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FTSE 100 posts triple digit loss as pandemic fears weigh

  • FTSE 100 index closes down 106 points
  • Rolls Royce is top Footsie loser
  • Wall Street shares down

5.10pm: FTSE closes 1.73% lower

FTSE 100 index closed in the red on Thursday, joining other global indices in heading lower, as markets watch the continuing pandemic crisis.

Britain's blue-chip benchmark closed down over 106 points, or 1.73% at 6,049.

Midcap FTSE 250 was also down around 200 points to close at 16,985.

Top loser on Footsie was Rolls Royce (LON:RR.), which dropped nearly 11% at 256.30p on the back of a first half update. The engineering giant has been hit hard due to air travel being severely impacted.

"Stocks finished deep in the red as the pandemic is still playing on traders minds as there are still concerns that cases could rise as lockdown restrictions have been eased," noted David Madden, market analyst at CMC Markets.

Madden highlighted the developments in the US, where, according to Reuters, 42 of the 50 states in the US registered an increase in the number of new cases on Wednesday, "so that is influencing sentiment on this side of the Atlantic".

On Wall Street, the Dow Jones Industrial Average plunged over 382 points at 25,684. The S&P 500 shed around 32 at 3,137.

4.15pm: Late swoon for the Footsie

Having shuffled painfully up the recovery trail for much of the item, Londons leading equities had a late swoon.

The heavily-weighted oil stocks were responsible for much of the weakness as the oil price took a tumble.

The Brent crude continuous contract was down US$1.13 (2.6%) at US$42.19 a barrel on futures exchanges, prompting a 3.7% fall for BP PLC (LON:BP.) and a 3.2% dive for Royal Dutch Shell (LON:RDSB).

????OIL#WTI August contract was down 9 cents/b (0.22%)#BRENT September futures were down 6 cents/b (0.14%)
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-Oil dips as virus fears offset gasoline recovery signs.
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The FTSE 100 was down 94 points (1.8%) at 6,045.

3.00pm: NASDAQ hits a new high

Once again, the NASDAQ Composite is ploughing (not plowing) its own furrow, heading to a new high while the S&P 500 and Dow Jones dip a little.

The NASDAQ was up 59 points (0.6%) at 10,552 but the S&P 500 was down by just under two points (0.0%) at 3,168 while the Dow Jones was off 99 points (0.4%) at 25,968.

There was mixed news on the US employment front.

“Jobless claims continue to head in right direction,” was the headline from Edward Moya at OANDA.

“Initial jobless claims fell to 1.31 million, lower than the 1.37 million consensus estimate but still the 16th straight time above the 1-million mark. Continuing claims dropped but are still at an eye-dropping 18 million level. The recent wave of new coronavirus cases is not yet impacting the labour market yet and many investors are breathing a temporary sigh of relief,” Moya reported.

Ian Shepherdson, the chief economist at Pantheon Macroeconomics, noted it was the biggest fall in initial claims – people who have just been fired – in four weeks but the July 4 holiday might have helped push the number down.

“Claims remain very high and appear likely to remain above one million per week until early August. Still, were relieved that claims have not risen outright in the wake of the reimposition of controls in some southern and western states, coupled with the impact of people choosing to stay home more in states where the virus is spreading rapidly. That said, the number of people making initial claims for Pandemic Unemployment Assistance—PUA, available to gig workers and freelancers—rose by 42K to 1,038K, the fourth straight weekly increase after a sharp drop in late May, suggesting that the impact of the retrenchment in the South and West is not falling evenly on the workforce,” he added,

“US unemployment claims at an all-time high,” was the headline from James Knightley, the chief international economist at ING.

Weekly initial jobless claims may not have been as high as expected but remained more than double the level seen during the credit crunch crisis.

“Focusing initially on the jobs claims (as that is what the market will do), they have proved to be far stickier than most analysts thought likely as the re-opening got underway. Unfortunately we dont expect to see meaningful declines from these huge numbers anytime soon. High-frequency data from Homebase suggest that employment gains are already plateauing as the spike in Covid-19 cases has led several states to announce renewed containment measures while other states delay their phased re-opening.

“This is forcing renewed businesses closures (leisure and hospitality in particular) while others are taking the view that it simply isnt viable for them to stay open. This is only adding to the problems in the jobs market, while at the same time the ISM business surveys indicate that larger firms are looking to shrink their workforces in the face of lower revenues and weaker corporate profits,” Knightley said.

Knightley makes the point that to be classified as “officially” unemployed, people have to be actively searching for work, and if, for instance, all the bars are shut, there is not much point bartenders looking for work, so they wont count as unemployed.

BLS versus DoI measures of unemployment

Source: Macrobond, ING

In London, the FTSE 100 was down 33 points (0.5%) at 6,123, continuing its half-hearted afternoon rally.

