- FTSE 100 gains 18 points
- UK GDP in July up 6.6%
- Sterling soft as Brexit trade talks conclude
- US stocks set for positive start
12.14: FTSE struggling for gains, Wall Street set for bounce back
London’s FTSE 100 clambered higher as the morning progresses, while the big US stock indices are all on course to start higher, according to the futures market.
The Dow Jones is predicated to bounce back with a 0.7% rise after a 1.45% decline overnight, while the S&P 500 and Nasdaq Composite are both seen rebounding 0.8% following their respective 1.8% and 2% drops a day earlier.
Software titan Oracle Corp (NYSE:ORCL) is up 4% in pre-market trade as results released outside of trading hours beat expectations, helped by revenue from key client Zoom Video Communications (NASDAQ:ZM). Oracle has been talked about as a potential buyer for the US operations of TikTok.
Exercise bike company Peloton Interactive (NASDAQ:PTON) is heading for a skid lower despite also beating Wall Street forecasts.
Back in Blighty, continuing a fairly volatile few days, the pound struggled higher by midday, up 0.2% against the greenback to 1.2831.
This week’s clashes between London and Brussels over the Northern Ireland protocol have done “brutal” damage to sterling, said analyst John Hardy at Saxo Bank.
“The situation is as serious as it has ever been because this time we are finally talking about the actual reality on the ground for the UK post-Brexit that will prevail in less than four months.
“Will realpolitik prevail and the two sides hammer out an amicable agreement, or is this a fight on principles that means both sides are willing to suffer significant damage to defend their principles: the UK on its sovereignty and the EU on ensuring the UK doesn’t enjoy advantages not available to its own members?
“I fear the latter,” Hardy wrote.
The Footsie has given up some of its gains and at pixel-time was up 18 points or 0.3% at 6,021.39.
10.45am: Boosts from Japan deal and weak pound
Giving a little bit of extra impetus to London trading this morning, the UK and Japan have agreed a post-Brexit trade deal.
This provides a rare boost for sentiment in a week that has been dominated by pessimism over the scope for an agreement by year-end, said market analyst Josh Mahony at IG.
“Interestingly, the shift in focus towards Asia for the UK has brought outperformance from the similarly Asian-focused Burberry, with the fashion firm heading up the FTSE 100 gainers in early trade.”
The Footsie index, up almost 20 points or 0.3% to 6,022.87, is outperforming its continental European peers because of a boost by a weak pound, down 0.1% to 1.2788.
Mahony says London’s equity bulls are hoping that we see further devaluation of the currency to new six-week lows to the benefit of internationally-earnings firms.
“Brexit fears are likely to play an increasingly significant role for both the pound and FTSE in the coming months. However, while many will hope both the EU and UK ultimately find common ground, the events of this week will certainly turn plenty of optimists who had expected a comprehensive trade deal by the December deadline.”
— Proactive (@proactive_UK) September 11, 2020
9.35am: Footsie back on front foot
London’s blue chips are inching higher as the analysis floods in about the earlier GDP data, which has been mulled over and shrugged off by currency traders amid the gloomy Brexit situation, with the pound now below 1.28 against the dollar.
While the ONS estimates that real GDP expanded 6.6% month-on-month in July and 8.7% in June, economists at Berenberg point out that July was still 11.8% below its pre-pandemic January level, compared to the 6.9% contraction during the financial crisis between February 2008 and March 2009.
They added that the strong gain in July exceeded expectations and suggests upside risk to a third-quarter forecast of 15.1% gain versus the second quarter, when there was 20.4% decline.
Comparing different sectors of the economy between July and pre-crisis February, the highly sectoral nature of this crisis is clear – financial services is almost back to normal, hospitality still down 60%. These sectoral different in output feed directly into the labour market.. pic.twitter.com/XCIlwIVfTU
— Resolution Foundation (@resfoundation) September 11, 2020
“While a better-than-expected uptick is possible for Q3, the recent escalation of Brexit tensions adds downside risks to Q4. The upside risk for our 2020 call overall (-10.2%) looks more modest despite the solid July gains.”
The data seems to show the UK economy continues to recover at a better rate than most of its counterparts on the European mainland, added Michael Hewson at CMC Markets, though he agreed that the recent deterioration in EU/UK trade negotiations could also act as a brake into year-end as the prospects of no deal increase further.
However he said the economic data is “almost a side show” against the tense backdrop of Brexit and between parliamentarians in Westminster.
