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FTSE 100 closes lower as gold surges and traders digest Sunak's spending plans

Britain's premier benchmark index finished down around half a percent, or 33 points, at 6,156

Victrex plc - FTSE 100 to head lower as rising coronavirus cases rattle investors, UK mini-budget eyed
UK stocks and European indices fell on Wednesday, a day the UK chacellor unveiled more stimulus measures in the light of the pandemic
  • FTSE 100 index closes down 33 points at 6,156
  • Gold price rises above nine-year highs
  • Chancellor Rishi Sunak unveils UK 'mini-Budget' 

5.05pm: FTSE closes in red

FTSE 100 index closed lower midweek as the gold price surged and traders continued to fret over the repercussions of the pandemic.

UK chancellor Rishi Sunak also today unveiled a new package of stimulus measures to help boost economic activity.

Britain's premier benchmark index finished down around half a percent, or 33 points, at 6,156.

FTSE 250 fared no better, closing down over 163 points at 17,186.

"Equity markets in Europe are in the red as concerns relating to the pandemic continue to weigh on sentiment. Volatility has been low as the health crisis has been bubbling away in the background. The health situation in the US seems to have a bigger impact on European stocks than it does across the pond," noted David Madden, analyst at CMC Markets.  

Meanwhile, Sunak unveiled stimulus measures, adding up to £30 billion, including a £2bn kick start scheme for jobs, a 6-month cut in VAT for the hospitality sector, 50% discounts in August at participating restaurants Monday to Wednesday, and a stamp duty holiday for the housing sector.

"Currency markets and bond markets appeared unperturbed with the size of today’s fiscal policy response, and it’s not hard to understand why given that every single government around the world is facing similarly huge challenges in keeping their economies afloat," said Michael Hewson, also at CMC Markets.

"Whether the measures work or not appears to be neither here nor there for the moment. The simple reality is that we don’t really know what effect these measures will have, or whether there will be a second wave, which could complicate the picture further," he added.

On Wall Street, trade was muted. The Dow Jones Industrial Average added around four points, while the S&P 500 added three. Safe-haven asset gold glistened over 0.62% to US$1,820.80 an ounce.

3.40pm: Gold price surges above US$1,800

The Footsie trimmed some losses ahead of close, shedding 22 points to 6,167.

On the other side of the pond, US stocks continued with the positive trend seen at the opening bell, with the Dow Jones adding 141 points to 26,031 and the S&P500 rising 18 points to 3,164.

The gold price surged above US$1,800 per ounce for the first time since 2011.

According to analysts at IG, it is not surprising as traders reach for assets such as gold to stave off the potential devaluation that comes with swelling central bank balance sheets, in an age of global monetary and fiscal expansion.

Craig Erlam, analyst at OANDA, noted that the price high "seemingly decouples from the stock market moves and as the dollar continues to be well supported".

“With tensions rising between China and a growing list of countries around the imposition of the national security law in Hong Kong, it's possible that we're seeing a bit of a safe haven drive, only time will tell," he said.

"I'm sceptical given its performance over the last number of months. This is a major resistance level, a break could be hugely significant.”

 

2.30pm: Mixed bag for housebuilders and hospitality stocks

The Footsie remained fairly unphased by the plan unveiled by Rishi Sunak earlier today, dropping 35 points to 6,154 in the afternoon.

Housebuilders had a lukewarm reaction despite the government pins its hopes on growth driven by the construction sector, which is to receive fat cheques to build infrastructure while owners are incentivised to make their homes more energy efficient.

Persimmon PLC (LON:PSN) advanced 3% to 2,492p, while Barratt Developments PLC (LON:BDEV) and Redrow PLC (LON:RDW) were up 2% to 538.83p and 462p respectively.

Taylor Wimpey PLC (LON:TW.), Vistry Group PLC (LON:VTY), Bellway PLC (LON:BWY) and Crest Nicholson PLC (LON:CRST) all added 1% to 145.45p, 727.54p, 2,610p and 214.2p respectively.

The only faller was Berkeley Group PLC (LON:BKG), down 1% to 4,266p.

The new initiatives didn’t seem to impress the hospitality sector much, with hotelier Whitbread PLC (LON:WTB) dipping 1% to 2,276p although Sunak stressed the importance of tourism.

Pubs and bars didn’t fare better, perhaps because the VAT cut to 5% doesn’t apply to alcoholic drinks.

