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FTSE 100 falls flat, US optimism doesn't last past noon

It was a good day for shareholders in Premier Oil and an even better one for shareholders in Borders & Southern and Rockhopper.

London dawn
  • FTSE 100 index ends 2 points higher 
  • US stocks turn higher, then fall
  • Premier Oil agrees to a merger with Chrysaor

5pm: Afternoon FTSE 100 gains fade to flat

The FTSE 100 ended a hair above the flatline Tuesday, finishing 2.5 points, less than 0.1%, higher. The FTSE 250 did much better, gaining 214 points, 1.2%, to 17,797.4.

What appeared to be a bounce driven by a promising start across the pond lost its steam in the final hours. 

"Stock markets have been dominated by indecision this week, with the US indices following their European counterparts in what looks like a distinct end to the ‘Trump left hospital’ bounce," IG Senior Market Analyst Joshua Mahony wrote Tuesday. "The coming months bring huge uncertainty for both sides of the Atlantic, with Trumps ongoing recovery from Covid bringing yet another unknown amid Brexit, US election, and second-wave fears. From a recovery perspective, we have seen slight grounds for optimism after the IMF laid the ground for a likely growth forecast upgrade next week."

In the US, the Dow Jones Industrial Average gained 140 points in the first hours of the Tuesday session, only to give it all back. By midday, the index was up just 16 points, less than 0.1%, at 28,165.4. The S&P dipped 5 points, 0.2%, to 3,403.4, and the Nasdaq lost 48 points, 0.4%, to 11,281.5.

Dragging the Dow down has been Boeing Co (NYSE:BA), shares of which fell 2% after the company sait it epxects the coronavirus to negatively impact sales for more than a decade, according to CNBC.

More broadly, traders are watching the President Trump's health closely, while also waiting for news on a potential coronavirus stimulus package. 

3.35pm: Win treble for oil sector

London’s index of leading shares continues to spin its wheels, despite a stronger than expected start by US stocks on Wall Street.

The FTSE 100 index was up 5 points (0.1%) at 5,949.

It’s been a good day for a bit of bottom fishing; as well as strong gains for aerospace-related stocks Rolls-Royce Holdings PLC (LON:RR.) and International Consolidated Airlines SA (LON:IAG) – up 18% and 7% respectively – the hotels sector has also seen some love, with Premier Inns owner Whitbread PLC (LON:WTB) 4.4% firmer at 2,286p and Intercontinental Hotels Group PLC (LON:IHG) 4.8% heavier at 4,273p.

It was a good day for shareholders in Premier Oil PLC (LON:PMO), the massively indebted oil producer. The company agreed to a merger with Chrysaor, and although Premier shareholders will own only 5.45% of the merged entity at best, 5% or so of something is better than 100% of nothing.

Premier has roughly US$2.7bn of total gross debt and hedging liabilities that will be cleared once the merger completes.

“The current operating environment has given rise for opportunistic M&A activity and the Premier/ Chrysaor merger represents the most interesting of 2020 in our view,” said SP Angel, a broker that focuses on resource stocks.

“Whilst the merger will result in significant scale and diversification, through the combination of material operated and non-operated cash generative production hubs in the UK North Sea, PMO’s [Premier’s] shareholders will only benefit from limited exposure. Indeed, a 5.45% equity exposure in the combined group would infer a £2.6bn combined market cap (based on PMO’s current £156m mkt cap). These seems certainly plausible with FY2020e revenues in excess of US$3.5bn and a well-financed and established work programme in our view,” the broker said.

If anything, the news was even better for Rockhopper Exploration PLC (LON:RKH), which is Premier’s partner on the Sea Lion asset near the Falkland Islands.

Rockhopper rocked 39% higher to 6.75p – a gain that was exceeded in size by just one stock today; Borders & Southern PLC (LON:BOR), which operates and has a 100% interest in three production licences in the South Falkland Basin. Borders’ shares were up 41% at 0.95p.

Talking of heavily indebted companies, Cineworld Group PLC (LON:CINE) rose 11% to 28.03p, clawing back some of yesterday’s blockbusting losses sustained after it confirmed it would close its UK and US cinemas for an indefinite period as a result of the corona pandemic.

