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FTSE 100 makes decent gains as China/US fears take a backseat but Wall Street is mixed

The benchmark of the UK's biggest companies closed up almost 54 points, or 0.87%, at 6,220 on Tuesday

Electrocomponents -
FTSE 100 continued Monday's momentum and closed higher on Tuesday
  • FTSE 100 index closes up 53 points
  • Meggitt leads the index higher
  • Aerospace stocks wanted on reports of rethink on 14-day isolation requirement for overseas arrivals

5.05pm: FTSE finishes higher

FTSE 100 index made decent gains again on Tuesday, finishing not far from one percent higher.

The benchmark of the UK's biggest companies closed up almost 54 points, or 0.87%, at 6,220. The midcap FTSE 250 was also ahead, finishing over 158 points higher at 17,436.

"Stock markets in Europe have posted decent gains for a second day in a row as a slight thawing of US-China trade relations, combined with hopes surrounding the easing of lockdown restrictions has boosted equity sentiment," noted David Madden, analyst at CMC Markets.

"It was reported last night that Chinese state controlled companies placed orders to purchase agricultural goods from the US. The purchases send out a positive message that the two largest economies in the world are still trading, despite the rising tensions in relation to Hong Kong."

Over in the US, traders appear to have largely shrugged off the civil unrest in a number of cities, while the reopening of various states' economies after lockdown is helping sentiment.

The Dow Jones added over 116 points at 25,591, while the S&P 500 gained nearly four points. The tech heavy Nasdaq  though shed over 34 at 9,517.

3.55pm: Aerospace stocks lifted by reports of government U-turn on quarantining

Although it was showing signs of flagging a bit towards the end, the Footsie had another good day on Tuesday.

London’s index of blue-chip shares was up 51 points (0.8%) at 6,217, led by aerospace engineer Meggitt PLC (LON:MGGT), which was up 11.3% at 314.30p.

Melrose Industries PLC (LON:MRO), which owns aerospace and automotive engineer GKN, was not far behind with an 8.7% advance to 129.4p.

Sentiment towards the aerospace sector softened on reports that the government might modify its demands that visitors (returning) to Britain arriving from next Monday will have to isolate for 14 days.

There’s talk of the rules being relaxed by the end of this month for people arriving from countries that have low infection rates.

2.50pm: US indices mixed

As has often been the case in recent days, the NASDAQ Composite is out of step with the other main US benchmarks, opening lower.

The NASDAQ was off 6 points (0.1%) at 9,546 while the Dow Jones was up 82 points (0.3%) at 25,557 and the S&P 500 was up 4 points (0.1%) at 3,060.

In London, the FTSE 100 was in a more decisive mood, rising 49 points (0.8%) at 6,215, helped by the strength of oil giants BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB), as oil prices hit a three-month high.

BP was up 4.8% at 325.8p and Shell was 2.9% firmer at 1,286.2p.

“Oil prices ticked up on reports that OPEC+ is set to bring forward its meeting to Thursday, with a short extension of the current production cuts as the most likely outcome,” noted SP Angel, the boutique broker.

“Market consensus suggests the group will extend the current output restrictions for one to three months,” SP Angel said. “As it stands, without an extension the extraordinary cuts agreed upon in April – 9.7mln barrels of oil per day will expire at the end of June.”

1.45pm: US indices to open higher

US benchmarks were expected to resume yesterday’s advance when trading restarts at 2.30pm.

Spread betting quotes indicated the Dow Jones index would open around 165 points higher at 25,640 while the S&P 500 was expected to rise 15 points to 3,071.

In London, the Footsie was mirroring the weather, heating up nicely at 6,232, up 66 points (1.1%).

Her Majesty’s Revenue & Customs has revealed that as at the end of May, 8.7mln jobs had been furloughed. The total amount claimed under the furlough scheme stood at £17.5bn.

Earlier on, the Bank of England revealed that £7.4bn of consumer debt was repaid in debt, which was twice what was repaid in March – and that, at the time, was a record level of repayments.

Before getting too carried away with an apparent newly found fiscal rectitude, the figure was due to a collapse in new borrowing to £11.8bn; to put that in perspective, that’s about half the amount that was borrowed in February.

