Politics

FTSE 100 closes first day of new month deeply in red as traders fear further trade spat

  • FTSE 100 index closes down 138 points
  • US indices sharply lower

5.15pm: FTSE 100 closes sharply lower

FTSE 100 index closed firmly in the red on the first day of May as traders ran out of steam and fear another bout of the China/US trade spat.

Britain's blue chip index closed down over 138 points at 5,763. FTSE 250 was also down, shedding over 306 points to 16,148. Over the week as a whole, FTSE 100 lost 0.19%.

Wall Street shares also tanked. The Dow Jones Industrial Average lost over 536 points at 23,804. The S&P 500 shed over 76 and the Nasdaq lost 271 points.

President Donald Trump believes the pandemic broke out from a lab in China, but has not shown any evidence. He has threatened to impose new import tariffs on the country due to the financial chaos caused by the virus More than 30 million people in the US have lost their jobs since it struck.

David Madden, market analyst at CMC Markets, noted that Footsie this week, had reached its highest level since early March, so Friday's "rising trade tensions acted as a good excuse to dump stocks".

There has been a decent recovery in European equities since mid/late March, but now traders are worried we could be in for another round of the US-China trade spat," he said.

Chris Beauchamp at IG Index summed up: "The new month has started off on a poor note for stock markets, which look at risk of turning lower as recent major events fade into the past. It was an action-packed week, including earnings from giants like Apple and Amazon and meetings of the BoJ, Fed and ECB, the three key global central banks. But with these now over and done with, it looks like markets are running out of key catalysts."

2.55pm: US markets down by around 2%

US indices have taken a bath at the outset, with the Dow shedding more than 450 points and the S&P 500 plunging close to 60 points.

The Dow Jones industrial average was down 443 points (1.8%) 23,902, having recovered a little, while the S&P 500 was also recovering slightly at 2,856, down 56 points (1.9%).

In London, where the talk earlier this week was of a bull market after one of the shortest bear markets on record, the FTSE 100 was wearing its second triple-digit loss in as many days.

The index was down 109 points (1.8%) at 5,792.

2.15pm: US indices trading lower on spread betting exchanges

US indices on spread betting exchanges are trending lower today.

The Dow Jones, which closed last night at 24,346, is trading 386 points lower and the S&P 500, which finished yesterday at 2,912, is quoted at 2,860, down 52 points.

If UK investors were hoping the US cavalry would rescue them – most European exchanges are closed for Mayday – then they have been disappointed and the FTSE 100 index languishes below 5,800 at 5,793, down 108 points (1.8%).

1.00pm: Shell leads the retreat for the second day in succession

It appears that Royal Dutch Shell (LON:RDSB) may have got off lightly yesterday when it announced its dividend cut; further losses have followed today.

The FTSE 100 index was down 111 points (1.9%) at 5,790, led lower by Shell, which is off 7.7% at 1,188p despite the price of Brent crude holding steady today.

“Oil prices have staged an impressive rebound this week after a rocky start, as the USO – Americas largest oil ETF – opted to avoid another May contract scenario and shed its June holdings. This represented around 20% of its US$3.6 billion portfolio so traders were naturally keen to get out the way and compress prices to very generous levels if youre a buyer. The price rebounded shortly after but still trades below US$20,” said OANDAs Craig Erlam.

“The production cuts are finally kicking in with Saudi Arabia reportedly implementing agreed reductions ahead of schedule, the OPEC+ deal officially underway as of today, Norway announcing a reduction of 250,000 barrels per day and ConocoPhillips culling 265,000 this month, rising to 460,000 next. Others will likely follow, at which point we may see downside pressures ease on oil prices and near contracts. Prices are still extremely low though and the next two weeks will likely see extreme volatility return,” he added.

11.50am: Mortgage approvals slump to a seven-year low

More news on house buying activity in the form of mortgage lending data from the Bank of England.

The bank reported that mortgage approvals for house purchases fell to a seven-year low of 56,161 in March from 73,674 in February. The consensus forecast was around 59,000 approvals.

