- FTSE 100 index sheds 30 points
- Moderna bullish on COVID-19 vaccine
- US indices rebound but remain underwater
5 pm: FTSE ends slightly underwater
The FTSE 100 ended the Thursday session down 28 points, 0.5%, at 6,049.9. The FTSE 250 closed 30 points lower, 0.2%, at 17,765.3.
The slip followed a unanimous decision from the Bank of England to hold interest rates at 0.1%, a record low.
In the US, the major indicies erased some of their early losses but turned toward the red in midday trading.
The Dow Jones was down 132 points, 0.5%, at 27,889.6 after being down nearly 400 points at the open.
The S&P 500 fell 1%, 34 points, to 3,351.1 and the Nasdaq took a 1.7% hit, 186 points, to 10,863.8.
3.40pm: Proactive North America headlines:
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3.15pm: Moderna eyes COVID-19 vaccine emergency use
FTSE 100 trimmed its losses in late afternoon, sliding 12 points to 6,065.
In the US, Moderna Inc (NASDAQ:MRNA) told Reuters it may soon submit its COVID-19 vaccine candidate for emergency authorisation for people at high-risk.
The biotech would put it forward if the formulation, now at the last stage of clinical trials, proves 70% effective.
To do so, 53 people of the 30,000 volunteers taking part would have to be infected with the virus so the data can be send to an independent safety board. This could happen around November or as soon as October.
The stock rose 1% to US$69.75 at US open.
2.40pm: US benchmarks plunge at open
US benchmarks started deep in the red on Thursday as traders mulled a set of weak economic reports and were uninspired by the much hyped Federal Reserve announcement on Wednesday.
The Dow Jones Industrial Average plunged 351 points, or 1,25% at 27,680. The S&P 500 dropped nearly 50 at 3,335.
The tech heavy Nasdaq exchange lost over 212 points, or 1.92%, at 10,839.
The US Central bank failed to "overdeliver" at their policy meeting, despite a significant commitment on interest rates, notes Craig Erlam, at Forex firm Oanda.
The Fed committed to keep interest rates low until 2023, or when rates have moderately been over 2% for some time.
"While vague, given the central banks inability to even hit 2% for a long time, we could feasibly be looking at low rates well beyond when they currently envisage. This is far more dovish than is being perceived," said Erlam.
2.10pm: US jobless claims miss forecast
The Footsie wallowed in the red ahead of US open while sterling was still burnt by the BoE announcement.
Londons index of big caps shed 28 points to 6,049 as the pound plunged 0.7% to US$1.2879.
“While clearly negative for GBP, we continue to see the UK-EU trade negations as the chief driving factor of GBP in coming weeks, with the success or the failure to agree on a (reasonable) trade deal also determining the odds of BoE negative interest rates,” said analysts at ING Economics.
“This means that the potential GBP negative from the failed UK-EU trade negotiations would be further exaggerated by the BoE likely moving rates into negative.”
US stock index futures extended their earlier falls, pointing to sharp opening losses Thursday on Wall Street after some Weak economic data amid the coronavirus (COVID-19) pandemic and uncertainty about the Feds new policy stance.
US weekly initial jobless claims rose by 860,000 in the week ended September 12, more than the estimated 850,000, with continuing claims at 12.63 million.
Separately, the Philadelphia Fed manufacturing index, fell to 15 in September from 17.2 in prior month, suggesting a slowing pace of the recovery from the COVID-19 pandemic in the area.
And another economic report showed US home builders started construction on homes at a seasonally-adjusted annual rate of 1.42 million in August, representing a 5% decrease from the previous month but a 3% uptick from a year ago.
The disappointing data came a day US central bank chairman Jerome Powell unsettled the market by emphasizing the challenges that the US economy faces as it attempts to emerge from recession brought on by the pandemic.
The Fed said it expected interest rates would stay near zero until at least 2023 but signalled that the road ahead for the economy could be a long one.
12.30pm: Bank stands pat, sending sterling lower
The pound dropped after the Bank of England left things as they are following its September monetary policy committee (MPC) meeting.
BoE policymakers voted unanimously to keep things as they are, as expected.
In its statement alongside the decision, the MPC noted that UK economic growth in July was around 18.5% above its trough in April but still around 11.5% below the fourth quarter of 2019, with employment falling by around 700,000 between February and August.
Furthermore, while recent payment data suggests consumption has continued to recover more strongly during the summer than the MPC expected, business investment intentions have remained very weak and uncertainty is elevated.
Furthermore, the committee noted that given the current risks, “it is unclear how informative” recent economic data can be about how the economy will perform further out.
“The recent increases in Covid-19 cases in some parts of the world, including the UK, have the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year,” the MPC said, adding that there “remains a risk of a more persistent period of elevated unemployment” than its central forecast.
Repeating that its “stands ready” to adjust interest rates, bond buying and other monetary policy if necessary, the policymakers also restated that they do not intend to tighten policy “until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably”.
