- FTSE 100 closes up nearly 56 points
- US surge provides tailwinds for UK stocks
- US Manufacturing PMI comes in even lower than expected
5pm: FTSE 100 closes ahead
FTSE 100 index closed in positive territory as traders focused on the oil price recovery rather than dismal economic data.
Britain's blue-chip benchmark finished the day up nearly 56 points at 5,826.
Midcap cousin FTSE 250 also rose, closing up over 207 points at 15,794.
West Texas Intermediate (WTI), the US benchmark crude, gained nearly 31% to US$18.03 a barrel. Brent crude gushed up nearly 10% to US$22.40 a barrel.
In the US, the Dow Jones Industrial Average surged over 281 points higher, while the S&P 500 added over 30 points.
The latest manufacturing and services data from the eurozone and the UK were appalling – record low rates of activity," noted David Madden, analyst at CMC Markets.
"The announcements initially caused stocks to trade lower, but the bullish run in oil overshadowed the figures.
"Also, some countries are relaxing their restrictions, so traders are taking the view that economic activity should tick-up in the months ahead. A number of big UK firms have announced plans to re-start operations."
Housebuilders were among the top gainers on Footsie as Taylor Wimpey (LON:TW.) (which took the top spot) and Vistry Group PLC (LON:VTY) announced a return to work at construction sites, setting in motion the potential return to residential building for the whole sector.
4.00pm: Footsie cruises past 5,800
Having made it up to the 5,800 level on the back of US optimism, the Footsie kept on going.
The FTSE 100 was up 60 points (1.0%) at 5,831, shaking out of its lethargy after US indices opened sharply higher despite another distressing set of jobless figures plus a predictably cataclysmic set of US Purchasing Managers Index (PMI) numbers.
The IHS Markit Manufacturing PMI fell to 36.9 from 48.5 in March, which was lower than the consensus forecast of 38.
Despite a wealth of reasons pointing to the contrary, the markets managed an afternoon rally this Thursday.
“For the week ending April 18th, another 4.427 million Americans filed for unemployment, taking the 5-week together to more than 26 million. According to some calculations, that wipes out every job created since the Clinton administration.
“In terms of market perception, however, it was a further come-down from the near 6.9 million peak seen a few weeks ago, and a drop off from last Thursdays 5.237 million reading,” commented Connor Campbell at Spreadex.
“Similarly, though both of the flash manufacturing and services PMIs out of the US saw a sharp decline month-on-month, they were nevertheless notable better than their European counterparts this morning, especially in services.
“These flimsy facts are potentially the reasons behind Thursdays post-US open gains; that and Brent Crudes continued rebound following Wednesdays spike in Trump-Iran tensions,” he added.
2.50pm: Footsie perks up as US stocks open higher
US defied expectations to take a big stride forward in early trading.
The Dow Jones industrial average was up 202 points (0.9%) at 23,673 and the S&P 500 was 27 points firmer (1.0%) at 2,827.
The advance was despite another set of scary weekly jobs claims in the US, with the figures for the last six weeks showing 25.4mln Americans have been pitched on to the dole.
“Another horrendous number, but at least the trajectory is clearly downwards,” observed Ian Shepherdson, the chief economist at Pantheon Macroeconomics.
“Some analysts feared an increase, on the grounds that claims would rebound after the holiday week, but any post-Good Friday rebound was swamped by the trend, as we expected. We anticipate a further decline in claims next week, but the rate of fall of Google searches for file for unemployment has slowed, suggesting it will take several more weeks before claims drop below one million. Note that in the single worst week after the crash of 2008, claims rose 665l,” he added.
Russ Mould, the quote machine at wealth management firm AJ Bell has come up with the slightly astounding statistic that the S&P 500 index is only down 4% year-on-year.
“That leaves all of the other major geographic options available to equity buyers well behind and begs the question of why US stocks are proving so resilient and whether it can last. After all, if you had said to someone a year ago that a global pandemic would strike, large parts of the US economy would be in lockdown and that stocks would only fall 4% from record-highs over the next 12 months you would have probably been told you were off your rocker,” Mould suggested.