Revolution Bars Group PLC (LON:RBG) shed 5% to 22.31p, Mitchells & Butlers PLC (LON:MAB) shed 4% to 165.49p, JD Wetherspoon PLC (LON:JDW) was down 1% to 996.65p while Fuller, Smith & Turner plc (LON:FSTA) remained flat at 747p.

It was a mixed bag among eateries, with Fulham Shore PLC (LON:FUL) up 5% to 7.5p, Restaurant Group PLC (LON:RTN) and Comptoir Group plc (LON:COM) flat at 58.25p and 3.85p respectively, while Tasty PLC (LON:TAST) dropped 4% to 2.64p

According to Chris Sanger, EY’s head of tax policy, the new job retention scheme “may leave a sour taste in the mouth for those businesses which have struggled on without furloughing workers and be seen as unfair in relation to those who worked throughout the lockdown”.

“With a grant of £1,000 per furloughed employee retained through to end January next year, this element of the Chancellor’s help may be small compared to the salary costs (effectively just over £300 per month), but will be welcome nonetheless,” he commented.

 

1.20pm: FTSE 100 remains muted after Treasury unveils mini-budget 

The Footsie remained muted past lunchtime as Chancellor Rishi Sunak unveiled the Treasury’s minibudget to boost employment in the UK.

London’s leading index was 24 points underwater at 6,165, little changed from late morning levels.

The Chancellor said the furlough scheme will be phased out by October as “endless extensions” would be “irresponsible”, because it would give people false hope to return to the jobs they had before the crisis.

He announced a new job retention policy, with employers being paid £1,000 per staff member taken back from furlough and kept until January.

This policy could cost as much as £9bn as the furlough scheme covered 9mln people.

Sunak also unveiled a three-point plan designed to support jobseekers, create and protect jobs.

The government vowed to pay the salary of any newly employed workers aged 16-24 for six months plus overheads, as well as improving job centres and coaching services.

Companies hiring trainees and apprentices will be paid £1,000 for each person, rising to £1,500 if the apprentice is over 55.

Westminster is also planning investments in infrastructure across the country to improve schools, roads and hospitals, plus a £3bn green jobs plan.

The construction sector, which Sunak said will drive growth, was favoured with £2bn grant to make homes more energy efficient. From September owners can apply for vouchers rising to up to £10,000 for low-income households.

As already anticipated by media reports over the week, homebuyers will be exempted to pay stamp duty if spending less than £500,000 until March 31 next year.

Finally, to help the battered hospitality and tourism sectors, the VAT will be cut to 5% on food, accommodation and attractions until January 12, creating an estimated £4bn catalyst.

In what he said was a “creative” measure, Sunak announced a 50% voucher discount to be used in cafes and restaurants in August from Mondays to Wednesdays.

Sunak said that these industries were the most hit by the crisis, with 1.4mln out of 2mln workers being furloughed.

 

11.40am: Housebuilders, publicans lower ahead of mini-budget announcement

The Footsie was wallowing in the red before lunch, slipping 16 points to 6,173.

Everyone’s eyes are peeled for the upcoming mini-budget statement, to be unveiled by Chancellor Rishi Sunak at 12.30pm after PMQs.

The government is expected to announce measures to keep unemployment among young people at bay, a stamp duty holiday for homebuyers and a cut to VAT to help the hospitality sector.

Despite housebuilders are set to be among the main beneficiaries, Barratt Developments Plc (LON:BDEV) dipped 1% to 521.4p, while Taylor Wimpey plc (LON:TW. shed 2% to 141.45p.

Publicans weren’t faring much better, with Marston's PLC (LON:MARS) down 7% to 48.73p and Mitchells & Butlers plc (LON:MAB) trading 6% lower at 162.14p.

According to Neil Wilson, analyst at Markets.com, the statement may not have as much for the hospitality industry as some had hoped.

 

10.30am: Deutsche Bank slapped with US$150mln fine around Jeffrey Epstein scandal

The Footsie was back to its earlier losses, now shedding 28 points to 6,160, as investors wait for the Treasury mini-budget.

“The FTSE 100 started off sharply lower before yo-yoing back to near parity in early trading on Wednesday,” says AJ Bell investment director Russ Mould.

“The market’s apparent indecision is understandable when you consider it has to balance the ongoing risks from coronavirus with the willingness of governments and central banks to prop up.”