3.30pm: Proactive North America headlines:

KULR Technology Group Inc (OTCQB:KULR)  partners with Airbus Defense and Space to provide lithium-ion battery safety solutions

ElectraMeccanica Vehicles Corp (NASDAQ:SOLO) says its US EV assembly facility will be located either in Arizona or Tennessee

Namaste Technologies Inc (CVE:N) (OTCMKTS:NXTFF) expands Cannabis 2.0 offerings with new butane hash oil products; inks pact with Stigma Grow

Killi Ltd (CVE:MYID) (OTCMKTS:MYIDF) launches UaretheProduct.io to allow users to see the dollar value of their data to big technology firms

Atlas Engineered Products Ltd (CVE:AEP) (OTC:APEUF) on way to becoming leading supplier of pre-manufactured wall panels on Vancouver Island

Biocept Inc (NASDAQ:BIOC) says it has received more than 50,000 COVID-19 specimens for processing at its San Diego lab

True Leaf Brands Inc (CSE:MJ) (OTCPINK:TRLFF) and its subsidiaries file plans with creditors; working with British Columbia Securities Comission

Benchmark Metals Inc (CVE:BNCH) (OTCQX:BNCHF) hitting broad zones of 'significant' bulk-tonnage mineralization at Cliff Creek zone at Lawyers asset

American Manganese Inc (CVE:AMY) (OTCMKT:AMYZF) announces further advance at its pilot project, with 92% extraction of lithium-ion battery material

FansUnite Entertainment Inc (CSE:FANS) (OTCMKTS:FUNFF) partners with global online sports betting leader Pinnacle Solutions

2.50pm: US stocks start mixed

Wall Street shares started mixed on Tuesday as traders watch for more on stimulus talks, monitor President Trump's health, and await a virtual speech from Federal Reserve chairman Powell.

In early deals in New York the Dow Jones Industrial Average added around 29 points to stand at 28,172 but the S&P 500 index shed nearly two points at 3,407.

The tech heavy Nasdaq shed around 21 points at 11,311.

Fed boss Jerome Powell will talk at a virtual meeting of the National Association for Business Economics, and dominating proceedings is likely to be how to combat the economic havoc wreaked by the pandemic.

Earlier, in macro-news it also emerged that the US trade deficit had climbed almost 6% in August this year to US$67.1 billion versus economist estimates for a figure of US$66.7 billion.

The figure is the third highest on record as American exporters struggle amid the pandemic.

Imports, however, have rebounded faster than exports, reflecting a reliance on non- domestic goods and America's stronger economic recovery after the virus first struck compared to many of its trading partners.

12.20pm: US set for subdued opening

US indices are set for an edgy start, with the NASDAQ Composite tipped to nudge higher while the Dow and the S&P 500 are expected to slide.

Spread betting quotes point to the tech-heavy NASDAQ Composite opening at around 11,442, up 10 points on last night’s close.

The Dow Jones average is seen opening its account 27 points lower at 28,122 and the S&P 500 12 points softer at 3,396.

“President Trump has returned to the White House, but doctors cautioned that he is not out of the woods yet health wise. In the past couple of sessions, traders have been fixated on The Donald’s health and the news that he was to leave the medical centre lifted market sentiment. It is still considered to be a step in the right direction, but the guarded language from the medical professionals has taken the wind out of the bulls’ sails,” suggested CMC markets’ David Madden.

“It would be unrealistic for doctors not to express come caution but Mr Trump is already making plans to get back on the presidential campaign trail. The proposed US coronavirus relief package will remain in focus and no doubt Nancy Pelosi, the House Speaker, will continue talks with the Treasury Secretary, Steven Mnuchin. The two spoke for one hour yesterday, but no details of the conversation were released. As far as traders are concerned, talking is preferable to being in a stand-off and not engaging with each other,” Madden said.

In London, the FTSE 100 has crept into positive territory, up 3 points (0.1%) at 5,946, helped by sterling shedding around half a cent against the greenback on foreign exchange markets.

11.10am: Closing of short positions at Rolls-Royce and IAG?

The return of PresidentTrump to the White House was supposed to end uncertainty in stock markets but there remain signs of apprehension in London.