Mould theorised that US earnings are receiving “strong support from leading tech stocks” while optimism has also been engendered by analysts predicting the recovery in earnings will be V-shaped, rather than U-shaped or worse still, L-shaped.
At least the S&Ps gravity-defying performance has perked up the Footsie a bit in London; the index has been little changed all day but is now up a mighty 28 points (0.5%) at 5,800.
1.30pm: US stocks set for subdued start
US indices are expected to open little changed this afternoon, mirror trading patterns in the UK.
The Dow Jones is expected to shed around 16 points to open at 23,460 while the S&P 500 is set to edge up 3 points to 2,802.
The first-time jobless claims numbers for last week revealed another 4.4mln US citizens applied for unemployment benefit for the first time last week.
— DaddyBear-US WTI Trader (@DaddyBear_WTI) April 23, 2020
In London, the FTSE 100 continued to mark time, up 2 points (0.0%) at 5,772 despite what Craig Er lam of PANDA called some “horrible PMIs”.
“Once again it seems investors are willing to give the data a free pass and while I can see the argument for that, it does seem to gloss over the fact that these numbers are absolutely horrendous and there will be consequences, no matter how much stimulus we see and how many support schemes are put in place,” Er lam said.
“Perhaps it's understandable that the data is getting something of a free pass at the moment. It may represent the current mood but arguably not so much the where business will be in six months, which is the point of the survey data. That, of course, will only last as long as unemployment doesn't become more permanent and companies stay in business, if that changes, the data won't get the free pass it currently is,” he added.
Nevertheless, there is definitely some demand for the safety of gold, with the price of the yellow metal up US$13.20 (0.8%) to US$1,751.80 an ounce.
Even the oil price is on the up, with the front-month contract for the US benchmark, West Texas Intermediate, up US$2.43 (17.7%) to US$16.18 a barrel.
The equivalent contract for Brent crude is up US$1.60 at US$21.97 a barrel.
“Oil prices gained momentum following a significant correction as the prospect of renewed tensions in the Middle East and optimism over supply cuts helped offset fears of a collapse in global demand due to COVID-19,” explained boutique broker SP Angel.
12.15pm: CBI Industrial Trends confirms the misery
UK manufacturers reported the quickest falls in output volumes and total new orders since 2009 in the three months to April, according to the CBI.
The Confederation of British Industrys (CBI) latest industrial trends survey also revealed that business optimism plunged at a record pace.
The survey of 330 manufacturing firms saw domestic orders drop at a similar pace to the last quarter, while the fall in export orders accelerated.
Investment spending plans for the next year sank to a survey-record low for buildings and plant & machinery, with record proportions of firms particularly concerned about demand uncertainty and internal finance availability.
Headcount in the three months to April fell at a similar pace to January, but manufacturers expect to reduce headcount at the fastest pace since 1980 over the next quarter.
“The April CBI industrial trends survey added to the evidence of the significant decline in manufacturing activity in April,” said Howard Archer, the chief economic advisor to the EY ITEM Club.
“The orders balance fell back to -56% from -29% in March and -18% in February. This took it down to the lowest level since 2009, and substantially below its long-term average of -13%. This reflected a sharp weakening of both domestic and foreign demand,” Archer reported.
“The export balance fell to -49% in April from -28% in March. This also took it below the long-term average of -17%.
“Manufacturing volumes were reported to have fallen over the previous three months, at the fastest rate since 2009. A balance of -21% reported a rise in April; this compared to -8% in March.
“Output expectations for the next three months fell to a record low. A balance of -67% of manufacturers expect a rise in output over the next three months, compared to -20% in March and +8% in February,” he added.