UK consumer price inflation fell to a five-year low of 0.2% last month.
Following the BoE announcement, sterling dropped 0.5% to US$1.2905, releasing some pressure on the FTSE 100, which reduced its arrears to 29 points on the day, or 0.5%, to 6,049.31, with UK high street lenders remaining around the day's lows.
11.55am: FTSE eyes BoE, Wall Street set for slide
Ahead of the Wall Street opening bell, traders are expecting US stocks to continue to retreat, as many did yesterday.
The Dow Jones, which was the only one of the main blue chip indices to remain in the green on Wednesday, is expected to join in with some blood-letting on Thursday.
Tech, which dominates the Nasdaq Composite and is about a quarter of the S&P 500, led the decline in the previous session, whilst energy rallied on oil prices strengthening.
Market analyst Chris Beauchamp at IG said: “A lingering sense of disappointment hangs over global markets in the wake of the Fed meeting last night.
“Investors had evidently hoped for something much more concrete than the relatively vague policy outlook provided by Powell and co, with equities struggling in early trading and the dollar finding some support.
“From the accompanying press conference, it is clear that the Fed finds itself in a similar situation to the ECB; content to err on the side of caution for now with regard to doing any more, but painfully aware that fiscal stimulus needs to pick up the slack even as the chances of that stimulus seem to be receding.
“With an election looming neither party in Congress wishes to give their opponents anything that could be transmuted into electoral advantage, and so the deadlock goes on. Improved GDP forecasts could help firm up the dollar, but will have equity traders worrying that a faster-than-expected rebound will prompt the Fed to ease off stimulus more rapidly than expected.”
Back in Blighty, the Footsie has climbed away from its worst lows but is still well in the red ahead of the Bank of England decision, down 43 points or 0.7% at 6,035.93.
“With the Bank of England (BoE), its more a matter of 'when', not 'whether' or 'what',” said Marshall Gittler at BDSwiss, noting that BoE governor Andrew Bailey said in a recent speech that “we are not out of firepower by any means” and with the market is pricing in a Bank Rate of -0.10% by next June, versus a target rate of +0.10% today.
Economists at investment bank ING said: “While its unlikely the Bank will rock the boat too much this week, there are two interesting questions. Firstly, will policymakers acknowledge that the downside risks to their August forecasts are growing? Certainly, some MPC members have been sounding more cautious in recent weeks.
“Secondly, will the Bank offer any clues as to how it might increase the level of stimulus in November? Despite the recent hype surrounding negative rates, Governor Andrew Bailey has indicated that he believes quantitive easing (QE) is a more useful marginal policy tool, and this is likely to be at the centre of the stimulus package we expect in the autumn.”
The pound is back to flat on the day ahead of the announcement, at US$1.2969.
10.50am: UK banks under pressure
UK banks were under pressure after the latest monetary policy statements from the US Federal Reserve and the Bank of Japan, as both authorities promise to anchor interest rates at record lows.
Analysts say the Bank of England is unlikely to be any more aggressive, given the uncertain economic backdrop, record levels of global indebtedness and its desire to keep cheap credit flowing.
“But central bank policies may be (unwittingly) doing more harm than good when it comes to the major lenders,” noted Russ Mould, AJ Bell Investment Director.
“Low base rates drag down the interest rates that banks can charge on loans and Quantitative Easing (QE) is designed to flatten out borrowing costs too, with the result that credit spreads (the premium in interest rate that a company has to pay relative to a Government) are also relatively low.”
“The net result is that the net interest margin on banks loan books is under fierce pressure, seriously undermining banks profitability and their ability to earn decent returns on equity… Until Governments pull the trigger on more spending and higher deficits, banking stocks may continue to recoil from central bank policy statements which promise low-interest rates for longer or even the dreaded prospect of negative interest rates.”
The wider blue-chip index was down 56 points to 6,021.
9.50am: John Lewis scraps staff bonus as Co-op posts sales surge
FTSE 100 trimmed its losses in mid-morning, dropping 44 points to 6,034, while sterling dipped 0.1% to US$1.2952.
John Lewis Partnership said it will not give a bonus to staff for the first time since 1953 after posting a £55mln loss for the six months to July 25.
Sales rose 1% but higher costs related to COVID-19 hit profits.
The early weeks of the second half have been encouraging in both of its brands, John Lewis and Waitrose, although it was announced yesterday the supermarket would close four more stores.
Meanwhile, fellow grocer Co-op reported an increase of 7% to £5.8bn in revenue for the half year to July 24, though costs related to the pandemic will come in at £97mln for the full year.
Profit before tax jumped 35% to £27mln while the supermarket chain also paid out £13mln in thank-you bonuses to staff.
8.50am: Retreat for Footsie
The FTSE 100 index opened lower on Thursday as it looks increasingly likely the UK is headed towards some sort of limited lockdown to ward off a coronavirus second wave.