In Germany, Deutsche Bank was hit with a US$150mln fine for failing to detect millions of dollars in suspect transactions by convicted sex offender Jeffrey Epstein.

The bank admitted to have processed hundreds of transactions totalling millions of dollars even though it was aware of his criminal history.

The New York State Department of Financial Services said these transactions included payments to individuals who have been accused of procuring underage girls, settlements to law firms for apparent legal expenses, payments to Russian models and for women’s school tuition, hotel and rent expenses.

“Banks are the first line of defence with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” said Superintendent Linda Lacewell.

“In each of the cases that are being resolved today, Deutsche Bank failed to adequately monitor the activity of customers that the bank itself deemed to be high risk.”

 

9.30am: boohoo slips further over supply chain woes

The Footsie trimmed some losses, dipping 7 points to 6,181 later on Wednesday morning, while sterling was flat at US$1.2549.

Fast-fashion giant boohoo Group PLC (LON:BOO) continued its descent over supply chain trouble, slipping 12% to 229.6p.

The AIM-listed clothier has seen over £1.6bn wiped from its market value since Monday, after weekend allegations of low pay and poor conditions at a supplier's factory in Leicester.

The owner Nasty Gal and PrettyLittleThing announced today an independent investigation to assess malpractice, hours after three leading clothing retailers - Next, Zalando and ASOS - dropped boohoo from their roster of clothes stockists.

An undercover reporter from the Sunday Times had alleged a Leicester-based factory, Jaswal Fashions, was paying staff as little as £3.50 per hour and operating with poor hygiene even after the new outbreak of coronavirus (COVID-19) in the city.

But boohoo said that Jaswal Fashions had never been a supplier and the order at the factory featured in the Sunday Times report was being repackaged for delivery to the group’s international distribution centre in Burnley.

 

8.45am: Slow start for Footsie

The FTSE 100 made a subdued start to proceedings on Wednesday with traders seemingly keeping their powder dry ahead of Rishi Sunak’s mini-budget later.

The UK index of blue-chip shares nosed 27 points lower to 6,162.52.

The Chancellor of the Exchequer is expected to announce a freeze on stamp duty up to £500,000 to kick start the housing market and a £2bn injection into training for the young unemployed.

It has also been revealed Sunak is considering a cut to VAT to support high street stores by lowering prices for shoppers, while business rate reductions for retailers could be on the cards.

More help for Britain’s beleaguered shopkeepers could come in the form of vouchers allowing the populous to go on a spending spree.

Most of the floated ideas have already been factored into share prices, so the action on the market was fairly subdued.

Asia-focused banks HSBC (LON:HSBA) and Standard Chartered (LON:STAN) fell 3.3% and 1.9% respectively amid worries over the economic impact of the coronavirus pandemic in the region.

Dropping down to the FTSE 250, bus and rail specialist FirstGroup (LON:FGP) suffered after it said social distancing rules would likely continue to impact the business. The shares fell 8.5%, and rival National Express (LON:NEX) reversed 3.2%.

Proactive news headlines:

Iconic Labs PLC (LON:ICON) said it has signed a services contract with Greencastle Capital to manage the JOE media business, which has been bought out of administration following its collapse in May. The media technology firm said under the terms of the deal it will immediately manage all operational and commercial aspects of the JOE media businesses in the UK and Ireland following regulatory clearance. In return, the company will be paid a monthly fee of £50,000 as well as 25% of all profits if certain targets are met. JOE media is the largest independent digital media company in the Republic of Ireland and has been one of the fastest-growing media companies in the UK since it launched in 2015. The brand is well known for its ‘House of Rugby’ series, the most-watched rugby show in the world, and generated over £10mln in revenue in 2019.

Panther Metals PLC (LON:PALM) has told investors that its desktop review of the wholly-owned Annaburroo gold project in Australia’s Northern Territory has identified potential for further delineation of gold mineralisation. It noted that the project remains underexplored with more than 95% of the area remaining unsampled and untested. The central and western portions of the licence are completely untested, the company added, and moreover its review concluded that prior exploration in certain areas are not considered effective due to thick transported soil cover which has potentially masked mineralisation.

MaxCyte Inc (LON:MXCT) has signed a clinical and commercial licensing deal with a company developing a gene-silencing drug for solid tumours. Under the agreement, APEIRON Biologics will be allowed to use the AIM-listed group’s Flow Electroporation technology and ExPERT platform to advance APN401, a siRNA-based cell therapy. In return, MaxCyte will receive “undisclosed development and approval milestones and sales-based payments in addition to other licensing fees”.

