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FTSE 100 closes nearly 3% higher as US spending plans cheer markets

Yesterday, the blue-chip benchmark closed down around 40 points at 6,064 as traders fretted about a second spike of coronavirus but today, Footsie finished up over 178 points, or 2.94% at 6,242.

Ashtead Group -
  • FTSE 100 index closes up 178 points
  • Wall Street in the green as Federal Reserve splashes out
  • UK payrolls fell by over 600,000 in April

5.15pm: FTSE closes firmly higher

FTSE 100 index closed firmly ahead on Tuesday as the rollercoaster ride with stocks continues.

Yesterday, the blue-chip benchmark closed down around 40 points at 6,064 as traders fretted about a second spike of coronavirus but today, Footsie finished up over 178 points, or 2.94% at 6,242.

Midcap FTSE 250 also surged, adding over 375 points, or 2.2% to 17,464.

The rise came as investors shrugged off news of more coronavirus cases as economies reopen to focus on spending plans in the US.

Over on Wall Street, the Dow Jones Industrial Average added over 422 points and the S&P 500 gained almost 63.

"The bullish sentiment is largely being fuelled by the belief the Trump administration is looking to set aside an extra $1 trillion for infrastructure spending," said David Madden, analyst at CMC Markets.

"The scheme would see funds being poured into roads, rail and 5G. The chatter of the stimulus package comes less than one day after the Fed announced they will start purchasing individual corporate bonds, so today the bulls are firmly in control."

3.55pm: Tuesday bubble punctured by Powell

Stocks on both sides of the Atlantic have run out of steam in the past few minutes, with the FTSE 100 now up just 141 points to 6,205.39, compared to the 222-point gain earlier.

On Wall Street the main indices have all deflated rather, as traders tune in to Fed chair Jerome Powell shoot the breeze in Congress. 

After the Fed's announcement about corporate bond-buying had provided the latest boost for markets, Powell seemed to be playing down the central bank's role, saying it felt it had to "follow through" and buy bonds because the plan was originally announced in March.

And if the market improves "we're happy to slow or even stop the purchases," the central bank chief said.

“It’s out of an excess of caution to preserve these gains for market function by following through,” Powell said.

“I don’t see us wanting to run through the bond market like an elephant snuffing out price signals, things like that.”

3pm: US shares take off

Wall Street stocks got off to a strong start on Tuesday, though their early gains slightly paled in comparison with those in Europe.

The Dow Jones jumped 694 points or 2.7% to 26,457.26 in the first half hour of trading, with the broader S&P 500 rising 2.4% and the tech-dominated Nasdaq Composite climbing 2.2%.

Boeing (NYSE:BA) and Caterpillar (NYSE:CAT), mirroring the gains for travel- and construction-related stock gains, were the top risers.    

Freshly released industrial production data was not necessarily helping the mood, as May’s number showed 1.4% month-on-month growth after the 12.5% decline in April, but it was less than the 2.9% expected.

Earlier retail numbers were much stronger than predicted, however, and the NAHB housing market survey produced a positive reading of 58, well up on the 45 from a month earlier. 

Back in London, the blue chip benchmark is up 214 points or 3.5% at 6,279.05.

Only four stocks are currently in the red, led by Paddy Power and Betfair owner Flutter Entertainment (LON:FLTR) and insurer Admiral (LON:ADM).

2.15pm: Travel stocks lead Footsie surge 

The FTSE 100 has been given a new lease of life as traders get out of bed across the Atlantic, striding 222 points or 3.7% higher to 6,287.31. 

Travel companies are leading the way, with Carnival (LON:CCL) up 16% and IAG (LON:IAG) up 11%, with easyJet (LON:EZJ) and engine maker Rolls-Royce (LON:RR.) not too far behind.  

READ MORE: TUI says UK bookings for next year are encouraging as holidays resume after lockdown

Travel investors are maybe buoyed by the Germany becoming the latest government to launch a new smartphone app that is hoped to give a boost to the tourism industry.

The Covid-Warn-App, which has similar characteristics to others launched by Italy, France, Poland, and Latvia, uses Bluetooth to measure and alert users if they have come close to another person who later tests positive for COVID-19.

All European Union members have also today agreed that such national coronavirus apps will be able to communicate with each other to help trace infections across borders.

US retail sales data also came in stronger than expected, jumping 17.7% on the previous month, way ahead of the 8% rise expected after sales in April declined 14.7%.