The FTSE 100 was down 26 points (0.4%) at 5,917, despite a return to favour of the stock speculators love to sell “short” – Rolls-Royce Holdings PLC (LON:RR.).

The propulsion systems marker’s shares climbed 10% to 136.3p on the day when it was revealed short-sellers – speculators who sell shares in a stock they do not own in the hope of buying the shares back cheaper later – made more profit shorting Roll-Royce shares in September than from any other short position of blue-chip shares.

The latest analysis from Ortex Analytics shows short-sellers returned to profit in September, trousering £418mln, after losing £420m on bets against UK blue-chip companies in August. Of the £418mln profit, £187.7mln came from shorting Rolls-Royce shares.

Another share that made the short-sellers happy in September was British Airways owner International Consolidated Airlines Group, S.A. (LON:IAG), where the profit was £168.8mln.

Maybe there is some short-covering going on because IAG, up3.7% at 149p, was the second-best performer on the FTSE 100.

10.15am: Housebuilders' shares derive little benefit from housebuilding surge

London’s leading equities are looking as weary as a world leader who might have emerged from the hospital prematurely.

The FTSE 100 was down 31 points (0.5%) at 5,912.

Housebuilders did not draw a lot of support from the latest survey of construction activity, which revealed a sharp increase in homebuilding in September.

The September Construction Purchasing Managers’ Index (PMI) rose to 56.8 in September from 54.6 in August.

New orders rose for the fourth time in as many months, with survey respondents continuing to mention a release of pent-up demand, according to IHS Markit, which compiles the data.

In line with the rise in new work, UK construction firms recorded another marked increase in purchasing activity at the end of the third quarter, with the growth rate at its highest level since October 2015.

On the employment front, staff numbers continued to fall in September; however, the rate of workforce contraction eased to the slowest for seven months.

"Following August's slowdown, growth in UK construction activity rebounded strongly in September. There were faster increases in activity in both the housing and commercial sub-sectors, which more than offset a sharper decline in civil engineering work,” said Eliot Kerr, an economist at IHS Markit.

"Forward-looking indicators point to a sustained rise in activity, with new work increasing at the quickest pace since before the lockdown and sentiment towards the 12-month outlook at its strongest for seven months.

"Meanwhile, latest PMI data pointed to another fall in employment numbers across the UK construction sector. That said, the rate of job shedding eased substantially, while building firms upped their purchasing activity in a further sign of encouragement for the months ahead,” Kerr added.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said the surge in activity and the rise in new orders was fuelled by the easing of lockdown measures.

“Of the three monitored sub-sectors, house building was the strongest performer, with activity increasing for the second month in a row, partially driven by residential-related services such as home improvements; however, civil engineering took another backwards step and progress worsened significantly as bigger construction developments stayed in suspended animation,” Brock said.

“Government support schemes are winding down, so the bigger worry remains levels of job creation. With another drop in employment numbers, vacancies were sparse and further redundancy schemes could be on the cards once this pent-up demand for work is satisfied but for now, builders are stocking up for Brexit and COVID preparations, so purchasing remains strong in spite of longer delivery times and some shortages.

“Optimism is at a seven-month high, so builders are enjoying this resurgence in activity following the summer lows," Brock said.

Housebuilders such as Barratt Developments PLC (LON:BDEV), Berkeley Group Holdings PLC (LON:BKG), Persimmon PLC (LON:PSN) and Taylor Wimpey PLC (LON:TW.) were all down by around half a percentage point.

9.40am: Homebuilding activity rises in September

The IHS Markit/CIPS UK Construction Total Activity Index registered 56.8 in September, up from 54.6 in August.

Any figure above 50.0 indicates a growth of total construction output.

Construction activity

Underlying data revealed varied results across the three monitored sub-sectors, said IHS Markit, which compiles the data from the survey.

The strongest performing category was home building, where firms registered a sharp expansion in activity for the fourth month running. Work undertaken on commercial projects also rose strongly, increasing at the quickest pace for over two years. Meanwhile, civil engineering activity fell for the second month running and at the sharpest rate since May, the market research firm said.

The FTSE 100 was down 27 points (.5%) at 5,916.

