Politics

FTSE 100 closes marginally lower as trade jitters persist amid pandemic

  • FTSE 100 closes nine points down
  • US indices mixed but generally lower
  • Sterling down by three-quarters of a cent

5.20pm: FTSE closes lower

FTSE 100 index closed marginally in the red on Monday as investor jitters continue over trade relations between the US and China.

Footsie closed off around nine points at 5,753. The mid-cap FTSE 250 was also down, shedding over 196 points at 15,951.

On Wall Street, the Dow Jones lost over 195 points and the S&P 500 shed around eight. The tech heavy Nasdaq though gained around 50 points at 8.655.

"Traders remain fearful of the latest development between the US and China," said market analyst at CMC, David Madden.

"President Trump has threatened to impose tariffs on imports from China because he blames the country for the pandemic. The US leader claimed the Covid-19 crisis was a mistake by the Chinese government," he said.

The pound was down 0.54% against the US dollar, while safe-haven gold continued to make gains, up 0.74% to US$1,713.50 an ounce.

3.50pm: The Footsie edges into positive territory

Helped by a slumping sterling on foreign exchange markets, the Footsie has roused itself to move into positive territory.

Londons index of leading shares was up 15 points (0.3%) at 5,778 as sterling shed almost three-quarters of a cent against the US dollar at US$1.2420.

Across the pond, US equities have recovered a little from a dismal start. The Dow Jones index was down 245 points (1.0%) at 23,479 and the S&P 500 was down 17 points (0.6%) at 2,813.

2.50pm: Trade war fears resurface

US indices have opened even lower than expected as investors fret about the return of the US-China trade war.

The Dow Jones industrial average was down 340 points (1.4%) at 23,385 and the S&P 500 was off 30 points (1.1%) at 2,799.

“Naturally, shares are down for a second day – and its May – so of course the question is Sell in May and go away? Theres a logic to it this year. Were headed into a recession, likely a depression. Markets have recouped about a third if youre in Europe, a half in youre in the States from the March sell-off. The risk to reward of holding on for further gains is a lot worse than a month ago,” ventured Jasper Lawler of LCG.

“Having forgotten about the trade war since last year, its all come flooding back for investors. US President Trump explicitly mentioned tariffs as a preferred way to extract money out of China as compensation for their role in the coronavirus pandemic,” Lawler said.

“Investors again face the difficult job of predicting Trumps next action on trade. Whether deserved or not, there is clearly a strong political motivation to ramp up blame on China in the US. The political calculus may well be that it is worth giving up the small economic benefit of Chinese agricultural purchases etc (that might not happen anyway) to have a scapegoat for Novembers election,” he concluded.

In London, it is looking increasingly likely that a bit of WD40 is going to need to be applied to get the FTSE 100 moving again; the index is down 7 points (0.1%) at 5,756.

2.25pm: US indices expected to open lower

US indices are expected to open sharply lower in the next few minutes.

The Dow Jones is tipped to shed 218 points to open at 23,506 while the S&P 500 is seen opening at around 2,814, down 17 ponts on Fridays close.

In London, the FTSE 100 is wondering what all the fuss is above and is more or less unchanged.

1.00pm: FTSE 100 back to square one as news flow dries up

Midway through the lunchtime session, the FTSE 100 is back to where it started the day.

“The UK index may find its steady performance challenged, however, when the Dow Jones et al get involved. The Dow is facing a 250 point fall once trading gets underway stateside, a drop that would push the index back below 23500, around 1400 points off of the intraday highs struck on the final day of April,” reported Connor Campbell, a financial analyst Spreadex.

There has not been a lot of news flow from the blue-chips to get the pulses racing, leaving the spotlight open for FTSE 250 stocks such as Tate & Lyle PLC (LON:TATE), which was 3.1% lower at 674p after a trading update.

The food ingredients group has seen lower demand for sweeteners and starches because of the coronavirus lockdowns in Europe and North America.

Inchcape PLC (LON:INCH) reversed 1.7% to 485.8p following the announcement of Duncan Tait, a former director of Fujitsu, as its new chief executive officer.

Sector peer Pendragon PLC (LON:PDG) tumbled 6.2% to 7.67p after it said it had rejected the idea of a merger with fellow car seller Lookers PLC (LON:LOOK).

Lookers was down 0.8% at 23.55p.

11.00am: Blue-chips stable even as confidence ebbs away among consumers and finance directors

Leading shares remain becalmed after Deloittes survey of bean-counters at Britains top companies indicated business confidence is at an all-time low.

Nine out of 10 cats … er … finance directors reckon there is a high or very high level of uncertainty facing their business, according to the consultants survey.

Only 16% of executives surveyed are more optimistic about the prospects for their company than they were three months ago.

“CFOs [chief financial officers] expect the lockdown to ease in May and June and demand in their own sectors to start recovering later this year but there is no expectation of a quick snap back in activity, with most CFOs assuming revenues will not return to pre-crisis levels for at least a year,” said Ian Stewart, the chief economist at Deloitte.

