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FTSE 100 closes marginally lower as trade jitters persist amid pandemic

Footsie closed its second trading day in May this year off around nine points at 5,753

BT Group PLC -
London and US stocks were hit, again, by worries over US, China trade relations
  • FTSE 100 closes nine points down
  • US indices mixed but generally lower
  • Sterling down by three-quarters of a cent

5.20pm: FTSE closes lower

FTSE 100 index closed marginally in the red on Monday as investor jitters continue over trade relations between the US and China.

Footsie closed off around nine points at 5,753. The mid-cap FTSE 250 was also down, shedding over 196 points at 15,951.

On Wall Street, the Dow Jones lost over 195 points and the S&P 500 shed around eight. The tech heavy Nasdaq though gained around 50 points at 8.655.

"Traders remain fearful of the latest development between the US and China," said market analyst at CMC, David Madden.

"President Trump has threatened to impose tariffs on imports from China because he blames the country for the pandemic. The US leader claimed the Covid-19 crisis was a ‘mistake’ by the Chinese government," he said.

The pound was down 0.54% against the US dollar, while safe-haven gold continued  to make gains, up 0.74% to US$1,713.50 an ounce.

3.50pm: The Footsie edges into positive territory

Helped by a slumping sterling on foreign exchange markets, the Footsie has roused itself to move into positive territory.

London’s index of leading shares was up 15 points (0.3%) at 5,778 as sterling shed almost three-quarters of a cent against the US dollar at US$1.2420.

Across the pond, US equities have recovered a little from a dismal start. The Dow Jones index was down 245 points (1.0%) at 23,479 and the S&P 500 was down 17 points (0.6%) at 2,813.

2.50pm: Trade war fears resurface

US indices have opened even lower than expected as investors fret about the return of the US-China trade war.

The Dow Jones industrial average was down 340 points (1.4%) at 23,385 and the S&P 500 was off 30 points (1.1%) at 2,799.

“Naturally, shares are down for a second day - and it’s May - so of course the question is ‘Sell in May and go away?’ There’s a logic to it this year. We’re headed into a recession, likely a depression. Markets have recouped about a third if you’re in Europe, a half in you’re in the States from the March sell-off. The risk to reward of holding on for further gains is a lot worse than a month ago,” ventured Jasper Lawler of LCG.

“Having forgotten about the trade war since last year, it’s all come flooding back for investors. US President Trump explicitly mentioned tariffs as a preferred way to extract money out of China as compensation for their role in the coronavirus pandemic,” Lawler said.

“Investors again face the difficult job of predicting Trump’s next action on trade. Whether deserved or not, there is clearly a strong political motivation to ramp up blame on China in the US. The political calculus may well be that it is worth giving up the small economic benefit of Chinese agricultural purchases etc (that might not happen anyway) to have a scapegoat for November’s election,” he concluded.

In London, it is looking increasingly likely that a bit of WD40 is going to need to be applied to get the FTSE 100 moving again; the index is down 7 points (0.1%) at 5,756.

2.25pm: US indices expected to open lower

US indices are expected to open sharply lower in the next few minutes.

The Dow Jones is tipped to shed 218 points to open at 23,506 while the S&P 500 is seen opening at around 2,814, down 17 ponts on Friday’s close.

In London, the FTSE 100 is wondering what all the fuss is above and is more or less unchanged.

1.00pm: FTSE 100 back to square one as news flow dries up

Midway through the lunchtime session, the FTSE 100 is back to where it started the day.

“The UK index may find its steady performance challenged, however, when the Dow Jones et al get involved. The Dow is facing a 250 point fall once trading gets underway stateside, a drop that would push the index back below 23500, around 1400 points off of the intraday highs struck on the final day of April,” reported Connor Campbell, a financial analyst Spreadex.

There has not been a lot of news flow from the blue-chips to get the pulses racing, leaving the spotlight open for FTSE 250 stocks such as Tate & Lyle PLC (LON:TATE), which was 3.1% lower at 674p after a trading update.

The food ingredients group has seen lower demand for sweeteners and starches because of the coronavirus lockdowns in Europe and North America.