#CBI monthly & quarterly industrial trends surveys sharply weaker across the board in April; substantial drops to long-term/record lows in new orders, output expectations, confidence, investment intentions & planned headcount https://t.co/Q4rAZJf1Nf
— Howard Archer (@HowardArcherUK) April 23, 2020
As with the PMI figures released earlier this morning, traders responded phlegmatically, with the FTSE 100 off just 10 points (0.2%) at 5,761.
10.55am: Taylor Wimpey and Aston Martin eyeing return to work for employees
Londons index of heavyweight shares remains tethered on a short lease to last nights close.
The FTSE 100 was down 5 points (0.1%) at 5,766.
“A dire set of European PMIs has not led to a severe decline in stock markets,” observed Chirs Beauchamp, the chief market analyst at IG.
“If you had told an investor on 1 January that, within a few months, global PMIs would dive to a fraction of their previous level, they would have thought you mad. What is equally confusing perhaps is the way markets seem to have taken todays incredible readings in their stride, or at least in a relatively calm fashion but then it does not take a genius to infer from the film of deserted European capitals that activity has taken a hit to the solar plexus and will not immediately rebound. And with talk of a new Marshall Plan for Europe doing the rounds stock markets are doing their best to look past all the bad data,” he added.
Aston Martin can probably apply social distancing in a factory controlled environment.
Not sure about Taylor Wimpey.
— CM (@CMcoggly) April 23, 2020
Investment platform operator AJ Bell PLC (LON:AJB) advanced 5.7% to 316p after its fiscal second-quarter update. Total customer numbers in the three months to the end of March increased to 262,179, up 22% year-on-year.
10.20am: The new normal
The Footsie is now more or less back to square one despite some eye-catching economic data this morning.
Londons index of leading shares was down 2 points (0.0%) at 5,769, with traders shrugging their shoulders at the IHS Markit/CIPS Purchasing Managers Index readings this morning, all of which hit all-time lows.
Brace yourself before looking at the chart: UK flash #PMI at all-time low of 12.9 in April. Our model indicates this means #GDP is likely falling at a quarterly rate of around 6.5% pic.twitter.com/yWp83o51rM
— Chris Williamson (@WilliamsonChris) April 23, 2020
“Weve seen the purchasing managers indices (PMIs) collapse across Europe so far this morning, and the story is no different in the UK. These figures are the first ones to fully take into account the lockdown period, and that saw the services index, which of course represents the bulk of UK economic output, slip down to 12.3. That's easily an all-time low,” said James Smith, the economist covering developed markets at ING.
“Theres little doubt these are shocking figures, but the reality is they dont tell us an awful lot that we didnt already know. Being diffusion indices, PMIs arent able to tell us the extent to which output has deteriorated (although clearly the answer is a lot),” Smith said.
“As lockdowns are unwound gradually over the next couple of months, we might see the PMIs begin to rebound as more firms report higher output. We saw something similar happen with the Chinese business surveys but the reality is that the underlying economic recovery is going to be much more gradual,” Smith predicted.
9.45am: UK PMI readings fall to all-time lows
The IHS Markit / CIPS Flash UK Composite Purchasing Managers Index (PMI) fell to an all-time low of 12.9 in April from 36.0 in March.
The flash UK Services Business Activity Index plummeted to 12.3 from 34.5 in March while the Manufacturing Output Index crashed to 16.6 from 43.9.
The flash UK Manufacturing PMI fell to 32.9 from Marchs 47.8.
“The UK economy has been hit by the COVID-19 outbreak in April to a degree far surpassing anything seen in the PMI surveys 22-year history. Business closures and social distancing measures have caused business activity to collapse at a rate vastly exceeding that seen even during the global financial crisis, confirming fears that GDP will slump to a degree previously thought unimaginable in the second quarter due to measures taken to contain the spread of the virus,” said Chris Williamson, the chief business economist at IHS Markit.
"Simple historical comparisons of the PMI with GDP indicate that the April survey reading is consistent with GDP falling at a quarterly rate of approximately 7%. The actual decline in GDP could be even greater, in part because the PMI excludes the vast majority of the self-employed and the retail sector, which have been especially hard-hit by the COVID-19 containment measures,” he warned.
