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FTSE 100 finishes under 6,000 as US Fed warns on virus impact

Footsie finished over 90 points down at 5,904. The FTSE 250 lost over 294 points at 15,878

Aston Martin Lagonda Global Holdings PLC - FTSE 100 to start lower as second-wave pandemic fears rise
European and US stocks were lower on Wednesday
  • FTSE 100 closes 90 points off
  • Wall Street benchmarks also lower
  • UK GDP down 5.8% in March

5.05pm: FTSE closes firmly lower

FTSE 100 index closed firmly lower midweek as the US Fed struck a downbeat tone on the economic future of the USA and while global coronavirus fears continue.

Footsie finished over 90 points down at 5,904. The FTSE 250 lost over 294 points at 15,878.

"A resurgence of virus concerns can be seen in the list of FTSE 100 stocks that are deep in the red today. Carnival, Rolls-Royce, Intercontinental Hotels and Compass are all in the line of fire if the push to reopen economies reverses and lockdowns return," noted analyst Chris Beauchamp at online trading group IG

"Whether this is just a temporary blip or the start of something more substantial remains to be seen, but it looks like we are in for some more weakness in equities for the time being."

Carnival (LON:CCL) was the top laggard on the blue-chip index, sinking 11.11% to 835p. Catering giant Compass (LON: CPG) slumped 7.85% to 1,150p.

On Wall Street the Dow Jones was off 466 points and the S&P 500 shed nearly 48.

Earlier, Federal Reserve chief Jerome Powell had said that additional policy measures from the Central Bank may be required to prevent lasting damage to the US economy.

3.50pm: Wall Street is a mixed bag

The Footsie was firmly in the red heading towards the close, while Wall Street was mixed as optimism on economic recovery cooled.

The UK's leading index dropped 55 points to 5,938 with the Dow Jones down 102 points to 23,661 and the S&P 500 flat at 2,868.

Nasdaq was doing better, bagging a rise of 58 points to 9,060.

Aside from fears of a second wave of coronavirus infections, recent optimism in US markets was dampened after Federal Reserve Chairman Jerome Powell said the economy is facing a long recession, potentially causing “lasting harm".

“The recovery may take some time to gather momentum and the passage of time can turn liquidity problems into solvency problems,” he said.

“Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”

Powell said the central bank is not looking at implementing negative interest rates, although President Donald Trump has invited it to do so.

“Powell himself highlights the fact that the crisis is driving inequality by citing that the Fed’s own analysis shows nearly 40% of households making less than US$40,000 per year had lost a job in March,” said analysts at ING, who expect another 12mln decline in payrolls in May.

 “Given this backdrop we strongly suspect there will be another round of major fiscal stimulus that receives broad support in Congress.”

2.25pm: Chancellor warns of a significant recession

FTSE 100 dipped further in the early afternoon after Chancellor Rishi Sunak warned of a “significant recession” following the GDP reading.

“Technically a recession is defined as two quarters of negative GDP, we've now had one...so yes, it is now very likely that the UK is facing a significant recession at the moment and this year,” he told Sky News.

Despite some optimism in the housing market, Capital Economics noted that a weakened economy, uncertainty and behavioural shifts from the coronavirus will hamper its recovery.

READ: Housing market restart will provide boost but may be short-lived

Sales are expected to be below 50% of their usual levels in May and June and will not go back to pre-virus figures in 2020, said economist Hansen Lu.

According to Lu, there will be an initial wave of transactions agreed before lockdowns, however a quarter of them could be cancelled, with slower demand to come thereafter as the pool of prospective new buyers has narrowed.

London’s big-cap index was down 59 points to 5,935.

1.30pm: Wall Street to open in the red

The Footsie held onto its midday losses, with Wall Street expected to have a dire start amid fears of a second wave of coronavirus infections.

US indices will have to recover from Tuesday’s plunge after Dr Anthony Fauci, a member of the country’s coronavirus task force, warned of the risks if the US releases businesses too soon.

