- FTSE 100 index closes 97 points up
- Wall Street shares up
- Flybe not to make it to April
5.05pm: FTSE 100 closes to the good
FTSE 100 index closed higher on Wednesday as markets were buoyed about the prospect of more interest rate cuts from central banks.
Yesterday, the US Federal Reserve made an emergency rate cut in a bid to combat the effects of the wide-spread coronavirus.
Today, the Bank of Canada also cut half a percentage point from its benchmark rate - marking the first easing of monetary policy in over four years.
There is now speculation that the Bank of England and the European Central Bank will follow suit soon, despite many asking what the rationale is for such moves, unlikely as it is to spur business investment or make consumers spend more.
Britain's blue-chip benchmark index closed up over 97 points at 6,815 after a late dash, while the FTSE 250 also gained ground, adding over 60 points at 19,742.
On Wall Street, the Dow Jones gained over 513 points at 26,431, while the S&P 500 added over 48 at 3,052.
"Traders are buying back into stocks as there are hopes more central banks will go down the route of lowering rates. Central bankers around the globe might not have agreed with the Fed’s move, but they might consider cutting rates in order to keep in step with the US central bank," said analyst David Madden, at CMC Markets.
Top riser on FTSE in London was household goods giant and the biggest firm you've never heard of, Reckitt Benckiser Group (LON:RB.), which saw shares surge 5.4% to 6,097p, presumably as its cleaning and health products continue to fly off shelves.
Also, Laxman Narasimhan, who became chief executive last September, has recently scrapped his predecessor’s plans to spin off the group's hygiene and home business.
3.15pm: Wall Street starts on the front foot
The UK big caps trimmed their gains ahead of Wednesday’s close, not helped by sterling recovering its losses.
London’s main stock index was up 57 points to 6,775, having at one point in the session been up 134 points, as the pound rose 0.1% to US$1.2823.
On the other side of the pond the markets started on the front foot, with the Dow Jones gaining 444 points to 26,362 and the S&P 500 advancing 39 points to 3,042.
Connor Campbell, analyst at Spreadex, said the markets have been “trying their best to ignore” warnings by the International Monetary Fund.
The Washington-based institution said global growth in 2020 will dip below last year’s levels, when GDP rose 2.9%.
This statement, as well as increasing coronavirus cases in the UK, dragged down European indices while Wall Street kept its head high.
However, although the indices have been surging, “ in the context of the last few sessions that does not even recoup the ground lost by the Dow following the Fed’ impromptu rate cut,” Campbell said.
US traders woke up to fresh ADP data reporting a 183,000 increase in private payrolls, above the 175,000 consensus, though they were from before the coronavirus outbreak.
“What matters next is the employment components of the next round of business surveys, and the path of jobless claims ahead of the March report,” said Ian Shepherdson at Pantheon Macroeconomics.
“Prudence suggests we have to expect softer jobs numbers for the next few months.”
2pm: Flybe on the brink of collapse again
The Footsie trimmed its gains after lunchtime, just as it was revealed Flybe has asked the government whether it can access a £100mln taxpayer loan “in the coming days”.
The struggling airline has been hit hard by a drop in demand following the coronavirus outbreak and estimates it will not make it to April.
Breaking: Flybe has told the government that it is running out of cash and will not survive until the end of the month. Airline has been hit by slump in bookings since COVID-19 outbreak. FlyBe says it needs a decision on its request for taxpayer loan of £100m “in the coming days”
— Joel Hills (@ITVJoel) March 4, 2020
Last month, Westminster approved a £100mln loan and deferral of an outstanding tax bill to keep the airline aloft.
British Airways owner IAG filed an official complaint saying it contravenes state aid rules, with chief executive Willie Walsh calling it a “blatant misuse of public funds”.
Meanwhile, the Financial Conduct Authority (FCA) announced it is reviewing the coronavirus contingency plans of “a wide range of firms” with the help of the Bank of England.
“We are discussing with firms and trade associations any particular issues they may have and are working with them to resolve these,” the FCA said.
London’s big caps gained 103 points to 6,821 while sterling was flat at US$1.2815.
12.30pm: Wall Street expected to open higher
London’s main equity index kept rising, with analysts expecting an uptick in US stocks when Wall Street opens later.
After the Dow Jones tumbled almost 800 points overnight analyst Connor Campbell at Spreadex has pencilled in a 400 point rebound for Wednesday.
