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FTSE 100 tanks as traders fear protracted downturn

FTSE 100 ends 162 points lower
The “fear index” sees biggest three-day move since mid-March

  • FTSE 100 ends 162 points lower
  • The "fear index" sees biggest three-day move since mid-March
  • Initial jobless claims in the US last week fell 2.98mln from 3.17mln the week before

5pm: FTSE closes 2.75% lower

FTSE 100 index closed firmly in the drink on Thursday, joining other global indices in heading lower, as traders fear a protracted economic slowdown caused by the virus.

Britain's top share index finished down over 162 points, or 2.75%, at 5,741. The mid-cap FTSE 250 tumbled 448 points at 15,430.

"The lack of market direction over the past month has been a reflection of the uncertainty that has dominated for traders, with initial optimism over impending moves to ease lockdown measures gradually souring," said Joshua Mahony, senior market analyst at IG.

"The ability to ignore the huge deterioration in the economic picture can only last for so long, with the reasoning behind such actions likely to come crashing down in the event that the prospect of a meaningful economic bounce back cannot occur."

On Wall Street, the Dow Jones tumbled over 155 points, while the S&P 500 lost nearly 22.

3.25pm: Sell in May makes a comeback

The weak start by US equities appears to have put the frighteners on UK investors, who had been trying to engineer a rally.

The FTSE 100 was down 218 points (3.7%) at 5,685, having fallen as low as 5,661 at one point this afternoon.

Sell in May and dont bother coming back again is starting to look like less of a joke and more of an investment strategy now that the indexs gains this month have been wiped out.

“The change in risk sentiment has come with the biggest 3-day move in the VIX Index [the so-called ear index] since 17 March and the volatility index is trading around 36 today far above the historical equilibrium point of 22 separating bull from bear markets. In other words, we remain in a bear market and the recent rally has not nullified that classification,” declared Peter Garnry, the head of equity strategy at Saxo Bank in a review of the current state of play of the US stock market.

2.50pm: FTSE 100's joined in the red by US indices

US indices took a large step back at the outset following another scary set of jobs numbers.

The Dow Jones was down 307 points (1.3%) at 22,941 and the S&P 500 was down 35 points (1.3%) at 2,784.

“US initial jobless claims dropped for the sixth straight week, but remain painfully high at 2.98 million,” reported James Knightley, the chief international economist at ING.

“Continuing claims are not climbing as quickly though, rising to only 22.8 million from 22.4 million,” he noted.

“There is an extra week lag in the data (week of 2 May, rather than the 9th), but the gap between the two series is somewhat strange. Obviously not everyone will qualify for unemployment benefits and there may well be the case of double-counting on initial claims as people try to register both online and by phone. There could also be [an] issue with backlogs between filing and receiving benefits and then being classified as a continuing claimant,” Knightley speculated.

“As such the true figure of the number of people out of work right now is somewhere in between and our best guess is that after payrolls fell 20.5 million in April we will see another 11-12 million decline for May,” he added.

More than 2.98 million Americans filed for first-time unemployment claims last week, a higher total than economist expectations of 2.7 million — and the eighth-straight week of numbers in their millions.

— NBC News Business (@NBCNewsBusiness) May 14, 2020

Roiana Reid at Berenberg Capital Markets said the sluggish decline in initial claims supports Berenbergs expectations of a slow recovery in the labour market.

“We expect the unemployment rate to be more than double its pre-crisis level at the end of 2021. A sluggish labour market recovery will constrain the rebound in consumption, especially of non-essential goods and services,” Reid said.

In London, the FTSE 100 was down 186 points (3.2%) at 5,718.

2.25pm: US weekly jobs claims higher than expected

US indices have fallen further on futures markets after the release of the latest weekly US jobs numbers.

The Dow Jones is now expected to open at around 22,985, down 263 points.

The S&P 500 is seen opening 27 points lower at 2,793.

Initial jobless claims in the US last week fell 2.98mln from 3.17mln the week before but the figure was above the consensus forecast of 2.5mln.

“The consensus always looked ambitious, because it implied a significantly faster rate of decline than the -15% per week trend in previous weeks. That said, we are a bit disappointed by the outturn, which shows claims down only 6.2%,” said Ina Shepherdson, the chief economist at Pantheon macroeconomics.

“Still the early evidence for this week, in the form of daily data from Pennsylvania and Wisconsin, alongside Google search numbers, points to claims falling more quickly again, to about 2,500k but our mid-June target for the first sub-1mln reading has to be pushed back to the end of the month,” he added.