Inchcape PLC (LON:INCH) reversed 1.7% to 485.8p following the announcement of Duncan Tait, a former director of Fujitsu, as its new chief executive officer.

Sector peer Pendragon PLC (LON:PDG) tumbled 6.2% to 7.67p after it said it had rejected the idea of a merger with fellow car seller Lookers PLC (LON:LOOK).

Lookers was down 0.8% at 23.55p.

11.00am: Blue-chips stable even as confidence ebbs away among consumers and finance directors

Leading shares remain becalmed after Deloitte’s survey of bean-counters at Britain’s top companies indicated business confidence is at an all-time low.

Nine out of 10 cats … er … finance directors reckon there is a high or very high level of uncertainty facing their business, according to the consultant’s survey.

Only 16% of executives surveyed are more optimistic about the prospects for their company than they were three months ago.

“CFOs [chief financial officers] expect the lockdown to ease in May and June and demand in their own sectors to start recovering later this year but there is no expectation of a quick snap back in activity, with most CFOs assuming revenues will not return to pre-crisis levels for at least a year,” said Ian Stewart, the chief economist at Deloitte.

Meanwhile, a YouGov/CEBR survey suggests consumer sentiment in the UK has fallen to its lowest level since January 2012.

“COVID-19 has brought about unprecedented lockdown measures with no end date in sight, so it’s hardly surprising that consumer confidence has slumped so dramatically. Time will tell if we have reached the bottom,” commented YouGov research director Oliver Rowe.

Despite the doom and gloom, the FTSE 100 was down just 16 points (0.3%) at 5,744.

10.00am: Weak sterling saves Footsie's bacon

We might as well have gone ahead with the traditional May bank holiday such has been the lack of activity on the FTSE 100.

The index was down 8 points (0.1%) at 5,754, having reached the “heady” heights of 5,774 at one point.

“Stock markets are in the red this morning as trade tensions between the US and China continue to weigh on sentiment,” said CMC’s David Madden.

“President Trump has threatened China with tariffs as he is blaming the Beijing administration for the Covid-19 pandemic. It is believed by US officials the Chinese government downplayed the severity of the health crisis. Mr Trump is directing his ire at the authorities in Beijing, and it looks as if he is gearing up for another trade spat. The Donald has a presidential election to contest in November, and it seems that he will be picking a fight with China in a bid to appeal to his voter base,” Madden noted.

The decision by investment guru Warren Buffett to dump airline stocks over the weekend has done little to change the market’s view on the travel and aerospace sector.

Jet engine maker Rolls-Royce Holdings PLC (LON:RR.) was down 4.8% at 298.2p; Melrose Industries PLC (LON:MRS), which owns aerospace engineer GKN, was 4.7% lower at 92.08p while low-cost airline easyJet PLC (LON:EZJ) slipped 4.7% to 541.2p.

The Footsie stocks at least have a weak sterling to cheer them up – the pound is down by two-thirds of a cent at US$1.2425; the FTSE 250 has no such comfort and is down 184 points (1.1%) at 15,963.

A weak pound is generally bad news for the mid-cap players as they tend to be less national players rather than multinational players, plus they have to pay more for imported raw materials.

With pubs and cinemas expected to be at the back of the queue when the lockdown ends, the likes of pubs owners Marston’s PLC (LON:MARS) and Mitchells & Butlers PLC (LON:MAB), down 11% at 34.2867p and 8.3% at 157.6p respectively, are getting it in the neck, as in cinemas operator Cineworld PLC (LON:CINE), which is down 8.7% at 53.82p.

Business events organiser Hyve Group PLC (LON:HYVE), 13% weaker at 20.2p, is getting hit for much the same reason, with the added weight of the expectation in some quarters that the company is planning to raise cash.

8.45am: Weak start on Star Wars Day

The FTSE 100 index, as anticipated, opened in negative territory amid heightening tensions between the US and China over what the latter knew and conveyed to the West about the Wuhan coronavirus (COVID-19) outbreak.

The index of UK blue-chips opened 39 points lower at 5,723.73.

Overnight President Trump ramped up the rhetoric suggesting he could impose trade tariffs of up to US$1 trillion on the world’s second-largest economy in reparation for the coronavirus pandemic.