“Marchs sharp drop in mortgage approvals occurred as the early-2020 upturn in the housing market was brought to a halt during the month by the impact of coronavirus on the economy, households and peoples movements. The housing market received a leg-up at the start of 2020 from increased optimism and reduced uncertainties following Decembers decisive General Election result,” wrote Howard Archer, the chief economic advisor to the EY ITEM Club.

“We believe house prices could fall back 5% over the next few months. The expectation is that house prices will come under downward pressure from a sharp rise in unemployment and many peoples incomes being hit (despite the Governments supportive measures) as well as sharply lower consumer confidence and increased caution,” Archer said.

Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, noted that net consumer credit fell by £3.8bn in March, which was much worse than the average increase of £1.0bn in the previous six months and the consensus forecast of £700mln.

“Marchs money and credit data show that private-sector demand for cash surged in March, as businesses and households battened down the hatches. The broad money—M4—holdings of private non-financial corporations leapt by 4.4% month-to-month in March, pushing up the year-over-year growth rate to 9.7%, from 4.2% in February, as firms sought to improve liquidity,” Tombs said.

“These data are month-end, so they capture the initial impact of the lockdown on firms cash holdings, but not any support to firms provided by the BoEs and Treasurys liquidity and loan operations. Data for April will provide a clear steer on whether businesses are collapsing, though March's figures are tentatively encouraging,” he added.

The FTSE 100 was down 114 (1.9%) at 5,787.

10.55am: RBS and Barratt Developments defy the trend

Leading shares have carried on yesterdays ragged retreat, although some stocks are defying the trend.

The FTSE 100 was down 132 points (2.2%) at 5,769 and wouldve been lower but for a relieved reaction to the results of Royal Bank of Scotland Group PLC's (LON:RBS) results.

READ RBS profits almost halved by charges for potential coronavirus losses

Richard Hunter of interactive investor said the provisions for bad loans wont have been a big surprise and “there are also a number of elements of this release” that give comfort in underlying the banks capital position.

“There is a large liquidity buffer which exceeds £200 billion and results in a liquidity coverage ratio in excess of 150%. The capital cushion is one of the highest in the sector at 16.6% and the total income figure for the group exceeded both expectations as well as the year-on-year figure. Alongside a focus on expenditure, this has resulted in an impressive improvement to the cost/income ratio which, at 57.7% compare favourably to 59.4% a quarter ago and 63% a year ago,” Hunter noted.

RBS shares were up 3.3% at 114.15p.

https://t.co/mlmebYwgp0#RBS #GDR #MXCT

— Andrew Scott (@AndrewScottTV) May 1, 2020

Also defying the trend was housebuilder Barratt Developments PLC (LON:BDEV), which was up 0.8% at 523.2p despite the Nationwide noting in its house price index release this morning that house buying activity has seized up.

Barratts shares were up 0.8% at 523.2p after it outlined plans to reopen construction sites on 11 May, although sales offices will stay closed.

“Its an important step but its too early for a fanfare. Reopening will be gradual, and the groups retail shops and show homes are staying closed for now. We know life without a shop front is hurting Barratts new sales, with reservations low throughout lockdown, and with construction efforts prioritising homes already started any additional new completions are unlikely,”said Emilie Stevens, an equity analyst at Hargreaves Lansdown.

“Unlike some of its peers, who said prices had generally remained firm, we didnt hear anything about price from Barratt. Thats not necessarily a bad thing but it makes judging the recovery difficult. Well need more clarity on prices and the demand for houses as the UK eases lockdown before we can plot a course forward,” she added.

Talking of the Nationwide house price index, which recorded a seventh successive month of year-on-year house prices, Howard Archer, the chief economic adviser to the EY ITEM Club, said the 0.7% month-on-month rise in house prices in April was unexpected.

“The Nationwide had reported regarding the 0.8% month-on-month rise in house prices in March that the cut-off point for its survey was just before the end of the month, so the survey would not have fully captured developments after the government imposed the lockdown,” Archer said.

“Significantly, the Nationwide observed that the impact of the coronavirus pandemic is not fully captured in its April data. This is because its index is constructed using mortgage approval data, and there is a lag between mortgage applications being submitted and approved.

“Specifically, Nationwide reported that around 80% of cases in its April sample relate to mortgage applications that commenced prior to the lockdown, and hence before the full extent of the impact of the pandemic became clear,” Archer reported.

