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FTSE 100 closes below 6,000 as traders mull dismal US jobs data

Footsie closed down over 214 points, or 3.5% at 5,901 on the day

Royal Dutch Shell Plc - FTSE 100 rally set to continue in face of stark blue-chip financial results
  • FTSE 100 closes 214 points lower
  • US stocks plunge
  • AstraZeneca wanted on hopes it might have a coronavirus treatment ready next year

5.30pm: FTSE 100 closes deeply in the red

FTSE 100 index closed 3.5% lower on Thursday as traders took flight and financial stocks were big London losers.

Wall Street stocks were also sharply off as new data showed that around 3.8 million workers in the US had applied for unemployment benefits last week, taking the level to above 30 million since the pandemic took hold.

Footsie closed down over 214 points at 5,901 on the day. The mid-cap FTSE 250 was also down, shedding over 380 points at 16,454.

Over on Wall Street, the Dow Jones shed over 368 points at 24,271, while the S&P 500 lost over 39. The tech heavy Nasdaq lost over 63 points at 8,850.

Top laggard on FTSE 100 was investment group Hargreaves Lansdown (LON:HL.), which lost 12.64% to 1,440.50p. Banking behemoth Lloyds (LON:LLOY) slumped 7.25% to 32.24p after it posted first quarter results this morning.

Analyst at CMC Markets David Madden said the pandemic was likely to trigger a jump in bad debts at the bank.

"It is fair to say the economic situation will get worse in the near-term, but at least Lloyds are in good health, as the CET1 ratio ticked up to 14.2%. The share price has drifted lower as traders realise that lending margins are likely to be squeezed further, while loan impairments are poised to rise," he suggested.

3.45pm: Risk-off day for equities

It is definitely a “risk off” day today, in London and elsewhere.

The FTSE 100 was down 171 points (2.8%) at 5,945, with companies heavily invested in global markets among the hardest hit.

Hargreaves Lansdown PLC (LON:JL.) was down 12% at 1,450.5p, Standard Life Aberdeen PLC (LON:SL.) was off 6.3% at 224.6p, Aviva PLC (LON:AV.) was 6.0% lighter at 244.2p and M&G PLC (LON:MNG) was 5.9% lighter at 281.9p.

Less than a dozen Footsie equities were in positive territory and these included defensive favourites, such as drugs giant AstraZeneca PLC (LON:AZN), up 3.1% at 8,463p, and utility companies Severn Trent PLC (LON:SVT), SSE PLC (LON:SEE) and United Utilities PLC (LON:UU.), all of which eked out small gains.

AstraZeneca was higher on hopes it might have a treatment for the coronavirus COVID-19 ready by next year.

“Yesterday’s risk party has left participants with a bit of a hangover: risk assets have taken a bit of a beating today amid a slew of pretty rotten economic data and an ECB presser that maybe wasn’t all that,” said Neil Wilson at markets.com.

“There is also a sense that equity markets rode too aggressively on the Gilead news and need to see more evidence, whilst the FTSE has notably underperformed thanks to the oil majors,” he added.

2.55pm: Optimism in short supply all of a sudden

Stocks got off to a weak start in the US after some ore gloomy jobs numbers.

The Dow Jones industrial average was down 283 points (1.2%) at 24.351 while the S&P 500 was off 25 points (0.8%) at 2,915.

“US initial jobless claims declined to 3.8mln during the week ending April 25 from 4.4mln in the prior week, bringing its total over the last six weeks to 30.3mln,” reported Berenberg Capital Markets.

“Although initial claims are down 44% from its peak at the end of March, the pace of the declines have slowed, suggesting that unemployment will continue to increase through at least May.

*Continuing claims for unemployment insurance, which are reported with a two-week lag, climbed to 18.0mln during the week ending April 18 from 15.8mln in the prior week, almost tripling its pre-COVID high from the Great Recession of 2008-2009,” it added.

James Knightley, the chief international economist at ING, noted that “With a further third of 16-65-year-olds economically inactive, less than half of the working-age population of America will be earning a wage in May.”

“In an election year, this means that the call for politicians to re-open the economy is only going to get louder, irrespective of the health advice,” he suggested.

In Europe, Christine Lagarde, the governor of the European Central Bank (ECB) has not exactly been sugar-coating things at the ECB’s monthly press conference.

She had forecast a 15% decline in the European economy in the second quarter.

ECB economists believe that the economy will shrink by between 5% and 12% this year.

“Given Eurozone's sharp GDP contraction in Q1 of -3.8% quarter on quarter and a much worse plunge in store for Q2, it is only a matter of time before the ECB acts again,” predicted Anna Stupnytska, the head of Global Macro at Fidelity International.