London's blue-chip benchmark opened 55 points lower at 6,023.99.
The prospect of further national restrictions came amid howls of protest from all sectors at the apparent failure of wholesale testing and sparked worries over the economic impact of moves to flatten the infection curve.
After hours Wednesday, the US Federal Reserve received what the Financial Times called mixed reviews for its vow to keep monetary policy loose while attempting to spell out what loose meant in reality.
“The move did reinforce the Feds dovishness,” said the FT. “But some economists and investors doubted whether the more specific guidance would be effective in achieving the central banks ambitious economic objectives, leaving it under pressure to deploy other more aggressive tools to help the recovery.”
Meanwhile, Bank of England governor Andrew Bailey and fellow members of the Monetary Policy Committee look set to stand pat on the UK base rate, which is sitting at a historic low of 0.1% following their latest meeting.
The powder is expected to remain dry on further stimulus efforts, which are expected to be deployed later this year when the Treasurys furlough scheme comes to an end.
Elsewhere, the partial climbdown from Boris Johnson on the controversial Internal Market Bill failed to calm nerves over Brexit.
However, Next (LON:NXT) led the blue-chip index with a 2.2% gain after the retailer proved resilient to the current carnage on the High Street.
“The pace of change enforced by the lockdown towards online sales was one which Next was ready to embrace,” said Richard Hunter, head of markets at Interactive Investor.
“Its online presence had long been a cornerstone of its success, and where customers continued to shop – inevitably on a lower scale – the business was quickly ramped up to meet demand. In addition, with much of its store portfolio based out of town, the more recent tentative return to physical shopping has also played into Nexts hands.”
The current market volatility appears to have been good news for the spread betting firm IG Group, which topped the FTSE 250 index with a 6.2% rise in the wake of first-quarter results.
Proactive news headlines:
Tiziana Life Sciences PLC (NASDAQ:TLSA) (LON:TILS) has signed an agreement to use its “potentially transformative” approach to modulating the immune system in a human clinical study of patients with coronavirus (COVID-19). Work will get underway in Brazil starting next month, with the company's drug, Foralumab, administered by nasal spray either on its own or in combination with an orally-taken anti-inflammatory called dexamethasone. Tiziana has moved straight into human trials because it had already secured safety data for the nasal application for the drug from a phase I clinical assessment carried out a year ago.
Eden Research PLC (LON:EDEN) has announced that its commercial collaborator, Eastman Chemical Company has received authorisation for the sale of its Cedroz product in France. The AIM-quoted company, which is focused on sustainable biopesticides and plastic-free formulation technology for use in the global crop protection, animal health and consumer products industries, said the French regulator has also approved Eden's biofungicide, Mevalone, for use in organic agriculture in France. Separately, the group added, it has been notified that Mevalone has received authorisation for use on table and wine grapes in Serbia via regional distributor K&N Efthymiadis (KNE).
OptiBiotix Health PLC (LON:OPTI) said its subsidiary ProBiotix Health has signed an exclusive distribution agreement for Brazil with local group Ayalla Marketing. The UK companys new partner will distribute the cholesterol-reducing probiotic, LPLDL, both as an ingredient and as four finished products – CholBiome, CholBiomeX3, CholBiomeBP and CholBiome. OptiBiotix said the deal offered an “agreed and expected” first order within 30 days from approval by the Brazilian authorities of its food technology.
FastForward Innovations Ltd, the AIM-quoted company focused on making investments in fast-growing and industry-leading businesses, has noted that its investee company Juvenescence Limited has signed a partnership deal with Evgen Pharma PLC.FastForward has around a 0.63% interest in the issued stock of Juvenescence. In a statement on Wednesday, Juvenescence – a life sciences company focused on modifying ageing and increasing human healthspan – said Evgen has licensed its sulforaphane stabilization technology for use in several non-pharmaceutical applications led by its JuvLife division.
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Keywords Studios PLC (LON:KWS), the ever acquisitive video games services firm, has confirmed a 13% increase in first-half revenue at €173.5mln, with organic revenues marking an 8% rise, as it also inked a new deal. The group's underlying earnings (adjusted EBITDA) jumped 19% to €30.8mln for the six months ended June 30, 2020, versus €25.8mln in the same period of 2019. Keywords highlighted strong demand for its services and a robust trading performance with its largest service line, game development, showing particularly strong growth. Keywords also announced its latest bolt-on through the US$13.3mln acquisition of LA-based Heavy Iron Studios Inc, a technical specialist that mainly works on top-tier game titles – most recently, for example, it has been contracted to Crystal Dynamics for its new Marvel Avengers title and has worked on Activisions Call of Duty franchise. A structured deal sees the company pay US$4mln of cash upfront, US$500,000 on the first anniversary of the deal, and up to US$8.8mln of contingent payments tied to performance targets across the first two years under the Keywords Read More – Source