The coronavirus outbreak prompted further rating cuts in the City.
TUI AG (LON:TUI) was downgraded to ‘hold’ from ‘buy’ by Norddeutsche Landesbank, halving its target price to €7 from €14, while Goldman Sachs cut the target price for Ryanair Holdings plc (LON:RYA) to €15.60 from €19.80 though it maintained a ‘buy’ recommendation.
Peel Hunt slashed the target price for Hostelworld Group PLC (LON:HSW) to 75p from 165p keeping the ‘reduce’, following this morning’s profit warning.
Ever more cases of Covid-19 are also prompting economists to review their views on UK growth and interest rates.
"In a change to our previous forecast, we now think that the economic effects of the coronavirus will result in GDP growth slowing to just 0.7% this year and will soon prompt the Bank of England to cut interest rates from 0.75% to 0.50%," said Paul Dales at Capital Economics.
"That said, we believe that a sizeable fiscal stimulus will contribute to both GDP growth and interest rates being higher next year than the financial markets currently expect."
The FTSE gained 131 points to 6,849 at lunchtime, while sterling trimmed its losses, down 0.1% to US$1.2794.
11.20am: Anglo American to buy Sirius Minerals
The Footsie was holdings its gains late on Wednesday morning, while mining giant Anglo American Plc (LON:AAL) was making the headlines for its upcoming acquisition of Sirius Minerals PLC (LON:SXX).
Over 80% of shareholders approved the £405mln takeover offer.
It was one of the most contentious sagas of the decade, as many investors said the offer, at 5.5p per share, was undervaluing the fertilising company, which was trading at 20p a year ago.
Anglo, which will have to inject US$1.3bn to start the polyhalite mine, rose 2% to 1,938.4p. Read more on the Anglo/Sirius story here.
Supermarkets were among the illustrious risers, perhaps as the general public is stockpiling amid fears of a coronavirus pandemic.
J Sainsbury PLC (LON:SBRY) and Ocado Group PLC (LON:OCDO) both advanced 2% to 211.3p and 1,150p respectively, while WM Morrison Supermarkets PLC (LON:MRW) was up 3% to 180.85p.
Conversely, the travel sector saw demand plummeting, with British Airways owner International Consolidated Airlines Group SA (LON:IAG) dropping 3% to 450.8p and easyJet PLC (LON:EZJ) dipping 1% to 1,063.25p.
The index was healthy, gaining 94 points to 6,812.
10.10am: Pound softens on weaker services PMI
The FTSE 100 was holding its gains in mid-morning helped by the sterling diving underwater.
The blue chips gained 92 points to 6,810 while the pound was down 0.2% to US$1.2781.
Business activity, new orders and employment all rose at a slower pace in February than in January, according to the latest services PMI survey.
The loss of momentum was due to the coronavirus outbreak hitting sales, especially in overseas markets, over reduced confidence or lack of supply.
The travel and transport industries took the hardest hits as many business and leisure trips were cancelled.
However, the reading was 53.2 for last month, still well above the 50.0 no-change value but down from 53.9 in January.
Coronavirus worries aside, some analysts still political turmoil looming over UK business.
“While Brexit-related worries have moderated significantly since late last year, Brexit uncertainty continues to dampen sentiment, with firms concerned about upcoming EU trade negotiations,”
“Moreover, analysis of reasons cited by companies for changes in export orders indicates that Brexit-related factors continue to be seen as a cause of lost overseas business on balance.”
8.40am: Investors wary
Wednesday was the eerie calm after the storm, with the FTSE 100 index's minor advance in stark contrast with Wall Street's overnight plunge, which appeared to be spooked by the Federal Reserve’s coronavirus-inspired interest rate cut with the Dow Jones losing more than 700 points.
The index of UK blue-chip shares opened just 8 points higher at 6,725.96
Elsewhere in New York on Tuesday, the broader-based S&P 500 index was at one point up 1.5%, then down 3.7% and closed off 2.8% on an extremely volatile day.
“Why did the stock market (and the dollar) fall when the Fed took such strong action?” asked Marshall Gittler, analyst at BD Swiss.
“Probably, this is due to two reasons. One, the suspicion that things might be much worse than they seem. If the situation is so dire that the Fed has to cut 50 basis points in between meetings, then it must be bad.
“Of course, this is a damned if they do, damned if they don’t response, because what would the markets have done if the G7 had held such a conference call and no one acted?"