Quarterly Deloitte survey of chief finance officers at largest #UK companies showed biggest drop in confidence since series started in 2007. Most CFO's do not see revenues returning to pre-crisis levels for at least a year https://t.co/sx9ha3Gjah

— Howard Archer (@HowardArcherUK) May 4, 2020

Meanwhile, a YouGov/CEBR survey suggests consumer sentiment in the UK has fallen to its lowest level since January 2012.

“COVID-19 has brought about unprecedented lockdown measures with no end date in sight, so its hardly surprising that consumer confidence has slumped so dramatically. Time will tell if we have reached the bottom,” commented YouGov research director Oliver Rowe.

Despite the doom and gloom, the FTSE 100 was down just 16 points (0.3%) at 5,744.

10.00am: Weak sterling saves Footsie's bacon

We might as well have gone ahead with the traditional May bank holiday such has been the lack of activity on the FTSE 100.

The index was down 8 points (0.1%) at 5,754, having reached the “heady” heights of 5,774 at one point.

“Stock markets are in the red this morning as trade tensions between the US and China continue to weigh on sentiment,” said CMCs David Madden.

“President Trump has threatened China with tariffs as he is blaming the Beijing administration for the Covid-19 pandemic. It is believed by US officials the Chinese government downplayed the severity of the health crisis. Mr Trump is directing his ire at the authorities in Beijing, and it looks as if he is gearing up for another trade spat. The Donald has a presidential election to contest in November, and it seems that he will be picking a fight with China in a bid to appeal to his voter base,” Madden noted.

Trade tensions between China and US that could slow a global economic recovery have reared their ugly head once more. EM currencies and riskier assets have been sold off while global stock markets have taken a hammering.#TradeWar #Covid19 #GlobalEconomyhttps://t.co/Bi7IfXUIZJ pic.twitter.com/LEucqT36VY

— TreasuryONE (@TreasuryONE) May 4, 2020

The decision by investment guru Warren Buffett to dump airline stocks over the weekend has done little to change the markets view on the travel and aerospace sector.

Jet engine maker Rolls-Royce Holdings PLC (LON:RR.) was down 4.8% at 298.2p; Melrose Industries PLC (LON:MRS), which owns aerospace engineer GKN, was 4.7% lower at 92.08p while low-cost airline easyJet PLC (LON:EZJ) slipped 4.7% to 541.2p.

The Footsie stocks at least have a weak sterling to cheer them up – the pound is down by two-thirds of a cent at US$1.2425; the FTSE 250 has no such comfort and is down 184 points (1.1%) at 15,963.

A weak pound is generally bad news for the mid-cap players as they tend to be less national players rather than multinational players, plus they have to pay more for imported raw materials.

With pubs and cinemas expected to be at the back of the queue when the lockdown ends, the likes of pubs owners Marstons PLC (LON:MARS) and Mitchells & Butlers PLC (LON:MAB), down 11% at 34.2867p and 8.3% at 157.6p respectively, are getting it in the neck, as in cinemas operator Cineworld PLC (LON:CINE), which is down 8.7% at 53.82p.

Business events organiser Hyve Group PLC (LON:HYVE), 13% weaker at 20.2p, is getting hit for much the same reason, with the added weight of the expectation in some quarters that the company is planning to raise cash.

8.45am: Weak start on Star Wars Day

The FTSE 100 index, as anticipated, opened in negative territory amid heightening tensions between the US and China over what the latter knew and conveyed to the West about the Wuhan coronavirus (COVID-19) outbreak.

The index of UK blue-chips opened 39 points lower at 5,723.73.

Overnight President Trump ramped up the rhetoric suggesting he could impose trade tariffs of up to US$1 trillion on the worlds second-largest economy in reparation for the coronavirus pandemic.

Meanwhile, US Secretary of State Mike Pompeo suggested in a TV interview there was significant evidence suggesting a lab in the Chinese city was the source of the infection.

“Tensions between the US and China had only just started to thaw after a trade deal was mutual agreed between the two superpowers,” said James Hughes of Scope Markets. "However, Trumps new attack on China has left investors worried that a flare-up in tensions could affect the market recovery."

“Trumps handling of the coronavirus crisis has been widely condemned as his rambling press conferences, mixed messages regarding lockdown and dubious medical advice have seen his ratings fall.

“With Trumps re-election hopes taking a hit it seems the focus of his efforts are in deflecting from his performance and instead of trying to steer the nation through this crisis, he will look to find ways to blame China for the crisis,” Hughes added.

A downturn in already rock bottom sentiment towards the travel sector saw shares in Intercontinental Hotels (LON:IHG) marked down 6% ahead of results later this week. Budget airline easyJet (LON:EZJ) and cruise giant Carnival (LON:CCL) were not far behind with falls of 5.3% and 4.3%, respectively.

Aero engines maker Rolls Royce (LON:RR.), which may have to cut 8,000 jobs amid the abrupt curtailment of air travel, was off 4.4%.

Investors moved back into defensive stocks or those that might potentially benefit from the lockdown.

In the case of online grocer Ocado (LON:OCDO) it is both a beneficiary of the house arrest of most of the UK population and a defensive play. Its shares opened 3.3% higher.

And takeaway giant Just Eat (LON:JET) advanced 2.4%, while drug group Hikma (LON:HIK) was buoyed by a resurgent health sector as it rallied 2.2%.

Proactive news headlines:

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