The FTSE 100 is up 17 points or 0.3% at 6,019.93, with Burberry (LON:BRBY) and Primark parent Associated British Foods (LON:ABF) top of the leaderboard, surrounded by other multinationals happy with the weaker pound.
8.30am: Subdued start for FTSE
The FTSE 100 index managed to notch up a modest gain in opening deals on Friday helped by GDP data showing the UK economy grew for the third month in a row in July, up 6.6%, although after sharp falls overnight on Wall Street the initial gains soon disappeared.
After half an hour of trading, the UK blue-chip index had lost 2 points just holding above the psychologically important 6,000 level at 6,001.64.
Richard Hunter, Head of Markets at interactive investor, commented: “A lack of fresh impetus is holding markets back, with both the US and the UK being buffeted by economic and political concerns. In the US the most recent failure to agree the next round of stimulus came into sharp focus as the number of US citizens on unemployment nudged 30 million.
“The divergence between Wall Street and Main Street has become a political issue in the midst of an election campaign where the rhetoric is starting to intensify. At the same time, the main driver of the market recovery has also been the subject of some debate, as tech stocks on punchy valuations have come under review given that the pandemic-fuelled rise of recent months may have reached a plateau for the time being.”
He added: “Despite the welcome news of a further improvement to the UK economy in July, sterling remains weak. Given the clouds of the end of the furlough scheme, a likely rise in unemployment on top of the current recessionary trend and negotiations faltering between the UK and the EU which threaten further to derail an economy which is desperately trying to recover, the immediate outlook poses more questions than answers.
“This sterling weakness has in part provided a prop for the FTSE 100 over the last week, given the constituents’ exposure to overseas earnings. While this has allowed the index to avoid some of the sharper recent falls, it remains down 20% in the year to date. Even at this level, with some regarding the index as one of the cheapest globally on valuation terms, the UK remains hampered by the lack of an immediate or obvious positive catalyst.”
There was little on the corporate front to provide much alternate attention, certainly among the big caps.
However, further down the market, oil tiddler 88 Energy Limited (LON:88E) stood out, jumping 25% higher to 0.365p as it reported the findings of final petrophysical analysis of the Charlie-1 well exploration, revealing greater hydrocarbon pay than previously estimated.
According to 88 Energy, the well’s net pay is significantly increased by the additional work and the largest additional contribution was in the Lima discoveries which are in the Seabee formation. The new analysis follows Premier Oil’s exit from the venture.
Proactive news headlines:
88 Energy Limited (LON:88E, ASX:88E) shares jumped higher on Friday as the firm reported the findings of final petrophysical analysis of the Charlie-1 well exploration, revealing greater hydrocarbon pay than previously estimated. According to 88 Energy, the well’s net pay is significantly increased by the additional work and the largest additional contribution was in the Lima discoveries which are in the Seabee formation. The new analysis follows Premier Oil’s exit from the venture. The Upper Lima section is now estimated to have some 250 feet of net pay, versus initial estimates of just 8 feet, whilst the Lower Lima section is now seen to span 111 feet of net pay compared to the earlier estimate of 64 feet.
Pembridge Resources PLC (LON:PERE) shares rose on Friday after the group said its subsidiary, Minto Explorations Limited, has secured a prepayment funding facility with its copper concentrate offtake partner, Sumitomo Canada Limited. The company said the pre-pay facility of up to US$12.5mln is additional to Minto’s existing offtake agreement, under which Sumitomo makes an advance payment of 90% of the value of concentrate output each month, with Pembridge noting that the facility represents a “further development” in Minto’s relationship with Sumitomo.
CentralNic Group PLC (LON:CNIC) said it has agreed to acquire two businesses, Zeropark and Voluum known collectively as Codewise, for US$36mln (£28mln) in a move it says will expand its monetisation segment. In an announcement after the close on Thursday, the internet domain name specialist said the Codewise companies provide services to domain name owners and website operators so that they can generate recurring income from the monetisation of traffic to their websites, as well as tools for online marketers to acquire traffic and customers and to manage and optimise their online marketing activities. CentralNic said the acquisition will help it build market share and is expected to be “significantly earnings enhancing with immediate effect”. To help finance the acquisition, CentralNic said in a separate announcement on Friday morning that it has successfully raised £30mln in a “significantly oversubscribed” private placing of 40mln shares at a price of 75p each, a 6% discount to its closing price on Thursday.
