- FTSE 100 index jumps 113 points
- Boohoo sees £1bn wiped from its market value
- Cineworld in potential disaster movie as Cineplex sues over aborted merger
4.00pm: Good start to the week
The Footsie quickly raced to its “ton” in the first five minutes of trading after which it might as well have declared its innings closed.
Entering the final half-hour of trading, Londons index of leading shares is still up by more than a hundred points – 113 points (1.8%) to be precise – at 6,271.
Shares in Boohoo Group PLC (LON:BOO) took a bashing after weekend press reports highlighted deplorable conditions in a Leicester garment making factory that is alleged to be a supplier of the fashion firm.
The shares tumbled 23% to 298.1p as AIMs glamour stock lost a lot of its shine through association with Jaswal Fashions, which was alleged to be paying its staff as little as £3.50 per hour compared to the minimum adult wage in the UK of £8.72.
There was trouble too for Cineworld Group PLC (LON:CINE) after Cineplex started legal proceedings against it. Shares in the London-listed cinemas operator fell 5.3% to 57p after Cineplex alleged Cineworld breached its obligations under the proposed acquisition of its Canadian rival.
— VIPortal INC (@VIPortalINC) July 6, 2020
3.00pm: US stocks off to a flyer after Buffett splashes the cash
US markets got off to a storming start, following a strong showing in Asian markets this morning.
Over the weekend, Berkshire Hathaway, the investment vehicle of legendary investor Warren Buffett, agreed to buy natural gas pipelines and storage assets from Dominion Energy for around US$10bn, which has been interpreted as a positive sign for the global economy.
The Dow Jones surged 425 points (1.7%) to 26,252 while the S&P 500 advanced 47 points (1.5%) at 3,177.
Back in Blighty, the FTSE 100 was 104 points (1.7%) to the good at 6,261.
Banking giant Lloyds Banking Group PLC (LON:LLOY) was 0.6% higher at 31.22p but underperforming the market after it announced that its exceedingly well-paid chief executive officer, António Horta-Osório will step down next year after completing 10 years in the role.
ANNOUNCEMENT: We're pleased to announce that Robin Budenberg CBE will join the Group Board from October 1st and take over as Chair in 2021.
— Lloyds Banking Group (@LBGplc) July 6, 2020
Fahed Kunwar, the Banks analyst at Redburn, described it as “a serious loss for Lloyds”. Well, theyve had a few of those under Horta-Osórios watch.
Over the past decade, he has run the bank in a highly centralised manner, with all key decisions going through him. As such his departure leaves a large vacuum as he was seen as defining the strategic direction of the business,” Kunwar said.
The shares trade at barely half where they were when he took the job, noted AJ Bells Russ Mould, “so Mr Horta-Osorio will be looking for a grandstand finish, including perhaps a fresh return to the dividend list”.
2.10pm: US indices to open sharply higher
After the long weekend break in the US, markets are set to resume on the front foot as US investors play catch-up.
Spread betting quotes indicate the Dow Jones will open at around 26,258, up 431 points, while the S&P 500 is expected to climb 48 points to 3,178.
In London, investors put their foot on the accelerator in the first half-hour of trading but have been cruising ever since, with the FTSE 100 up 115 points (1.9%) at 6,272.
There was some welcome news for car dealers this morning in the form of new car sales in the UK.
New car sales rose to 145,377 in June from 20,247 in May and 4,321 in April as showrooms reopened but the June figure was still down 34.9% year-on-year.
“Nevertheless, Junes year-on-year drop in new car sales was still substantial and was higher than what had been seen in February and January before lockdown restrictions were in force – even allowing for the fact that showrooms in Wales and Scotland were not allowed to open to 22 and 29 June respectively. It was also reported that one in five showrooms in England remained closed through June,” said Howard Archer, the chief economic advisor to the EY ITEM Club.
“Even before coronavirus, year-on-year drops in new car sales in both February (2.9%) and January (7.3%) had indicated that the sector had not benefited from any reduced uncertainties and increased consumer and business confidence early on in 2020 following December's election. There was a drop of 44.4% year-on-year in the month of March – a key month because of number plate changes – to 254,684 vehicles as coronavirus had an increasingly negative impact on consumer and business behaviour, culminating in the lockdown on 23 March when car showrooms were closed.
“Earlier in the year, new car sales had been limited by a number of factors: business and consumer caution over making major purchases, reduced demand for diesel cars amid environmental concerns and uncertainties over policy, and stricter emission regulations affecting supply,” Archer noted.