UK citizens – sorry, subjects – are also putting more money away for a rainy day, with saving deposits up by £16.2bn in April.

“Borrowing has fallen off a cliff,” noted Sarah Coles, a personal finance analyst at Hargreaves Lansdown.

“Given the fact that consumer credit was growing at 10% a year a few years ago, it’s astonishing that we’re currently borrowing less than we did this time last year,” she declared.

“We’ve also beefed up our savings, and have been salting away an extra £5 billion a month since the crisis hit.

“This will come as painful news to businesses that have relied on our willingness to borrow and spend, but will make it far easier for us all to weather the uncertainties that lie ahead,” Coles added.

12.05pm: Supermarkets miss out

Supermarkets were among the few blue-chips to miss out on the market’s advance this morning.

Wm Morrison Supermarkets PLC (LON:MR), down 2.8% at 185.3p, was the top faller, followed by Tesco PLC (LON:TSCO), down 1.7% at 227.89p, which announced this morning that its chief bean-counter will be leaving, Alan Stewart, will be leaving at the end of April 2021.

“Out with the old and in with the new. When someone takes charge, they will often want to surround themselves with their own team and the incoming CEO at Tesco, Ken Murphy, looks to be no exception. The news that the supermarket’s current finance chief Alan Stewart will step down in 2021 isn’t, therefore, a big surprise,” suggested AJ Bell’s investment director, Russ Mould.

“He will depart with a lot of goodwill. After joining from Marks & Spencer in 2014, Stewart, along with chief executive Dave Lewis who leaves at the end of October, was instrumental in repairing the damage wrought by an accounting scandal.

Elsewhere in the sector, even glamour stock Ocado Group PLC (LON:OCDO) was down in the dumps. More of a technology stock now than a grocery play, Ocado was nevertheless down 1.4% at 2,198.84p.

Another technology stock, Rightmove PLC (LON:RMV) was off the pace after two reports today laid bare the state of the UK housing market at the height of the lockdown.

The property listings website operator fell 1.0% to 584.4p.

Commenting on the slump in mortgage approvals in April, Hugh Wade-Jones, the managing director of Enness Global Mortgages, said, “it’s important to remember that this data only provides a snapshot of market conditions and one that was taken in the midst of a full market shutdown”.

“You wouldn’t cut someone down at the knees and expect them to run a marathon and quite frankly, it’s a wonder that any mortgages were approved at all, let alone funds deployed.

“So while the UK property market may be experiencing an out of body experience due to an abrupt reduction in activity, it’s far from being pronounced and although it may take a month or two to see a recovery materialise, early indicators at ground level suggest there is plenty of life in it yet,” he said.

The FTSE 100 was up 62 points (1.0%) at 6,229

11.20am: Mortgage approvals slump in April

The Footsie continued to advance in the second half of the morning.

London’s index of heavyweight shares was up 68 points (1.1%) at 6,235, just a few points off its intra-day high.

Following on from the release this morning of the Nationwide’s House Price Index, the Bank of England (BoE) has released house purchase mortgage data for April.

House purchase mortgage approvals fell to 15,800 in April from 56,100 in March; the consensus forecast was for a slump to 24,000.

“April’s level of 15,848 in mortgage approvals for house purchases was by far the lowest since the series started in 1993. The previous low was 26,359 in November 2008. It was 57,818 below the more than six-year high of 73,660 that had been seen in February,” observed Howard Archer, the chief economic adviser to the EY ITEM Club.

“The EY ITEM Club suspects house prices could fall back 5% over the next few months.

“Despite the easing of restrictions on the housing market, the EY ITEM Club suspects that the upside to activity may be limited for some to come.

“Indeed, a survey by Zoopla found that 41% of those asked had put moving plans on hold owing to the uncertainty, loss of income, or future prospects for their finances,” Archer said.

Net consumer credit fell by £7.4bn in April after declining by £3.8bn in March. The market had pencilled in a figure of £4.5bn.