1.35pm: US indices to move higher after jobless numbers

US stocks are set to open higher after weekly first-time jobless claims were lower than anticipated.

Initial jobless claims last week eased to 1.31mln from 1.43mln the week before; economists had plumped for a figure of 1.38mln.

Continuing claims subsided to 18.06mln from 18.29mln the previous week; the consensus forecast was 18.95mln.

Spread betting quotes suggest the S&P 500 will kick off 7 points firmer at 3,177 while the Dow Jones is expected to limp 12 points higher to 16,079.

As ever, coronavirus cases are occupying the minds of investors, with The Johns Hopkins database indicating yesterday that there were 58,600 new cases reported yesterday, up 14.5% reported the day before.

“A sharp drop in testing—down 28% from last Wednesday—likely flatters the new case numbers, but the trend rate of increase is slowing. The seven-day average increase in new cases compared to a week ago slowed to 20.6%, the lowest rate since June 19 and down from a peak of 43.7% on June 28,” observed Ian Shepherdson of Pantheon Macroeconomics.

“The seven-day average number of deaths rose both yesterday and Tuesday but the numbers are erratic because of delays in reporting, so this is not yet definitive evidence that deaths are trending higher. Rising deaths are likely, though, despite the lower mortality rate—due to the lower median age of people infected compared to the spring, and improvements in treatment—because the number of cases has increased so much,” he added.

In London, the FTSE 100 was down 25 points (0.4%) at 6,131.

11.55am: Royal Institution of Chartered Surveyors reports recovery in house prices

The net balance of surveyors reporting that house prices have risen over the last three months recovered to -15 in June, from -32 in May.

Economists had expected a reading of -25.

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However, respondents remain cautious about the year ahead. The June 2020 RICS UK Residential Market Survey is live now ????https://t.co/rHgPzOOpfU pic.twitter.com/uQ7xdXEWfA

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“Housing demand has returned quickly to pre-COVID levels, though we expect lenders caution to prevent transactions this year from recovering completely to 2019 levels,” said Samuel Tombs, the chief UK economist at Pantheon Macreconomics.

“The net balance of surveyors reporting that buyer enquiries were higher than in the previous month rocketed to +61 in June, from -7 in May. This chimes with online search data suggesting home-buyer interest currently exceeds its pre-lockdown level. Property listings also have surged, with the new sale instructions balance jumping to +42, from -22, and the stock of homes on estate agents books nearly returning to pre-virus levels,” Tombs continued.

“Nonetheless, new mortgage rates have merely held steady this year, despite the MPCs [Bank of Englands Monetary Policy Committee] efforts, while a big question mark hangs over the future incomes of the near-30% of the workforce that recently has been furloughed. GfKs composite index of consumers confidence also remains very low, consistent with housing demand fading once the current pent-up demand has fizzled out. Admittedly, the Chancellors decision to raise the threshold for stamp duty land tax to £500K, from £150K, will help to shore up prices. Nonetheless, past experience shows that stamp duty cuts fail to boost transactions if employment is declining and/or credit availability is deteriorating. Accordingly, we think the housing market will be lacklustre once again in Q4.” Tombs said.

The FTSE 100 was down 39 points (0.6%) at 6,118.

11.20am: Housebuilders defy the trend

The Footsie losses have lengthened despite investors enthusiasm this morning for housebuilding stocks.

The FTSE 100 was down 36 points (0.6%) at 6,119, despite Persimmon PLC (LON:PSN) rising 6.0% to 2,578p after its trading update this morning.

“While Persimmons update showed that completions were understandably down 35% in H1, pricing remains firm, sales rates continue to improve, build rates have recovered and the cash position has improved,” said David OBrien, an equity analyst at Irish broker Goodbody.

“In the context of a 35% fall in completions, this is a very strong performance. The context is similar to peers in that pricing is firm, sales rates have rebounded strongly and build capacity is increasing. However, completions are stronger and on build rates, Persimmon is well ahead of its competition.

“While the economic impact of COVID-19 means that demand and prices are likely to fall significantly from Q3 onwards, there is no sign of that yet. The stock has outperformed the sector and the market recently, but there is enough in todays figures to drive it on a bit more,” he noted.

9.45am: Drab and overcast – and so is the weather

The weather in London is not the only thing that is dull and overcast; Londons stock market is matching the weather.

The FTSE 100 was down 11 points (0.2%) at 6,145, largely thanks to an 8.5% fall for propulsion systems designer Rolls-Royce Holdings PLC (LON:RR.).

The aerospace engineer revealed in its half-year trading update that widebody engine flying hours were down to about half normal levels in the first half of the year and a quarter of normal levels in the second quarter – all of which affects the revenue the company earns from maintenance activities.