Scotgold Resources Limited (LON:SGZ) has told investors its full underground development team is now back at work and blasting operations have resumed at the Cononish gold and silver mine in Scotland. The return to full operation was in line with the group's schedule announced in June, and operations are in full compliance with the coronavirus (COVID-19) safe operating procedures, the company added. At the same time, Scotgold is ramping up drilling capacity at the mine project with the addition of extra rigs, via a new agreement with Epiroc UK & Ireland Ltd.

Oncimmune Holdings PLC (LON:ONC) has noted that researchers driving innovation at the cancer diagnostic group have contributed "world-class science” to the field of rheumatoid arthritis (RA) and it’s early detection. That’s the opinion of Oncimmune’s chief executive, Dr Adam Hill, whose ImmunoINSIGHTS team was integral to a paper published in the journal ‘Arthritis Research & Therapy’. Led by Oncimmune's Dr Petra Buddle and Dr Hans-Dieter Zucht, a study was set up to assess the diagnostic potential of IgG antibodies in early RA. It did so by assessing 411 patients enrolled in Germany. The scientists concluded that the autoantibody, cTRA2B-IgG, had the potential to improve diagnosis of early-stage rheumatoid arthritis.

Coinsilium Group Limited (LON:COIN) said it has executed an agreement with IOV Labs Limited to establish a joint venture (JV) in Singapore. The blockchain investment and advisory firm said the JV will promote and commercialise IOV’s services and technologies, principally in the Asian markets, and be financed by IOV through a loan which is to be repaid from future revenues. IOV is the parent of RSK, the developers of the first smart contract platform secured by the Bitcoin network in which Coinsilium holds an interest of around 1.9mln RIF tokens. It also owns Taringa!, one of the largest Spanish language social media apps with around 30mln members.

Zoetic International PLC (LON:ZOE) has said it is expecting the completion of the divestment of the company’s legacy oil and gas interest, DT Ultravert, during the next week. The CBD-focused firm also noted a change in deal terms which both advances the transaction to completion and in the longer-term offers improved value to Zoetic. It has agreed with the acquirer, Path Investments, that Zoetic will receive a higher royalty over future production - increased to 6% from 5% - and it will accept a higher allocation of share warrants, to a total of 30mln. Meanwhile, Path will cover Zoetic’s professional and technical costs with cash.

e-Therapeutics PLC (LON:ETX) has unveiled plans to raise up to £12.4mln to fund its “next stage of growth and value creation” by expanding its drug discovery platform and asset pipeline. In an announcement after the close on Tuesday, the biopharmaceutical firm said it will raise £6.3mln of the total in a placing through the issue of around 52.8mln new shares at 12p each, a 30% discount to its Tuesday closing price. Meanwhile, the company also announced a subscription to raise around £2.8mln through the issue of 23.3mln new shares at the same price and a broker option to raise another £2.5mln. The group also made a retail offer at the 12p price on the PrimaryBid platform to provide certain existing retail shareholders and other retail investors with an opportunity to participate in the fundraise. In an announcement on Wednesday morning, e-Therapeutics said the retail offer had raised £750,000 through the issue of 6.25mln shares.

Supermarket Income REIT PLC (LON SUPR), the real estate investment trust providing secure, inflation-protected, long income from grocery property in the UK, said it board has today declared an interim dividend in respect of the period from April 1, 2020, to June 30, 2020, of 1.460p per ordinary share, payable on or around August 7, 2020. The ex-dividend date will be July 16, 2020, with a record date of July 17, 2020. The dividend will be paid 0.818p as a Property Income Distribution in respect of the Company's tax-exempt property rental business and 0.642p as an ordinary UK dividend. The company has now declared four quarterly dividends totalling 5.8p per ordinary share for the financial year ended June 30, 2020, achieving its full-year dividend target. 

Symphony Environmental Technologies PLC (LON:SYM) has announced the appointment of Zeus Capital Limited as its Nominated Adviser and Joint Broker with immediate effect.