Things are not back to normal, by any means, with the level of clothing store sales still remained more than 60% below its February level, for example.

With the easing of lockdown in many states leading to a greater recovery in shopping activity than had been anticipated, economists at Capital Economics said they now estimate GDP contracted an annualised pace of around 30% in the second quarter, rather than the 40% fall previously expected.

12.40pm: Wall Street ups the pace 

US stock futures are pointing towards a strong start on Tuesday, having set the positive tone overnight.  

Wall Street reversed a faltering session at the start of the week when the Fed rode in to the rescue with confirmation of its latest bout of corporate bond-buying.

“The announcement helped shift attention from fears that rising coronavirus cases in some parts of the US and China would ultimately thwart efforts to kick-start the world’s two largest economies, this in spite of some 25,000 reported cases in the US over the weekend after Florida and Texas had removed most restrictions,” said analysts at Rabobank. 

The main events for the US later will be Fed chair Jerome Powell giving the first leg of his semi-annual monetary policy testimony to the Senate’s Banking Committee. 

Despite yesterday's boost with the announcement on corporate bond purchases, analyst Chris Scicluna at Daiwa Capital Markets said investors should expect more of what was said last week at the monthly policy meeting press conference, “with plenty of caution about the outlook for the labour market and inflation, and hence the need for monetary policy to remain supportive over the forecast horizon”. 

US data today includes retail sales and industrial production data for May, along with the NAHB housing survey and business inventory data for April.

Retail sales are expected to claw back around 8% after dropping by double that in April, while excluding auto sales is predicted to see growth of around 5.5%. 

Held back by weakness in the mining sector, industrial production is seen rising 2.9% month-on-month, following a drop of 11.2% the prior month. 

Back in Blighty, the FTSE 100 is continuing to inch ever higher, up 156 points or 2.6% to 6,220.7 at lunchtime.

11.55am: Investors say stock market is “overvalued”

The Footsie was up 150 points or 2.5% by not long before midday to 6,214.73 but most professional investors think the stock market is a bit too toppy, according to a poll.  

Some 98% of fund managers surveyed by Bank of America Merrill Lynch believe markets are “overvalued”.

A coronavirus second wave is seen by 49% as the biggest “tail risk”, coming on the day that officials in Beijing reported that 106 people in the capital city are confirmed to have COVID-19, the most serious flare-up in China since February. 

Institutional investors fear of a prolonged recession fell to a net 46% in June from 93% in April, the survey found, while cash made up 4.7% of portfolios in June, down from 5.7% a month before. 

Investors view ‘long US tech and growth stocks’ is the most crowded trade at the moment, with around 72% of investors plumping for this option, up from the month before.

Talking of tech stocks, the European Commission has just opened a formal antitrust investigation into Apple’s (NASDAQ:AAPL) Apple Pay service after Spotify (NYSE:SPOT) complained about the 30% commission that customers were being charged for subscriptions via the app.

10.45am: Blue chips bouncing

In mid-morning trading, the FTSE 100 is up 128 points or 2.1% to 6,192.86, as markets worldwide rally in the wake of central bank moves.

“What seemed like a significant turn lower for equities has turned into another bounce, with the Fed and BoJ actions overnight providing the catalyst for the revival in risk appetite,” said Chris Beauchamp at IG.

“While the timing of the Fed’s moves will be viewed as somewhat suspect, given that it comes just as the VIX spikes and equities take a dive, the reality is that activist central banks are a feature, not a bug, and will remain the driving force for markets thanks to the boost to liquidity and confidence that these provide.”

Carnival (LON:CCL) is the top riser on the Footsie now, perhaps on the back of the announcement from TUI that it was planning to begin gradually restarting its cruise business with short three- to four-day cruises this summer. 

Looking deeper into the earlier UK labour market numbers, economist Kallum Pickering at Berenberg pointed out that data on hours worked, vacancies, claimants and furloughed workers “depicts a major deterioration in labour market activity”.

“Nevertheless, the data are, for now at least, better than anticipated and support some cautious optimism. With a lot of help from the government employment subsidy scheme, the core of the labour market remains protected from short-term acute shock from the pandemic.

“In time, the headline unemployment and employment data could deteriorate materially. Such indicators often lag trends in general economic activity. The risk of a massive wave of layoffs when the Coronavirus Jobs Retention Scheme comes to an end in October.”