National Grid PLC (LON:NG.) retreated 3.3% to 869.6p after industry regulator Ofgems latest price control review.

The electricity grid operator said it was “extremely disappointed” with the draft determination published by Ofgem.

Sector peer SSE PLC (LON:SSE), down 0.9% at 1,329p, was also less than gruntled, saying it was “disappointed and deeply concerned by today's publication of Ofgem's Draft Determination for the RIIO-T2 price control period.”

???? Today @ofgem announced the details of the next stage of energy network price controls

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8.55am: Dull early progress

The FTSE 100 defied early predictions to open in the red as traders kept a weather eye on the upsurge in new coronavirus cases amid fears of a pandemic second wave.

The index of UK blue-chips fell 12 points to 6,144.55 early on.

Treasury figures, meanwhile, revealed the cost of the outbreak here in the UK has soared to nearly £190bn following Rishi Sunaks £30bn package to combat the crisis.

Wednesdays mini-budget, meanwhile, which included stamp duty relief and offered significant financial help to employers, continued to receive a lukewarm response.

On the market, Persimmon (LON:PSN), up 4%, topped the Footsie risers after a guardedly optimistic trading update and was also buoyed by the chancellors stamp duty cut.

There were very few reasons to be cheerful about Rolls-Royces (LON:RR.) outlook statement, however, and, reflecting this, the stock lost 7%.

“The problems in the aerospace sector continued to be laid bare this morning as Airbus the European plane maker reported that it had failed to obtain any new aircraft orders for the third month in succession,” said Michael Hewson of CMC Markets.

“This is equally bad news for Rolls Royce who have been having difficulties of their own, as they reported their latest first-half numbers this morning.”

Proactive news headlines:

Eurasia Mining PLC (LON:EUA) shares soared on Thursday as the Russia-focused miner returned to AIM following the clarification of its relationship with Chinese group CITIC Merchant Co Limited. The company confirmed that it has entered a success fee-based engagement letter with CITIC to explore possible strategic options for its mining assets. Eurasia also reiterated its announcement from July 1 that it has appointed UBS as its leading adviser to assist in a review of its strategic options including asset sales or a sale of the company.

Tharisa PLC (LON:THS) has reported higher quarterly chrome production as its sales of platinum group metals (PGM) returned to pre-pandemic levels. For the quarter ended June 30, 2020, the miner said its activities in South Africa recommenced in full at the start of May and that in the three month period it had produced 321.4 kilotons of chrome, up 3.6% on the prior quarter, while PGM production rose 9% to 35-kilo ounces (koz). The firm said its co-product model utilising mechanised and low labour-intensive mining in an open pit had allowed it to maintain production at reduced measures despite the lockdown in South Africa and also to “significantly increase output during May and June”.

Ariana Resources PLC said gold production at the Kiziltepe Mine in Turkey in the three months to the end of June was higher than anticipated. Kiziltepe, which is part of the Red Rabbit 50/50 joint venture with Proccea Construction, produced 4,679 ounces, down from 5,129 ounces but in line with guidance issued for the half-year. Total ore processed in the quarter was 54,862 tonnes at an average head grade of 3.02 grams per tonne (g/t). Quarterly open-pit ore mined was 77,179 tonnes, at an average mined grade of 2.79 g/t gold, and total material movement for the quarter was 973,603 tonnes.

Ceres Power Holdings PLC (LON:CWR) has said it ended the last 12 months in a strong position with operational momentum maintained against the headwinds caused by the coronavirus outbreak. The clean energy specialist said revenue for the period to June 30, 2020, will be in the region of £20mln, representing year-on-year growth of 20-25%. Cash and short-term investments were £108mln as of that date. Looking ahead, the fuel cells specialist said it expects to sign new customer partnerships “as commercial demand remains strong”.

Caledonia Mining Corporation PLC (LON:CALE) has described its production performance in the last quarter as an outstanding achievement, with gold output rising 6.2% at 13,499 ounces in the three months ended June 30, 2020. It marked production for the first half of 2020 at 27,732 ounces, up 12.5% versus the same period last year. Guidance for the full year – pitched at 53,000 to 56,000 ounces – is retained and the company told investors it is on-track with its progress towards its 2022 production target of 80,000 ounces.

Highland Gold Mining Limiteds (LON:HGM) has said its four operating mines produced 61,357 ounces of gold and gold equivalent in the second quarter, in line with forecasts, In the same period of last year, 70,293 ounces of gold were produced. Total production in the first half of 2020 was 125,347 ounces, down from 142,254 ounces in the same period of last year but in line with internal production targets. The company expects to produce between 290,000 and 300,000 ounces over the whoRead More – Source