“Complicating the ECB's dilemma is - perhaps unsurprisingly - the ongoing delay in bold fiscal action from the European Commission. As details on the area-wide crisis instruments including the ESM lines and the recovery fund are yet to be finalised, the ECB has to continue doing the heavy lifting. As things stand these instruments are unlikely to be available until later in the year or - in the case of the recovery fund - early next year,” she added.

Little wonder that investors in London were licking their wounds, with the decline in the FTSE 100 extending to 153 points (2.5%) at 5,962.

1.45pm: US first-time jobless claims rose by 3.8mln

US indices are expected to open lower after another bleak weekly jobs report.

Spread betting quotes suggest the Dow Jones industrial average will open at around 24,490, down 144 points on last night’s close, while the S&P 500 is tipped to shed 12 points to start at 2,928.

First-time jobless claims last week in the US totalled 3.8mln, which is at least a slowdown from the 6.9mln claims at the end of March but does mean that the number of people claiming unemployment benefit for the first time has increased by about 30mln in just six weeks or so.

In Europe, the European Central Bank (ECB) has announced additional liquidity operations but stopped short of more quantitative easing (QE).

“There will be a new series of non-targeted pandemic emergency longer-term refinancing operations (PELTROs). There will be seven PELTROs and they will be carried out at 25bp under the refi rate until September 2021. After several tweaks to the TLTROs at the last meeting, this is another attempt to provide the banking sector and hence the real economy with more liquidity,” said Carsten Brzeski, the chief economist for the Eurozone at ING.

“The decision to keep all other instruments unchanged shows that the ECB first wants to take stock of all recently taken measures. It probably also wants to keep some powder dry. And, this dry powder is needed, as today's GDP data has given us the first impression of how severe the crisis in the eurozone actually is,” he added.

In London, the FTSE 100 is sporting a triple-digit loss at 6,013, down 102 points (1.7%).

12.45pm: Lloyds and Royal Dutch Shell fight over the wooden spoon

The Footsie was at its lowest point of the day halfway through the luncthime strading session, with sentiment hit by updates from two index heavyweights.

London’s index of leading shares was down 81 points (1.3%) at 6,034, with oil giant Royal Dutch Shell PLC (LON:RDSB) just about denying Lloyds Banking Group PLC (LON:LLOY) the wooden spoon.

The former is down 7.7% at 1,339.2p after announcing a dividend cut this morning while lender Lloyds was off 7.6% at 32.115p after its first-quarter profits plunged.

“Often seen as a barometer of the UK economy, this update from Lloyds underscores the scale of the challenges ahead,” said interactive investor’s Richard Hunter.

“At a headline level, the impairment provision of £1.4 billion is up from a previous figure of £275 million, and has all but obliterated first-quarter profit,” he noted.

11.30am: Downward drift continues

Real gross domestic product (GDP) in the Eurozone dived by 3.8% quarter-on-quarter in the first quarter, in line with market expectations.

On a year-on-year basis.GDP fell 3.3% after rising by 1.0% in the fourth quarter of 2019.

Unemployment in the euro area rose to 7.4% in March, from 7.3% in February; the consensus forecast had been for an unemployment rate of 7.8%.

The headline inflation rate in the Eurozone declined to 0.4% in April from 0.7% in March, which confounded economists’ predictions of a fall to a rate of 0.1%.

“It’s almost funny that in a quarter where estimates are probably as uncertain as they’ve ever been the initial GDP headline is exactly in line with the consensus. Revisions are guaranteed—we think they will be to the downside—but broadly speaking, these numbers are probably a fair reflection of the situation on the ground in Q1,” said Claus Vistesen, the chief Eurozone economist at Pantheon Macroeconomics.

Meanwhile, Pantheon’s ever-useful daily coronavirus update notes that UK hospital deaths continue to fall but the government has been pressured into including care home deaths into the figures, which has increased the number of deaths by 3,811.

“US confirmed cases rose by 2.7% yesterday, down from a 3.5% increase on the same day last week. The rate of decline in cases has slowed but is now stable,” said Ian Shepherdson, Pantheon’s chief economist.

Over at Deutsche Bank, on a day when Royal Dutch Shell surprised many in the market by cutting its precious dividend, Christian Nolting (global chief investing officer) and Markus Müller (global head chief investment office) predicted that “the post-coronavirus world is likely to be characterised by lower yields for even longer, despite higher borrowing”.

“At a corporate level, those sectors best able to adapt will fare better and we are likely to see failures elsewhere. Corporate earnings are likely to fall further than current consensus estimates. Following long-term investment themes may help navigate this difficult landscape,” they suggest.

