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FTSE 100 closes in the red; Wall Street struggles on grim GDP outlook

The index of UK blue-chips dropped 142 points to finish at 5,990

AstraZeneca - FTSE 100 to start slightly higher as investors brace for economic and blue-chip reporting
  • FTSE 100 index loses 142 points on the day
  • Wall Street sees red
  • US GDP down 32.9% in the second quarter

5.05pm: FTSE 100 loses ground to close 142 points lower

The FTSE 100 finished the day in the red as loomy quarterly results from Lloyds Bank, Standard Chartered and a host of other firms led the index lower on Thursday.

The UK's main index lost 142 points, or 2.3%, to finish at 5,990 on Thursday.

With the US Fed rate decision out of the way, investor focused has shifted back to the pandemic, according to CMC Markets analyst David Madden.

"A jump in coronavirus cases in parts of Spain, Australia, Brazil and China, has added weight to the argument there will be a second wave," Madden wrote. "In the US, Republicans and Democrats have yet to reach an agreement in relation to the $1 trillion stimulus package, and that is also playing into the bearish mood."

US/Canada 5pm/12pm EST

Stocks fell in North America on Tuesday across the board at the midday point, with the Nasdaq doing its best to tread water. The Dow Jones fell 321 points at 26,218, while the S&P 500 lost 26 points to hit 3,232 points. Only the Nasdaq was in the green, but just barely, up 3 points at 10,551. In Canada, the S&P/TSX retreated 136 points at 16,159.

Proactive US/Canada headlines

Auryn Resources Inc (TSE:AUG) (NYSEAMERICAN:AUG) executes transformational deal with Eastmain Resources to create Canadian-focused gold explorer Fury Gold Mines

FSD Pharma Inc (NASDAQ:HUGE) (CSE:HUGE) notifies Health Canada it will forfeit licenses of subsidiary FV Pharma and suspend operations

BevCanna Enterprises Inc (CSE:BEV) (OTCMKTS:BVNNF) and Argentia Gold to bring line of cannabis-infused beverages to the Atlantic provinces

Benchmark Metals Inc (CVE:BNCH) (OTCQB:CYRTF) signs trilateral agreement with three First Nations to advance Lawyer’s gold-silver project in British Columbia

BetterLife Pharma Inc (CSE:BETR) (OTCQB:BETRF) says special meeting of Altum shareholders has “overwhelming” voted to approve the planned merger

ImagineAR Inc (CSE:IP) (OTC:IPNFF) taps former top UK newspaperman Mike Anderson as advisor for spearheading UK and Europe sales

O3 Mining Inc (CVE:OIII) intersects 17.8 grams per ton gold at its East Cadillac property in the Abitibi region of Quebec

Nextleaf Solutions Ltd (CSE:OILS) (OTCQB:OILFF) completes acquisition of its Nextleaf Labs cannabis processing subsidiary

3.45pm: Donald Trump proposes election delay on Twitter

FTSE 100 was about to close the session with a 167-point plunge to 5,964 as the afternoon took a bad turn after the latest US economy data.

It came after a worse than forecast 10.1% contraction in the German economy, with markets already “in a foul mood”, said Connor Campbell at Spreadex.

“Thursday’s German and US GDP readings have acted as something of a wake-up call for investors, reminding them exactly what the economic cost of this pandemic – which is far from over – actually is,” he noted.

“On top of all this, Donald Trump tweeted that November’s Presidential election should be delayed, as he continues to fabricate the threat of mail-in voting fraud,” Campbell continued.

“A potential glimpse of how he will behave if he does lose to Joe Biden, and the last thing investors wanted to hear on an already historic day for bad news.”

2.40pm: Wall Street opens with bruises from record-breaking GDP data

The Footsie plunged below the 6,000 mark as Wall Street opened, diving 141 points to 5,990.

US indices weren’t faring much better, with the Dow tumbling 283 points to 26,255 and the S&P500 dropping 27 points to 3,231.

The markets were bruised by the shocking 32.9% fall in US economy in the second quarter, which was still below the consensus of 34.5%

Initial jobless claims also missed expectations, rising to 1.43mln from 1.42mln, while analysts expected 1.44mln.

“Near-real-time data all show that the economy hit bottom in mid-April and then expanded rapidly through mid-June, before flattening. That means activity at the end of the quarter was much higher than the average across the quarter as a whole, so GDP growth in the third quarter will benefit from a hugely favourable base effect,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“A double-digit jump in third-quarter GDP is more or less guaranteed, but that does not mean the labour data will continue to record increasing payrolls and falling unemployment after July.”

