logo-loader

FTSE 100 closes 2.9% higher as US Fed unveils US$2.3 trillion lending facility; jobless claims soar

Britain's blue-chip benchmark finished nearly 165 points higher, or 2.9% at 5,842

PureTech Health plc - FTSE 100 set to start positively, key economic stats will reveal initial impacts of coronavirus
FTSE 10o closed 2.9% higher on Thursday after further action from the Bank of England and the US Fed amid the crisis
  • FTSE 100 index closes nearly 165 points up
  • Just Eat top Footsie riser
  • Mondi underperforms after mixed first-quarter trading update.

5.15pm: FTSE 100 closes firmly ahead

FTSE 100 index powered higher on Thursday ahead of the Easter weekend as global markets continued to rally.

Britain's blue-chip benchmark finished nearly 165 points higher, or 2.9% at 5,842. The FTSE 250, a more UK focused index, closed up over 545 points higher, at 16,407.

It came as the US Central bank unveiled a $2.3 trillion lending facility to shore up the economy across the pond and earlier the Bank of England had announced a temporary extension of a so-called  Ways and Means Facility (W&M) - basically an agreement to directly bankroll the government's spending via an emergency overdraft.

Traders appeared to shrug off eye-watering data from the US, which showed another 6.6 million Americans filed for unemployment benefits in the week to April 4, bringing the total of those unemployed to over 16 million in the past three weeks.

"The economic impact of this virus is becoming more and more evident by the day, with the initial jobless claims figure taking on an enhanced role in guiding markets over the ongoing slowdown," said Joshua Mahony, senior market analyst at IG.

"The Fed funding seen today is a clear attempt to control the rush to lay off workers across many SMEs, with unemployment rising on a steep upward trajectory. Interestingly, the expectations of further economic suffering have been reflected in demand for havens such as gold, with stock markets largely brushing aside the ongoing economic struggles in favour of a more optimistic outlook."

On Wall Street, the Dow Jones Industrial Average added over 462 points, while the S&P 500 gained  over 53.

3.45pm: Footsie finishing the day on a high

With 45 minutes of the trading day left the Footsie was close to its high point for the day as the recovery bandwagon rolls on.

London’s index of blue-chip shares was up 158 points (2.8%) at 5,836, led by Legal & General Group PLC (LON:LGEN), one of that diminishing band of heavyweight stocks still paying a dividend.

READ UK dividend income 'at risk' of halving in 2020 due to coronavirus

Shares in the insurance group were up 12% at 219.6p.

Also back in favour was ITV PLC (LON:ITV), the terrestrial broadcaster that was regarded as a bid target in the days when its stock market valuation was considerably higher.

Shares in the broadcaster (but not at the moment) of Coronation Street were up 9.4% at 76.9p.

Packaging giant Mondi PLC (LON:MNDI) was only partially participating in the rally after its trading update this morning.

The shares were grudgingly marked up 0.5% at 1,355p as the group boasted of a “robust” first-quarter performance, although it did admit that towards the end of the quarter and into early April it saw a deterioration in its uncoated fine paper order book as the effects of the various lock-down measures took hold.

3.00pm: US shrug off jobless numbers

US indices opened higher although some of the early euphoria has dissipated.

The Dow Jones industrial average was up 401 points (1.7%) at 23,834 and the S&P 500 was 45 points (1.7%) better at 2,795.

Investors were in no mood to be thrown off course by alarming US jobless figures; maybe they took heart that the number of first-time jobless claims last week, at 6.6mln, was at least lower than the 6.9mln the week before but sooner or later at this rate the US is going to run out of employed people who can be laid off.

“Continuing claims for unemployment insurance, which are reported with a two-week lag, increased to 7.5mln during the week ending March 28 from 3.1m in the prior week, an all-time high,” note Berenber Capital Markets’ Mickey Levy.

“This rapid deterioration in labour market conditions is historic. Continuing claims jumped from 2.8mln in January 2008 to 6.6mln in May 2009, during the Great Recession – it took 17 months for continuing claims to increase by 3.8 million; this time a 5.7mln increase has occurred over a couple of weeks,2 he noted.