Since the middle of March, a staggering 36.8mln US citizens have started applying for unemployment benefit.

In London, the FTSE 100 was recovering slightly to 5,716, down 188 points (3.2%).

Housebuilders were among the hardest hit after the release this morning of the latest survey of property surveyors by the Royal Institution of Chartered Surveyors (RICS).

The survey, which subtracts the percentage of respondents who saw a decline in house-buying activity from the percentage that saw an increase, came up with a balance of -92 in April, even worse than Marchs -68.

As for prices, following a run of three successive months of positive readings, the RICS headline house price balance fell into negative territory with a net balance of -21% of respondents noting a decline in prices.

RICS reported that 35% of the survey participants believe that when the market reopens, prices could be left up to 4% lower, while more than 40% take the view that prices could in fact fall by more than 4%.

“Feedback suggests that a recovery in prices could take a little while longer than sales levels, with respondents suggesting, on average, prices will recover in eleven months,” RICS reported.

“Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown. Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February. Moreover, whether this can be realised will largely depend on how the pandemic pans out and what this means for the macroeconomic environment,2 said Simon Rubinsohn, the chief economist at RICS.

“Critically, to ensure the housing market can begin to operate in a more functional way and that developers have the confidence to continue building in these very difficult circumstances, further specific interventions from Government, following on from the announcement of flexible site working hours, and support to smaller developers announced yesterday, are likely to be necessary,” he added.

Persimmon PLC (LON:PSN), which issued a trading statement today, was down 6.1% at 2,019p.

Barratt Developments PLC (LON:BDEV), down 4.6% at 456.7p, and Taylor Wimpey PLC (LON:TW.), down 5.3% at 134.4p, got off a bit more lightly.

1.00pm: US indices to open lower

After yesterdays shake-out, US investors will have to don their tin hats again today with indices set to tumble again.

The Dow Jones, which fell 517 points yesterday to close at 23,248 is tipped to open at around 23,057, down 191 points.

The S&P 500, which fell 50 points to 2,820 yesterday, is seen opening 21 points lower at 1,799.

“Federal Reserve Chairman, Jerome Powell's, comments were hardly comforting on Wednesday. A bleak assessment of the outlook combined with demands for more fiscal stimulus – at a time when Congress looks deeply divided on the issue – and a rejection of negative rates wasn't exactly what investors wanted to hear right now,” commented OANDA's Craig Erlam.

“Of course, there's already unprecedented amounts of stimulus flowing around the financial system in a bid to avert a global depression but we are already in a severe recession. Any hope of a V shaped recovery is long gone and we're in full damage limitation mode. Perhaps the reality is finally setting in, although who would be surprised to see equities marching higher again tomorrow?

“It's long been said that markets are hooked on stimulus, only more of the drug can sustain them. If that was true before then it's certainly looking the case now and even the staggering efforts we've seen in recent months may not be enough. Only more will do,” he added.

Meanwhile, Raoul Leering, the head of international trade analysis at Dutch finance house, ING, says the possibility of another trade war is back.

“President Trump has said he will terminate the phase one deal if China does not live up to the goal of increasing imports from the US by a total of US$200 billion the end of 2021. Once again we have witnessed that Trump is willing to apply tariff hikes (or at least threaten their use) to other policy areas than just trade. He called tariff hikes the ultimate punishment if China does not allow non-Chinese experts to be involved in the search for the origin of Covid-19, Leering noted.

“Trade secretary Wilbur Ross has also ramped up trade tensions by initiating a national security section 232 investigation into imports of (parts of) transformers and transformer regulators,” he added.

In the UK, the FTSE 100 has shed 190 points (3.2%) at 5,714, with insurance giant Prudential PLC (LON:PRU), down 6.8% at 1,016.5p, leading the retreat after it issued a business update to coincide with its annual general meeting.

The first quarter of 2020 saw overall Asian sales decline by 24% year-on-year, with Hong Kong and China sliding 50% and 19% respectively.


11.30am: Zap! Powell! Fed boss's comments biff the markets

According to the Office for National Statistics (ONS), 46% of adults think it will be longer than six months before life gets back to normal.

The ONS noted that this compared with 33% after the first week of lockdown, so UK citizens are getting a bit more realistic/pessimistic (delete as appropriate) about how long coronavirus-related restrictions will last.