1.50pm: US economy contracts at fastest pace ever

FTSE 100 was 118 points underwater at 6,013 before lunch, while Wall Street is also expected to open in the red.

Fresh GDP data showed the US economy contracted at the fastest pace ever in the second quarter, plunging by 32.9% against a 5% drop in the first quarter.

“The decline in second quarter GDP reflected the response to COVID-19, as "stay-at-home" orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses,” the US Bureau of Economic Analysis said.

“This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending.”

“The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the second quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.”

12.20pm: UK extends state help for small businesses

FTSE 100 plunged 111 points to 6,019 at lunchtime, hitting lows last seen in May.

The UK finance ministry extended help to small businesses after EU state aid rules were relaxed.

Companies with fewer than 50 employees and a turnover of less than £9mln can now benefit from loans of up to £5mln under the Coronavirus Business Interruption Loan Scheme.

Following pressure from industry groups, the European Commission changed the regulations, which the UK still follows before Brexit, last month.

The restrictive rules were put in place before the pandemic hit to avoid bailouts to failing companies.

“These eligibility hurdles have been a real stumbling block for many firms across the UK throughout the crisis,” said Chris Wilford, head of financial services policy at trade body CBI.

“They have had a real impact on the ability of some high-growth firms and those with more complex structures being able to access the loan schemes. More jobs and livelihoods will be now be saved.”

Westminster is trying to avoid mass unemployment amid a significant deterioration in the economic outlook, as shown in Thursday’s update by Lloyds Banking Group PLC (LON:LLOY) which is considered as a barometer of the UK economy.

The bank hiked its impairment charge for bad loans to £3.8bn for the half-year, both for the immediate hit of the pandemic and estimates of higher defaults in loans as various government support schemes subside.  

“With GDP growth remaining under pressure and the unemployment rate potentially yet to peak, the uncertainty around Brexit negotiations takes on additional significance given an already faltering economy,” commented Richard Hunter at interactive investor.

“Meanwhile, historically low interest rates are set to hold firm for some considerable time to come… In addition, the consumer has where possible been paying down loans and reducing spending on credit, both of which are normally steady income lines for the banks, with the result that there has been an increase in retail deposits as any spare cash is put to one side.”

11am: BAE Systems, Rentokil Initial lifted by dividend news

FTSE 100 kept dwindling down during the morning, tumbling 92 points to 6,039.

BAE Systems PLC (LON:BA.) was among the blue-chip risers, advancing 4% to 494.7p after announcing it will pay an interim dividend of 9.4p per share, in line with last year.

The defence equipment giant decided to reward shareholders despite a 11% drop in half-year profits, although it expects a 5% rise in sales for the whole of 2020.

Increased volumes in F-35, Combat Vehicles and growth in the electronic defence portfolio have been offsetting a shortfall in its commercial business.

Similarly, Rentokil Initial PLC (LON:RTO) added 3% to 563p after hinting there may be a final dividend in sight if trading continues in line with expectations in the second half.

The pest control and hygiene services provider skipped the interim distribution with revenue down 1% to £1.2bn, though higher costs dragged profit before tax down 46% to £61mln.

Sales are expected to improve, having dropped 12% in April but rose 4% in June, although a second wave of coronavirus infections could hinder progress.

9.50am: Royal Dutch Shell books US$18.1bn loss amid oil price crisis

The Footsie dived further in mid-morning, losing 78 points to 6,053, while sterling was flat at US$1.2990.

Royal Dutch Shell Plc (LON:RDSA) shed 1% to 1,213p despite booking an eye-watering US$18.1bn quarterly loss amid a deep crisis in the oil industry.

The losses included some US$16.8bn of impairment charges triggered by lower crude price and margin forecasting - with US$8.2bn written-off in integrated gas, US$4.7bn written-off in upstream, US$4bn in oil products, and US$5mln in corporate.

Adjusted earnings were marked in positive territory at US$600mln, an 82% decline year-on-year but still well away from the US$664mln loss forecast by analysts which perhaps cushioned the share price from a harder fall.

The oiler still announced a second-quarter dividend albeit at a downgraded 16 cents per share, in-line with the 65% reduction seen in the first quarter.