“It's worth stressing that it's still very early days and new cases that are emerging are just an expected increase that comes from such action, rather than a spike that warrants further restrictions,” pointed out Craig Erlam, analyst at OANDA.

Ocado Group PLC (LON:OCDO) was among the blue-chip risers, up 1% to 2,073p, even though UBS initiated coverage with a ‘neutral’ recommendation.

Analysts said its massive potential is already reflected in the current price and they set a price target at 1,900p.

Analysts at the investment bank have Tesco PLC (LON:TSCO) and J Sainsbury’s PLC (LON:SBRY) on their ‘buy’ list, arguing the threat from discounters will recede and the coronavirus pandemic create new consumer spending patterns.

The main index was down 43 points to 5,951 after lunch, while sterling advanced 0.5% to US$1.2325.

12.05pm: Retailers down on April sales plunge

The Footsie shed 46 points to 5,947 ahead of lunchtime, with retailers adding to the general malaise.

Primark owner Associated British Foods PLC (LON:ABF) dropped 3% to 1,727.5p while clothier NEXT PLC (LON:NXT) was down 4% to 4,614p.

According to data released by the British Retail Consortium late on Tuesday, sales decreased by 19.1% in April, against an increase of 2.4% in April 2019, the worst reading since the monitor began in 1995.

Despite a 58% spike in online non-food sales, e-commerce did not make up for the loss of in-store purchases.

Shore Capital said that retailers face huge challenges as consumer confidence is set to remain low during and after the crisis.

Companies will operate on thin balance sheets despite state support, but those with enough cash will be able to snap up acquisitions at a convenient price.

“We anticipate a reduction in capacity and the probability of a whole new debate on the future of urban centres and the role that retailing plays,” the broker said, highlighting the accelerating shift to online shopping.

Among the survivors on the high street there will be Next, Primark and Marks and Spencer Group PLC (LON:MKS), analysts predicted.

10.50am: Analysts hope for sharp GDP recovery once economy restarts

The Footsie was firmly in the red in late morning, down 59 points to 5,935.

Analysts expect the GDP to plunge around 25% in the quarter to June, from the 2% dip in the quarter to March.

WATCH: Morning Report: FTSE 100 falls on fears of second wave of global coronavirus casualties

The summer outlook also depends on the effectiveness of safety measures while restrictions are lifted.

“From an economic standpoint, the delay in UK Covid-19 experiences means that we could see the timelines laid out by Johnson pushed back as lessons are learnt from those countries which ease lockdowns too much or too soon,” said Josh Mahony, analyst at IG.

However, some experts believe that such sharp declines in GDP will be followed by increases of the same tune.

“This isn’t a normal structural recession: it’s the result of deliberate shutting down of large sections of the economy,” commented William Ryder, analyst at Hargreaves Lansdown.

“It means that if businesses can keep going through the crisis, the recovery could be equally record-breaking when we emerge on the other side.”

According to Ryder, London’s stocks are diversified in terms of geography, so the economic data coming from abroad matters just as much as anything we read about the UK.

9.30am: housebuilders higher on easier lockdown restrictions

The Footsie pared its losses in mid-morning as the market still digests the latest figures on the UK economy.

London’s big caps shed 55 points to 5,939 as sterling rose 0.1% to US$1.2272.

The woes of TUI, Carnival, easyJet and International Consolidated Airlines dragging the index down were helped by housebuilders benefitting from looser lockdown rules.

Berkeley Group Holdings PLC (LON:BKG) was up 2% to 4,178p, while Barratt Developments Plc (LON:BDEV) and Taylor Wimpey plc (LON:TW. both rose 1% to 498.1p and 147.4p respectively.

Taylor Wimpey announced plans to reopen sales centres and show homes gradually from 22 May following updated UK government guidance on coronavirus.

Initially this will be for pre-booked appointments and with strict social distancing rules, the company said.

