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FTSE 100 makes further gains as global rally continues

Britain's blue chips closed up over 42 points at 7,482. The midcap FTSE 250 added around 94 at 21,534

GlaxoSmithKline PLC -
FTSE 100 finished higher and Wall Street rose after a strong ADP private sector jobs report
  • FTSE 100 index closes up 42
  • Strong dollar weakens sterling
  • US employment rises sharply in January

5pm: FTSE 100 closes to the good

FTSE 100 index closed higher as the global stock rally continues and the pound eased.

Britain's blue chips closed up over 42 points at 7,482.  The midcap FTSE 250 added around 94 at 21,534.

Adding to the positive sentiment was an upbeat ADP jobs report from across the pond - seen as a big indicator ahead of the main event on Friday.  It showed 291,000 private sector jobs were created last month, trouncing estimates for 157,000.

"Indices have continued to gain on Wednesday, adding to the rally seen in the first two sessions of the week," said Chris Beauchamp, chief market analyst at online trader IG.

"Reports of a Coronavirus treatment chivvied up European indices and US futures this morning, while a solid ADP report provided further impetus – the payroll firm issued its highest number since May 2017, with no sign of real tightness in the US labour market," he added.

"As a result, investors expect further job growth and a longer economic expansion, something Donald Trump will only be too keen to shout about."

The Dow Jones Industrial Average added over 316 points, while the S&P 500 gained over 24.

3.30pm: Bullish dollar drags sterling down

Wall Street opened in the green as fears over the coronavirus dissipated while there were strong US employment numbers for the month of January.

The Dow Jones advanced 332 points to 29,139 while the S&P 500 gained 28 points to 3,326.

Alongside the strong US performance, a bullish dollar pushed sterling further underwater, with a sharp 0.5% decrease to US$1.2965 in the early afternoon.

“It is not an across-the-board weaker pound story, it seems more of a strong dollar story,” David Madden from CMC Markets told Proactive.

Despite the dip in the currency, the Footsie was fairly muted, advancing 41 points to 7,482.

2.25pm: US employment shoots up in January

Ahead of Wall Street’s restart, data on US employment showed a sharp increase over the last month.

According to the ADP payroll survey, private employment increased by 291,000 in January, a number that stunned experts following a 199,000 gain in December.

The figure is important for the markets as it is a precursor for the key US non-farm payrolls out on Friday, which Ian Shepherdson from Pantheon Macroeconomics expects to be “much less spectacular”.

“The drop in claims between the December and January payrolls survey weeks likely boosted ADP’s number substantially, but it was due to seasonal adjustment issues over the holidays, not any real shift in the pace of layoffs,” he said.

However, Shepherdson added, such a big leap cannot be ignored and upped the forecast for Friday to 200,000 from 160,000.

“The drop in claims between the December and January payrolls survey weeks likely boosted ADP’s number substantially, but it was due to seasonal adjustment issues over the holidays, not any real shift in the pace of layoffs,” he concluded, as businesses ‘do not like the trade war’”.

Back home, was a few minutes to go until the New York open the FTSE 100 index was up 56 points to 7,496, benefitting as sterling dipped into the red, down 0.2% to US$1.3003.

1.15pm: WHO says no ‘breakthrough’ coronavirus discovery

Stocks gains were reduced slightly in early afternoon trading after the World Health Organization (WHO) said the ‘breakthrough’ treatments for coronavirus have yet to be confirmed.

“There are no known effective therapeutics against this 2019-nCoV (virus) and the WHO recommends enrolment into a randomized controlled trial to test efficacy and safety,” a spokesperson told Reuters.

The WHO will hold a press conference later today.

But London’s big caps did not lose optimism and advanced 47 points to 7,487 while sterling held its head high at US$1.3046, up 0.1%.

“US futures and European stocks gained and Treasuries tanked as virus optimism ran wild on reports that a key breakthrough was made in the search for a coronavirus cure,” said Oanda’s David Moya.

“Markets are still primarily focused on the coronavirus and today’s news that HIV and flu drugs show promise in treating the coronavirus will keep the risk-on rally going strong.”

China’s Health Commission lead researcher Li Lanjuan is expected to propose the combination of Arbidol and Darunavir as the latest version of the government’s treatment plan. 