“The eventual recovery in the labour market will be nowhere as rapid as its deterioration. Governments will be very careful in reopening sections of the economy, and until there is a vaccine/therapeutic for COVID-19, rolling shutdowns may unfold in smaller pockets. Moreover, some businesses have permanently closed and others that reopen may reduce payrolls because of sluggish demand. Labour market dislocations will take a while to sort out,” Levy warned.

“A sluggish labour market recovery will constrain the rebound in consumption, especially of nonessential goods and services,” he added.

James Knightley at ING said we should be prepared for a new post-war record high in the unemployment rate.

“It hit 10% at the peak of the Global Financial Crisis and 10.8% in 1982. With employment having fallen 16.8 million over the past three weeks based on jobless claims (since the data were collected for the March employment report) we estimate that the US unemployment stands today at around 14%. This is versus 4.4% in March and 3.5% in February. In all likelihood millions more of undocumented migrant workers can be added to this number,” Knightley said.

“That said, we remain hopeful that the fiscal stimulus, with initiatives to encourage employers not to lay-off staff – will start to bear fruit and keep unemployment below the 20% figure Treasury Secretary Mnuchin feared ahead of the package agreement.

“When we finally get through the crisis and we can head on the path towards ‘normality’, unemployment will not fall as rapidly as it spiked. There is likely to be a rolling withdrawal of the restrictions, a process that gets underway in Austria and the Czech Republic next week, meaning a slow return to business as usual. Many companies will not make it through the crisis due to the plunge in demand and others will restructure and come out requiring a smaller workforce. As such the need for additional fiscal support for affected households and businesses seems a virtual certainty,” he added.

Back in Blighty, where the word furlough has moved from being an obscure word heard only in films based on the US military to an everyday word, the FTSE 100 was up 157 points (2.8%) at 5,844.

2.05pm: US indices to open higher

Even after US jobless numbers turned out even more cataclysmic than expected, US indices are expected to open higher.

Spread betting quotes suggest the Dow Jones will open around 268 points higher 23,702 while the S&P 500 is slated to kick-off 27 points firmer at 2,777.

In London, investors are also congregating around the punchbowl (two metres apart, obviously), with the FTSE 100 up 105 points (1.9%) at 5,783.

1.35pm: World economy in a deep hole

As if we need telling, the International Monetary Fund (IMF) has warned the world is in an “economic crisis like no other”.

The London stock market did not seem to care; the FTSE 100 was up 60 points (1.1%) at 5,738.

Kristalina Georgieva, the managing director of the IMF said the US-based organisation is bracing itself for “the worst economic fallout since the Great Depression”.

“Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020. Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year,” Georgieva said.

As if to underscore the point, it was revealed this afternoon that first-time jobless claims in the US last week soared by 6.6mln, taking the total number of job losses over the last three weeks to 16.8mln.

Economists had pencilled in a figure of around 6mln for the latest jobs update and while the actual figure topped estimates, the real figure might have been worse still as there have been delays in processing claims, such has been the surge in lay-offs.

12.40pm: Oil rallies as market waits on OPEC+

After a mid-morning dip, London’s index of heavyweight shares has recovered its mojo as focus switches to today’s OPEC+ meeting.

The FTSE 100 was up 75 points (1.3%) at 5,752, with booze brands giant Diageo PLC (LON:DGE), up 2.8% at 2,592p, doing its bit to fuel the advance after a trading update.

“Governments all over the world have closed pubs and restaurants to combat the spread of COVID-19, and this has had a predictable impact on Diageo’s sales. While the proportion of sales made in these venues varies by region, the impact is fairly significant everywhere. This is unfortunate, but we see no reason why sales shouldn’t bounce back once the pubs reopen. The uptick in retail sales demonstrates the demand for Diageo’s products, although we think this will moderate once people can enjoy a drink with friends in the pub again instead of over Zoom,” said William Ryder, an equity analyst at Hargreaves Lansdown.

“Diageo is likely to have a rough quarter or two, but its brands are strong enough to carry the group to a robust recovery once the virus passes. Fortunately, Diageo has no problem accessing liquidity, making it unlikely the group will come under any serious financial strain in the immediate future; however, if the shutdowns go on long enough even the most well-fortified balance sheets could find themselves a little unsteady,” he added.