The ONS noted that its survey was conducted before the announced changes to lockdown rules on 10 May.

On the plus side, the survey recorded the largest week-on-week decrease in overall levels of concern. In Great Britain, three-quarters of adults said they were very worried or somewhat worried about the effect that the coronavirus (COVID-19) was having on their life now, compared with 80% the week before.

This decrease was also seen among those aged 70 years and over, falling to 72% this week from 75% last week, and for those with an underlying health condition, falling to 75% this week from 80% last week.

The market seems to be in tune with the general publics concerns about how long it will take to hit the reset button as the FTSE 100 was down 142 points (2.4%) at 5,762.

Comments from Jerome Powell, the chairman of the US central bank, have served as a bit of wake-up call for investors.

Sharp losses for US indices yesterday set the stage for Europes weakness this morning, as investors take heed from Powells comments last night about the recession and its potential severity. “The market seemed to have concluded that the downturn would be manageable, as seen in its placid reaction to shocking data such as US GDP and non-farm payrolls, but if the chairman of the Federal Reserve is worried then it is time to sit up and take notice," said Chris Beauchamp, the chief market analyst at IG.

“Central bankers have been at pains to stress their ability to continue to intervene to provide liquidity, as we saw with BoE governor Andrew Bailey yesterday, but they cannot stop the recession entirely. With earnings season now mostly finished, but worse to come, equities look vulnerable to a pull-back, building on the losses of the past two sessions,” he added.

The management of WH Smith PLC (LON:SMWH) has won plaudits for its decision to switch focus from the high street to travel hubs but it could not have foreseen the coronavirus pandemic, which has had a big effect on its business.

The shares fell 7% to 852.5p after a trading update.

“In April the wheels came off as airport travel all but ceased, with a similar picture being seen at the groups other profitable business area within railway stations. April group revenue plunged 85%, comprising a 91% decline in Travel and a 74% drop from the High Street,” reported Richard Hunter, the head of markets at interactive investor.

“As has been seen so markedly within the tourism and travel sector and, indeed, connected businesses such as WH Smith, prospects largely rest on the return to something of an economic normality,” he continued.

“The US market could potentially provide an early fillip to restored revenues, where 80% of air passengers take domestic flights. The question mark over the wider issue of international travel, however, is a major concern for the likes of WH Smith. Equally, train travel looks likely to be subdued with fewer passenger numbers in the short-term, while pressure on an already embattled High Street is likely to resume on the other side of the pandemic,” he added.

When you buy a book online at @WHSmith do they try and sneak a massive chocolate bar into your basket at checkout too?

— David Spencer (@dspencer47) May 14, 2020

10.00am: Second wave (of selling) fears grip markets

Market pundits are beginning to wonder whether markets, on the recovery trail for eight weeks now, might be about to see a second wave of selling.

The FTSE 100 was down 129 points (2.2%) at 5,777, following heavy falls on US markets yesterday.

“The sharp rebound from March lows is beginning to stall as record levels of uncertainty are juggled with extended valuations,” said Saxo Banks Eleanor Creagh.

“The disconnect between the real economy and equity markets has been surreal. For the S&P 500, P/E [price/earnings] multiples derived via forward earnings estimates are at levels last seen in 2002, post the dotcom crash when the index was still ~30% from its eventual low. Although that period teaches valuations can remain departed from reality for longer than is comfortable. Now heightened geopolitical tensions, mounting second wave risks and labour market destruction are eroding the expectation of an aggressive V-shaped recovery that has been priced by investors,” she suggested.

Just a few UK blue-chips are defying the trend, among them funds supermarket operator Hargreaves Lansdown PLC (LON:HL.), which is up 5.8% at 1,685p after a trading statement.

Year-to-date the financial services firm has racked up total revenue of £448.1mln, up 13% year-on-year, supported by record dealing volumes.

The update from housebuilder Persimmon PLC (LON:PSN) was not so well-received and the controversial firms shares currently sit in the Footsie cellar, down 4.7% at 2,048.6p.

The company said it will reopen its sales offices in England tomorrow. Initially, sales consultations will be on a booked appointment basis only.

8.40am: Another grey day

The FTSE 100 opened in negative territory on Thursday amid worries over the economic impact of the coronavirus pandemic lockdown and fears over a second wave of cases of the disease in countries given the all-clear.

The index of UK blue-chips opened 76 points in arrears at 5,827.95.