8.45am: Slow start to trading

The FTSE 100 seemed to run out of puff in early trade on Tuesday after three successive trading sessions in the green.

London’s blue-chip stock index opened 6 points lower at 5,937.05.

The UK blue-chip index resisted the pull of Wall Street, where the Dow Jones Industrials Average closed 466 points higher.

US markets were buoyed by the release from hospital of President Trump, and, more pertinently, a seeming willingness of politicians to agree a new stimulus programme.

Upcoming on Tuesday are speeches from the European Central Bank and Federal Reserve, which, according to Richard Hunter, head of markets at Interactive Investor, will provide “further colour” on the state of the global economy.

Assessing the lacklustre start to proceedings in London, Hunter was bearish on the immediate prospects for the Footsie. “The index remains friendless as international investors file the UK’s issues under too difficult, with economic prospects seemingly bleak given the likely spike in unemployment to come and the possibility of failing UK-EU negotiations," he said.

“Despite some tentative early week gains, the index remains down 21% in the year to date, encumbered also by the underperformance of some of its main constituent sectors, such as the oils and banks.”

On the market, Premier Oil (LON:PMO) shot up 13% after it negotiated a rescue merger deal with privately-owned Chrysoar.

Also on the rise was Watches of Switzerland (LON:WOSG), which jumped 19% after upgrading its full-year earnings guidance.

On the decline was Rentokil Initial (LON:RTO), which dropped 3% after Goldman Sachs cut its recommendation to ‘neutral’ from ‘buy’.

Proactive news headlines:

Inspiration Healthcare Group PLC (LON:IHC) has declared its maiden interim dividend after a positive first-half performance. The global medical device company, which has played its part in sourcing ventilators in the UK for use on coronavirus (COVID-19) sufferers, saw revenue in the six months to the end of July 2020 rise by 77% to £14.2mln, up from £8.1mln the year before. Revenue from the sourcing of ventilators in the period totalled £2.9mln; excluding this revenue and sales contributed by the recent acquisition of ventilator maker SLE, revenue was up 25% on a like-for-like basis.

Oncimmune Holdings PLC (LON:ONC) has been awarded funding to help develop a “comprehensive diagnostic tool” for coronavirus (COVID-19). The financial backing comes from the UK Research and Innovation Ideas to Address COVID-19 programme. It will support a collaboration between Oncimmune and Medicines Discovery Catapult (MDC) to deliver a project called IMPACTT, which stands for Immunity Profiling of Patients with COVID-19 for Therapy and Triage.

Sureserve Group PLC (LON:SUR) has confirmed it is mulling a return to the dividend list after trading in the last month of its financial year remained in line with management targets.  The year to September 30, 2020, showed “resilient growth in revenue, earnings and cash flow”, the corporate compliance and energy services group said in a post-close season trading update. With net cash of £3mln in the bank at the year-end, ongoing recurring cash flows and an order book of £375mln, the group said its board has the confidence to invest in the business and is considering reinstating its sustainable dividend policy.

Live Company Group PLC (LON:LVCG) has announced it is building a new ‘supertour’ BRICKLIVE Tutankhamun. The tour, which is based around the King Tutankhamun 'Treasures of the Golden Pharaoh', will be launched in summer 2021 and will tour the globe to coincide with the 100th anniversary of the discovery of King Tutankhamun's tomb in November 1922. The entertainment firm said it has also signed a new contract with Inverary Castle in Scotland for Bricklive Fantasy Kingdom which will open next week and run until the end of October.

Galantas Gold Corporation (LON:GAL) (CVE:GAL) said it has re-started concentrate processing operations at the Omagh gold mine in Northern Ireland. The re-start follows a coronavirus-related shutdown which began in May. Underground mining remains suspended. In the period from May 26, 2020, to September 30, 2020, approximately 147 tonnes of concentrate was despatched, containing an estimated 551.5 troy ounces of gold.

Supermarket Income REIT PLC (LON:SUPR) has decided to increase the target amount for its recent share placing to up to £200mln from approximately £150mln. The trust said its board had based this increase on a strong level of support from investors; its confidence in executing on the pipeline; and an increase in further appropriate investment opportunities since the marketing roadshow began. The placing shares will be issued at 104p, a 6.3% discount to the closing price on September 16, 2020.

