are only 6% down on the levels wed usually expect at this time of year – a month earlier businesses had worried they could fall as much as 18%.

“However, a huge number of job losses are still on the way, and after the furlough scheme ends in October, employment is expected to be down 10%.

“The information and communications industry is taking a big hit at the moment. Employers were already battling to manage changes in the way we consume information, and the crisis brought about a fall in sales and a collapse in advertising which was the final straw for some. It has meant an awful lot of restructuring and job losses,” she said.

“The accommodation and food industry, by contrast, was in full flood when the crisis hit, and the furlough scheme allowed businesses to hit pause rather than stop. Its problems will come later down the line as the furlough scheme is gradually withdrawn, and they struggle with running a business based on social interaction at a time of social distancing,” she suggested.

11.35am: BoE survey suggests leisurely recovery in investment levels

The Bank of Englands survey of chief financial officers indicates UK PLC is expecting a severe hit to second-quarter sales from the coronavirus (COVID-19).

In the May “Decision Maker Panel” (DMP) survey, businesses expected their sales in the second quarter to be 42% lower than they would otherwise have been, employment to be 6% lower and investment to be 43% lower.

The second-quarter sales and investment impacts were similar to the April survey, but the employment impact was materially smaller than the 18% expected in April, probably reflecting the extension of the furlough scheme, the Bank of England (BoE) said.

Sales were expected to recover only gradually over the next year with the negative impact from COVID-19 lessening from 42% in the second quarter to 30% in the third quarter, 18% in in the fourth and 10% in the first quarter of 2021.

The impact on employment was expected to be more persistent and to be larger in the second half of the year than it was in the second quarter, peaking at 10% in the fourth quarter.

Investment was expected to recover somewhat more slowly than sales, the BoE said. The reduction in investment due to COVID-19 was expected to be 43% in the second quarter (Q2), 37% in Q3, 28% in Q4 and 18% in 2020 Q1.

The FTSE 100 was down 16 points (0.2%) at 6,367.

10.30am: Car sales plunge 89% year-on-year in May

If the construction sector is in a bad way, things are not much better in the motor trade.

Private new car registrations fell 83.8% in May from a year earlier, which at least represented an improvement on Aprils 98.7% plummet.

Total registrations, including fleet and business sales, fell 89.0% in May.

“Car dealerships remained closed throughout May, making it operationally difficult for customers to receive cars they ordered earlier this year. Registrations likely will spike this month, now that dealerships have reopened to the public and a backlog of orders has to be worked through,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.

“Nonetheless, car sales will be well below pre-virus levels in the second half of this year. The volume of people searching online for one of the top five bestselling cars rebounded last month, but still was down 14% year-over-year in the final week of May. In addition, consumers confidence remained consistent in May with a 20% shortfall in new car sales relative to last year,” Tombs noted.

“Even if confidence recovers later this year, it will be a while before car sales recover, given that buyers can defer purchases easily, and they represent a big, long-lasting financial outlay. Interest rates for car finance packages also might rise, as lenders price-in a higher chance of default. And so far, the government is showing no sign of caving in to industry lobbying for another scrappage scheme, similar to that seen in the 2008-to-09 recession,” Tombs said.

Car dealer Lookers PLC (LON:LOOK) picked an interesting day to release a trading and operational update but judging by the 8.6% increase in the share price to 25.3p.

The company revealed plans to lower its headcount by 1,500 as the company intends to close 12 dealerships.

“Keep in mind the company announced the closure of 15 sites in late 2019. The group said that it has resumed trading across all areas of the business, but not surprisingly, the capacity levels are far lower. The restructuring plan that was revealed today will incur a one-off cost of approximately £9 million, but it will equate to payrolls savings of £50 million,” reported CMCs David Madden.

The FTSE 100 was down 26 points (0.4%) at 6,356.

For perspective the previous years sales even for the number 10 spot of other vehicles were 3xhttps://t.co/JfdP0HT7Ey pic.twitter.com/msWIJ9LQFp

— Dee (@DeeJ722) June 4, 2020

[youtube https://www.youtube.com/watch?v=wYvp9QrBVos]

10.10am: "Job losses will follow without a strong pipeline of work waiting in the wings"

Londons index of leading shares reacted phlegmatically to the release of another grim temperature reading of the UK construction activity.

The FTSE 100 index was down 13 points (0.2%) at 6,370, despite some support for airline stocks easyJet PLC (LON:EZJ) and British Airways owner International Consolidated Airlines (LON:IAG). The former was up 4.5% at 819.4p and the latter was 3.3% better at 288.4p.

The IHS Markit/CIPS UK Construction Purchasing Managers Index (PMI) for May recovered to 28.9 in May from 8.2 in April, which was a bit of a no-score draw for the sector.

“A gradual restart of work on site helped to alleviate the downturn in total UK construction output during May, but the latest survey highlighted that ongoing business closures and disruptions across the supply chain held back the extent of recovery,” said Tim Moore, the economics director at IHS Markit.