The FTSE 100 was down 35 points (0.6%) at 6,081.

10.00am: Good news and bad news from Anglo-Dutch giant

In the battle of the Anglo-Dutch giants, the decline of Royal Dutch Shell PLC (LON:RDSB) is outweighing the rise of Reckitt Benckiser PLC (LON:RB.).

The FTSE 100 was down 25 points (0.4%) at 6,090 with Shell, down 6.3% at 1,359.6p, leading the retreat after it shocked the market by cutting its interim dividend.

“Although highly unusual, this cut wasn’t unexpected given the oil price plummeted 60% in the first quarter as the market responded to the Covid-19 outbreak, the large oversupply caused by the Russia-Saudi dispute and growing expectations of a sharp drop in future economic activity. The market naturally responded negatively to the move,” said Ian Forrest, an investment research analyst at The Share Centre, perhaps suggesting that the move was unexpected in some quarters at least.

“Investors are probably focusing on how the company expects the factors behind its decision to last beyond this year and so may fear that dividends are likely to be at current levels for some time,” Forrest added.

Fast-moving consumer goods maker Reckitt Benckiser PLC (LON:RB.) was on the sunnier side of the Footsie street, up 3.9% art 6,654p after its first-quarter trading update.

Some wags have suggested the company has benefited from the unconventional medical advice given by President Trump regarding the use of bleach but Emilie Stevens, an equity analyst at Hargreaves Lansdown, noted the company does have many other heavyweight brands.

“We hope no-one’s injecting RB’s products, but the public are most certainly buying them in huge quantities – sales of the likes of Neurofen were up by a third, and cleaning products like Lysol and Dettol weren’t far behind,” Stevens said.

“This growth is likely to have been beyond RB’s wildest forecasts, and as a result, RB expects a better year ahead. However, RB were quick to point out this level of demand may be short-lived, at the moment the group said its proving difficult to distinguish between stockpiling, effectively bringing forward future sales, and an underlying increase in demand. Given a vaccine is at least a year away, and hygiene is showing to be a serious Covid defender, it’s not implausible to think that sales will remain higher, but for how long and how high, is unclear.

“Given the recent strategic revamp 2020 was already going to be a big year for Reckitt, Coronavirus has provided a jump-start but RB still has its work cut out,” she added.

8.45am: Bad day for news

The FTSE 100 beat a retreat in early trade on Thursday as Royal Dutch Shell (LON:RDSB) put the kibosh on what was supposed to be a positive start to proceedings by cutting its dividend for the first time since the Second World War.

The move wiped 7% from both the A and B shares, which, because of their index weighting, proved a significant swing factor.  Oil peer BP (LON:BP.) appeared untouched by Shell’s shock move, however, having left its quarterly payout unchanged earlier this week.

The UK index of blue-chip stocks shed 12 points to 6,103.64 early on. It had been expected to be a sunnier start to proceedings, particularly with the Dow Jones Industrials Average closing more than 500 points higher on Wednesday amid optimism around Gilead’s potential treatment for the acute symptoms of coronavirus (COVID-19).

Shell wasn’t alone in spreading the gloom. The quarterly update from Lloyds Banking Group (LON:LLOY) seemed about as appetising to the market as a bucket of cold sick with the shares off 3.6%, dragging with them Royal Bank of Scotland (LON:RBS), down 3.5%.

“Lloyds is feeling the pinch from not having a large investment bank,” said Nicholas Hyett, an analyst at Hargreaves Lansdown.

“While rivals Barclays and HSBC have seen an increase in trading activity offset weaker interest income, Lloyds must take a hit on the chin. The fall in the Bank of England base rate meets revenues are sharply lower and provisions for bad loans have decimated profits.

“Fortunately, the balance sheet has proven more than capable of handling the pressure in the first quarter, and the cancellation of the dividend means the bank’s key capital ratios have actually improved.”

On the plus side, gaming giant Flutter Entertainment (LON:FLTR) was up 5.6% after confirmation the merger with Stars Group will formally complete next week.

Finally, first-quarter trading from Reckitt Benckiser (LON:RB.) delivered a 5.4% boost to the Anglo-Dutch consumer goods giant’s share price.

Proactive news headlines:

Conroy Gold and Natural Resources PLC (LON:CGNR) said it has discovered a new gold mineralised outcrop on its Glenish gold target in the Longford-Down gold trend. The gold exploration and development company said channel sampling in the Glenish gold target has identified gold-in-bedrock – 1.0 metres (m) at 0.4 grams per tonne (g/t) - from an outcrop of Arenite gouge, with pyrite mineralisation.  This newly discovered gold outcrop is located over 500m northeast from the gold-in-bedrock previously intersected by drilling and enhances the overall prospectivity of the Glenish gold target, Conroy said in a statement.