OptiBiotix Health PLC (LON:OPTI) has seen the deals keep flowing. The group's latest deal is with a company called United Italian Trading Corporation (UITC), which has landed the exclusive rights to distribute the cholesterol-lowering product line, CholBiomeX3, in Singapore. UITC, whose customers include hospitals, clinics, doctors’ surgeries, and pharmacies, has agreed to order 5,000 boxes for delivery by the end of the year and increasing annual minimum order quantities to retain its exclusivity.

Blue Star Capital PLC (LON:BLU) said Dynasty eSports, in which it has a 13% stake, is making “rapid progress”. The comment came as the AIM-listed investment company updated investors on the activities of Dynasty, a pioneer in the online eSports portal management (EPM) market. In the third quarter, Dynasty signed three separate software-as-a-service (SaaS) agreements to provide its white-labelled platform to two eSports franchise operators and to the largest telecoms carrier in the Middle East.

Caledonia Mining Corporation PLC (LON:CMCL) (TSE:CAL) said it has signed an agreement with the Government of the Republic of Zimbabwe under the terms of which Caledonia will evaluate mining rights, properties and projects in the gold sector that are controlled by the government. The evaluation is with a view of assessing the potential to advance development on these properties or projects, the group added. Caledonia believes Zimbabwe is a highly prospective region for gold discoveries. The company said it has also assessed and continues to assess investment opportunities in the Zimbabwe gold sector that are privately-owned. 

Strategic Minerals PLC (LON:SML) (OTCMKTS:SMCDY) said it has received a positive updated mining scoping study and financial assessment from mining consultant Wardell Armstrong International about the Redmoor tungsten and tin project in Cornwall. The study shows the internal rate of return (IRR) at 29% and the net present value (NPV) at US$128mln. The indicative production rate proposed in the study was set at 600,000 tonnes per annum, with a potential mine life of 10-plus years based on 7.2mln tonnes of feed.

Vast Resources PLC (LON:VAST), the AIM-listed mining company, said that Atlas Special Opportunities LLC has given notice to the company that it elects to convert bonds of US$500,000 under the terms of the Bond Issuance Deed as announced on October 24, 2019. The company said it can confirm it has satisfied the exercise of conversion rights by making payment of the cash alternative amount of US$555,555. It added that following the previous announcement made on September 10, 2020, regarding progress on asset-backed debt financing linked to the Baita Plai Polymetallic Mine in Romania, the company can also confirm that its ongoing progress with the relevant international banking institution is not effected by this conversion by Atlas.

Curtis Banks Group PLC (LON:CBP), one of the UK's leading SIPP providers, has announced that the pre-conditions to the acquisition of Talbot and Muir Limited, including receipt of approval from the Financial Conduct Authority, have been satisfied, accordingly, completion of the acquisition will occur on October 30, 2020. Will Self, CEO of Curtis Banks, commented: "I am delighted that the acquisition of Talbot and Muir will complete at the end of the month.  Our two businesses are highly compatible in terms of the culture, service offering and distribution routes and this combination reinforces our position as a leading SIPP provider in the UK whilst also being immediately earnings enhancing for the Group as a whole. I very much welcome the Talbot and Muir team into the Curtis Banks Group and I look forward to working with them to drive the future growth of the business."

Alien Metals Limited (LON:UFO), a minerals exploration and development company, said that, following the receipt of warrant exercise notices, it has issued 6,250,000 ordinary shares of no par value in the capital of the company at an issue price of 0.15p per share and 10,555,556 ordinary shares of no par value in the capital of the company at an issue price of 0.3p per share.

Sensyne Health PLC (LON:SENS), the UK Clinical AI company, has announced that its annual general meeting will be held virtually on October 30, 2020, at 2.00pm GMT. As a result of current public health advice and "Stay at Home" guidance, the Company wishes to notify its shareholders that physical attendance in person at the AGM will not be possible.

Applied Graphene Materials PLC (LON:AGM), the producer of speciality graphene materials, said it will be announcing its preliminary results for the period ended July 31, 2020, on October 14, 2020.