Car dealer shares were mixed, with Inchcape PLC (LON:INCH) up 0.5%, Vertu Motors PLC (LON:VTU) down 0.4% and Pendragon PLC (LON:PDG) off 2.6%. Camrbia Automobiles PLC (LON:CAMB) was unchanged.
1.30pm: Supermarkets miss the party
Just a dozen Footsie constituents were in the red as investors went “risk-on” ahead of the Chancellor of the Exchequers summer statement on Wednesday.
The FTSE 100 was up 110 points (1.8%) at 6,267.
Supermarkets were among those resisting the firmer trend; the sector is seen as a defensive play and investors are in the mood today for something a bit racier.
Packaging giant DS Smith PLC (LON:SMDS) was also off the pace, sliding 2.9% to 282.83p after a broker upgrade following its full-year results last week in which it opted not to resume dividend payments.
12.05pm: Barratt's trading update lifts the housebuilding sector
After a strong start, the FTSE 100 shuffled sideways for the rest of the morning.
The FTSE 100 index was up 112 points (1.8%) at 6,269, with Barratt Developments PLC (LON:BDEV), up 7.5% at 527.2p, leading the way, after its trading update with sector peers Persimmon PLC (LON:PSN) and Taylor Wimpey PLC (LON:TW.) not far behind.
“As investors search for rays of light in the current economic fog, Barratts has provided a glimpse of cautious optimism,” said Richard Hunter, the head of markets at interactive investor.
“Visibility on the road ahead remains murky, however. It is too early to quantify the full economic impact of the pandemic on the UK, let alone consumer confidence, and any recovery could be drawn out. The resumption of Brexit talks could also weigh generally on the sector, while the Help to Buy scheme which has been such a boon is currently due to expire in March next year. This could punch a further hole in profits unless an extension to the scheme is announced,” he cautioned.
“In the meantime, generally good mortgage availability, historically low-interest rates and a housing shortage all play into the bull case for the sector,” Hunter noted.
This mornings Construction Purchasing Managers Index (PMI) wont have done sentiment towards the sector any harm, either.
The PMI rose to 55.3 in June, from 28.9 in May, above the consensus, 46.0.
“The jump in the PMI above 50 makes sense, given that it should simply be an indicator of month-to-month growth in construction output. A similar picture was presented by the ONS' Business Impact of Covid-19 survey, which showed that the proportion of construction companies reporting that they are actively trading rose to 87.4% in the first half of June, from 82.6% in the second half of May,” explained Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“The rebound in the PMI was driven by the housing sector—its activity index rose to 59.0, from 30.9—but the commercial and civil engineering activity indices also recovered, to 53.8 and 52.4, respectively. Nonetheless, the new orders balance rose only to 50.4, from 25.4, and the employment index increased merely to 41.5, from 31.2, suggesting that construction firms are preparing for demand to remain well below pre-COVID levels later this year.
“Admittedly, the recovery in construction activity should be stronger than after the 2008-to-09 recession, given that banks are better placed to supply credit through the recovery, and public sector investment will be increased, not squeezed. Nonetheless, a full V-shaped recovery is not on the cards, given that the future occupancy rates of office and retail space are highly uncertain, and lenders have pulled back from high LTV [loan-to-value] lending which supports first-time buyers to purchase new homes. Accordingly, we currently expect construction output to be about 5% below its pre-COVID level in the fourth quarter of this year,” Tombs revealed.
9.50am: Builders "the stars of the UK economy in June"
The IHS Markit/CIPS UK Construction Purchasing Managers Index (PMI) bounced back strongly in June.
The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index jumped to 55.3 in June, from 28.9 in May; a reading above 50 indicates an expansion in activity.
Higher levels of business activity were overwhelmingly linked to the reopening of the UK construction supply chain following stoppages and business closures during the early stages of the coronavirus disease 2019 (COVID-19) pandemic, said IHS Markit.
“June's survey data revealed a steep rebound in UK construction output as more sites began to reopen and the supply chain kicked into gear. House building led the way with the fastest rise in activity for nearly five years, while commercial and civil engineering also joined in
the recovery from the low point seen in April,” said Tim Moore, the economics director at IHS Markit, which conducts the survey.
"As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period. While it has taken time for the construction supply chain to adapt and rebuild capacity after widespread business closures, there is now clear evidence that a return to growth has been achieved,” he added.
Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said builders were the stars of the UK economy in June.
"As business confidence improved to its largest extent since February, companies were buying up materials and laying the groundwork for a stronger summers end. This resulted in the highest input price inflation since the start of the year as supply chains creaked under the strain of increased shortages. Building performance is dependent on other sectors recovering at a similar pace, and as businesses were opening up, some fell short of their usual delivery capacity,” Brock said.