Perspex screens and distance marker guides will be installed with show home viewings unaccompanied and limited to one family at a time to view each house.

Since the UK implemented a lockdown in March, people could move if “reasonably necessary” but property viewings were halted and offices were shuttered.

Housing minister Robert Jenrick said these operations were allowed to resume, although virtual viewings are encouraged “where possible”.

Jenrick said the new measures unblock 450,000 transactions put on hold during the coronavirus outbreak.

8.35am: Weak start to Wednesday

The FTSE 100 opened down around 1% on Wednesday after the UK economy recorded its worst-ever monthly contraction – with the promise of worse to come as the coronavirus (COVID-19) pandemic rolls on.

The index of UK blue-chips fell 62 points to 5,932.49 in early trading.

Uk gross domestic product fell by 5.8% in March, according to official figures. This was the period in which the lockdown just started to kick in, so not a great deal of cheer was garnered from the fact the number was marginally better than expected.

“In essence, there’s not much in this data to offer too much in the way of comfort, as we know April and May are likely to be much worse, as the UK economy starts to take very baby steps out of lockdown this morning,” said Michael Hewson of CMC Markets.

“As we look ahead to the summer months it's likely to be a long and winding road, towards restarting the economy.”

Internationally, sentiment has been driven by a potential second wave of coronavirus infections in those countries deemed to have recovered early from the pandemic.

On the market, the travel stocks were again in the doldrums after UK health secretary Matt Hancock effectively cancelled the collective overseas holiday plans of the population on Tuesday.

Intercontinental Hotels (LON:IHG) led the Footsie fallers with a 4.5% decline, followed by cruises operator Carnival (LON:CCL), off 4.2%.

On the rise was building supplies specialist Ferguson (LON:FERG), whose latest update on trading was bad, but a smidgeon less bad than expected. The shares nosed 2.2% higher.

Proactive news headlines:

Gaming Realms PLC (LON:GMR) announced it has signed an agency agreement with Hasbro Inc (NASDAQ:HAS) for the play and entertainment firm to negotiate licensing opportunities for its Slingo brand. The AIM-listed company said the deal will enable Hasbro to provide licensing opportunities for new and existing territories in certain digital gaming categories outside the online real money gaming and lottery segments. Gaming Realms added that it selected Hasbro to supplement its licensing business based on its status as a top 6 global licensor as well as its “long and successful track record of licensing well-known game brands into a wide range of digital game and gambling categories with major digital gaming companies including Electronic Arts, Ubisoft, Scopely and Scientific Games”.

Union Jack Oil PLC (LON:UJO) chairman David Bramhill has told investors that excellent progress is being made bringing the Wressle oil field in North Lincolnshire to development. It comes as the project's operator confirmed the completion of four groundwater monitoring boreholes on the Wressle site, which are required under the project’s approvals, and a three-month period of monitoring and analysis will now take place. "Excellent progress is being made in respect of the development process at Wressle leading to 'first oil', expected during H2 2020,” Bramhill said in a statement.

Ariana Resources PLC (LON:AAU) said it has completed its initial earn-in work for Venus Minerals Ltd, a firm focused on copper-gold projects on the island of Cyprus. AIM-listed Ariana said it had spent €920,000 in the initial earn-in, giving it a holding in Venus of 9.24%, adding that it is committed to funding a minimum of a further €180,000 before October, at which time it will own a 12% stake. The company will earn-in up to 50% of Venus once it has committed a total of €3mln, with a further €1.9mln required to be spent between October 2020 and October 2022. Ariana also said that new licence applications for the New Sha Deposit, part of the Venus portfolio, have been submitted, adding that exploration results to date across the portfolio are “highly encouraging” including the discovery of a new zone of outcropping mineralisation at the Mariner project.

