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FTSE 100 closes 2.2% ahead as traders look beyond dismal Q2 numbers

  • FTSE 100 index closes firmly higher
  • Wall Street shares up
  • UK Q2 GDP falls by 20%

5.01pm: FTSE 100 closes higher midweek

FTSE 100 index closed higher midweek as traders appeared to look beyond the truly dismal second quarter gross domestic product (GDP) figures earlier.

The UK economy shrank by a fifth in the last quarter, from April to June 30 due to the pandemic crisis, but GDP did rise 8.7% in the month of June.

Britain's top share index finished the day up over 135 points at 6,289, while the FTSE 250 added around 50 points at 18,047.

Wall Street was also on good form, with the Dow Jones, S&P 500 and Nasdaq index all ahead.

"After months of indecision, we are finally seeing much more conviction from the FTSE 100 as it hits a three-week highs in the wake of an economic rebound in June. With Q2 growth confirmed at -20.4%, traders have been happy to concentrate on the more current NIESR forecasts that shows a potential 15% rebound in Q3," said Joshua Mahony, a senior market analyst at IG.

US and Canada 4pm/11am EST

Wall Street shares flew higher in early deals. The Dow Jones Industrial Average added nearly 285 points to stand at 27,971. The S&P 500 gained over 44 at 3,378. The tech heavy Nasdaq index went over 203 points higher at 10,985. In Canada, the S&P/TSX index added over 174 points at 16,671.

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3.20pm: Coronavirus vaccine maker Moderna secures US$1.5bn order form US government

As the US trading session progressed through its first hour, shares in biotech Moderna Inc (NASDAQ:MRNA) were on the ascent, rising 1.3% to US$69.88 following news overnight that the group has secured an order from the US government for 100mln doses of a coronavirus vaccine that it is currently developing.

Donald Trump said that the order also has an option attached to purchase a further 400mln doses. Overall, the company stands to receive US$1.5bn for the order.

The vaccine, knowns as mRNA-1273, is currently undergoing phase III clinical trials, while the US government has also struck a purchase deal with pharma giant Pfizer Inc (NYSE:PFE) for its own coronavirus vaccine to the tune of US$2bn.

Back in London, heading into its final hour of trading the FTSE 100 was adding to its gains and was up 116 points at 6,270 shortly before 3.20pm.

2.45pm: Wall Street opens higher

The US markets have kicked off on the front foot as expected for Wednesday, taking their lead from the positive mood in Europe.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.96% at 27,951 while the S&P 500 was 0.98% higher at 3,366 and the Nasdaq rose 1.17% to 10,909.

Meanwhile, the FTSE 100 was also trundling along firmly in the green, logging a 90 point gain to 6,244 just before 2.45pm.

1.45pm: US market expected to start higher

Wall Street is expected to start Wednesdays session higher, taking its lead from Europe, however, some analysts are sceptical about whether there could be a repeat of Tuesdays sentiment reversal which saw the main indices rise before dropping into the red.

“US futures are back in positive territory, up almost 1%, which could be an encouraging sign but it may not be that simple”, said OANDAs Craig Erlam.

“We need to see a fresh high in the S&P and Dow today and, ideally, an end to the Nasdaq losing streak, to shore up confidence. That may seem a little dramatic but with US yields spiking the last couple of days and delivering a sledgehammer blow to precious metals in the process, reassurance is what investors now need”, he added.

The dollar could also see some movement with US consumer price inflation data revealing a 0.6% rise in July, higher than some had expected raising concerns of inflationary pressures in the US economy.

Back in London, the UKs recession seemed to have done little to dent market optimism, with the FTSE 100 up 93 points at 6,247 at around 1.45pm.

12.05pm: FTSE 100 continues ascent into lunchtime

As the middle of Wednesdays session approached, the FTSE 100 had continued to climb steadily higher, adding 65 points to reach 6,220 shortly before midday.

The index appears to have been buoyed by solid gains in some of the shares of its biggest constituents, with HSBC Holdings PLC (LON:HSBA) up 3.4% at 357.7p while Royal Dutch Shell was 1.9% higher at 1,193.8p.

“The former has gained thanks to renewed strength in the oil price, while a lack of further developments in US-China tensions has allowed HSBC and Asian peer Standard Chartered to make up some lost ground”, said IGs Chris Beauchamp.