11.45am: Media reports of coronavirus ‘breakthrough’ 

The market was having a ball in late morning after news broke out on a ‘significant breakthrough’ in UK research for a coronavirus vaccine.

Meanwhile, a news station in China claimed a research team at Zhejiang University has discovered an effective drug to tackle the situation, but that story has yet to be confirmed.

“Traders have latched onto the headlines and are buying into the market with the view the health crisis could be brought under control,” said David Madden from CMC Markets.

Renewed optimism is expected to lift Wall Street indices at the opening bell.

The Footsie had jumped 62 points to 7,502 while the pound was steady, up 0.1% to US$1.3051.

10.50am: New car sales drop in January

London’s blue chips index stayed strong in mid-morning though some stocks were hit by new car sales figures, with some reactions still coming in on the services PMI.

According to data by the Society of Motor Manufacturers and Traders, registrations were 149,200 last month, down 7% on January 2019.

Experts said the figures have been driven down by caution over making major purchases, a sharply reduced demand for diesel cars amid environmental concerns and uncertainties over policy, and stricter emission regulations affecting supply.

A further hit to the sector has come from the removal of the incentives to buy plug-in hybrid vehicles, EY ITEM Club chief economic advisor Howard Archer said.

Motor retailer Pendragon PLC (LON:PDG) took a 2% hit to 11.98p while competitor Lookers PLC (LON:LOOK) rose 3% to 56.4p after flagging profits are safe.

The FTSE 100 advanced 53 points to 7,493 while sterling trimmed its gains, up 0.1% to US$1.3052.

The market hailed the latest services PMI survey but experts wonder whether it was an overly optimistic result.

“It does need to be taken into consideration that the purchasing managers’ surveys can tend to overstate developments at times of significant changing political circumstances, so the flash survey could possibly exaggerate the rebound in January after overplaying some of the earlier weakness,” Howard added.

9.50am: Services PMI show economy rebound

The Footsie is now in positive territory with a morning caffeine shot provided by data on the UK’s crucial service sector showing a post-election boost.

The services purchasing managers’ index (PMI) was 53.9 for January, the highest reading in 16 months, further in the green after the 50.0 recorded in December.

Clarity following the general election helped growth in business activity as well as consumer spending.

Export sales returned to growth in January, but the rate of expansion was marginal, IHS Markit said.

“Signs of greater willingness to spend and renewed positivity about the domestic economic outlook has helped lift service providers' growth projections to the highest for just under five years,” said Tim Moore, director at IHS Markit.

“However, this sub-index was the only measure in the final UK Services PMI dataset to drop since the earlier 'flash' estimate, which may suggest that business expectations tailed off towards the end of the month.”

London’s big caps bagged 55 points 7,495 while sterling inched up 0.2% to US$.13036 out of the red from earlier.

8.30am: Drifting lower

The action was subdued in London after a strong rebound on Monday and Tuesday with traders ignoring the pull of gains on Wall Street and in Asia, while marking down international stocks affected by a stronger pound.

In early trading, the FTSE 100 was down 4.5 points at 7,435.32.

WATCH: Morning Report: CentralNic sees 95% increase in 2019 revenues and earnings

A bout of the collywobbles had followed Boris Johnson’s broadside ahead of post-Brexit trade negotiations, which had weighed on the pound. However, things have since settled down and sterling has been magnetically drawn back towards - and above - the US$1.30 level.

The morning’s big talking point was blue-chip tobacco giant Imperial Brands (LON:IMB), which has been hit by a US crackdown on vaping. The shares dropped 5% early on.

According to analysts at City broker Liberum, Imp's management has been “prudent” by taking the vaping hit upfront.

“This clears another cloud that overhung Imperial's shares,” it added. Liberum reckons Imp's shares - currently trading at 1,855p - are worth 2,900p.

Proactive news headlines:

Power Metal Resources PLC (LON:POW) said interest from “third parties continues to be received” for a Botswana massive nickel sulphide project it is helping bankroll. The annual Mining Indaba conference in Cape Town this week has provided the stage to update on the progress at the Molopo Farms Complex Project (MFC). Power has an 18.26% stake in the deposit’s owner Kalahari Key Mineral Exploration and will have a 50.96% economic interest in the project once it has “earned in” by spending US$500,000 on exploration.