“April’s money and credit figures show that the Treasury's and the BoE’s policy response to COVID-19 quickly funnelled cash to struggling businesses. Private non-financial corporations' broad money holdings increased by a huge £17.7bn in April, following the unprecedented £24.1bn rise in March,” reported Samuel Tombs at Pantheon Macroeconomics.

“The combined increase in March and April equates to a hefty 8% of quarterly GDP [gross domestic product], or 42% of quarterly profits. This spike in liquidity is in stark contrast to the 2008/09 recession, when firms' cash holdings declined right from the onset of the downturn,” Tombs added.
 

9.40am: Market ignores sterling's strength to push Footsie above 6,200

The Footsie was back above 6,200 even as sterling was racking up the gains on forex markets against the US dollar.

The FTSE 100 was up 48 points (0.8%) at 6,215, despite the pound increasing in value by four-tenths of a cent to US$1.2533. A strong exchange rate is generally reckoned to be bad news for the many global players in the Footsie.

“Risk sentiment continues to trade extremely well as the market ignores the downside risks of US-China friction, US political unrest and the impact of the virus. The focus seems to be on the reopening of the economy and the ample liquidity in the system that needs to be put back into risk assets. The fact that this risk rally is difficult to understand also means that it is under-owned,” said Rony Nehme, the chief market analyst at Squared Financial.

“We also believe that the market has been fading strength in commonwealth currencies, given the negative backdrop of US-China trade tensions and the impact of the virus on growth,” he added.

The market does not seem in the mood to pay much heed to coronavirus (COVID-19) statistics so the latest statistics from the Office for National Statistics (ONS) on weekly death occurrences in England and Wales might well be ignored.

Nevertheless, the ONS reported that a total of 43,837 deaths involving COVID-19 were registered in England and Wales between 28 December 2019 and 22 May 2020.

In England, the number of deaths involving COVID-19 in care homes that were registered by 22 May was 12,142, while in Wales the number of deaths was 591.

The numbers of deaths involving COVID-19 is defined by the ONS as cases where COVID-19 or suspected COVID-19 was mentioned anywhere on the death certificate, including in combination with other health conditions.

“If a death certificate mentions COVID-19, it will not always be the main cause of death but may be a contributory factor,” the ONS said.

8.55am: Gains modestly extended

The FTSE 100 opened Tuesday's session modestly higher amid hopes the global economy is slowly pulling out of the mire as coronavirus (COVID-19) lockdown restrictions are eased.

The index of UK blue-chip shares rose 26 points early on to ​​​​​6,192.87.

UK blue-chips followed the lead set by Wall Street overnight, which nudged into positive territory.

Asia too was higher today, though US futures currently point to a down day there as unrest over the George Floyd murder looks set to be met with a strong response with President Trump ready to deploy the army.

May's Nationwide House Price Index reading, the first since lockdown in March, asked more questions than it answered.

However, Howard Archer, chief economist of the influential EY Item Club, made this forecast: “[We] suspect house prices could fall back 5% over the next few months. Despite the easing of restrictions on the housing market, we suspect that the upside to activity may be limited for some to come.”

Housebuilders Barratt Developments (LON:BDEV) and Taylor Wimpey (LON:TW.) rose 1.5% and 1% respectively, while Persimmon (LON:PSN) was flat.

Rolls Royce (LON:RR.), up 4%, topped the risers with the shares recovering further from the markdown that followed the downgrade of the aero-engine maker’s debt to junk status.

Cruise giant Carnival (LON:CCL) also found a few fans in the City as it sailed 3% higher. On the FTSE 250, travel giant TUI (LON:TUI) was up 9%.

Proactive news headlines:

Gaming Realms PLC (LON:GMR) has highlighted “high levels” of growth in its licensing revenues across April and May. In a trading update, the AIM-listed firm said licensing revenue was up 80% over the five months to May 31, 2020, while revenues from its social division were 15% higher. Gaming Realms said the stronger performance had been underpinned by continued growth in new licensing partners such as new deals with 888casino.com, Sky Betting & Gaming in the UK and Draft Kings in the US state of New Jersey.