9.40am: Mix of risky and defensive

London’s blue chip stocks have given up some of their initial froth but are still boasting triple-digit gains for the morning. 

The FTSE 100 is up 139 points or 2.3% to 6,203.56 as the index is carried higher on the wave of positive momentum around global markets, some upbeat company reports and a surprisingly small rise in UK unemployment.      

Gains for the Footsie have been led by the oil, consumer goods, tobacco and construction sectors. 

“This is interesting as it shows investors have been drawn to a mixture of defensive and more risky sectors, rather than just one of them being in vogue,” said Russ Mould, investment director at AJ Bell.

After reports that Donald Trump is planning to unveil a vote-winning US$1trn infrastructure plan, stocks focused on the US construction market were given a boost, such as CRH (LON:CRH) and Ferguson (LON:FERG).

Travel stocks were also prominent among the top risers, with easyJet (LON:EZJ) flying higher after the budget airline agreed to defer more Airbus aeroplane deliveries to beyond December 2022.

Tour operator TUI (LON:TUI) gave a boost to the sector and its shares after saying it is poised to “partially restart” its summer 2020 programme after the easing of travel restrictions in Europe, providing the catalyst for cruise operator Carnival (LON:CCL) and British Airways owner IAG (LON:IAG) to rise up the leaderboard.

8.55am: Bouncebackability

The FTSE 100 opened up in sparkling form on Tuesday with a gain of more than 150 points without a second glance being given to the latest dire UK unemployment data.

The index of UK blue-chips opened 152 points higher at 6,216.6.

Driving the positivity was the US Federal Reserve’s move to buy US company debt. 

Closer to home, the UK employment print was bad – just not as bad as anticipated as the number of workers on UK payrolls fell by over 600,000. Scratching the surface, the latest data for March to May revealed a record drop in the number of hours worked with the country going into coronavirus (COVID-19) pandemic lockdown.

Economists suggested the full effects of the unprecedented economic slowdown, which resulted in a 20% fall in UK GDP, will only be seen in the autumn when government support such as the furlough programme unwinds.

“The latest labour market figures show that the Treasury’s Coronavirus Job Retention Scheme has succeeded in preventing massive job losses so far, though a second wave of redundancies remains likely when financial support for employers who furloughed workers is wound down between August and October,” said Samuel Tombs, chief economist of Pantheon Macroeconomics.

On the market, the big mover was US-focused plant hire giant Ashtead (LON:AHT), which surged more than 14% after maintaining its dividend in spite of a precipitous fall in fourth-quarter profitability.

Had you bought the stock at its March low you’d now be sitting on an 86% profit, while the price is around a quarter higher than it was a year ago, which means it has significantly outperformed the Footsie.

“The group appears to have taken the right decisions at the right times and is well-placed despite the challenges which are yet to come as a result of the pandemic,” said Interactive Investor stock guru, Richard Hunter. “Ashtead has been a market favourite for some time and the consensus of the shares as a buy will almost certainly remain intact.”

Proactive news headlines:

Faron Pharmaceuticals (LON:FARN) has reported “continued progress” for two of its clinical-stage programmes, Clevegen and Traumakine, ahead of a virtual R&D day on Tuesday. For Clevegen, a precision cancer immunotherapy targeting Clever-1 positive tumour-associated macrophages in selected metastatic or inoperable solid tumours, Faron said the World Health Organisation (WHO) has approved bexmarilimab as the International Nonproprietary Name (INN) for the treatment. INNs are designed to make communication about pharmaceutical drugs more precise and avoid prescribing errors. Faron also said an additional cohort has been added to Part II of the ongoing MATINS trial which is exploring the potential of bexmarilimab (Clevegen) in patients with anaplastic thyroid cancer. Meanwhile, the firm announced that its Trumakine product, which is designed to help treat Acute Respiratory Distress Syndrome (ARDS) and is being used in two global, adaptive trials investigating potential coronavirus (COVID-19) treatments, will now be subject to a third trial to investigate whether the company’s IV IFN beta-1a can treat coronavirus.

Clipper Logistics PLC (LON:CLG) told investors it is in advanced talks with Arcadia Group over a transportation contract for their store delivery network. If finalised and secured, the contract envisages Clipper making nearly 3,000 deliveries per week starting in August 2020. "Clipper has an enviable track record of developing solutions to meet the needs of retailers in a changing environment,” Steve Parkin, Clipper executive chairman said in a statement. “I am delighted to be working closely with Arcadia on this solution and in developing a longer-term partnership."