8.55am: Prediction reversed

The FTSE 100 index fell at the open on Thursday amid heightened coronavirus pandemic second wave concerns and dismay at America’s seeming inability to tackle to the outbreak.

The index of UK blue-chips opened 42 points lower at 6,089.65.

The tumble was exacerbated by an immediate markdown of the banking stocks in the wake of Lloyds’ (LON:LLOY) quarterly results in which it revealed it has set aside another £2.4bn for bad debts. The shares slumped 6.5%.

“The current environment is proving to be a hard slog for Lloyds, and the difficulties are unfortunately set to continue,” said Richard Hunter, stock picker-in-residence at Interactive Investors.

“Since its last update, Lloyds estimates that the economic outlook has deteriorated further, partly because of the immediate impact of the pandemic in its second quarter, but also due to the likelihood of significantly higher defaults on loans in the next few months as various government support schemes subside.”

While Lloyds has by far the biggest exposure to UK retail lending, its warning served as a clarion call to sell shares in NatWest (LON:NWG) - the renamed Royal Bank of Scotland Group - which were off 3.5% ahead of its quarterlies on Friday.

On the up was BAE Systems (LON:BA.), which said it would restart its dividend payment following an improvement in its financial fortunes. And AstraZeneca (LON:AZN) advanced 2.4% following first-half results and after delivering an upbeat update on one of its key drugs.

Proactive news headlines:

Belvoir Group PLC (LON:BLV), the lettings and estate agent, said its interim revenue and profits were both well ahead of a year ago despite the coronavirus (COVID-19) lockdown. Since the restrictions on the housing sector were lifted in mid-May, there has been a surge of activity due to pent-up demand, Belvoir said in a trading update for the half-year to June. The AIM-listed group’s offices were closed between March 25 and May 13, but June was a record-breaking month for housing activity at its estate agent Newton Fallowell and also in its mortgage division, the firm said. Group network revenue in June rose by 12% compared with a year earlier, with the lettings business up by 17%.

SigmaRoc PLC (LON:SRC) has reported strong earnings and revenue growth in the first half of its current year, adding that it has “good exposure” to further infrastructure spending and growth in the housing and repair, maintenance and improvement (RMI) markets. In a trading update for the six months to June 30, 2020, the construction materials group said it has “delivered results ahead of its own expectations given the challenging trading environment”, reporting underlying earnings (EBITDA) of £10.9mln, up 91% year-on-year, while revenues climbed 83% to £54.5mln.

Ariana Resources PLC (LON:AAU), the Turkey-focused gold group, has announced a 50% increase in the size of the resource at its Salinbas project. The total amount of gold at the 100%-owned project is now estimated at 1.5mln ounces, up from 1mln previously, and split between two licences – Salinbas and Ardala. In addition, there has been a significant upgrade in the classification of the resource at Salinbas, said Ariana, with 35% now in the measured (11%) and indicated (24%) categories. Kerim Sener, Ariana’s managing director, said the new resource confirms the project has multi-million ounce, multi-commodity potential.

Directa Plus PLC (LON:DCTA) said it has been granted a patent by the Italian Patent Office for the Company's G+® graphene to improve the performance of rubber based shoe outsoles. The company, a leading producer and supplier of graphene nanoplatelets based products for use in consumer and industrial market, noted that the patent covers both the formula containing G+® and the outsole made with the formula.

Minds + Machines Group Limited (LON:MMX) has reported continued top-line billings growth in its first half as the company said its business had proven “resilient” to the effects of the coronavirus pandemic. In a trading update for the six months to June 30, 20920, the internet top-level domain (TLD) specialist reported a 31% rise in registrations to 2.38mln, while automated online channel billings rose 20% to US$7.8mln, delivering overall billings growth of 7% to a total of US$7.9mln. Cash generated in the first half also increased by 13% to US$2.5mln.

discoverIE Group PLC (LON:DSCV) has said its order book “remains strong” and that it sees “significant scope for further expansion” in its design & manufacturing (D&M) division. In a trading update for the first four months of its current year ending March 31, 2021, the customised electronics specialist said since May orders have increased by around 10% per month in June and July, to a level similar to sales. Group sales for the whole period are around 8% lower than last year, however, the company said organic growth rates continued to be stronger in its target markets, led by its renewable energy and medical divisions.