Inspired Energy plc (LON:INSE) said its board has been encouraged by the performance of the business, which remains cash generative, during the coronavirus (COVID-19) lockdown period as it posted its full-year 2019 results. The consultant for energy procurement, utility cost optimisation and legislative compliance in the UK and Ireland believes it is well-positioned to respond effectively as activity levels continue to recover. The company said its corporate order book, which rose 9% to £57.5mln during 2019, had further increased to £60.1mln by the end of April.

Braveheart Investment Group PLC (LON:BRH) said things are starting to roll in the collaboration between Kirkstall, its investee company, and Animal Free Research UK. The non-animal medical research charity has awarded the first three projects that will use Kirkstall's Quasi Vivo system in research related to the coronavirus (COVID-19). Imperial College London will be modelling early immune responses to SARS-CoV-2 in a fluidic system; the Centre for Sport, Exercise and Life Sciences at Coventry University will investigate obesity, diabetes and COVID-19; and the Johns Hopkins Bloomberg School of Public Health will look into the susceptibility of chronic obstructive pulmonary disease (COPD) and cigarette smoke airway epithelia to SARS-CoV-2.

Amur Minerals Corporation (LON:AMC) has said it is to hold an extraordinary general meeting on June 19, with the main item on the agenda a resolution to increase the amount of shares the company is allowed to issue. “The directors remain cognisant at all times of potential mergers, acquisitions or investments which would benefit the company's business,” Amur said in its official notice to the market. “Such potential transactions include acquiring interests in revenue-generating assets or financial instruments within the mining sector to provide the company with a reliable source of income going forward, or where the company will be able to add short to medium-term value.”  The proposal is that the company be allowed to increase the amount of shares it can issue from 1bn to 2bn.

Zoetic International PLC (LON:ZOE) said it has raised £350,000 by selling stock to an existing individual shareholder. Private investor John Story has increased his stake in the CBD specialist to 5.06% by acquiring 8.75mln share at 4p each. The proceeds will be used to fund the new US distribution contracts for its Chill range of cannabidiol products.

Circassia Group PLC (LON:CIR) said it has been provided access to a £5mln equity finance facility by the North Atlantic Small Companies Investment Trust (NASCIT) and noted stock market investor, Richard Griffiths. The facility will be available until November 30, and the new stock will be issued at “the lower of 24.6p and the price at which Circassia may issue any other new ordinary shares”. NASCIT will subscribe to 70% of the shares, Griffiths the remainder. Chairman Ian Johnson said he was “grateful” of the support from the company’s two key investors.

Iconic Labs PLC (LON:ICON), a multi-divisional new media and technology business, announced that it has received a notice of exercise from European High Growth Opportunities Securitization Fund in respect of the exercise of its conversion rights under its Convertible Bonds in respect of the first tranche drawn down under the Financing and Settlement Agreement for the aggregate principal amount of £50,000 resulting in the issue to the investor of 500,000,000 new ordinary shares.

Condor Gold PLC (LON:CNR) (TSX:COG) has announced that following an exercise of warrants with an exercise price of 25p per warrant, it is issuing 817,927 new ordinary shares with a nominal value of 20p each in the capital of the company and has received gross proceeds of £204,482.

Tiziana Life Sciences PLC (LON:TILS) (NASDAQ:TLSA), a US and UK biotechnology company that focuses on the discovery and development of novel molecules to treat human disease in oncology and immunology announced that it has allotted and issued 1,498,685 ordinary shares in respect of the exercise of 1,498,685 warrants at a price of 39p and 50p per share, yielding £710,843 in cash proceeds for the company.

SIMEC Atlantis Energy PLC (LON:SAE) has announced the appointment of Investec Bank as its nominated adviser and sole broker, effective immediately.

Directa Plus PLC (LON:DCTA) has said that its annual general meeting (AGM) will be held on Friday, June 26, 2020, at 12.00pm (CEST) at ComoNExT - Science and Technology Park, Via Cavour 2, 22074 Lomazzo (Co), Italy. It noted that due to various governmental coronavirus (COVID-19) guidelines, no shareholders will be able to attend.