Chaarat Gold Holdings Limited (LON:CGH) has said it is “on track” to deliver its full-year production guidance for its Kapan gold mine in Armenia, noting that the run of mine grades at the project have improved over the last two months. In a post-period statement accompanying its results for the six months ended June 30, 2020, the company said Kapan is still expected to deliver 55,000 gold equivalent ounces in the year, while grades at the mine improved in July and August and are now expected to be above levels seen in the first half for the rest of the year. Chaarat said these improved grades were the result of targeted development work carried out in the year to date which focused on “identifying higher grade ore blocks that require minimal development”.
Genel Energy PLC (LON:GENL) has revealed its intention to raise up to US$300mln in debt financing, to replace an existing bond that is set to mature in December 2022. It is looking to issue a new five-year bond and said it has engaged Pareto Securities to organise a roadshow with international credit investors. Genel noted that it had over US$350mln of cash at the end of August, with net cash stated at US$55mln.
The stock to be sold represents up to approximately 5.7% of the property franchise’s issued share capital and is being offered at a price of not less than 150p each. Belvoir shares closed trade on Thursday at 155p. The final number and price of the placing will be agreed by broker finnCap and the selling shareholder, who is founder and former chairman Mike Goddard, at the close of the bookbuild process.
ImmuPharma PLC (LON:IMM) has provided an update regarding its submission to the US Food & Drug Administration (FDA) of a Special Protocol Assessment (SPA) for Lupuzor’s Phase III trial in Lupus patients. In a brief statement, the specialist drug discovery and development company said that, in discussions, Avion Pharmaceuticals, its licensing partner for Lupuzor, has confirmed that, whilst the review period by the FDA for an SPA request is normally up to 45 days – which has now passed – Avion has as yet not received a response from the regulator and as such the file is still in the review queue, due to the current workload at the FDA. ImmuPharma said it will provide an update to the market as soon as Avion has received a response from the FDA and the company has been notified.
Blue Star Capital PLC (LON:BLU), the investing company with a focus on esports, technology and its applications within media and gaming, announced that it has allotted 100,000,000 new ordinary shares of 0.1p each in the company following an exercise of warrants at an exercise price of 0.1p each, providing the company with proceeds of £100,000
Power Metal Resources PLC (LON:POW), the AIM-listed metals exploration and development company said it has received a notice to exercise warrants over 2,250,000 new ordinary shares of 0.1 pence each in the company. It noted that subscription monies of £22,500 have been received by Power Metal in respect of the exercise.
Adamas Financial Asia Limited (LON:ADAM) said that further to its announcement September 7, 2020, it has been advised that there has been a further delay in the receipt of the remaining subscription monies under its recent funding. It added that it expects the remaining subscription monies from placees to be remitted over the course of the next few days.
ReNeuron Group PLC (LON:RENE), a global leader in the development of cell-based therapeutics, announced that all resolutions put to shareholders at its annual general meeting held on Thursday were duly passed.
Impax Environmental Markets PLC (LON:IEM) has said its monthly factsheet for August 2020 is now available on the company’s website at: https://impaxenvironmentalmarkets.co.uk/wp-content/uploads/2019/05/factsheet-Impax-Environmental-Markets-Plc-august-2020.pdf
6.50am: Small fall predicted
The FTSE 100 index is seen retreating modestly at the open on Friday, extending the previous session’s fall following overnight drops by US markets, but gains in Asia and a further wobble by the pound on Brexit trade fears should limit the decline in London.
Spread betting firm CMC Markets expects the blue-chip index to open around 3 points lower at 6,000, holding on to the key psychological level recaptured this week as it did on Thursday when it recovered from earlier sharp falls to end just 9.32 points lower.
Overnight in New York, the jitters returned for the Dow Jones Industrials Average which closed 405 points, or 1.4% lower at 27,534, while the broader S&P 500 index lost 1%, and the tech-laden Nasdaq Composite fell 0.6%.
US markets suffered as big tech firm shares fell again amid worries about their stretched valuations and on growing doubts about US economic stimulus.
David Madden, market analyst at CMC Markets UK noted: “Republicans in the Senate failed to push forward a coronavirus relief package. The lawmakers proposed a bill that would see unemployment benefit being enhancing by $300 per week.
“The proposed package would have allocated funds to schools and testing facilities, it also would have authorised new loans to small businesses. The Democrats are holding out for a more generous package. The bill failed but it should bring about further political wrangling.”
Asian stock markets were mostly higher on Friday, however, with Japan’s Nikkei 225 index up 0.6% and Hong Kong’s Hang Seng index ahead 0.4%, as US stock index futures rose sharply today indicating a bounce-back by Wall Street is likely today.