“Secondly is indeed the damned if they don’t side of that assessment. The Fed was the only central bank to act after the call. That’s a rather tepid response compared to what happened in 2008. Furthermore, there were no announcements on the fiscal side anywhere. The Fed can’t rescue the global economy by itself,” he added.
Asia’s main markets marked time as the Fed’s swift intervention did little to shore up confidence and new light was shed on Covid-19, the disease caused by the new coronavirus.
The World Health Organisation has suggested it is deadier than at first thought with a 3.4% fatality rate.
Here in the UK, preparations are being made for a fifth of the workforce to be off at any one if the outbreak can’t be contained.
The London market’s big faller in early trade was the now-small-cap shopping centre owner Intu (LON:INTU), which tumbled 30% after failing to put together rescue fundraiser in the order of £1-1.5bn.
Sticking with the tiddlers, Oncimmune (LON:ONC) saw its shares jump after announcing the US launch of its lung cancer diagnostic.
Proactive news headlines:
Sirius Minerals PLC (LON:SXX) is set to be acquired by Anglo American Plc (LON:AAL) for £405mln after its offer was approved at yesterday's shareholder meeting. Over 1,300 investors cast their vote on Tuesday with 80.28% in favour. The offer needed 75% approval to go ahead.
Itaconix PLC (LON:ITX) has inked a joint development agreement for a biodegradable packaging venture. The agreement envisages a collaboration to evaluate the use of Itaconix's BIO*Asterix line of functional additives in new biodegradable packaging solutions.
Haydale Graphene Industries PLC’s (LON:HAYD) graphene nano-platelets have been incorporated into a cosmetic face mask recently launched by South Korean firm iCraft. The company said the masks will utilise the thermal and electrical conductivity of graphene to help the skin absorb its contents.
Oncimmune Holdings PLC (LON:ONC) chief executive Adam Hill has heaped praise on the company’s American partner following the launch of its lung diagnostic into the world’s largest healthcare market. Biodesix Inc “exceeded our expectations”, Hill said. Oncimmune’s EarlyCDT Lung test will be sold in the US as Notify Lung for use by doctors in identifying nodules at high risk of lung cancer.
SDX Energy PLC (LON:SDX) told investors that the BMK-1 exploration well has encountered commercial quantities of gas in two targeted horizons. BMK-1 was described previously as a “play-opening” well and the result confirms that the core productive area in Morocco extends north, de-risking some 20bn cubic feet of prospective gas resources. The result is expected to significantly extend the life of resources.
BATM Advanced Communications Ltd (LON:BVC) has seen earnings double in 2019 after what its chief executive said was a “great performance in the second half”. For the year ended 31 December, the networking tech and bio-medical firm reported earnings (EBITDA) of US$9.8mln, up from US$4.9mln in 2018, while revenues rose to US$123.4mln from US$119.6mln. Adjusted operating profit, meanwhile, was up to US$5.3mln from US$2.6mln.
Allergy Therapeutics PLC (LON:AGY) has made a “steady” start to the financial year, according to its chief executive Manuel Llobet with revenue and profit up, respectively, by 9% and 10% backed by a strong operational performance. Turnover for the six months to December 31 advanced to £50.5mln from £46.7mln as the firm reported “good growth” across the product portfolio and a small gain in European market share.
Xpediator PLC (LON:XPD) has taken out a 20-year lease on a new 200,000 sq ft distribution centre at Southampton's container port. The opening of this new facility will take the freight company’s UK warehousing capability to approximately 700,000 sq ft with the new distribution centre scheduled to be built in 2021.
Argo Blockchain PLC (LON:ARB) has reported a 56% increase in monthly income from its Bitcoin mining operation while also completing a capacity expansion ahead of schedule. In a monthly update, the cryptomining firm said it had mined around 337.5 Bitcoin equivalent in February, a 37% increase on January’s figure, generating revenues of £2.54mln compared to £1.63mln in the prior month.
Tekcapital PLC (LON:TEK) revealed that its portfolio company, Salarius Ltd. has signed an agreement with iLevel Brands Inc as part of the launch of North American sales of its new SaltMe! full flavour-low sodium snack line. The UK intellectual property investment group – which is focused on creating marketplace value from investing in university technology - said the agreement, combined with a previously announced distribution agreement, will expand Salarius' market penetration and brand awareness for its new potato chip snack line with retail brand placements across the entire East Coast, Midwest and Southwest geographic areas of the United States.