Open Orphan PLC (LON:ORPH), a rapidly growing specialist CRO pharmaceutical services company which is the world leader in the testing of vaccines and antivirals using human challenge study models has said it will be attending and presenting at a series of investor events from July 9 to 1, 2020. Cathal Friel, Open Orphan's chief executive officer, will be in attendance for all of the events and will be presenting to update existing and potential investors on the company's business plans for 2020-2021. No new material information will be disclosed at any of the events, which are: Hardman & Co. Investor Forum Webinar, July 9, 2020, 3.00pm-4.30pm; Proactive Investors One2One Investor Forum, July 9, 2020, 6.00pm-8pm; and Mello Virtual - Investing in the New World, July 11, 2020, 9.00am-5.00pm.

IXICO LON:IXI), the data analytics company delivering insights in neuroscience, has announced the company's digital attendance at the On Helix Digital conference, being held on July 13-14, 2020. IXICO will share a pre-recorded presentation by Robin Wolz, the group’s SVP Science & Innovation, entitled 'Biomarkers for CNS clinical trials from imaging and actigraphy.' Two AI approaches to measure biomarkers in CNS disorders will be presented; the first approach is a method based on deep learning to segment brain volume in Huntington's disease and the second novel approach is the sleep assessment in Parkinson's disease from wrist-worn actigraphy. There will be an opportunity to set up one-to-one tele-meetings with potential customers and investors.

Instem PLC (LON:INS), a leading provider of IT solutions to the global life sciences market, has said it intends to host a live presentation via the Investor Meet Company platform in the coming weeks. A date and time will be announced in due course. Investors can sign up to Investor Meet Company for free via https://investormeetcompany.com/instem-plc/register-investor.

6.35am: Coronavirus case upsurge rattles sentiment 

The FTSE 100 is expected to open lower on Wednesday as increasing coronavirus infections in several parts of the world cast doubt on the prospects of an economic recovery

Spread-better IG expects the FTSE 100 to open down around 40 points after ending Tuesday’s session 96 points lower at 6,189.

Market sentiment appears to have been dampened as hopes of an economic recovery have been clouded by rising numbers of coronavirus cases, particularly in the US where several states have had to suspend reopening measures and have warned of rapidly dwindling hospital capacity.

Reports from the White House that the next round of US government spending could be capped also did little to reduce anxiety.

The Dow Jones Industrials Average closed 1.5% lower at 25,890 overnight, while the S&P 500 fell 1.08% to 3,145 and the Nasdaq Composite dropped 0.86% to 10,343.

The murky outlook made for a mixed performance in Asia, with Japan's Nikkei 225 down 0.58% while Hong Kong’s Hang Seng rose 0.54%.

Some investors may also be looking to keep their powder dry ahead of the UK’s ‘mini-budget’ later on Wednesday at 12,30pm, when Chancellor of the Exchequer Rishi Sunak is expected to unveil a raft of measures designed to help stimulate the British economy out of its pandemic slump.   

READ: What to expect from the UK’s ‘mini-budget’

On currency markets, the pound was up 0.04% at US$1.2554, with any announcements in the mini-budget potentially providing catalysts for movement in sterling.

Significant announcements expected on Wednesday, July 8:

UK ‘mini-budget’

Trading updates: Victrex plc (LON:VCT)

Finals: FirstGroup PLC (LON:FGP), U and I Group PLC (LON:UAI), Liontrust Asset Management PLC (LON:LIO)

Around the markets:

  • Sterling: US$1.2554, up 0.04%
  • Brent crude: US$42.98 a barrel, down 0.23%
  • Gold: US$1,794 an ounce, down 0.01%
  • Bitcoin: US$9,268, down 0.19%

City headlines:

  • Unemployment could surge to close to 15% by the end of this year if the coronavirus returns with a second wave, according to the Organisation for Economic Co-operation and Development (OECD) – Telegraph
  • Next, Asos and Amazon have decided to pull all Boohoo clothing from sale as growing anger over workers’ pay and conditions at the company’s suppliers resulted in £1.5bn being wiped from the fast-fashion brand’s value in two days – Guardian
  • Deutsche Bank has been slapped with a $150 million fine after admitting that it failed to detect millions of dollars in suspect transactions by the convicted sex offender Jeffrey Epstein – Times
  • Lansdowne Partners is planning to close its flagship $2.8 billion Developed Markets fund after a long period of poor performance – Financial Times
  • Rishi Sunak will respond to growing fears of a surge in youth unemployment from Britain’s pandemic-scarred economy on Wednesday with a £2bn temporary job creation scheme for the under-25s – Guardian
  • The OECD has urged the governments to scale back emergency wage subsidy schemes to encourage workers to move out of shrinking sectors – FT

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