"Only two months ago the construction sector produced the worst results in the history of the PMI, and there are still some potholes to navigate around as Government support for jobs is stripped away. Employment levels remained deflated, with reports of redundancies,
furloughed staff and a reluctance to boost staff numbers when new order levels remained so flat but with a significant rise in the headline output number, it looks as though all the building blocks are there for the sectors increasing health," Brock suggested.
The FTSE 100 was up 106 points (1.7$) at 6,266.
8.45am: Strong start to the new week
The FTSE 100 got off to a strong start on Monday with financial support for the coronavirus recovery rather than the toxic impact of the outbreak itself powering positive sentiment.
The index of UK blue-chip shares rocketed 144 points higher to 6,301.17.
Earlier Asias main markets kicked off in fine fettle with China leading the way following a raft of encouraging data in recent days suggesting the worlds second-largest economy may bounce back to life more quickly than predicted. Even the usually slow-to-respond Japanese stock market appeared to have a little buoyancy Monday.
Closer to home, sentiment was aided by news of £1.57bn of support for the arts in what is expected to be a much larger injection to save jobs. Also being mooted is a trainee scheme aimed at getting young people back to work, and a potential stamp duty hiatus.
On the market, Boohoo (LON:BOO) made a formal response to a newspaper investigation into the pay and conditions of one of the online fashion retailers major suppliers – one which City broker Liberum said didnt go far enough.
“[It] only really speaks of investigating the particular factory in question and raises the question of how many other breaches management is potentially unaware of,” Liberum's analysts said in a note to clients.
“The rest of the statement speaks of procedures and checks that management has already put in place, which if the allegations are true, have clearly not been robust enough to stop significant breaches happening," the analysts added, having downgraded their rating for Boohoo to 'hold' from 'buy' on the reports at the weekend.
Boohoos share fell 12% early on, wiping £577mln from the value of the business.
On the Footsie, the housebuilders were in rude health amid reports that chancellor Rishi Sunak may be willing to sanction a stamp duty holiday for up to six months. Taylor Wimpey (LO:TW.) and Persimmon (LON:PSN) advanced 6.5% each.
Rolls Royce (LON:RR.) was up 6% amid reports it may shut its pension scheme early to alleviate the financial pressure applied because of the coronavirus outbreak, which has decimated its main customer, the airline industry.
Proactive news headlines:
4D pharma plc (LON:DDDD) has said the crucial next stage of a cancer clinical study is underway with four new sites added in the US to accelerate patient recruitment. Up to 30 people per tumour type will participate in Part B of the companys phase I/II trial to assess its live biotherapeutic, MRx0518, in combination with immune checkpoint inhibitor Keytruda. The assessment will look for a meaningful clinical impact on cancer patients that have become resistant to this type of therapy. Researchers are looking for a complete or partial response or stable disease for six months or longer.
i3 Energy PLC (I3E) has signed a binding agreement to acquire private Canadian oil and gas company Gain Energy through a reverse takeover for US$58.8mln. AIM-listed I3 had flagged the deal two weeks ago, but not named the target. Gain operates in the Western Canadian Sedimentary Basin, the same area of operation as Toscana, another Canadian company I3 agreed to buy two weeks ago. Gain produced at a rate of around 11,000 barrels per day equivalent throughout 2019 and generated around US$34mln in underlying profits.
Zoetic International PLC (LON:ZOE) has announced its first international distribution contract, with a deal in the Czech Republic and Slovakia for its Chill brand tobacco alternative CBD products. The company noted that Chill branded products now have a clear roadmap for distribution and sale across filling stations and tobacco retailers in the two countries. Further discussions are ongoing with distributors in other territories, it added
OptiBiotix Health PLC (LON:OPTI) has extended its distribution agreement with a company called CTC Holding to include an additional product. CTC will now sell WellBiome in Philippines, Vietnam, Indonesia, Colombia, the Dominican Republic and Guatemala in addition to OptiBiotix weight management products SlimBiome, SlimBiome Medical and GoFigure. WellBiome is a blend of prebiotic functional fibres, functional dietary fibres and mineral that promote the diversity of the gut microbiome.
Supermarket Income REIT PLC (LON:SUPR) has entered into a £74.1mln sale and leaseback transaction with supermarket group, Waitrose & Partners, part of the John Lewis Partnership. The acquired portfolio comprises six freehold supermarkets with an average gross internal area of 32,000 square feet. The stores are let to Waitrose on new 20-year leases with a tenant-only break option in year 15 and are subject to five-yearly, upward-only, CPIH inflation-linked rent reviews; the rent will go up by a minimRead More – Source