Brexit trade talks to conclude
On currency markets, sterling wobbled near a 1 1/2-month low set on Thursday amid fears that UK-EU trade negotiations, due to conclude today, may fall apart.
The European Union told Britain it should urgently scrap a plan to break their divorce treaty, but Prime Minister Boris Johnson’s government refused and pressed ahead with a draft law that could sink four years of Brexit talks.
EU lawyers believe that just by tabling the draft ‘internal markets bill’ the UK is in violation of the Withdrawal Agreement and may initiate infringement proceedings if the bill is adopted, according to an EU legal option leaked to the Guardian newspaper.
UK growth; US inflation
The main focus on Friday will be macro, with the release of the UK gross domestic product (GDP) monthly growth figures for July, and the August US CPI inflation numbers.
The British government was relatively slow to lockdown the economy so the true impact of the coronavirus (COVID-19) pandemic wasn’t seen until April, the first full month of the lockdown, when the economy contracted by 20% – the largest negative reading on record.
Since then, things have started to improve, as sections of the economy have reopened. The May, and June monthly readings were 1.8% and 8.7% respectively, but, CMC’s Madden says keep in mind the economy was coming from low bases. Roughly speaking, economic output is 17% below the pre-pandemic level.
July saw the re-opening of pubs, restaurants, hairdressers and barbers, so the reading should reflect a sizeable rise in economic activity.
Meanwhile, the July reading for US CPI inflation caught some economists by surprise coming in at 1%, a sizeable increase on the 0.6% that was posted in June, and above the consensus estimate for 0.8%.
The core level was impressive too as it was 1.6%, and that was a big rise on the 1.2% registered in June. The fact the core reading also jumped suggests that underlying demand is strong.
Ashmore is expected to report much stronger net revenues than the £314mln seen a year earlier, thanks mostly to higher management fees.
Analysts at UBS expect £335mln, leading to underlying profits (EBITDA) of £216mln and EPS of 26.7p and said “investors will focus on any commentary the company provides with regards to the strength (or weakness) of flows since the end of June”.
Around the markets:
- Sterling: US$1.2821 down 0.5%
- Gold: US$1,943.90 an ounce, down 0.5%
- Brent crude: US$39.89 a barrel, down 0.2%
6.45am: Early Markets – Asia/Australia
Asian stocks were mostly in positive territory on Friday with China’s Shanghai Composite up 0.43% while Hong Kong’s Hang Seng index advanced 0.66%.
Japanese stocks saw gains with the Nikkei 225 advancing 0.72% but South Korea’s Kospi declined 0.38%
In Australia, the S&P/ASX 200 fell 0.60% as major miner Rio Tinto announced its chief executive will be stepping down following the destruction of historically significant Aboriginal caves.
Proactive Australia news:
Twenty Seven Co Ltd (ASX:TSC) has entered into a binding term sheet with an exclusive option to acquire Oz Gold Group Pty Ltd and the rights over two highly prospective gold projects – Mt Dimer in WA and Trident in NSW.
Sipa Resources Ltd (ASX:SRI) has entered into a binding heads of agreement (HOA) to form an innovative joint venture with Buru Energy Ltd (ASX:BRU) to progress base metals and hydrocarbon exploration at the Barbwire Terrace Project in Western Australia.
XTEK Ltd (ASX:XTE) achieved record revenue for the 2020 financial year, underpinned by contributions from HighCom Armour Solutions Inc in the US and ongoing Small Unmanned Systems (SUAS) supply and support.
Macarthur Minerals Ltd (ASX:MIO) (CVE:MMS) is in a stronger position to complete its Lake Giles Project financing strategy after the early conversion of all outstanding convertible notes 23 months prior to maturity.
Carnavale Resources Limited (ASX:CAV) has started drilling at Grey Dam Nickel Project in Western Australia targeting recently defined EM conductors and potential nickel sulphide mineralisation in bedrock.
Andromeda Metals Ltd (ASX:ADN) is higher after defining zones of high-grade halloysite-kaolin within the Bright White domain at Hammerhead prospect on the Eyre Peninsula in South Australia, highlighting a potential construction product application.
Emerald Clinics Ltd (ASX:EMD) welcomes the interim decision from Australia’s Therapeutic Goods Administration (TGA) that recommends low dose cannabidiol, or CBD, become a Schedule 3 medicine on the Australian Register of Therapeutic Goods (ARTG).