“Latest surveys and reports clearly show that housing market activity took an increasing and substantial hit from coronavirus during March, reflecting the restrictions on peoples movements as well as the impact on confidence and economic activity,” he noted.

10.15am: House prices were heating up … pre-lockdown

House prices in the UK were up by 3.7% year-on-year in April, representing the strongest growth rate since 2017, according to the mortgage lender, Nationwide.

The building societys house price index rose 0.7% in April to 443.1 after rising 0.8% in March to 439.9.

The average house price (not seasonally adjusted) rose to £222,915 from £219,583.

“Annual house price growth increased to 3.7% in April, up from 3% in March – the fastest pace since February 2017 (when annual growth was 4.5%). There have been month-on-month gains for the last seven months in a row, after taking account of seasonal effects,” said Robert Gardner, the chief executive officer of the Nationwide.

The figures came with one obvious caveat.

“Its important to note that the impact of the pandemic is not fully captured in this months figures. This is because our index is constructed using mortgage approval data, and there is a lag between mortgage applications being submitted and approved,” Gardner explained.

“Indeed, c80% of cases in the April sample relate to mortgage applications that commenced prior to the lockdown, and hence before the full extent of the impact of the pandemic became clear, he added.

Housing market activity is now grinding to a halt, Gardner said, after steadily building momentum in the opening months of the year.

Gardner apparently forgot to tell shareholders in Rightmove PLC (LON:RMV); shares in the property listings website operator were up 2.0% at 507.8p in a declining market.

The FTSE 100 was down 132 points (2.2%) at 5,769

Instant Info – Nationwide House Price Indexhttps://t.co/d5Goj4i4oY pic.twitter.com/5nzGwNvk4p

— Neal Hudson (@resi_analyst) May 1, 2020

10.00am: Supply chains under strain

Despite an admittedly predictable dire manufacturing PMI reading for April, the Footsie is trading sideways after opening sharply lower.

Londons index of blue-chip shares was down 127 points (2.2%) at 5,775.

“UK manufacturing suffered its worst month in recent history in April, as output, orders books and employment all fell at rates far surpassing anything seen in the PMI survey's 28-year history. Huge swathes of industry were hit hard by company closures, weak global demand, lockdowns and social distancing measures in response to COVID-19. The only pockets of growth were seen at firms making medical and food products,” said Rob Dobson, a director at the indexs compiler, IHS Markit.

“Supply-chains also felt the full force of the outbreak as average supplier delays rose to the greatest extent seen since PMI records began. International goods flows were constrained by delays in air freight, shipping and border control issues, and staff shortages often limited production,” he added.

“Inflationary pressures are remaining in check at the moment, linked to weak demand and collapsing global oil prices, but persistent shortages could start to drive some prices higher, notably for food,” Dobson warned.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said last months “dismal predictions” became a reality in April.

“Domestic customers deferred orders and export customers thrashed around trying to source a dwindling number of raw materials to keep their supply chains operating before finally giving up. Complicated by government edicts terminating normal business activity, UK companies were forced to put factories on lockdown anyway bringing their operations to a complete stop,” Brock said.

“With the expectation of potential price rises to come, some firms resorted to stockpiling measures in an attempt to beat future supply pandemonium which only exacerbated the problem of dysfunctional supply chains. Some sectors such as food and medical supplies were able to continue but obstacles in logistics and transportation as borders closed and social restrictions were implemented meant usual activity was beyond difficult,” he added.

9.40am: Manufacturing PMI not quite as bad as feared

The IHS Markit/CIPS Purchasing Managers Index (PMI) fell to a record low of 32.6 in April, from 47.8 in March; the consensus forecast was 31.

The fall in the Manufacturing PMI (which is a composite of five indices) was ameliorated by a comparatively modest reduction in stocks of purchases and record lengthening of vendor lead times (which has an inverse contribution to the PMI level), the survey compiler explained.

Survey data were collected between 7-27 April. Response levels were similar to those observed before the outbreak, IHS Markit noted.

The FTSE 100 was down 119 points (2.1%) at 5,781 shortly after the release of the PMI reading.