"It seems likely that construction activity will rebound in the near-term, as adaptations to social distancing measures become more widespread and the staggered return to work takes effect; however, latest PMI data pointed to another steep reduction in new orders received by UK construction companies, with the pace of decline exceeding the equivalent measures seen in the manufacturing and service sectors,” he added.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply, said building work continued to be grounded by the pandemic and lockdown measures in May.

"Spending was slashed as clients continued to stonewall building firms and put new projects on hold. With furloughed staff across the supply chain, companies saw their capacity leak away and the construction sector now faces the most challenging environment for generations. Building materials were in constrained supply as vendors gradually reopened in May, while items such as personal safety equipment were difficult to source.

"As the sector staggers back to work, and builders put their heads above the parapet, they face a number of obstacles. New safer working practices will ensure operations can continue but client confidence to place new orders is harder to predict. As the furlough scheme is unravelled towards the end of the summer, the floodgates preventing redundancies may also fly open and job losses will follow without a strong pipeline of work waiting in the wings. It will take a long time for the sector to build strength from the ruins of COVID-19,” he predicted.

Purchasing managers report #UK #construction activity contracted markedly in May but at much reduced rate from April record drop as some sites resumed activity. #PMI up to 29.9 from just 8.2 in April. Activity off lows in all sectors: housebuilding, commercial & civil engineering

— Howard Archer (@HowardArcherUK) June 4, 2020

9.45am: Construction sector remains down in the dumps

The IHS Markit/CIPS UK Construction Purchasing Managers Index (PMI) recovered to 28.9 in May from 8.2 in April.

That being said, the index was still the second-lowest reading since February 2009, when the credit crunch was at its crunchiest.

A PMI reading below 50 indicates a contraction in activity.

Around 64% of the survey panel reported a drop in construction activity during May, while only 21% signalled an expansion, said IHS Markit, which compiles the survey.

“Where growth was reported, this was mostly attributed to a limited return to work on-site following shutdowns in April,” it added.

The FTSE 100 was down 9 points (0.2%) at 6,373.

8.35am: Mild profit-taking

The FTSE 100 index endured a minor case of the collywobbles in early trade on Thursday ahead of a meeting of the European Central Bank and US weekly jobs data later.

The index of UK blue-chips opened 30 points lower at 6,352.75.

After a triple-digit gain on Wednesday, it was perhaps to be expected that traders would look to book a little profit.

Following better than expected ADP employment numbers in the US, the Dow Jones Industrials Average closed more than 500 points to the good and is now at levels last seen in early March.

James Hughes, chief market analysts at Scope Markets commented: "Thursday will see a continuation of the jobs theme in the US as we get the all-important weekly jobless claims. Expectations are for a further 1.8mln Americans to have sought unemployment benefit this week. Although bad this figure is way off the drastic readings at the height of the pandemic.

"The better than expected data only shows that the picture may finally be hitting its peak, and doesnt give any indication of how the US government plans to get the over 40mln people in the US back into employment."

The profit-taking theme continued at the individual stocks level, with the recent good run for Rolls Royce (LON:RR.) ending in a 4.8% fall.

Similarly, shares in British Airways owner IAG (LON:IAG) were off 4.6%, as were those of cruise operator Carnival (LON:CCL).

AstraZenecas (LON:AZN) collaboration with Accent Therapeutics was greeted with a 2% rise in the share price. Given drug buddy Hikma (LON:HIK) was also up, the move was probably more suggestive of a drift towards defensive equity investments.

Proactive news headlines:

Open Orphan PLC (LON:ORPH) has announced the launch of hVIVO's COVID Clear Test, its antibody testing service, following the successful completion of the installation, testing and training for the coronavirus (COVID-19) test, The service will be offered to large employer groups and partners including GP networks, nursing care businesses, health clinics and private hospitals. Samples will be tested in the company's London lab with results returned within 48 hours.

Gfinity PLC (LON:GFIN) said it has signed a five-year deal with Abu Dhabi Motorsport Management (ADMM) to design, develop and deliver an esports racing championship (ERC). The AIM-listed firm said the ERC concept is based on a “unique format not seen in virtual racing before” and will feature professional simulation racing drivers and a roster of teams from digital motorsport. The championship will have two seasons each calendar year, with the first to take place in 2020 and be hosted by Gfinity.

Sativa Group PLC (LON:SATI) has received a takeover bid from Canadian-listed cannabinoid (CBD) extraction and agriculture specialist Stillcanna Inc. The offer, which was unveiled after Wednesdays London close, will see Stillcanna offer 0.33507 new shares for each Sativa share, valuing the Aquis Exchange-listed companys entire share capital at around £10.66mln. The offer represents a 28.6% discount to Sativa's middle market closing price of 2.6p per share on April 21, when a deal was first mooted, and the group noted that following the deal its shareholders will own around 65% of the combined entity. In a separate announcement, also after yesterdays close, Sativa reported its results for the year ended December 31, 2019, which saw its revenues increase more than five-fold to £1.45mln from £0.26mln while its gross margins improved to 52% from 42% due to a decrease in the cost of CBD extract and production efficiencies. Sativa also reported figures for the first quarter of 2020, posting revenues of £0.36mln, 49% higher than the prior-year and gross profit of £0.21mln with a 59% margin, ahead of management expectations.