Circassia Group PLC (LON:CIR) has reported slight signs of improvement in some areas after sales across all its markets were affected by the coronavirus (COVID-19) pandemic. “While it remains highly challenging to predict revenue trajectory, early signs of recovery in certain markets offer some signs of encouragement,” the company said in a statement alongside its results for the year to December 31, 2019.  The group is now focused on selling its NIOX asthma diagnostic In China, Europe, the US and elsewhere following the return of two COPD treatments to AstraZeneca in May. In the year to end-December 2019, NIOX sales rose by 27% to £34.6mln out of total sales of £62.4mln which included £27mln from Astra’s COPD drug Tudorza.

ClearStar Inc (LON:CLSU) said its revenue run rate experienced a “significant uptick” from the end of May as the labour market and employers began to slowly recover from the effects of the coronavirus (COVID-19) pandemic. In a statement to be made at the background and medical screening specialist’s AGM on Tuesday, ClearStar chairman Barney Quinn said while the company has not yet returned to its pre-pandemic run rate, the increased sales were “extremely encouraging” and they expected the growth to continue as the US market continued to recover. He added that the company had not lost any customers during the period and has “continued to make progress in onboarding new customers and generating new business”, notably the onboarding of three new financial institutions, the latest of which was a sizeable household name that was now generating revenue for the group.

Bidstack Group PLC (LON:BIDS) said it has received a Gold Standard 1.1 certificate from the Internet Advertising Bureau (IAB), the UK industry trade body for digital advertising. Launched in 2017 to improve standards in digital ads, the Gold Standard focuses on three key areas; reducing ad fraud, improving the digital advertising experience and increasing brand safety. Bidstack, which specialises in in-game advertising technology for video games, said the certificate should provide “further confidence to global advertising agencies when allocating client spend to the new "native in-game" digital advertising category” offered by the company.

European Metals Holdings Ltd (LON:EMH)(ASX:EMH) has been granted an updated preliminary mining permit for the eastern part of the Cinovec lithium deposit by the Czech Ministry of the Environment. The permit has been issued for a period of eight years. A preliminary mining permit is a necessary legal pre-qualification before obtaining a final mining permit. The approval covers an area of 0.201 square kilometres and means that, in combination with previously granted preliminary mining permits, the entire Cinovec ore reserve is now permitted.

Union Jack Oil PLC (LON:UJO) has revealed the highlights of a GaffneyCline authored Carbon Intensity Study on the West Newton project, onshore East Yorkshire. The group said the study had positive conclusions including an AA rating for carbon intensity for its potential upstream crude oil production, confirming it is significantly lower than the UK average and also when compared to other onshore analogues. According to the GaffneyCline report, West Newton could produce the equivalent of just 5 grams of CO2 per megajoule of energy created and that could be reduced further, to 3.5, with the application of gas-to-grid technologies.

Thor Mining PLC (LON:THR)(ASX:THR) has completed the field component of the due diligence for its acquisition of American Vanadium Pty Ltd, a company which holds interests in uranium and vanadium-focussed projects in Colorado and Utah. Thor announced on June 1, 2020, that it had signed an option agreement to acquire American Vanadium, subject to satisfaction of due diligence requirements. The non-field component of the due diligence is also nearing completion with finalisation pending assay laboratory results, the group added.  A total of 21 samples were collected in the field component, including four outcrop samples and 16 samples from historic mining dumps, all of which appear to host uranium, Thor said in a statement, while outcrop samples appear to host vanadium.

AfriTin Mining Ltd (LON:ATM) said mining operations at the Uis tin mine have now returned to full scale following the easing of coronavirus (COVID-19) lockdown measures in Namibia. The lockdown has resulted in delays to planned throughput increases, and optimisation work has now been resumed to allow the operation to reach design capacity. Meanwhile, an internal review has identified staged modifications that could potentially increase the net present value to US$122mln, and the internal rate of return to 60%. Additionally, the company has now despatched its fourth shipment of tin concentrate.