The oil price is recovering today as the OPEC+ members meet to thrash out their differences.

Brent crude for June delivery is up 75 cents at US$33.59 a barrel.

“Producers will attempt to find agreement on output that addresses the collapse in demand and crude prices. No one is winning in this environment but, as ever, each are losing to different degrees and have a different ideas on how it should be resolved. I don't think a grand deal is as nailed on as markets would have us believe but, as ever, common sense should prevail,” suggested Craig Erlam at OANDA.

“If a substantial deal is going to get over the line, the US must play a part in some form. It is currently hoping that a market-driven, forced production cut will be enough to convince other producers to cut but I'm not sure that will be enough. Other assurances will be necessary to get Russia on board, which is the biggest risk to a deal,” Erlam asserted.

11.00am: BoE's Ways & Means Facility is pulled out of mothballs

The Bank of England (BoE) and Her Majesty’s Treasury have announced a temporary extension of the Ways and Means Facility (W&M).

Often referred to as the BoE’s overdraft, the facility’s reactivation is a “recognition of the extreme uncertainty and volatility” that the Debt Management Office (DMO) faces in managing day-to-day government finances in the current fiscal year, Barclays said.

“This is largely a risk management exercise. By increasing the overdraft facility, it is a recognition that the cash flows over 20/21 are going to be highly uncertain - there is a huge question mark over tax revenues. So increasing the overdraft facility allows the DMO the flex it needs to manage the cash flow volatility that is inevitable over the year,” Barclays explained.

“The reactivation of the facility will take the pressure of the bill and repo [repurchase] markets over the course of 2020/21. These markets are primarily where the DMO’s cash management operations show up. Unexpected swings in cash flows would require greater use of these markets in terms of greater swings. Increasing the W&M will allow the DMO, with its cash management hat on, a greater degree of flexibility, and not resort having to use the repo and bill markets more aggressively and less predictably,” Barclays continued.

In effect, increasing the W&M should mean fewer gilts being issued than would otherwise have been the case.

Meanwhile, Howard Archer, the chief economic advisor to the EY ITEM Club, has been picking over the bones of this morning’s gross domestic product (GDP) release covering the three months to February.

“Disappointing news on the UK economy as GDP dipped 0.1% month-on-month in February and was up just 0.3% year-on-year. This followed GDP growth of 0.1% month-on-month in January (revised up from flat),” Archer reported.

“Construction output contracted 1.7% month-on-month and services output was only flat. Manufacturing output rose 0.5% although industrial production was only up 0.1% overall. Even allowing for some hit to construction activity (and retail sales) from the very wet weather, this was a lacklustre performance,” Archer said.

“The hope had been that improved business and consumer confidence resulting from reduced uncertainties after December’s election – reinforced by the UK leaving the EU with a deal on 31 January – would fuel a clear pick-up in economic activity early on in 2020; however, while confidence did pick up markedly, this failed to translate into significantly improved economic activity,” Archer declared.

Samuel Tombs puts it more pungently. The chief UK economist at Pantheon Macroeconomics said that the stagnation of GDP in the first two months of 2020 shows that talk of a post-election ‘Boris bounce’ was “just hot air”.

“Looking ahead, we have assumed that GDP will be about 20% below normal during the lock-down, which we expect to last three months. This points to a quarter-on-quarter drop in GDP of 1.8% in Q1, followed by a huge decline of about 15% in Q2, though all forecasts merely are ballpark estimates at this stage,” Tombs admitted.

“Thereafter, we are relatively optimistic that a combination of mass testing and contact tracing, together with continued social distancing and occasional localised lock-downs can help to keep virus infection numbers at a level the NHS can manage in the second half of this year, without the government having to maintain the current set of severe restrictions but neither employment nor confidence will return fully to its pre-virus peak this year, suggesting that GDP still will be about 3% below pre-virus levels in Q4,” Tombs predicted.

Nevertheless, the FTSE 100 indicated investors retain their irrational exuberance, although less of it is in evidence now than it was in the first hour of trading, with the index’s rise slashed to 26 points (0.4%) at 5,703.
 