6.50am: Quiet start predicted

The FTSE 100 is on track to extend its meagre gains for the fourth session in a row after a strong Wall Street rally overnight.  

London’s blue-chip stock index has been predicted to inch 7 points higher on Tuesday, according to spread-betters on the IG platform, having finished up almost 41 points or 0.7% at 5,942.94 at the start of the week.

US stocks climbed to one-month highs overnight amid reports that President Donald Trump’s health was improving and that a coronavirus spending package could be agreed. 

The Dow Jones Industrials Average jumped nearly 466 points or 1.7% to 28,148.64, while the broader S&P 500 leapt 1.8% higher and the tech-fuelled Nasdaq Composite surpassed them both with a 2.3% surge.   

“The mood in the markets was the polar opposite yesterday to the bearish sentiment on Friday – when it was first announced that the US leader had tested positive for Covid-19,” said market analyst David Madden at CMC Markets. 

“Roughly three hours after the close of the European markets yesterday, it was reported that Mr Trump would be released within a few hours and the announcement helped US stocks extend their gains. The US leader claimed he would be back on the campaign trail again.”

Possibly even more beneficial to US markets was news that House Speaker, Nancy Pelosi, had spoken to Treasury Secretary, Steven Mnuchin, concerning the proposed coronavirus stimulus package, although no details were released. 

Back in Britain, Chancellor of the Exchequer Rishi Sunak told the online Conservative party conference that he would continue to come up with ways to “support people and businesses”. 

He also mentioned curbing spending over the medium term and warned that tax rises would be needed to help pay for the cost of the coronavirus crisis as the government needed to balance the books for future generations.

6.50am: Early Markets - Asia/Australia

Stocks in the Asia-Pacific region were higher on Tuesday as the Reserve Bank of Australia (RBA) decided to maintain its current monetary policy settings.

Hong Kong’s Hang Seng index advanced 0.84% and in Japan, the Nikkei 225 rose 0.53%.

South Korea’s Kospi gained 0.22%, while the S&P/ASX 200 in Australia added 0.35%.

READ OUR ASX REPORT HERE

Proactive Australia news:

American Rare Earths Ltd (ASX:ARR) has surged to a new two-year high on a new US Presidential Executive Order declaring a national emergency that the US needs to increase its related mining and processing capacity.

Lake Resources NL (ASX:LKE) (OTCMKTS:LLKKF) is making significant progress with its sustainable, high-purity ‘clean’ lithium strategy with Hazen Research Inc on track to produce samples of high purity battery quality lithium carbonate next week.

engage:BDR Ltd (ASX:EN1) has increased its monthly revenue by $230,000 or 20% to $1.43 million for the month of September.

Archer Materials Ltd (ASX:AXE) (OTCMKTS:ARRXF) is encouraged by progress with patent applications for its deep tech IP, which is at the core of the ‘knowledge economy’ where output in the form of patents is a prerequisite to successful technology commercialisation.

Matador Mining Ltd (ASX:MZZ) has made a new gold discovery, Angus, about 1-kilometre southwest of Window Glass Hill (WGH) deposit which further enhances the potential of the Cape Ray Gold Project in Newfoundland, Canada.

Bardoc Gold Ltd’s (ASX:BDC) decision to expand exploration drilling at its namesake gold project to plus-40,000 metres has immediately been rewarded with the discovery of a new high-grade shoot beyond planned underground development at Zoroastrian deposit.

Alice Queen Ltd (ASX:AQX) has started diamond drilling ahead of schedule at the Horn Island Gold Project Joint Venture (JV) with St Barbara Limited (ASX:SBM) in Torres Strait, Far North Queensland.

Bryah Resources Ltd (ASX:BYH) has completed an aircore (AC) drilling program of 67 holes for 5,998 metres at four high-priority gold-copper prospects within the Bryah Basin Project, in Western Australia.

Element 25 Ltd (ASX:E25) has received a payment of $1 million in relation to the deferred consideration for the sale of Cummins Range Rare Earth deposit to RareX Ltd (ASX:REE).

Kangaroo Island Plantation Timbers Ltd (ASX:KPT) plans to harvest fire-damaged plantations on Kangaroo Island are taking shape with the company advising the three levels of government of its intentions.

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