Meanwhile, US Secretary of State Mike Pompeo suggested in a TV interview there was significant evidence suggesting a lab in the Chinese city was the source of the infection.

“Tensions between the US and China had only just started to thaw after a trade deal was mutual agreed between the two superpowers,” said James Hughes of Scope Markets. "However, Trump’s new attack on China has left investors worried that a flare-up in tensions could affect the market recovery."

“Trump’s handling of the coronavirus crisis has been widely condemned as his rambling press conferences, mixed messages regarding lockdown and dubious medical advice have seen his ratings fall.

“With Trump’s re-election hopes taking a hit it seems the focus of his efforts are in deflecting from his performance and instead of trying to steer the nation through this crisis, he will look to find ways to blame China for the crisis,” Hughes added.

A downturn in already rock bottom sentiment towards the travel sector saw shares in Intercontinental Hotels (LON:IHG) marked down 6% ahead of results later this week. Budget airline easyJet (LON:EZJ) and cruise giant Carnival (LON:CCL) were not far behind with falls of 5.3% and 4.3%, respectively.

Aero engines maker Rolls Royce (LON:RR.), which may have to cut 8,000 jobs amid the abrupt curtailment of air travel, was off 4.4%.

Investors moved back into defensive stocks or those that might potentially benefit from the lockdown.

In the case of online grocer Ocado (LON:OCDO) it is both a beneficiary of the house arrest of most of the UK population and a defensive play. Its shares opened 3.3% higher.

And takeaway giant Just Eat (LON:JET) advanced 2.4%, while drug group Hikma (LON:HIK) was buoyed by a resurgent health sector as it rallied 2.2%.

Proactive news headlines:

Union Jack Oil PLC (LON:UJO) has relayed communications by West Newton operator Rathlin Energy to the communities in the vicinity of the project in East Yorkshire relating to the coronavirus (COVID-19) pandemic. “This update is to let you know that we are moving our programme of works forward, in line with the latest government and public health guidance on COVID-19. We continue to follow the advice closely,” Rathlin said in a letter. Rathlin detailed that, as from today, it is starting the construction of an access track to the West Newton B site.

Open Orphan PLC (LON:ORPH) has signed a new contract with a US biotechnology company for the provision of a respiratory syncytial virus human challenge study. The group said the contract is projected to deliver £3.5mln in revenue all of which is expected to be recognised in 2020. This new contract follows the signing in March of another respiratory syncytial virus (RSV) human challenge contract, now underway, for an initial £3.2mln. Open Orphan said the contract wins underscore its position as a world leader in the provision of viral challenge studies, vaccine and viral laboratory services, which is a particularly hot topic following the onset of coronavirus (COVID-19). Meanwhile, the company also revealed that Trevor Phillips is going to stand down as its chief executive officer.

Gfinity PLC (LON:GFIN) has revealed that is to run a second instalment of the ePremier League Invitational tournament that sees professional players and celebrities represent teams in electronic matches. Participants will play each other in a knock-out format using EA SPORTS FIFA 20 on a PlayStation 4 console. Among the players taking part are Phil Foden (Manchester City), Billy Gilmour (Chelsea), James Maddison (Leicester City), John Egan (Sheffield United), Ryan Sessegnon (Tottenham Hotspur) and Callum Wilson (Bournemouth). Games will be broadcast on SkySports, YouTube and Twitch with the final also to be shown on Sky Sports Premier League, Main Event and worldwide.

OptiBiotix Health PLC (LON:OPTI) announced that it has entered into a non-exclusive license agreement for its SlimBiome trademark with Smart For Life, Inc. and related launch of cookies containing OptiBiotix's SlimBiome proprietary weight management technology in the USA and Canada. The life sciences group, which is developing compounds to tackle obesity, high cholesterol, diabetes and skincare, said the license is contingent on an annual minimum order quantity and the first order within thirty days of signing the agreement. Smart For Life - https://www.smartforlife.com - is a US-based company that was founded in 2002 by Dr Sasson Moulavi, a bariatric doctor.