9.50am: UK economy was already struggling for growth in February

Fifteen of the FTSE 100’s 101 stocks are sporting gains above 5% this morning as the optimistic mood continues.

The FTSE 100 was up 96 points (1.7%) at 5,774, with Just Eat Takeaway PLC (LON:JET), up 10% at 7,324p, leading the advance.

“Once again choosing to turn a blind eye to the negatives, the European indices picked up the baton left by the Dow Jones last night, continuing to rebound sharply higher,” reported Connor Campbell at Spreadex.

“Though Wednesday saw another alarming number of deaths in the UK and US, the Dow Jones finished up yesterday’s session close to 800 points higher, investors choosing to focus on the fact that the lock-down in Wuhan has now been partially lifted after 11 weeks.

“That seems to have provided something of a light at the end of the tunnel for the Western markets, a sign that this thing will, eventually, be halted,” he added.

Adding a bit of balance to the market’s current euphoria, the Link Group UK dividend monitor revealed this morning that UK companies have already scrapped payouts to shareholders worth a “staggering” £28.2bn between now and the end of December this year.

“This represents over one third (34.5%) of the dividends Link had expected UK PLC to pay over the rest of this year before the crisis struck,” Link said.

Link reckons a further £23.9bn of dividend pay-outs are at risk this year.

Meanwhile, figures released by the Office for National Statistics (ONS) indicate the UK economy was already labouring in February before the full effects of the coronavirus pandemic.

UK gross domestic product in the three months to the end of February grew by an estimated 0.1%, which was at least an improvement on the zero growth seen in the three months to the end of January.

The ONS said there was “some anecdotal evidence” that the coronavirus had some effect on the figures, with the negative impacts outweighing the positive ones.

“Although gross domestic product (GDP) and its top-level components were largely unaffected, some small negative impacts could be seen in certain industries, such as travel agents and tour operators within services and manufacture of transport equipment within production. The small impacts that can be seen within the production data can also be seen to some degree in the UK trade data, also released today,” the ONS said.

The total trade balance (goods and services), excluding non-monetary gold and other precious metals, increased by £6.6 billion to a surplus of £1.4 billion in the three months to February 2020; this is the first underlying three-month total trade surplus since comparable records began, the ONS said.

The trade in goods deficit, excluding non-monetary gold and other precious metals, narrowed by £6.4 billion to £23.2 billion in the three months to February 2020, caused by falling imports of machinery and transport equipment, chemicals, and miscellaneous manufactures, it added.

8.45am: Positive pre-Easter start

The FTSE 100 followed the lead set by Wall Street as it opened its daily account with a triple-digit gain ahead of the long Easter holiday weekend.

The index of UK blue-chips opened 117 points higher at  5,795.12.

WATCH: Morning Report: FTSE 100 starts in the black after decent day on Wall Street

“The mood in markets continues to improve but it’s patchy. Virus cases continue to rise at a rapid clip but markets are extrapolating the data forward and hoping we’re close to a peak,” said Jasper Lawler of London Capital Group.

In the US, Bernie Sanders' exit from the presidential race, clearing the way for Joe Biden, appeared to give the markets a shot in the arm.

However, bromide may be administered Thursday if the weekly US jobless numbers come in scarily high.

In London, the Footsie was led by Carnival (LON:CCL), up 9% and still riding the wave from Saudi Arabia’s investment.

Just Eat Takeaway (LON:JET) was also near the top of the blue-chip leader board with an 8% gain, with traders speculating the home delivery service will be one of the major beneficiaries of the UK lockdown.

Among the small-caps, Tiziana Life Sciences (LON:TILS) was an early big riser, advancing 52% on news it has developed a delivery mechanism for its coronavirus treatment.

Proactive news headlines:

Tiziana Life Sciences PLC (NASDAQ:TLSA) has developed a handheld inhaler that will allow the rapid delivery of TZLS-501, its drug to treat inflammation of the lung caused by the coronavirus (COVID-19). “The technology, we think, provides immediate relief thanks to the delivery speed,” said chairman Gabriele Cerrone in a statement. It has submitted a provisional patent application for the investigational new technology, which could also be used to transport other similar treatments rapidly to the affected areas. Currently, doctors administer life-saving drugs intravenously.