88 Energy PLC (LON:88E) confirmed it has so far had received acceptances of 37.58% in its takeover offer for fellow Alaska explorer XCD Energy. The offer remains open until June 25 and, to date, the proposal has been accepted by shareholders with a total of 262.96mln shares and 21.5mln listed options, representing 18.3% of those in issue. Significantly, 88 Energy noted that XCD directors – which previously recommended the offer to shareholders – have now provided their acceptances for their shareholdings.

Tekcapital PLC (LON:TEK) said its investee company Guident, which is developing in-car apps for autonomous vehicles, has appointed three new members to its scientific advisory board. They are professors Naphtali Rishe and Hayder Radha and Dr Marielle Gross. In a statement, Guident's chairman and CEO Harald Braun said: “Their combined experience and knowledge in artificial intelligence software for autonomous vehicles and bioethics will provide valuable insight as we expand the development of our remote monitoring and control centre for AVs and land-based delivery drones." In the same announcement, investors were also told that Guident had secured a US patent to protect its intellectual property around the "methods and systems for emergency handoff of an autonomous vehicle". This patent teaches new methods to improve the safety of autonomous vehicles and land-based delivery drones, the company said.

Touchstone Exploration Inc. (LON:TXP) (TSX:TXP) has announced that on June 15, 2020, the conditions precedent were satisfied in respect of its previously announced US$20mln, seven-year term loan agreement with Republic Bank Limited. Touchstone said it withdrew US$15 million to satisfy obligations relating to prepaying the company's former C$20mln credit facility and has the option to withdraw the remaining US$5mln available balance prior to June 15, 2021.

Iconic Labs PLC (LON:ICON), a multi-divisional new media and technology business, has announced that it has received a notice of exercise from European High Growth Opportunities Securitization Fund in respect of the exercise by the investor of its conversion rights under convertible bonds issued in respect of the first tranche drawn down under a financing and settlement agreement for the aggregate principal amount of £170,000 resulting in the issue to the Investor of 1,700,000,000 new ordinary shares in Iconic Labs.

6.50am: Footsie set for triple-digit gain 

The FTSE 100 index is predicted to make a stonking start on Tuesday as stocks worldwide were boosted by US monetary and fiscal stimulus plans, papering over concerns about a second wave of the coronavirus pandemic.

London’s blue-chip index was called 162.5 points or 2.7% higher by traders on the IG spread betting platform.

Overnight, US stocks recovered to finish in the green after the Federal Reserve kicked off a new corporate bond-buying programme, with reports also suggesting that the White House is working on a US$1trn infrastructure fund to boost the economy.

The Dow Jones Industrials Average added 158 points, or 0.6% on Monday, while the S&P 500 closed up 0.8% and the Nasdaq Composite finished 1.4% higher.

Asian stocks were romping higher on Tuesday, with Japan’s Nikkei 225 index up 4.7%, the Hang Seng rising 3%, and the Shanghai Composite up 1.1%.

“The impressive gains in Asia will continue throughout the remainder of the session, with Europe sure to climb aboard as well,” said Jeffrey Halley, market analyst at Oanda.  “The Trump infrastructure plan will turbo-boost any individual companies and sectors, likely to have even a sniff of part of the action.”

Tuesday’s economic focus in the UK will be on April’s unemployment numbers and May’s claimant count, while across the pond later the spotlight will be on retail sales and industrial production figures.

UK unemployment is expected to rise to around 4.6% after a long while at multi year lows and wage growth to slow below 1.5%, while May’s 5.0K claimant count is predicted to halve to around 400,000.

The most prominent item of company news in the diary is Ashtead Group PLC’s (LON:AHT) full-year results, where the US construction market is key.

With more signs that the world economy is heading for an almost unprecedented contraction, such a downturn could also imperil Ashtead’s dividend growth streak, which has continued since 2005.  Analysts are already predicting a final dividend of 35.8p, which would amount to a cut from last year’s payout.

Around the markets:

  • Pound up 0.5% to US$1.2671
  • Oil flat, with a barrel of Brent crude at US$39.77
  • Gold up 0.4% to US$1,734.80

Significant announcements expected on Tuesday:

Finals: Ashtead Group PLC (LON:AHT), Eckoh PLC (LON:ECK), Braemar Shipping Services PLC (LON:BMS), Checkit PLC (LON:CKT), Tatton Asset Management PLC (LON:TAM), Telecom Plus PLC (LON:TEP)

Interims: Oxford Biodynamics PLC (LON:OBD)

Economic data: UK employment data, US retail sales

City headlines:

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