At the top of the blue-chip risers was insurer Admiral Group PLC (LON:ADM), which climbed 5.1% to 2,654p after reinstating its special dividend on top of an increased interim payout as it said there was now a “reduced level of uncertainty in the economic environment compared to earlier in the year”.

At the bottom of the pile was cybersecurity group Avast PLC (LON:AVST), which sank 5.7% to 566p despite a strong set of interims as investors seemed to take the opportunity for profit taking amid analyst commentary that the uplift in the firms fortunes was temporary.

Meanwhile, the fallout from the UKs dismal GDP figure seems to have been priced into sterling, which was mostly flat against the dollar at US$1.304.

10.30am: Just Eat serves up record numbers during pandemic

The Footsie was up 52 points to 6,206 in late morning, as the latest GDP reading was water under the bridge, while sterling was flat at US$1.3056.

Just Eat Takeaway.com NV (LON:JET) emerged as one of the few pandemic winners, registering a record number of new restaurant and active consumers on its platform during the first half of the year.

The food delivery app saw adjusted underlying earnings (EBITDA) for the six months to June 30 rocket 133% to €177mln, with revenues up 44% to €1bn.

But experts are wondering whether the recent success is set to last.

“People may take time to get used to frequenting restaurants again, particularly while restrictions are in place, but there are other attractions to getting someone else to prepare your food than just the eating of it and people may eventually be drawn back to the social side of going out for a bite,” said AJ Bell investment director Russ Mould.

“The companys acquisition drive reflects the pressure it feels in an extremely competitive marketplace – one that includes Deliveroo and Uber Eats,” he added.

Deliveroo casts a particularly large shadow thanks to Amazons plan to take a stake in the business – though this remains subject to approval by the competition authorities.”

The stock advanced 2% to 8,844p following the news.

9.35am: M&G top riser despite difficult half-year performance

FTSE 100 was on the rise in mid-morning, up 35 points to 6,189 as it shakes off the UKs worst quarterly GDP reading on record.

“Contracting 20.4% from April to June, the UKs Q2 performance makes it far and away the worst hit country among its G7 peers. Its not even close,” said Connor Campbell, analyst at Spreadex.

“Though for the overall quarter the economy shrank by 20.4%, the economy grew by 2.4% in May and 8.7% in June. And while that still leaves the UK way off where it was pre-pandemic, it has sparked hopes that the country can turn the ship around.”

Meanwhile, M&G PLC (LON:MNG) was the top riser among the big caps, advancing 5% to 182.22p.

The fund manager, recently demerged from Prudential PLC (LON:PRU), said retail investors have continued to desert the business over the last six months.

Net outflows were £4.1bn in the six months to end-June 2020, with retail asset management recording a £7.7bn decline cushioned by £2.8bn of institutional inflows and a net £800mln rise in retail savings through PruFund.

But according to Richard Hunter at interactive investor, following the “dash to cash” seen during the pandemic, those looking for long-term investments could find M&Gs offer a suitable option.

“The longer-term prospects for the company against a backdrop of a population increasingly aware of its need to save and invest for the future means that the previous market consensus of the shares as a buy is likely to hold firm,” he noted.

8.30am: Predictions prove wrong

The FTSE 100 opened in positive territory on Wednesday in the face of dire official figures that showed the UK was in a deep recession due to the coronavirus pandemic.

The index of UK blue-chip shares defied early predictions to open 17 points higher at 6,171.07.

UK gross domestic product fell by a record 20.4% in the second quarter, the worst performance of any EU nation with all parts of the economy hit hard.

Chancellor Rishi Sunak told Sky: “Ive said before that hard times were ahead, and todays figures confirm that hard times are here. Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.

“But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity.”

Howard Archer of the EY Item Club expects a third-quarter rebound, “with GDP expanding at least 12% quarter-on-quarter”.

The market reaction was to seemingly shrug and say well, it could have been worse.

Leading the Footsie risers was Admiral (LON:ADM) with a 5% charge higher after the insurers interim results and the revelation of a bumper dividend payment amid reduced uncertainty.

The delivery group Just Eat Takeaway (LON:JET) has been one of the few beneficiaries of lockdown, as revealed in its latest figures. The shares rose 3.5%.

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