Supermarket Income REIT PLC (LON:SUPR) has unveiled plans to raise £75mln through the issue of new shares as it eyes many “attractive opportunities across the marketplace”. The investment trust said that it will raise the funds through the issue of shares at a price of 103p each, a 5.7% discount to its closing price on Wednesday. The company said the funds should allow it to purchase two assets with a value of around £115mln, while the company has also identified a further pipeline of assets with an approximate value of £180mln.

Eckoh PLC (LON:ECK) has reported “another record year” for its business with double-digit revenue growth across the group. In an update for the year ended March 31, 202, the secure payments specialist said trading for the period had been “in line with market expectations” with revenue growth across both its UK and US businesses. The group also reported record order levels for the year with 10% growth to £35.9mln.

MaxCyte Inc (LON:MXCT), the global cell-based therapies and life sciences company, expects to continue to see growth in its life sciences business in 2020. In a business update, the company said it made a strong start to 2020 and, although the coronavirus (COVD-19) pandemic has the potential to hit revenues, the MaxCyte business remains resilient due to strong recurring revenues including from consumables and instruments in place under long-term leases with cell therapy partners. Significant growth in the life sciences business segment is expected from 2019’s levels, it added.

Location Sciences Group PLC’s (LON:LSAI) has said its first-quarter performance was in line with expectations but added that the second quarter will see some impact from the coronavirus pandemic and it has offered its services to the government during the lock-down period. The location data verification company noted that while half of its revenues are from fixed monthly fees, the other half are based on the volume of location advertising, which looks certain to decline during the lock-down.

Silence Therapeutics PLC (LON:SLN) said it has repurposed equipment at its Berlin site to produce critical reagents for coronavirus (COVID-19) diagnostic test kits currently in short supply. The work is being carried on a cost-only basis for a firm called TIB Molbiol and it is hoped Silence’s specialist equipment help significantly increase its partner’s capacity to produce test kits on short notice.

Chariot Oil & Gas Limited (LON:CHAR) has said it recognises that market conditions may expose value-accretive growth assets, that are a strategic fit, and it will remain open to such opportunities. The explorer, in a statement, meanwhile highlighted its focus on the Anchois gas development in Morocco – whilst maintaining capital discipline. It noted that it had US$9.6mln of cash at the end of 2019 and it is tied to no work commitments on any of its licences, plus it is debt-free.

Caledonia Mining Corporation PLC (LON:CMCL) (TSE:CAL) said production at its Blanket gold mine in Zimbabwe was up sharply year-on-year in the first quarter of 2020. During the quarter, Caledonia said 14,233 ounces of gold were produced, up 19% on the 11,948 ounces produced in the first quarter of 2018.

88 Energy Ltd (LON:88E) has repeated that it does not expect to incur any costs from the drilling of the Charlie-1 well, which saw “mixed” results. In a quarterly activities update, 88 Energy also said it would launch a new partnership programme for the Charlie asset. Whilst partner Premier Oil PLC (LON:PMO) has chosen to exit the project, AIM-quoted 88 Energy confirmed that US$23mln was deposited into the joint venture bank account (in accordance with the JV deal) and the well costs remain within the expected budget.

Eurasia Mining PLC (LON:EUA) executive chairman Christian Schaffalitzky has said the company’s mining operations are “ongoing without any impact of [coronavirus]” as it updated investors on its progress. The AIM-listed miner said while the pandemic had not affected its operations, it was maintaining its £600,000 cash position as well as a currently unused credit line of US$1mln (£806,505) from its largest shareholder. 

Advanced Oncotherapy PLC (LON:AVO) has raised £15mln through a direct subscription with new and existing shareholders in the cancer treatment pioneer. The issue price of 25p is in line with last night's closing price, with the group's directors subscribing for £190,000 worth of shares. Advanced Oncotherapy said work on its first proton beam therapy site in Harley Street has been halted due to coronavirus restrictions, but it will use the money raised to get regulatory approval of its novel technology.

US Oil & Gas PLC (USOP) has announced a US$83,295 equity raise, issuing shares to private investors. A total of 222,714 new shares in the company are being sold at a price of 31p per share, the company said in a statement. “The proceeds of the placing will be used to provide US Oil with additional working capital, including the funding of drilling operations,” it said.