ImmuPharma PLC (LON:IMM), the specialist drug discovery and development company has announced that its Annual General Meeting (AGM) confirmed for Thursday, June 18, 2020, at 10.30am, will now be held at: 52 Grosvenor Garden, London SW1W 0AU. The group said the coronavirus (COVID-19) guidance rules still apply, as set out in the announcement issued on May 21, ad any shareholders attempting to gain access to the AGM will be excluded from the meeting on the ground of public safety.

KRM22 PLC (LON:KRM) the technology and software investment company that focuses on risk management for capital markets has said its annual general meeting (AGM) will be held at the offices of Fieldfisher LLP at Riverbank House, 2 Swan Lane, London EC4R 3TT on June 25, 2020, at 10.00am. In light of the government's ongoing response to the coronavirus (COVID-19) outbreak, banning all non-essential travel and gatherings of more than two people, the company requests all shareholders to submit their Form of Proxy or use the CREST Proxy Voting Service and not to attend the meeting in person.

Westminster Group PLC (LON:WSG), a leading supplier of managed services and technology-based security solutions worldwide has confirmed that its AGM will be held at the company's offices Westminster House, Blacklocks Hill, Banbury Lane, Banbury, Oxon OX17 2BS on June 25, 2020, at 11.00am. It said votes may be submitted prior to the AGM by mail using the Form of Proxy or in the case of CREST members, by utilising the CREST electronic proxy appointment service. In order to comply with the UK government's coronavirus (COVID-19) measures, the AGM is being convened as a "Closed Meeting" with a quorum of two and other shareholders will not be permitted entry on the grounds of safety. In addition, the company said it also intends to hold an investor webinar on July 23, 2020, to present an update on its activities and trading. Details will be made available on the company's website nearer the date of the AGM.

Touchstone Exploration Inc. (LON:TXP) (TSX:TXP), an oil and gas exploration and production company active in the Republic of Trinidad and Tobago, said it will be holding a live online interview and Q&A session with the company’s senior management team on Thursday, June 4, 2020, at 7.00pm BST. To join the event: https://vtm.clickmeeting.com/txp; room ID: 229-863-978. Or to listen by telephone, call +44 (20) 7048-4146 and provide the Participant PIN: 262163878 followed by the # key. The webcast will be recorded and made available on ValueTheMarkets.com - http://www.valuethemarkets.com/  - after the event.

Quadrise PLC (LON:QFI) has announced that its chairman, Mike Kirk, and its CEO, Jason Miles will provide a live presentation at the Proactive Investor webinar on Thursday, June 4, 2020, from 6.00pm. Investors can register to attend via the link: https://bit.ly/2TENuZq. It said no new material information will be disclosed at the presentation and a copy of the company's updated presentation being provided will be available on the company’s website on the evening of June 4.

Tiziana Life Sciences PLC (LON:TILS, NASDAQ:TLSA) said it has issued 1.499mln shares in respect to warrants exercised at 39p and 50p that brought in cash proceeds of £710,843. During May, the company issued a total of 1.743mln shares under its ATM sales agreement to meet sales of a total of 348,689 American depositary shares (ADS), bringing in gross proceeds of £1.6mln (US$1.985mln).

7.15am: Annual house price growth slows in May

The Nationwide’s index of house prices fell in May, sliding 1.7% to a reading of 435.5 from 442.8 in April.

The average price of a house sold in May was £218,902, down from £222,915 in the previous month.

“UK house prices fell by 1.7% over the month in May, after taking account of seasonal effects – this is the largest monthly fall since February 2009. As a result, the annual rate of house price growth slowed to 1.8%, from 3.7% in April,” reported Robert Gardner, the mortgage lender’s chief economist.

Gardner revealed that around 15% of people surveyed were considering moving house as a result of “life in lockdown”, with 34% stating they “think differently about their home as a result of the COVID-19 outbreak, especially the importance of a garden and the need for more indoor space”.

Shareholders in DIY products seller Kingfisher PLC (LON:KGF) will be pleased to learn that 22% of people surveyed said they had changed their mind over what constituted the most important aspects of a home and are considering improving their home as a result of COVID-19.

Spread betting quotes are suggesting the FTSE 100 index will open at around 6,186.