Zoetic International PLC (LON:ZOE) “continues to develop on all fronts”, its chief executive Nick Tulloch said in an update. The vertically-integrated cannabidiol (CBD) business said progress with one particular US partner, a retailer called AATAC, had “surpassed expectations”.

Primary Health Properties PLC (LON:PHP), one of the UK's leading investors in modern primary healthcare facilities, is continuing its expansion with the addition of a property in Wales. The FTSE 250-listed firm said it has contracted with a developer to fund the development and acquisition of a purpose-built primary care centre in Llanbradach, near Caerphilly in Wales for a total cost of £2.8mln.

Europa Oil & Gas Holdings PLC (LON:EOG) has exited Licensing Option (LO) 16/19, in the South Porcupine Basin, offshore Ireland. It follows an exploration programme which concluded that the prospectivity of the area is limited, the company said. Europa expects that by relinquishing LO 16/19 it will avoid £105,000 of future costs.

accesso Technology Group PLC (LON:ASCO) has revealed that its chief financial officer (CFO), John Alder will step down from his position, and the group’s board, with effect from 31 March 2020, just a week after the firm’s former CEO returned to "re-energise the company". In a statement on Wednesday, the electronic queuing and e-ticketing specialist said that during the lag time, Alder will continue to serve as accesso's CFO overseeing the company's year-end financial results and to affect an orderly handover.

Victoria Oil & Gas PLC (LON:VOG), in a trading update, has highlighted the signing of a new agreement to potentially secure long term gas supplies from the Etinde field. But Elsewhere, the Cameroon-focused gas producer said operations at the Logbaba gas field continue to be troubled by third-party factors tied to ENEO – which has been impacted due to Altaaqa - ENEO’s generator supplier - stopping operations at the Logbaba gas-fired power station because of non-payment.

MaxCyte Inc (LON:MXCT), the global cell-based therapies and life sciences company, has announced its planned participation at the BIO CEO & Investor Conference at the New York Marriott Marquis. The group said its CEO & President Doug Doerfler will present on Monday, 10 February at 2:30 p.m. Eastern Time in the Odets Room on how MaxCyte is driving the development of the next generation of cell-based therapies through its ExPERT instrument family, supporting its Life Sciences Business, and with its proprietary CARMA platform.

Adamas Finance Asia Limited (LON:ADAM) has announced the publication of a detailed research note covering important progress at its investment in Future Metal Holdings Limited, the firm's largest investment by value in the portfolio. ADAM holds an 85% controlling shareholding in Future Metal, which owns a large dolomite quarry in China where production has recommenced as planned, with output and sales continuing to be ramped up. In addition, Equity Development has released an interview with Suresh Withana, Managing Partner at the Company's Investment Manager, Harmony Capital, in which he discusses progress at Future Metal's quarry, other constituents of ADAM's portfolio and the Company's business strategy and growth plans.

6.50am: Footsie set to pause for breath 

The FTSE 100 index is expected to run into some profit-taking at the open on Wednesday, following a leap in the previous session, in spite of overnight gains by US and Asian markets as worries over the economic impact of the coronavirus continue to abate, with investors in London more sanguine.

Spread betting firm IG expects the UK blue-chip index to open around 32 points lower at 7,407, having jumped 113 points, or 1.6% higher on Tuesday, to add to a 40 gain in the previous session.

Overnight on Wall Street, the Dow Jones Industrials Average closed 1.4% stronger at 28,807, while the broader S&P 500 index gained 1.5% and the tech-laden Nasdaq composite index jumped 2.1%. After-hours in the US, earnings from media giant Disney pleased investors, sending their shares higher.

In Asia today, Japan’s Nikkei 225 index also bounded ahead, adding 1.2%, but Hong Kong’s Hang Seng index was less enthusiastic, taking on only 0.4% as the death toll from the coronavirus on mainland China approached 500 with a 20% jump in the number of cases reported.

On currency markets, sterling edged lower as the implications of prime minister Boris Johnson’s recent post-Brexit EU trade negotiations comments continued to be a drag, as was the Bank of England’s recent no change stance on UK interest rates.