OptiBiotix Health PLC (LON:OPTI) said its partner for Australia and New Zealand has extended the commercial collaboration to include gut health line WellBiome. Maxum Foods already has access to OptiBiotix’s SlimBiome and the OptiBiome products under an earlier manufacturing, supply and profit-sharing agreement. This is the fourth extension deal since the launch of WellBiome just over a month ago.

Genel Energy PLC (LON:GENL) has told investors that DNO, as project operator, has confirmed production averaged 102,000 barrels of oil per day (bopd) from the Tawke licence assets in Kurdistan during the second quarter of 2020. The licence, 25% owned by Genel, comprises the Tawke and Peshkabir oil fields, which produced at 58,100 bopd and 43,900 bopd respectively over the three-month period. This marked an 11% decline amidst halted development activity, to conserve cash as crude prices saw volatility.

Greencoat UK Wind PLC (LON:UKW), Britain’s largest onshore wind farm investor, has said cashflows remained steady over the half-year to end June despite volatility in power prices caused by the coronavirus (COVID-19) pandemic. Electricity generation for the period was 2% above budget at 1,494GWh though good wind conditions in the first quarter eased in the second three-month period. Power prices were below budget, primarily reflecting low gas prices and low demand due to COVID-19, but dividend cover remained robust, said Greencoat UK.\Botanical Holdings PLC said its medicinal cannabis-focused subsidiary EuroCan has completed the purchase of land in Portugal where it will start its European growing operations. The 23-hectare site is in the municipality of Mação, a proven agricultural area around two hours north-east of Lisbon. “Completion of this land purchase represents a significant step forwards for our operations in Portugal,” said chief executive Carl Esprey in a statement.

Oriole Resources PLC (LON:ORR) has struck a deal to sell its legacy royalties in Turkey to its partner Bati Toroslar for US$250,000. The deal will see Oriole receive US$30,000 within the next seven days followed by the balance in line with contingent milestones, namely the start of mine construction at either Hasançelebi or Doğala projects. The move is in-line with the previously stated asset monetisation strategy and follows the disposal of the company’s shares in Tembo Gold Corp (for US$172,000).

Stobart Group Ltd (LON:STOB) said it is trading in line with its expectations as its London Southend Airport has reopened to passengers after the coronavirus pandemic lockdown and its energy business has benefited from a restart in construction work across the UK. In an update for its annual general meeting (AGM) on Thursday, the group’s chairman David Shearer said the company has made “good progress” in the execution of its strategy.

IronRidge Resources Ltd (LON:IRR) told investors it has had further high-grade results and defined significant targets at the Ehuasso area of the Zaranou gold project in Côte d'Ivoire. The initial reverse circulation drilling at Ehuasso yielded multiple high-grade results were recorded along with broader low-grade intersections. Highlight results included 4 metres at 25.8 grams per tonne (g/t) gold, 4 metres at 16.8 g/t and 12 metres at 6.59 g/t with a higher grade 4 metres at 17.9 g/t.

NQ Minerals PLC (AQSE:NQMI) (OTCQB:NQMLF), the base and precious metals producer from its Hellyer Gold Mine in Tasmania Australia, announced that it has raised £447,500 (gross) at 7p per share from a UK based investor and a group of private investors for general working capital purposes and, as a result, the company will issue 6,392,857 new ordinary shares.

6.50am: Front foot start predicted 

The FTSE 100 looks set to start Thursday on the front foot, predicted to rise modestly.

CFD firm IG Markets sees London’s blue-chip benchmark rising around 14 points, making the price 6,148 to 6,151 with just over an hour to go before the start of the trading on the stock exchange.

Macroeconomics are very much the focus for index traders today, after the US Federal Reserve last night left rates and policy untouched and ahead of quarterly GDP numbers from Germany and USA later. Albeit the corporate diary is stacked with blue-chip reporting too.

But attention will also land on a big batch of corporate news. AstraZeneca Plc (LON:AZN) will be in focus largely due to its involvement in the development of a coronavirus (COVID-19) vaccine, meanwhile, Royal Dutch Shell Plc (LON:RDSB), Lloyds Banking Group Plc (LON:LLOY), Diageo PLC (LON:DGE), Anglo American PLC (LON:AAL) and BAE Systems Plc (LON:BA.) are also on the slate.

To some extent, the pivot point of the day will most likely be GDP numbers which will provide everyone with a top-level gauge of the economic damage done by the coronavirus.