Kavango Resources PLC (LON:KAV) chief executive Michael Foster said he expects his team to make significant progress validating the thesis that its Botswana target is host to a “world-class” copper, nickel and platinum group deposit. His comments were made as the mine developer outlined a comprehensive early-stage exploration plan for the Kalahari Suture Zone, or KSZ for short. The idea of the programme is to identify “high-potential drill targets” in so-called underground traps - and in doing so increase the chances of future drilling success.

Brunner Investment Trust PLC (LON:BUT) has announced a change of portfolio manager and plans to at least maintain its dividend in this financial year. Lucy Macdonald has stepped down with Matthew Tillett, who has worked closely on Brunner for a number of years, now to take on the lead management role supported by global equity managers Jeremy Kent and Marcus Morris-Eyton. In a statement, Brunner added that Morris-Eyton is a long-standing member of the European Growth team of Allianz Global Investors (AGI), the trust’s investment manager. Carolan Dobson, Brunner’s chairman, said: "The Brunner Investment Trust is in a good place. The discount has narrowed significantly over the last few years and we have steadily increased the proportion of our shares held by wealth managers and platforms which now stands at around 40%.” She added: “Prudent management of the company's revenue account has left the company in the strong position of having 28.6p of revenue reserves per share compared to last year's dividend of 19.98p and the Board expects to at least maintain this level of dividend in this financial year."

Anglo Asian Mining PLC (LON:AAZ) has reported record revenues in 2019 and maintained its production forecasts for 2020 despite the coronavirus pandemic. For the year ended December 31, 2019, the Azerbaijan-focused miner reported a pre-tax profit of US$30.1mln, up 19% on the prior year, while revenues increased 2% to a record level of US$92.1mln. The company also declared a final dividend of US$0.045 per share, giving a total dividend for 2019 of US$0.08 compared to US$0.07 in 2018.

Canadian Overseas Petroleum Limited (LON:COPL) (CSE:XOP) has told investors that its board has authorised management to strike deals to issue shares to its non-secured creditors. It was agreed on May 12 and it will allow accounts receivable to be converted into shares at the same price as agreed in the separate agreement in the recent Yorkville-Riverfort equity placing agreement. The company, in its financial results statement, noted that at the end of the year it was experiencing liquidity issues which have extended into the current period exacerbated by the coronavirus (COVID-19) pandemic.

BlueRock Diamonds PLC (LON:BRD) said it has put the “important building blocks” in place to grow the miner following the restart of production at the Kareevlei operation in South Africa earlier this week. The company said it had negotiated a finance facility that will support sales of rough-cut stones. A new partnership, meanwhile, will see the precious gems sold in Antwerp, the world centre for the industry, rather than locally. BlueRock also outlined plans to keep its mining costs down, while operating the open-cast site within the new work regulations. It also updated on its financial position, stating it has around £1.2mln in cash and liquid assets.

Mosman Oil And Gas Ltd (LON:MSMN) has told investors that production continues at the Stanley field in Texas, albeit with output currently around 20% lower than the rate seen in the second half of 2019. The company, in an update, noted the challenges presented by the coronavirus (COVID-19) pandemic and market conditions. It said though that it believes its current cost structure will allow the company to remain profitable, even if oil prices are down to ‘the mid-teens’.

Metal Tiger PLC (LON:MTR) noted that further to its announcement of April 28, investee company Cobre Limited (ASX:CBE) has now revealed that it has completed the acquisition of the remaining 20% of shares in Toucan Gold Pty Ltd, which is now 100% owned by Cobre.  As previously announced, Metal Tiger has conditionally agreed to invest a further A$310,000, at Cobre’s IPO price of A$0.20 per share, which will result in the issue of 1,550,000 new Cobre shares to the AIM-listed investor in natural resource opportunities, subject to Cobre shareholder approval, which will maintain its interest in Cobre at 19.99%. Michael McNeilly, Metal Tiger’s chief executive officer commented: “This is an important step in the further development of the Perrinvale Copper Project. With complete control over the asset, Cobre can now progress the project in a manner of its own choosing at a pace which will prove exciting for shareholders.”