ANGLE PLC (LON:AGL) (OTCQX:ANPCY) has said its liquid biopsy system provides a “straightforward and scalable approach” to analysing and assessing treatment options for men with advanced prostate cancer. That was the conclusion of associate professor Amir Goldkorn, whose team at the University of Southern California, used ANGLE’s Parsortix device as part of its workflow to decide which drugs or drug combinations to give patients. Partsortix harvests the tell-tale signs of cancer called circulating tumour cells (CTCs) so that they can then be assessed. It offers an alternative to physical biopsies, which are invasive and painful, and antibody-based methods of capturing of cells.

Diversified Gas & Oil PLC (LON:DGOC) has told investors it maintained production levels in the first quarter and it is to pay a 3.5p per share dividend for the period. In a trading update, the company said its production in the three months ended March 31, 2020, was marked at 94,000 barrels of oil equivalent per day (boepd) – 564mln cubic feet equivalent per day – helped by the group’s well management programme which offset natural declines. Adjusted underlying earnings (EBITDA) were reported at US$78mln for the period, in line with the prior period, with sales prices supported by a hedged price of US$2.73 per mln, the group added.

Bushveld Minerals Ltd (LON:BMN) has said it produced a net attributable 482.5 metric tons of vanadium (mtV) in the form of Nitrovan during the first quarter of 2020, marginally ahead of production in the corresponding period a year ago, with this quarter affected by shut-downs related to the coronavirus. In an operational update, the company also noted that it booked sales of 898 mtV, or 664.5 mtV 74% net attributable. Underlying production costs rang in at US$18.90 per kilogramme, an 8% decrease relative to the first quarter of 2019, supported by a weaker ZAR/USD exchange rate.

Vast Resources PLC (LON:VAST) has commented on articles published in the Zimbabwean press, in the course of the week commencing April 27, 2020, regarding the Chiadzwa Community concession block joint venture in the Eastern Highlands of the country, for which it is currently awaiting finalisation. In a statement, the company noted that it, and its subsidiaries have, throughout the joint venture process, maintained constant dialogue and interaction with the community and all stakeholders who have formally written to the company maintaining their support. The company said it continues to act in good faith to the benefit of the Republic of Zimbabwe and the entire community, and always in accordance with the instructions and direction of the relevant governmental authorities.

Cadogan Petroleum Plc (LON:CAD) has confirmed a 15% increase in year-on-year production during 2019, although losses in its gas trading and services divisions impacted profit for the year. In its annual financial report, the Ukraine-based producer said some 104,816 barrels oil equivalent flowed in 2019, up from 91,085 barrels the year before. Cadogan generated US$5.9mln of gross revenue, down from US$14.7mln in the comparative period of 2018. Average realised prices dropped to US$47.2 per barrel oil equivalent, versus US$51.3 in 2018.

Iofina PLC (LON:IOF) has said its IO#8 iodine plant in western Oklahoma is set to face a decline in its brine supply just weeks after coming online. Iofina’s brine supply partner for its number 8 plant is a saltwater disposal (SWD) operator that sources brine from multiple hydrocarbon producers. On May 1, the SWD operator informed Iofina that oil and gas operators have shut-in or intend to shut-in wells due to reduced operating margins at current oil prices; this is likely to materially affect the volumes of brine available for iodine isolation at IO#8.

Verona Pharma PLC (LON:VRP, NASDAQ: VRNA) said, after the London market close on Friday, that six abstracts presenting “clinically relevant” findings from its trials of ensifentrine for chronic obstructive pulmonary disease have been accepted by the American Thoracic Society (ATS) International Conference. The group said they have been published on the ATS website and in the peer-reviewed publication, American Journal of Respiratory and Critical Care Medicine. Included was a late-breaking abstract that expands on Phase IIb efficacy and symptom data released on January 31 covering nebulised ensifentrine added on to tiotropium demonstrated.

Red Rock Resources PLC (LON:RR.), the natural resource development company with interests in gold, manganese and minerals, has announced that Scott Kaintz, an executive director and COO and CFO of the company, who now has increased responsibilities at Regency Mines PLC where he has taken on the CEO role, is to become a non-executive director of Red Rock, effective from May 1, 2020. The group said he has agreed to remain in a non-executive role to oversee for a period a seamless transition of his responsibilities at the company as Red Rock brings in a new CFO. Red Rock chairman Andrew Bell commented: "Scott has been an important part of Red Rock's history. We record our gratitude and appreciation for his hard work and fine qualities, and wish him well in his future career. His willingness to stay on for a time as a non-executive is much appreciated."