“We’ll get to see laid bare the extent of the hit to economic activity over the period of the economic lockdowns, in April, May and June,” said Michael Hewson, analyst at CMC Markets. “We already know that the economic rot had started to set in at the end of Q1, with the German economy contracting -2.2% and the US economy contracting by -5%.

“Today’s numbers are expected to be even worse by an indeterminate factor, with the German economy predicted to contract by -9%, and the US economy by as much as -34.5%, though the margin of error is expected to be quite high, with estimates ranging from -20% to -40%.

“In times such as these, the use of adjectives like unprecedented has become an almost daily event, however, the use of it doesn’t change the fact that trying to determine the economic damage caused by the virus can’t really be estimated by calculations on a spreadsheet, given the knock-on effects it continues to have on human behaviour now as well as future economic activity over the next few quarters.”

Wall Street finished Wednesday’s trading positively last night. The Dow Jones Industrials Average ended the session up 160 points or 0.61% at 26,539. The S&P 500 marked a 1.24% rise to end the day at 3,258 whilst the Nasdaq Composite rose by 1.35% to sign-off at 10,542.

In Asia on Thursday, Japan’s Nikkei 225 index was trading 0.13% lower at 22,367, whilst Hong Kong’s Hang Seng moved positively, trading up 0.8% at 25,078. The Shanghai Composite was a sliver higher at 3,298.

Around the markets:

  • The pound: US$1.2967, down 0.23%
  • Gold: US$1,959 per ounce, down 0.51%
  • Silver: US$23.99 per ounce, down 1.49%
  • Brent crude: US$43.68 per barrel, up 1.06%
  • WTI crude: US$41.21 per barrel, up 0.4%
  • Bitcoin: US$10,996, down 2.1%

6.45am: Early Markets - Asia/Australia

Stocks in the Asia Pacific region mostly traded higher on Thursday after the US Federal Reserve left interest rates unchanged.

Hong Kong’s Hang Seng index gained 1.05% and South Korea’s Kospi rose 0.13%.

The Shanghai Composite was up fractionally while in Japan, the Nikkei 225 fell 0.13%.

In Australia, the S&P/ASX 200 gained 0.67% after Fortescue Metals (ASX:FMC), Coles Group (ASX:COL) and Goodman Group (ASX:GMG) set new record-high share prices in early trade.

READ OUR ASX REPORT FOR MORE INFORMATION

Proactive Australia news:

Nanoveu Ltd’s (ASX:NVU) shares have been almost 18% higher to 9 cents after signing distribution agreements for its antiviral protection products for the Thai and Malaysian markets with Sanyo Trading Company Ltd.

Red River Resources Ltd (ASX:RVR) has increased its asset base after being granted new high-grade polymetallic silver-indium projects in northern Queensland hosting the highest-grade known indium deposits in Australia.

Theta Gold Mines Ltd (ASX:TGM) (OTCMKTS:TGMGF) has taken another step towards production at the Starter Theta Pit Gold Project in South Africa with geotechnical drilling and a geophysical survey underway.

Moho Resources Ltd (ASX:MOH) has launched a share purchase plan where existing eligible shareholders will have the opportunity to acquire up to $30,000 worth of ordinary shares at an issue price of 13 cents per share, to raise up to $2,391,949, before costs.

Paradigm Biopharmaceuticals Ltd (ASX:PAR) (OTCMKTS:PBIGF) shares have been more than 9% higher in early trade to $3.55 following encouraging results received across 10 patients treated with Zilosul® under the FDA approved Expanded Access Program (EAP) in the US.

Lithium Australia NL (ASX:LIT) and partners Australian Vanadium Ltd (ASX:AVL) (OTCMKTS:ATVVF) and Mercator Metals Pty Ltd have identified first targets for exploration near the recent Julimar nickel, copper and PGE discovery.

Matador Mining Ltd (ASX:MZZ) has started its 2020 drilling program at the Cape Ray Gold Project in Newfoundland, Canada, which includes 12,000 metres of diamond drilling as well as an extensive greenfields exploration program.

Ora Banda Mining Ltd (ASX:OBM) (FRA:M6N) has completed the retail component of its 1 for 9 accelerated non-renounceable pro-rata entitlement offer of new fully paid ordinary shares in the company.

Strategic Elements Ltd’s (ASX:SOR) collaborative project to develop Printable Memory technology with the University of New South Wales (UNSW) and CSIRO has won significant funding from the Australian Research Council Linkage program.

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