In the UK, the chancellor, Rishi Sunak, took Wednesday's March UK GDP update as a clear message the economy is already in a deep recession.

Overnight on Wall Street, The Dow Jones Industrial Average finished a bloody session 500 points lower, with Asias main markets following suit.

“The fears around the economic impact of the pandemic are finally becoming the major story driving markets after months of rallying on anything that pointed to the lockdown easing and infection numbers falling,” said James Hughes, analyst at Scope Markets.

“Over the last few days, we have seen officials from the US, UK and Europe all reiterate points made previously and state that many countries will suffer for a deep recession for an extended period of time.”

Intercontinental Hotels (LON:IHG) fell a further 3.3% early on as sentiment towards travel-related stocks continued to deteriorate – despite already being at rock-bottom levels.

The housebuilders were also on offer with Barratt Developments (LON:BDEV) topping the losers list with a 3.5% decline.

Fund platform group Hargreaves Lansdown (LON:HL.) was one of the markets few winners, advancing 8.2% after it bucked the trend in the savings industry by adding new customers.

Proactive news headlines:

ImmuPharma PLC (LON:IMM) has noted the results of a recent study conducted at Emory University Atlanta in the US, which it postulates may provide evidence that its Lupuzor lupus treatment could help to reduce or prevent the occurrence of the cytokine storm seen in coronavirus patients. The drug development firm said the findings of the study suggested that coronavirus patients and systemic lupus erythematosus (SLE) sufferers experiencing flares might share similar inflammatory symptoms, underpinned by similar mechanisms. As Lupuzor is a modulator of immune response and an anti-inflammatory agent that has activity against SLE, ImmuPharma said further exploratory work is ongoing to assess the treatments “possible potential and clinical program in [coronavirus] patients”.

Tiziana Life Sciences PLCs (LON:TILS, NASDAQ:TLSA) chief executive believes the companys StemPrintER technology has the “potential to become an essential prognostic tool” in the fight against breast cancer. Kunwar Shailubhais comment followed the release of a scientific abstract ahead of a poster discussion session at the American Society of Clinical Oncologys (ASCO) virtual conference being held later this month. This poster showed the stem cell biology-based genomic tool had “greater refinement [than] and superiority [to]” than the current market leader, Oncotype DX, in delivering prognostic information on women with ER+/HER2- form of breast cancer. The results were compiled by the European Institute of Oncology in Milan in collaboration with the Royal Marsden Hospital and Queen Mary University in London.

Echo Energy PLC (LON:ECHO) told investors that it has successfully agreed amendments to its €5mln loan, with the lender accepting a deferral of all cash interest payments for 2020. In a statement, the company said the agreement with Lombard Odier Asset Management will help it preserve its existing cash resources. A quarterly interest payment was due for the three months ended March 31, 2020, and that will no longer be required, with no cash interest payments now payable before March 31, 2021. Echo Energy said: “The amendment is a further important step in the successful restructuring of the company's debts and provides a waiver of default for any non-payment of interest previously due under the loan.”

Bango PLC (LON:BGO) said it has signed a significant platform deal with a major global telecoms provider. The mobile commerce specialist said the deal will run for an initial period of three years and is worth at least £1.5mln with the opportunity to earn additional revenues. Under the agreement, the telecoms provider will deliver a range of third party products and services to its customers through the Bango Platform and will use data insights to optimise the targeting of product offers.

Verona Pharma PLC (LON:VRP) (NASDAQ:VRNA) said it has been given the regulatory green light for two phase III studies of the nebulised formulation of its drug for chronic obstructive pulmonary disease (COPD). It followed what is called an End of Phase II meeting with the US Food & Drug Administration (FDA) at which the company was provided “clarity” by officials on how it should proceed with the trials. Specifically, the FDA provided its input on the dosing, primary and secondary endpoints, patient population and study design.

Ceres Power Holdings PLC (LON:CWR), a global leader in fuel cell technology and engineering, has announced the appointment of Mark Garrett as its chief operating officer, joining the Executive Management board with effect from August 10, 2020. Ceres said Garrett said joins the company from Ricardo PLC (LON:RCDO) where he held various positions including chief operating officer and group strategy officer. Garrett succeeds the company's current chief operating officer James Falla, who will leave Ceres in August 2020 to pursue other opportunities.