Anglo Pacific Group PLC (LON:APF) (TSX:APY) has announced that, as a result of the UK government’s coronavirus measures, and the knock-on effect following compliance with the Financial Conduct Authority's request to delay the publication of its audited 2019 Annual Report and Accounts, its Annual General Meeting (AGM) will now be held at 2:00pm on May 27, 2020, at the company's registered office, 1 Savile Row (entrance via 7 Vigo Street), London W1S 3JR. However, to comply with the government's "Stay at Home" measures, shareholders will not be permitted to attend the AGM in person and should, therefore, vote by proxy. The group also said payment of its final dividend for the year ended December 31, 2019, of 4.125p, subject to shareholder approval at the AGM, is now expected on June 18, rather than on June 4 as previously indicated.

Condor Gold (LON:CNR) (TSX: COG) has announced that its Annual General Meeting will be held on Thursday, May 7, 2020, at 11:00 am at the company's registered office: 7/8 Innovation Place, Douglas Drive, Godalming, Surrey. However, it added, due to current restrictions imposed by the UK government, shareholders will be unable to attend the meeting in person and should participate electronically by registering with the company beforehand.

6.40am: FTSE 100 called higher 

The FTSE 100 is predicted to start Thursday on the front foot as the macroeconomic and political picture moves into focus for equity markets.

CFD and spread betting firm IG Markets makes the London benchmark some 53 points higher with just over an hour to go until the open, with a quote of 5,709 to 5,713.

Wall Street managed a strong finish to Wednesday, driven by political headlines – Bernie Sanders' withdrawal from the US presidential race and also positive comments from President Trump's medical aide Anthony Fauci (director of the US National Institute of Allergy and Infectious Diseases).

The Dow Jones Industrials Average ended Wednesday some 779 points, or 3.44% higher at 23,433 whilst the S&P 500 similarly gained 3.4% to close at 2,749. The Nasdaq Composite rose to close 2.58% higher at 8,090.

It was rounded off with indications of a supportive Federal Reserve as illustrated by minutes of the US central bank's last policy meeting.

Later, US weekly jobs data will be a big focus – not least as economists predict that another 5.5mln Americans became unemployed in the past week, which would move the aggregate to close to 10mln for the past fortnight as the coronavirus pandemic escalates.

“The sharp rise in unemployment levels across the world is a clear and present concern for some in the markets, who take the not unreasonable view that markets are underestimating the economic damage that is about to be unleashed on the US and the global economy,” said Michael Hewson, an analyst at CMC Markets.

“Under ordinary circumstances, it would have been an important day for UK data with the release of the latest GDP numbers for February, along with industrial and manufacturing production data." 

The analyst added: “Given recent events these aren’t normal circumstances, which means today’s expected rise of 0.1% will probably be the high-water mark for the UK economy for months to come.”

In Europe, attentions are on EU finance talks which failed to agree on terms for a joint €500bn pandemic relief fund.

Asian markets were mixed today. Japan’s Nikkei 225 index fell 128 points or 0.66% to 19,224, whilst Hong Kong’s Hang Seng added 144 points or 0.6% to 24,115. The Shanghai composite was in positive territory too, rising 0.4% to 2,826.

Around the markets:

  • The pound: US$1.2380, down 0.02%
  • Gold: US$1,648 per ounce, down 0.97%
  • Brent crude: US$33.24 per barrel, up 4.1%
  • Bitcoin: US$7287, down 1.18%

Significant events expected on Thursday:

Finals: Puretech Health PLC (LON:PRTC),

FTSE 100 ex-dividends to knock 0.29 points off the index: DS Smith plc (LON:SMDS)

Economic data: UK trade balance, UK production, UK monthly GDP, US jobless claims, US PPI

City Headlines:

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Amundi Physical Gold ETC: Europe's cheapest ETC now trading on the London...

Amundi Physical Gold ETC's Ashley Fagan who's head of ETF, Indexing & Smart Beta Development for UK and Ireland introduces the product to Proactive London's Andrew Scott. She says they've seen a great deal of demand from European as well as UK investors and that's what lead them to list...

1 day, 10 hours ago

24 min read