ImmuPharma PLC (LON:IMM) said it is focused on the “optimum route forward” for the business that includes the phase III development of its key asset, Lupuzor, but will also focus on up and coming candidates in the portfolio. Its nucant and peptide programmes appear to have the potential to open three therapeutic areas: cancer, metabolism and anti-infectives. ImmuPharma also told investors, as it reported full-year 2019 results, that it was looking at potential other auto-immune disease uses for Lupuzor distinct from the treatment of lupus.

BATM Advanced Communications Limited (LON:BVC) has issued a coronavirus-focused update in which it says the pandemic has not been all bad for its business. The group expects its Bio-Medical division to perform well during the global lockdown period and the Networking & Cyber division to experience a temporary slowdown. Given the uncertainty surrounding the length and economic severity of the crisis, it is too early to estimate the financial impact on the company for the whole of 2020, the provider of real-time technologies for networking solutions and medical laboratory systems said. As previously announced, BATM has launched a new diagnostics kit to detect coronavirus (COVID-19) that received certification in March 2020.

Verona Pharma PLC (LON:VRP) (NASDAQ:VRNA) outlined plans for the coming months as it updated on a busy start to the year and confirmed it is financially well placed. The company is focused on developing discoveries such as ensifentrine for respiratory conditions such as chronic obstructive pulmonary disease (COPD). The focus going forward is on the preparation for what’s called an end-of-phase II meeting with the US Food & Drug Administration to discuss Verona’s success in delivering the drug using a nebuliser. Scheduled for this quarter, the formal conversation with the American regulator will guide the design of a phase III study.

Zaim Credit Systems PLC saw an 11.6% year-on-year growth in the amount of money lent out in the first quarter of 2020. The lender, which operates in Russia and targets borrowers not well-served by mainstream lenders, said the amount funded in the first quarter rose to £2.55mln from £2.32mln a year earlier and £2.28mln in the preceding quarter. The amount lent dipped a bit in March as the effects of the coronavirus (COVID-19) began to take hold. In April, the lender said it saw a significant decrease in demand, leading to an expected decrease of around 44% year-on-year in the amount funded, which the company attributed to the reduction in footfall throughout Moscow resulting from the measures enacted regarding COVID-19.

Greatland Gold PLC (LON:GGP) has reported “exceptional” drill results from the Havieron deposit, in Western Australia, confirming continuity of the higher grade mineralisation. The latest drilling results expand the footprint of the mineralisation within an arcuate sulphide zone as well as surrounding proximal breccia, the company said in a statement. Highlights of the drill intercepts included grades up to 9.3 grams per tonne (g/t) over 22.8 metres n(m), as well as seeing other cuts with grades of 6.2 g/t, 4.4 g/t and 3.8 g/t.

Live Company Group PLC (LON:LVCG) said it has secured £250,000 in additional funding through a loan with NatWest to boost its working capital and continue its planned build programme for 2020. The media firm said the loan, made through the UK government’s backed interruption scheme, will be drawn down in full and repayable in 12 monthly instalments, the first of which is due 13 months after the drawdown. The company also said that in line with the UK’s job retention scheme, it has extended the furloughing of around half of its full-time workers to the end of June as well as implementing a 50% pay reduction for all staff earning over £2,500 per month.

Woodbois Limited (LON:WBI) has reported a jump in full-year revenue as its underlying losses (LBITDA) narrowed by around 50%. For the year ended December 31, 2019, the Africa-focused timber group noted that revenues had risen by 45% year-on-year to US$19.5mln, while its LBITDA from continuing operations narrowed to US$1.9mln from US$3.8mln. The company also said recovery rates from its sawmill in Gabon had risen to 40% from 33% during the year, while post-period it had recommenced operations in Mozambique after more than two years.

European Metals Holdings Limited (LON:EMH) said the Czech Ministry of the Environment has granted Geomet the preliminary mining permit related to the Northwestern part of the Cinovec deposit. The group said the permit, which is a necessary legal pre-qualification before obtaining a final mining permit, has been issued for a period of 8 years and guarantees the company the priority right to apply for and obtain a final mining area and a final mining permit. It noted that the preliminary approval for the Northwestern part of the deposit covers an area of 1.27 square kilometres and, together with the existing preliminary mining permits, now encompasses the entire Cinovec ore reserve.