Panther Metals PLC (LON:PALM) has announced that it will hold its annual general meeting (AGM) at 9.00am on June 4, 2020. As the group expects significant restrictions on personal movement to still be in place due to the coronavirus (COVID-19) pandemic, the AGM will be an electronic meeting only. All voting at the resolutions will be conducted on a poll which means that shareholders should submit votes by proxy (by post, email or online voting) as soon as possible and all questions which shareholders wish to raise should be submitted in advance to [email protected].

Midatech Pharma PLC (LON:MTPH) (LON:MTP), a drug delivery technology company focused on improving the bio-delivery and bio-distribution of medicines has announced that China Medical System Holdings Ltd (CMS), its concert parties and the Company have mutually agreed to amend the relationship agreement entered into on January 29, 2019 Midatech and the CMS Concert Party have agreed to amend the agreement to remove CMS' rights to appoint a director and observer to the board of Midatech. In addition, in the event that a vote at a general meeting or election is required, the CMS Concert Party has agreed to vote their ordinary shares in the same manner and proportion as all other ordinary shares are voted by shareholders. The company said it remains in an "Offer Period" as defined in the Takeover Code in relation to the previously announced Formal Sale Process that is underway as part of its strategic review.

Faron Pharmaceuticals Oy (LON:FARN) (NASDAQFIRSTNORTH:FARON), the clinical-stage biopharmaceutical company, has announced Toni Hänninen, its chief financial officer acquired 3,500 ordinary shares in Faron at a price of €4.3255 per share on May 12, 2020. Following these purchases, it added, Hänninen holds 50,297 ordinary shares in the company.

6.45am: Footsie looks set for a dour start

The FTSE 100 is set to open around 1% lower on Wednesday as investors worry over a potential ‘second wave’ of the coronavirus (COVID-19) pandemic.

CFD and spreadbetting firm IG Markets sees the London benchmark some 60 points lower, making the price 5,943 to 5,946 with just over an hour to go until the start of trading.

It comes after Vodafone drove the FTSE 100 to a strong showing on Tuesday, before sentiment turned across global equity markets.

“It was a lacklustre trading session as concerns about a second wave of the coronavirus crisis played on traders’ minds,” said David Madden, analyst at CMC Markets.

“Countries such as China, South Korea and Germany have eased up on lockdown restrictions, which was seen as progress, but sadly the countries have seen an increase in the rate of new COVID-19 cases. The rate of new infections hasn’t been huge, but it has been enough raise a few eyebrows.”

In New York, the Dow Jones Industrials Average fell 457 points or 1.89% to close Tuesday’s session at 23,764. The S&P 500 dropped 2.05% to finish at 2,870 while the Nasdaq Composite was similarly 2.06% lower to end the session at 9,002.

Asian stocks were mixed today. Japan’s Nikkei 225 was down 0.4% trading at 20,281. But Hong Kong’s Hang Seng rallied to rise 0.2% at 24,302 and the Shanghai Composite was slightly higher at 2,892.

Around the markets:

  • The pound: US$1.2281, up 0.17%
  • Gold: US$1,704, up 0.05%
  • Brent crude: US$29.48 per barrel, down 0.5%
  • WTI: US$25 per barrel, up 5.9%
  • Bitcoin: US$8,898, up 1.42%

Significant announcements expected on Wednesday:

Trading announcements: Aston Martin Lagonda Global Holdings PLC (LON:AML), Spirax-Sarco Engineering PLC (LON:SPX), TP ICAP PLC (LON:TCAP)

Interims: TUI AG (LON:TUI), Compass Group PLC (LON:CPG), Sage Group PLC (LON:SGE), Marston’s PLC (LON:MARS), SSP Group plc (LON:SSP), Brewin Dolphin Holdings PLC (LON:BRW), Stock Spirit Group PLC (LON:STCK)

Economic data: UK GDP, US PPI

City Headlines:

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