Oncimmune Holdings PLC (LON:ONC) has said findings from one of its studies are to be featured at a prestigious international cancer research conference this month. The immunodiagnostics group announced that its data from profiling tumour associated antibodies in melanoma patients receiving immune checkpoint inhibitors has been selected as a featured presentation at the upcoming American Society of Clinical Oncology 2020 – ASCO for short – Virtual Scientific Programme, which will take place from May 29 to May 31. The featured presentation will review data assessing samples from patients receiving either Pembrolizumab, Ipilimumab, Nivolumab monotherapy, or combination therapy of Ipilimumab and Nivolumab, which have been analysed on Oncimmune's proprietary biomarker discovery engine, SeroTag. The data identified that autoantibodies have a role in predicting clinical outcomes or immune-related adverse events (irAEs).

MaxCyte Inc (LON:MXCT) has said it will present clinical data from an ongoing phase one trial of its MCY-M11 treatment for ovarian cancer and peritoneal mesothelioma at the American Society of Clinical Oncology's upcoming annual meeting. The cell-based therapy specialist said the data, which encompasses the first three cohorts of a dose-escalation trial to demonstrate the safety of MCY-M11 and the feasibility of one-day manufacturing, will be available as a poster presentation in the Developmental Therapeutics: Immunotherapy session from 8am Eastern Time (1pm BST) on May 29. The presentation will be entitled: "Feasibility and preliminary safety and efficacy of first-in-human intraperitoneal delivery of MCY-M11, anti-human-mesothelin CAR mRNA transfected into peripheral blood mononuclear cells, for ovarian cancer and malignant peritoneal mesothelioma."

Westminster Group PLC, the supplier of managed services and technology-based security solutions, racked up its fourth consecutive year of double-digit percentage revenue growth in 2019. Reporting numbers for the year ended December 31, 2019, Westminster said its revenues rose 63% to £10.9mln in 2019, up from £6.7mln in 2018, with a 46% increase in recurring revenues to £5.6mln, up from £3.8mln the year before. It pointed out that the current year so far has been a good one with order intake and revenues ahead of budget. Revenues in the first quarter were up 22% year-on-year at £4.5mln with the company making “a healthy profit” of several hundred thousand pounds in the quarter both before and after-tax as it begins to benefit from new contracts.

Iofina PLC (LON:IOF), specialists in the exploration and production of iodine and manufacturers of specialty chemical products, has announced that its subsidiaries Iofina Chemical Inc., and Iofina Resources Inc., have received loans totalling US$1.09mln from the US government. The loans come under the US Small Business Administration's Paycheck Protection Program (PPP) which is part of the Coronavirus Aid Relief and Economic Security Act (CARES). PPP loans, or a portion of the loan, may be forgivable if loan proceeds are used for eligible purposes, including employee retention and payroll. At this time, the group said, it expects a significant majority of funds received to be eligible for forgiveness under the program.

ADM Energy PLC (LON:ADME) has agreed to pay a US$250,000 deposit, in cash and shares, for its previously announced acquisition of an additional 2.25% interest in the OML 113 asset in Nigeria. "Keeping to our stated plan, we have completed the second stage of this agreement with EER, taking us another step closer to concluding the transaction and increasing our position in OML 113, which is a high-quality asset,” Osamede Okhomina, ADM chief executive said in a statement. "Despite the wider, global macroeconomic issues, we believe the longer-term outlook remains very positive within our market. We are focused on continuing to execute our strategy and are well placed to do so having recently strengthened our financial position," he added.

KRM22 PLC (LON:KRM) saw its shares rise on Thursday as it completed a share placing at a premium, raising around £1.14mln. The risk management software firm said it had raised the proceeds through the issue of around 3.8mln new shares at a price of 30p each, a 27.7% premium to its closing price last Thursday, the last trading day before Monday when it unveiled that it had exceeded its fundraising target. KRM22 also said its executive chairman and chief executive, Keith Todd, chief financial officer Kim Suter and non-executive director Steve Sparke intend to make a further equity investment of around £135,000 in the company through a subscription for 499,998 new shares at the placing price. The company said the proceeds of the fundraising will be used for general working capital purposes.

Europa Oil & Gas Holdings PLC (LON:EOG) chairman Simon Oddie has told investors he is encouraged by the progress being made with the onshore Wressle oil field project in Lincolnshire. It comes after the project operator provided an update on the site work, which has been continuing during the coronavirus (COVID-19) pandemic. Four groundwater monitoring boreholes were completed at the Wressle site, as required under the projects approvals, and a three-month period Read More – Source




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