Oncimmune Holdings PLC (LON:ONC) said it is expecting further strong growth in the top-line in the current fiscal year. In a trading update covering the 12 months to the end of May 2020, the immunodiagnostics specialist noted that its revenue was in line with market expectations. Meanwhile, it said, the next 18 months are expected to create substantial revenues within the EarlyCDT lung cancer test business. while the pipeline of contracts within the ImmunoINSIGHTS services business is building. Oncimmune also noted that its board has been streamlined, as a result of which Geoffrey Hamilton-Fairley, the non-executive vice-chairman and co-founder of the company, plus two other non-executive directors – Julian Hirst and Carsten Schroeder – have stepped down from the board with immediate effect.

Tiziana Life Sciences PLC (LON:TILS) (NASDAQ:TLSA) said the chairman of its scientific advisory board has received a research grant from the National Institutes of Health in the US to investigate the companys nasal anti-CD3 drug, Foralumab, for the treatment of Alzheimers disease. The NIH award provides third-party validation of the work of Dr Howard Weiner in an area of great unmet medical need. He believes the nasal administration of Foralumab is a “potentially revolutionary approach” to treat patients with Alzheimers.

Oracle Power PLC (LON:ORCP) has said it continues to receive support for the development of its Thar project in Pakistan. As announced in March, Oracle has submitted an application to the Private Power and Infrastructure Board for a letter of intent (LOI) on behalf of the consortium developing the project. The issuance of the LOI will be a major step in the development of Thar Block VI and would confirm the Government of Pakistan's commitment to purchase power from Thar Block VI. Oracle has now paid the US$50,000 evaluation fee that became due under the terms of the LOI and has received a payment of US$7,491 from Sheikh Ahmed Dalmook Al Maktoums private office in respect of the offices share of the evaluation fee.

Personal Group PLC (LON:PGH) chairman, Mark Winlow will tell shareholders at Thursdays annual general meeting that, given the current coronavirus (COVID-19) pandemic environment, the leading provider of employee services has made an encouraging start to the year. In the AGM statement, Winlow said: “We continue to engage with clients, existing and new and I am pleased to announce that we are negotiating significant potential new Let's Connect and Insurance clients which are on-going despite the challenges of COVID-19." In a separate statement, Personal Group on also announced that its CFO Mike Dugdale has confirmed his intention to retire on September 30, 2020. The company said Sarah Mace, the group financial controller and company secretary, will be appointed as Interim CFO on September 30, Dugdales departure date allowing an orderly handover and transition time.

Impax Asset Management Group PLC (LON:IPX) has increased its interim dividend saying it is good financial health while inflows and the performance of its funds saw a rebound in April. Inflows into its funds were a record £1.8bn in the half-year to March 31, 2020, Impax said, but assets under management were affected by coronavirus volatility and dropped by 4% to £14.4bn. In April, net inflows were almost £300mln, it added, and at the end of the month assets under management had rebounded to £15.8bn.

Strategic Minerals PLC (LON:SML) said it has raised £1.1mln through a placing and subscription of around 244.4mln new shares to help pay the remaining balance of £990,000 for the acquisition of New Age Explorations interest in Cornwall Resources, holder of the Redmoor Tin/Tungsten project. The AIM-listed company said the shares had been issued at a price of 0.45p each, a 28.6% discount to its closing price on Wednesday, adding that it is also allowing existing shareholders to subscribe for up to 22.2mln new shares at the same price through a broker option. "The company continues to limit equity raisings to only fund projects it believes will value add over time. Today's raise not only achieves this, through securing the balance of the Redmoor acquisition, but the board considers that it will also remove a perceived market overhang associated with the need to fund this liability”, Strategic Minerals chairman Alan Broome said in a statement.

Curzon Energy PLC (LON:CZN) has raised £166,066 by placing shares at a penny a pop. The placing shares came with warrants attached that can be exercised at 1.5p a share. In all, 16.6mln shares were issued along with 17.6mln warrants. The funds raised will be used to advance and complete negotiations with the Sun Seven Stars Investment Group (SSSIG) on a transaction involving the London Critical Metals Market (LCMM).

Keywords Studios PLC (LON:KWS), the international technical services provider to the global video games industry, has announced that Andrew Day, its chief executive officer, yesterday exercised 150,095 options over ordinary shares dating from the time of the company's IPO in 2013. Of these 150,095 options, 86,593 were awards granted on 8 July 2013 under the terms of the company's long term incentive plan and were Read More – Source

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