NQ Minerals PLC (LON:NQMI) (OTCQB:NQMLF), the base metals and gold/silver producer from the Hellyer Gold Mine in Tasmania, announced that it has appointed VSA Capital Limited as its corporate broker, with immediate effect, alongside First Sentinel who is the company’s Aquis Exchange financial adviser. The company noted that VSA Capital is a specialist in the natural resources sector and provides ongoing long-term advice to listed companies on all aspects of interaction with new and existing shareholders, as well as equity research.

Vast Resources PLC (LON:VAST), the AIM-listed mining company, said it has elected to pay the interest of $29,591.45 due on April 29, 2020, on the $7,101,947 bond issued to Atlas announced on 31 January 2020 by the issue of 15,582,523 shares at a price of 0.15327p each. It noted that, under the terms of the Atlas Bond Issuance Deed, the company is entitled to elect to make payment of interest in shares at an issue price of 90% of the Volume Weighted Average Price of the shares on the business day before the interest payment date.

6.45am: Rally set to continue 

The equity market rally looks set to resume in the face of stark blue-chip financial results as sentiments are steered more by hopes of getting back to ‘normal’ than counting the costs of the coronavirus (COVID-19) lockdown to date.

In London, the FTSE 100 is predicted to open around 60 points higher, with IG Markets making a price of 6,182 to 6,185 with just over an hour to go until the open.

This morning brings updates from Royal Dutch Shell (LON:RDSB), Lloyds Banking Group (LON:LLOY), Reckitt Benckiser (LON:RB. and J Sainsbury’s (LON:SBRY) plus several others – most trading news and financial results won’t make pleasant reading for shareholders.

More broadly, macro attention will be on the first few economic indicators for April.

Nonetheless, it is largely news from one American company that is driving the global equity market, as Gilead Sciences Inc’s (NASDAQ:GILD) trial of the remdesivir drug showed some effectiveness in the treatment of COVID-19 patients.

“This news simply acted as an even stronger tail wind for stocks as markets looked beyond the data for the promised land of an economy coming out of lockdown, and slowly restarting against a backdrop of a treatment for Covid-19, quickly followed by a vaccine,” said Michael Hewson, an analyst at CMC Markets.

“Let us hope that this rose-tinted view of the rest of the year doesn’t collide with the hard reality of an earnings wipe-out, as consumer spending struggles to recover against a backdrop of caution and high unemployment.”

Last night in New York, the Dow Jones Industrials Average gained 532 points or 2.21% to close at 24,633. Similarly, the broader S&P 500 index advanced 2.66% to finish Wednesday at 2,939 and the Nasdaq Composite strengthened further, adding 3.57% to end the session at 8,914.

In Asia on Thursday, Japan’s Nikkei rose by 539 points or 2.74% to 20,312 while Hong Kong’s Hang Seng added 0.28% to 24,643 and the Shanghai Composite gained 1.22% to 2,857.

Around the markets:

  • The pound: US$1.2480, up 0.09%
  • Gold price: US$1,712 per ounce, down 0.1%
  • Brent crude: US$24.62 per barrel, up 20.33%
  • WTI Crude: US$17.16 per barrel, up 39%
  • Bitcoin: US$9,278, up 17%

Significant announcements expected on Thursday:

Trading announcements: Royal Dutch Shell PLC (LON:RDSB), Lloyds Banking Group PLC (LON:LLOY), Reckitt Benckiser Group PLC (LON:RB.), Schroders PLC (LON:SDR), St James’s Place PLC (LON:STJ), G4S PLC (LON:GFS), Glencore PLC (LON:GLEN), Evraz PLC (LON:EVR), Hikma Pharmaceuticals PLC (LON:HIK), ConvaTec Group PLC (LON:CTEC), James Fisher & Sons PLC (LON:FSJ), Howden Joinery Group PLC (LON:HWDN), Kingspan Group PLC (LON:KGP), Lancashire Holdings Ltd (LON:LRE), Network International Holdings PLC (LON:NETW), Vivo Energy PLC (LON:VVO), Kaz Minerals PLC (LON:KAZ),

Finals: J Sainsbury PLC (LON:SBRY), Symphony Environmental Technologies PLC (LON:SYM), Ocean Outdoor Limited (LON:OOUT), Morses Club PLC (LON:MCL)

Interims: Up Global Sourcing Holdings PLC (LON:UPGS), Apax Global Alpha Limited (LON:APAX)

FTSE 100 ex-dividends to knock 0.69 points off the index: London Stock Exchange Group PLC (LON:LSE)

Economic data: US jobless claims, US Chicago PMI, UK car production, UK house prices

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