The last of this week’s trio of February purchasing managers indexes could provide the pound with some support, however, if it shows the dominant UK services sector getting a lift in the wake of the certainty from December’s general election result.

Health on the corporate agenda

Coronavirus is not something that drugs giant GlaxoSmithKline PLC (LON:GSK) is likely to address in its full-year results, with the firm’s focus on other killer diseases.

Investors will be looking for news on Glaxo’s injectable HIV drug and the Shingrix vaccine for shingles, as well as comment about future dividends.

The launch of the former had to be delayed due to a late response letter by the US authorities, and analysts now expects a 2021 entry in the market.

Meanwhile, the supply of the latter is outstripping demand and analysts noted a “moderate” boost in production.

On the negative side, sales for bronchitis treatment Advair are expected to fall sharply in 2019, with the product now off-patent and facing generic competition.

The analyst consensus points to Glaxo reporting full-year earnings per share of 120p, around a 4% decline.

Housebuilders and Vodafone too

It will also be a busy day for housebuilders, with Barratt Developments PLC (LON:BDEV) and Redrow plc (LON:RDW) to open the door on the sector’s latest half-year numbers, which come in the wake of a host of upbeat comments on the sector since the UK general election.

And blue-chip mobile phones giant Vodafone PLC (LON:VOD) is also due to report on its third-quarter performance, with investors looking for updates on the recently troublesome overseas markets of Spain, South Africa, Italy and India.

Significant events expected on Wednesday:

Finals: GlaxoSmithKline PLC (LON:GSK), Smurfit Kappa Group plc (LON:SKG)

Interims: Barratt Developments PLC (LON:BDEV), Redrow plc (LON:RDW), Frontier Developments PLC (LON:FDEV)

Trading announcements: Vodafone Group plc (LON:VOD), Domino’s Pizza Group PLC (LON:DOM), Grainger PLC (LON:GRI)

Economic data: UK services PMI, UK composite PMI, US ADP employment, US balance of trade, US services PMI, US composite PMI

Around the markets:

  • Sterling: US$1.3017, down 0.1%
  • Gold: US$1,559.38 an ounce, up 0.1%
  • Brent crude: US$54.57 a barrel, up 0.1%

City headlines:

  • Disney's streaming service attracted nearly 29mln paid subscribers in less than three months, as the company beat Wall Street predictions but took a hit from the cost of its launch - Daily Telegraph:
  • Shares in Snapchat's parent company has admitted it had paid $100mln to settle a lawsuit against investors who accused it of misleading them about its growth - Daily Telegraph
  • New John Lewis boss Dame Sharon White has hired Nina Bhatia as executive director at the struggling retailer as she battles to revive its fortunes - Daily Telegraph
  • A jump in the share price of miner Glencore has netted a £310mln payday for the 'billionaire boys' club' of current and former executives who control around 21% of the company – Daily Mail
  • Morrisons boss David Potts faces fresh pressure to boost sales after figures showed the grocer is lagging behind major rivals as shoppers shun meat and booze – Daily Telegraph
  • Metro Bank has hired a top law firm to probe claims it breached sanctions against Cuba and Iran – Financial Times
  • Michael Ronen, a top US executive at SoftBank’s $100bn Vision Fund, is leaving after expressing concerns over “issues” at the technology group - Financial Times
  • One of Goldman Sachs’ most senior former investment bankers in Asia, Andrea Vella, has been permanently barred from the US banking industry for his alleged role in the 1MDB scandal – Financial Times
  • Carlsberg is braced for a major hit in China after the coronavirus outbreak triggered a temporary shutdown of hundreds of karaoke bars – Daily Telegraph
  • Barrick Gold boss Mark Bristow has lashed out at the fund management industry and its new-found focus on social and ethical investing - Financial Times:
  • Ikea is to close its Coventry city centre store this summer, marking the first closure of one of its big UK branches, putting 350 jobs at risk - The Guardian:
  • EY is facing a claim for €95mln in damages from the liquidator of Maple Bank, a Frankfurt-based lender that was shut down because of its role in a Europe-wide tax scandal – Daily Telegraph

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