6.45am: Blue-chips to continue regaining lost ground

The FTSE 100 is expected to continue to regain lost ground on Tuesday as economic data show many countries around the world continuing to creep back towards normal in the wake of the ongoing coronavirus pandemic. 

London’s blue chips are tipped to start 33 points higher according to the IG spread-betting platform, adding to the near-90 point gain to finish at 6,166 a day earlier.

Wall Street stock indices finished modestly higher overnight despite a continued tension in the country as the President called for a military presence in the streets to quell Black Lives Matter protests after the police killing of George Floyd.

Overnight on Wall Street, the Dow Jones Industrials Average share index added almost 92 points or 0.4% to 25,475, while the broader S&P 500 rose 0.4% and the tech-led Nasdaq Composite added 0.7%.

Asian markets were in the green on Tuesday morning, led by the Nikkei 225 in Tokyo, up 1.5%, while the Hang Song in Hong Kong added 0.6% and the Shanghai Composite was just on the right side of flat. 

Tuesday’s agenda brings the fourth round of Brexit negotiations, which are taking place over video conference, as well as house price data from Nationwide and lending data from the Bank of England

On Tuesday's corporate agenda there is a continuation of the stream of mid-cap company updates and some macroeconomic data that will be of interest to investors in various industries.

Among the company news should be final results from Electrocomponents PLC (LON:ECM), with the market last hearing from the industrial distributor on March 23.

At that point, the FTSE 250 group confirmed a significant drop in sales volumes to customers into locked-down markets such as Italy and France.

With Electro reporting a strong cash position and saying it had been able to leverage its global supply chain and strong online offering to mitigate the worst impact, using its UK hub to meet global demand, analysts at Peel Hunt said they "don't see a reason for these mini-trends to have changed materially". 

Around the markets:

  • Pound - up 0.1% at US$1.2494
  • Oil - Brent up 0.8% at US$38.61
  • Gold - down 0.1% at US$1,748.60

Significant announcements expected on Tuesday:

FinalsElectrocomponents PLC (LON:ECM), Mediclinic International Plc (LON:MDC), Card Factory PLC (LON:CARD), Vianet Group PLC (LON:VNET), Inspired Energy plc (LON:INSE)

AGMs: Aviva PLC (LON:AV.), Saga PLC (LON:SAGA)

City headlines:

FT

  • Trump vows to deploy US military to quell protests - President says he will ‘dominate the streets’ following unrest over killing of George Floyd
  • Mining remains a bright spot in M&A gloom - most large mines are operating without interruption as China continues to suck in their products
  • Investor plans £15bn support for UK companies toiling with crisis loans - Business Growth Fund proposes state-backed scheme to aid indebted companies emerging from pandemic

The Times

  • We’ll compromise if you do too, Britain tells EU - compromise to be offered on fisheries and “level playing field” trade rules if the European Union backs off from its “maximalist” demands on regulatory alignment and fishing access.
  • Senior Facebook employees are openly criticising Mark Zuckerberg’s refusal to take action over posts by President Trump that rival social media sites have censured for “glorifying violence”. 
  • Investors, brokers and market-makers have given broad backing to proposals to cut the stock market trading day by ninety minutes to only seven hours.

Telegraph

  • Watchdog prepares legal action against insurers over Covid payouts - some insurers decided to pay out on claims as the threat of legal action loomed
  • Dealers are open again - but who wants to buy a car? The motoring industry is getting back into gear with socially distant selling, but questions remain over consumer demand
  • Monsoon tells landlords to waive rents or face closures - founder Peter Simon has been trying to offload the company for the past two months

Guardian

  • The ongoing coronavirus pandemic will haunt the US economy for a decade, wiping close to $8tn off economic growth, according to new projections released by the Congressional Budget Office (CBO).
  • The Ted Baker founder, Ray Kelvin, has slashed his stake in the fashion retailer by more than half, handing control of the company to an investor known as “the Rottweiler” as part of an emergency £105m fundraising to get the business through the coronavirus pandemic.
  • Shoppers rushed back to high streets and retail parks on Monday as the reopening of car showrooms, markets and some Ikea stores marked the easing of lockdown restrictions in England.

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