8.45am: Weak start before weekend

The FTSE 100 opened with a triple-digit fall on the first day of May as traders waited nervously for the latest monthly manufacturing print from the UK purchasing managers index.

The PMI number is expected to be dire at around 33. Remember, a reading below 50 reveals contraction. So, the figure currently being touted estimate suggests a rapid decline.

The index of UK blue-chips opened 146 points lower at 5,755.38. The Footsie lost over 200 points on Thursday following another depressing round of weekly unemployment data from the US; the Eurozone, meanwhile, saw its economy shrink at a record pace.

Wall Street set the tone as it closed firmly in negative territory yesterday; while Asia markets, led by Japan, were also hard hit today.

Shells (LON:RDSA) decline continued after Thursdays dividend cut with its A-shares off 6%.

The mining sector was hit hard by concerns over global growth with Glencore (LON:GLEN), down 5.5%, leading the charge lower.

Worries over international travel came back to haunt easyJet (LON:EZJ) amid worries of a prolonged lockdown. The airlines' shares were off 4.9%.

Proactive news headlines:

Genedrive PLC (LON:GDR) has said that its coronavirus testing kit has completed the last significant manufacturing milestone and remains on track. The diagnostics firm said the test has completed its pilot manufacturing runs and yielded high performing multiplexed assays for coronavirus testing. The company is now aiming for the test to receive CE marking in around three weeks.

Kromek Group PLC (LON:KMK) has updated on the status of its business and its response to the coronavirus pandemic. In a trading update on Friday, the detection technology specialist said despite the outbreak it will continue to deliver on its multi-year contracts, which it said will give it “good visibility over future revenues”, adding that it also has a healthy pipeline of projects.

Vectura Group PLC (LON:VEC) has drawn attention to a recommendation relating to the use of one of the companys asthma treatment formulations in Europe In a statement, the company noted that the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) has adopted a positive opinion recommending the approval of Novartis's Enerzair Breezhaler (QVM149). Enerzair Breezhaler, which uses a formulation devised and licensed by Vectura, is a maintenance treatment for uncontrolled asthma in adult patients.

Inspiration Healthcare Group PLC (LON:IHC) has revealed that the first consignment of ventilators it will distribute to the National Health Service (NHS) has arrived in the UK. The medical technology company said the consignment will shortly be shipped to a holding and distribution facility managed by the Ministry of Defence. In the last few days, Inspiration Healthcare has also extended its 24-hour helpline facility for clinical staff at all UK hospitals.

MaxCyte PLC (LON:MXCT) chief executive Doug Doerfler has described the companys £25.1mln fundraiser, which also marks the start of preparations for a NASDAQ listing in the US, as the start of a “new and exciting growth chapter” for the company. The issue of new stock priced at 131p will be split into two tranches – a £7.3mln placing and subscriptions to bring in a further £17.8mln. The cash will be put to work on a number of fronts, including helping MaxCyte prepare financially and commercially for customers scaling up their requirements. It will also be used to “accelerate growth and explore opportunities for new product development”, investors were told.

Quadrise Fuels International PLC (LON:QFI), the developer of cleaner marine fuel, said a new round of cost savings has given it financial headroom until the middle of next year. "We are pleased that we have been able to deliver a material extension to our cash runway, which will now take us to mid-Q2 2021,” Quadrise chairman Mike Kirk said in a statement. “This provides us the opportunity to progress our business development opportunities in earnest for over one-year – an increase of around 5 months to that forecasted at the beginning of 2020.”

Frontier IP Group PLC (LON:FIPP) revealed that its portfolio firm Molendotech has raised £425,000 in an equity funding round to accelerate the development of its bacteria testing technology. The investment firm said, following the fundraising, Molendotech is now worth £3.9mln, valuing Frontiers own 12.6% stake in the firm at around £493,000. Before the funding round, Frontier held a 14.1% stake valued at £324,000.

KR1 PLC (LON:KR1) revealed that it has invested US$75,000 into Union Finance, a credit mutual built on Ethereum. The blockchain and cryptocurrency investor said Union Finance will allow people and organisations to take out loans on the blockchain without the need for collateral, a credit score, or revealing personal information on a public ledger. KR1 added that it will receive a yet-to-be-determined amount of discounted tokens from its participation in the seed round.