Duncan Brock, the group director of the Chartered Institute of Procurement & Supply (CIPS) said the UK private sector had been plunged “into the twilight zone”.
"The overall services fall in output was faster than manufacturing and the steepest since records began in 1996 as social distancing measures enforced for the population stopped everything in its tracks and an eerie silence descended over the UKs streets.
"Theres nothing to applaud in this months results. Even the slight rise in optimism from last months record low feels like a blip to what the economy is facing in 2020. The figures for April could not be more worrying but as we may not have reached pandemic peak yet, theres much more bad news to come,” he warned.
Traders in London did not seem overly surprised or concerned by the dire warnings. The FTSE 100 was down just 12 points (0.2%) at 5,759.
8.45am: Unilever tips the Footsie slightly into the red
The FTSE 100 index got off to a mixed start on Thursday with reactions to corporate news flow from the blue-chips cancelling each other out.
The fast-moving consumer goods maker disappointed the market with its first-quarter trading statement.
“There are some pockets where the picture is less bright and these issues may have taken more prominence today with investors looking for solid returns,” said Richard Hunter at Interactive Investor.
“Underlying sales growth in Emerging Markets, for example, declined by 1.8% in an area which should nonetheless provide Unilever with some strong longer-term opportunities. By product line, Foods and Refreshment dipped 1.7%, which is meaningful given that the division contributes 35% of turnover,” Hunter added.
Just Eat Takeaway.com (LON:JET) was 3.0% lower at 7,660p after it placed 4.6mln shares – roughly 3.2% of the companys issued share capital – at the equivalent of 7,620p, raising roughly €400mln.
Meggitt shares were 6.9% higher at 265.1p after it said the majority of its manufacturing facilities remain open during the lockdown period.
“Our defence portfolio represents a significant part of the group's revenues and is performing strongly as work on key defence programmes continues as scheduled,” the company added.
Housebuilders have been volatile in the last few weeks but Taylor Wimpey PLC (LON:TW.) brought some cheer to the sector as it revealed it is to start a staged re-opening of its construction and sales sites from early next month using new social distancing protocols.
Proactive news headlines:
Kavango Resources PLC (LON:KAV) shares jumped higher on Thursday as the explorer highlighted progress at key projects in recent months. In an update, the group said its flagship Botswana exploration assets continue to advance and it noted that there has so far been minimal disruption as a result of the coronavirus (COVID-19) pandemic, as it had already focused work on desktop-based analysis and modelling. For the Kalahari Suture Zone (KSZ), for example, the company said it and its consultants are presently constructing a new model incorporating findings from a successful 2019 drill programme, with the aim of defining high-grade targets for the next campaign. Kavango noted that it is fully funded to the next phase of exploration at KSZ.
Open Orphan PLC (LON:ORPH) has revealed that its hVIVO subsidiary has commenced the testing of an anti-viral drug for treating coronavirus (COVID-19) on behalf of its client Nearmedic International. Nearmedic is a specialist pharmaceutical, biotechnological and medical business headquartered in Moscow; it is running tests using hVIVO's virology expertise and laboratory capability on an anti-viral drug that could potentially be used to combat SARS-CoV2 (COVID-19) infections. Open Orphan said this drug has both potential anti-viral and anti-inflammatory activity and as such could reduce both virus infectivity and disease severity respectively.
Braveheart Investment Group PLC (LON:BRH) has said its investee company Kirkstall is to collaborate with Animal Free Research UK to supply its Quasivivo proprietary testing equipment for use in coronavirus (COVID-19) research. Braveheart owns 64.7% of Kirkstall. In its update, Braveheart noted that another firm in its portfolio, Pharm 2 Farm (51.7%) is also now producing medical-grade hand sanitiser gel and plans to increase production to 2,000 litres per day by the end of May.