Braveheart Investment Group PLC (LON:BRH), the fund management and strategic investment group has announced that, further to its announcement on March 3, 2020, it has converted into equity the £60,000 of convertible loan it held in Kirkstall Limited and as a result, Braveheart's shareholding has increased to 80%.

Curzon Energy PLC (LON:CZN) has said it continues to the advance the due diligence process with the Sun Seven Stars Investment Group regarding the potential acquisition of a 100% interest in London Critical Metals Market and good progress has been made to date. The company added that it will make further updates as appropriate. Curzon also announced that it has agreed to refinance its outstanding secured loan notes of £216,553 and its unsecured loan notes of US$200,000. As previously announced on February 13, 2020, the company has further agreed with the Secured Note lenders to capitalize the amounts due to date into a new principal amount of £263,265 as of April 1, 2020, with the interest rate to remain the same at 13% per annum, while the maturity date of the Secured Loan notes has been extended and is now the sooner of the completion of a reverse takeover, or 1 October 2020. And as previously announced on February 13, 2020, the company has agreed with the Unsecured Note lenders to refinance by extending the existing balance to October 1, 2020, with the interest rate remaining the same at 15% per annum, and the total outstanding principal and interest is approximately US$238,918. 

6.25am: Heightened verbal hostilities 

The FTSE 100 looks set to open its weekly account in negative territory amid heightened verbal hostilities between America and China over the origins of the coronavirus.

Comments from US secretary of state Mike Pompeo that he has seen evidence the outbreak emanated from a facility in Wuhan have ramped up the tension levels.

“There's enormous evidence that that's where this began. We've said from the beginning that this was a virus that originated in Wuhan, China,” Pompeo told American TV.

“We took a lot of grief for that from the outset. But I think the whole world can see now. Remember, China has a history of infecting the world, and they have a history of running substandard laboratories,” he added.

President Trump hinted at potential sanctions as a result of what has been seen as a lack of transparency in the part of the People’s Republic.

“Having only recently signed a trade deal with China, just prior to the outbreak of the current pandemic, he caught the markets a little off guard by comments that raised the prospect of raising new tariffs against them on the premise that the virus was their fault, and that they sought to spread it on purpose, or at the very least did little to halt its spread,” said Michael Hewson of CMC Markets.

On the oil market, American crude was once again under pressure with West Texas Intermediate down almost 6% at US$18.63 on worries over the deteriorating economic outlook.

Here in the UK, it looks likely to be another busy week for scheduled corporate news - although little is due today - with BT (LON:BT.A) set to update the market amid reports that it intends to slash the dividend. ITV, (LON:ITV), National Express (LON:NEX), Trainline (LON:TRN) and Intercontinental Hotels (LON:ICH) are among the other big names reporting.

Significant announcements expected on Monday:

AGMs: Rightmove PLC (LON:RMV)

Economic data: UK construction PMI

Around the markets:

  • Sterling US$1.2449, flat
  • Gold US$1,707.30 an ounce, up 0.4%
  • Brent crude US$26.21 a barrel, down 0.9%

City headlines:

Financial Times

  • Draft rules laid out for UK workplaces to ease lockdown
  • Consultants in line of fire over projects to tackle coronavirus
  • Banks to book more than $50bn against bad loans
  • UK steps up plans to train 50,000 form fillers for post-Brexit trade
  • Ministers unveil stabilisation plan for UK universities

Times

  • Record fall in business confidence
  • Rolls-Royce runs into trouble as flying hours collapse 90%
  • Business owners get ready for bounce back loan scheme
  • Rock star of US investing gives his first online show
  • Rich landlords join forces in Britain’s most unlikely union

Telegraph

  • UK fishing ports face collapse after demand plummets
  • Warren Buffett sells all shares in major airlines amid $50bn loss
  • ‘Risky’ pubs and restaurants shunned by energy market

Guardian

  • Sports Direct managers accuse firm of making them work on furlough
  • How Tesco's 'doomsday exercise' helped it cope with the coronavirus

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