Rainbow Rare Earths Limited (LON:RB.) said activity at its Gakara mine has continued largely unhampered by restrictions imposed to combat the spread of the coronavirus pandemic. Although foreign travel has been largely suspended into and out of Burundi, goods are now able to pass across road borders, and the latest export of 100 tonnes of concentrate reached the port of Dar-es-Salaam unhindered, Rainbow told investors. Work continues towards the completion of the company's maiden JORC-compliant resource estimate, which is expected to be completed in the coming weeks, it added.

Block Energy PLC (LON:BLOE) told investors that the company is prepared for an extended period of low prices, and its fundamentals remain strong, as it reported results for the 18 months to December 31, 2019, after the market close on Thursday. “We are accelerating the exploitation of gas resources in West Rustavi and are planning the increase of oil production and exploitation of gas resources in the blocks being acquired from Schlumberger,” Block Energy chairman Philip Dimmock said in the results statement. “We are confident the market will recognise our inherent value and re-rating potential.” Block Energy ended December with US$6.49mln of cash, and it reported a US$6.03mln loss for the year.

Bahamas Petroleum Company PLC (LON:BPC) said it has received confirmation that its fund has been approved for listing on the Bahamas International Stock Exchange (BISX). It has been set up to enable Bahamas investors to participate in the companys exploration programme, with shares in the company issued to the fund via subscription. The Central Bank of the Bahamas (CBB) has also now approved the process by which Bahamas Petroleum will receive subscription funds, expected to take place shortly after the CBB has finished vetting the investors.

Tekcapital PLC (LON:TEK) said it has raised £925,000 via a share placing to provide additional funding for its portfolio firms and additional working capital. The IP investment group said it raised the funds through the issue of around 9.2mln new shares at a price of 10p each, a 13% discount to its closing price on Thursday. The shares in the placing will represent around 10.54% of the enlarged share capital.

i3 Energy PLC (LON:I3E) told investors that it was not able to enter into a reserves based lending facility of alternative funding facility by April 30, the extended deadline set by noteholders back in November. Nonetheless, it said that it remains in talks with all noteholders to waive this condition. The group added that it will update the market once these discussions have concluded.

Scancell PLC (LON:SCLP), the developer of novel immunotherapies for the treatment of cancer, announced that in recognition of the impact of the coronavirus (COVID-19) crisis and to help fund the initial research work to develop a vaccine for COVID-19 the members of its senior management team have agreed to a temporary 25% reduction in salaries with effect from May 1, 2020. The group said none of Scancell's other employees will be affected. The company also announced that on April 30 it granted 1,000,000 share options to acquire ordinary shares in the company to each of the members of its senior management team – Dr John Chiplin, Dr Cliff Holloway, Professor Lindy Durrant, Dr Sally Adams, Dr Richard Goodfellow and Mr Keith Green – with an exercise price of 8.15p each which will vest twelve months from the date of the grant.

Genel Energy PLC (LON:GENL) told investors that it continues to seek a viable commercial way forward for the Bina Bawi projects oil and gas resources. In a statement, the company said it received documentation, including a new draft production sharing contract (PSC), from the Kurdistan Regional Government (KRG) in mid-April following a commercial understanding reached in September. It added that the documentation requires further negotiation, and, whilst these talks are ongoing, the KRG has said it will not serve notice to terminate the existing PSC.

Shield Therapeutics PLC (LON:STX) said it has seen little disruption from the coronavirus pandemic on plans to commercialise its iron deficiency drug Feraccru. Talks to find a partner for the product in the US, where it is known as Accrufer, are ongoing, it added, with significant interest from a range of companies. Sales of Feraccru in Germany and the UK rose during the first quarter of 2020, according to the firm's European partner Norgine, though Shield noted this was before the full impact of the pandemic became clear. Shield added, however, that it has had to repay a €2.5mln milestone to Norgine following the results of the AEGIS-H2H clinical study, which showed Ferracru had not met its primary endpoint of non-inferiority at 12 weeks in both the "intention to treat" (ITT) and "per protocol" (PP) populations.

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