Seeing Machines Limited (LON:SEE) has appointed Stifel Nicolaus Europe Limited as its joint broker with immediate effect to assist in broadening the group’s investor base across North America. The advanced computer vision technology company, which designs AI-powered operator monitoring systems to improve transport safety, said Stifel’s appointment follows a successful introduction to US-based investors in New York in January.
PCF Group Plc (LON:PCF), the AIM-listed specialist bank, has advised that given the current concerns surrounding travel the bank will be offering shareholders the option of viewing its forthcoming AGM remotely via an online video stream. The group said this does not affect any of the other arrangements for the AGM, which will take place as previously announced at 1 Cornhill, London EC3V 3ND on Friday 6th March 2020 at 10.00am, and to which shareholders remain welcome to attend in person.
Ergomed PLC (LON:ERGO), a company focused on providing specialised services to the pharmaceutical industry, will announce its preliminary results for the year ending 31 December 2019 on 25 March 2020. The group added that Miroslav Reljanović, its executive chairman, Richard Barfield, chief financial officer and Lewis Cameron, chief operating officer will host a presentation and conference call for analysts at 9.30am GMT on the day of the results at the offices of Numis, 10 Paternoster Square, London EC4M 7LT.
6.45am: Footsie called higher
The FTSE 100 is expected to start Wednesday’s session higher as an emergency rate cut by the US Federal Reserve left markets somewhat becalmed.
Spread-better IG expects the FTSE 100 to open around 17 points higher after it ended Tuesday with a 63 point gain at 6,718.
The market focus continues to be on the coronavirus outbreak, which took another turn as Italian authorities considered extending their quarantine area after the death toll in the country jumped to 79 on Tuesday.
In an attempt to defuse growing panic over the outbreak, the Federal Reserve made an emergency cut to interest rates yesterday afternoon of 50 basis points.
However, despite an initial spike, the move failed to lift Wall Street overnight with the Dow falling 2.9% to 25,917, the S&P 500 dropping 2.8% to 3,003 and the Nasdaq down 2.99% at 8,684.
“It appears that the move rather frustrated investors who were expecting a more creative, or impactful action than a simple rate cut, which they thought wouldn’t remedy to disrupted supply chain problems. We have a real issue here: investors are expecting central bankers to become the heroes that they are not meant to be”, said Swissquote Bank’s Ipek Ozkardeskaya.
The performance of the Asian markets on Wednesday was more mixed in the wake of the Fed move, with Japan's Nikkei 225 up 0.08% while Hong Kong’s Hang Seng was down 0.11%.
On currency markets, the Fed’s rate cut made the dollar somewhat weaker against other major currencies, however, mounting no-deal Brexit anxiety meant the pound was down 0.03% at US$1.2807 against the dollar.
Sterling, however, could benefit from positive UK services PMI numbers and weak US ADP employment numbers, both of which are due later today.
Significant announcements expected for Wednesday 4 March:
Finals: Legal & General Group PLC (LON:LGEN), Attraqt Group PLC (LON:ATQT), BATM Advanced Communications Ltd (LON:BVC), Devro PLC (LON:DVO), Elementis plc (LON:ELM), Hill & Smith Holdings PLC (LON:HILS), Hostelworld Group PLC (LON:HSW), Polymetal International PLC (LON:POLY), Vivo Energy PLC (LON:VVO)
Interims: Allergy Therapeutics PLC (LON:AGY)
Trading announcements: DS Smith plc (LON:SMDS)
Economic data: UK services PMI, US services PMI, US non-manufacturing PMI, US ADP employment
Around the market:
- Sterling: US$1.2807, down 0.03%
- Brent crude: US$52.55 a barrel, up 1.3%
- Gold: US$1,642 an ounce, up 3.1%
- Bitcoin: US$8,792, down 0.4%
City headlines:
- Sirius Minerals’ shareholders have narrowly backed a £405 million takeover by Anglo American, saving its North Yorkshire fertiliser mining project – Times
- Fears of a coronavirus-driven global economic slowdown have mounted after stock markets gave a lukewarm reaction to the emergency cut in US interest rates and new data showed that China and Hong Kong came to a virtual standstill in February – Guardian
- Chancellor Rishi Sunak to end decade of freezes on fuel duty in the Budget, in a bid to help Britain meet its climate change targets – Financial Times
- A wave of contracts for the HS2 rail link has helped push Britain’s builders back into growth for the first time in 10 months – Telegraph