FTSE 100 manages positive finish but traders wary amid health crisis

  • FTSE 100 closes up
  • US indices open lower but recover
  • First-time jobless claims in the US fall by less than expected

5.05pm: FTSE 100 closes higher

FTSE 100 index closed in positive territory on Thursday but FTSE 250 fared less well as traders continue to weigh up where the health crisis is heading.

Britain's blue-chip benchmark finished over 23 points higher at 6,147, while midcap cousin FTSE 250 shed over 38 at 17,112.

"Indices have managed to clock up some passable gains this afternoon, although this is more of a holding action rather than a solid rebound from yesterdays heavy losses," noted Chris Beauchamp, chief market analyst at IG Index.

"The key question for investors now is whether the rise in cases is a series of localized outbreaks or the beginning of a real second wave."

A rise in US cases of the virus along with uninspiring economic data put a lid on Wall Street markets too although stocks did rise.

The Dow Jones Industrial Average added around 43 points. The S&P 500 added nearly three points.

Among the top laggards on Footsie was property listing site Rightmove PLC (LON:RMG), which was downgraded to sell from hold by analysts at German bank Berenberg.

They warned that a backlash from agents could mean the platform will struggle to increase prices “ever again” from discounted levels. Shares fell 4.19% to 530p. United Utilities Group (LON:UU.) was the biggest loser, shedding 4.48% to 912.40p.

4.10pm: FTSE set for positive finish

After being below water for most of the day, the Footsie looked set to finish the day on a positive note.

Londons index was up 31 points (0.5%) at 6,155, with financial stocks to the fore.

Asset managers Standard Life Aberdeen PLC (SL.) and Schroders PLC (LON:SDR), up 3.9% and 3.5% respectively, both figured in the top three Footsie movers while funds supermarket Hargreaves Lansdown PLC (LON:HL. was not far behind with a 2.8% increase.

The mid-cap FTSE 250, however, remained in the red albeit not by much. The index was down 16 points (0.1%) at 17,135, thanks principally to a 12% stumble to 158p by Royal Mail PLCs (LON:RMG) shares after a poorly received set of full-year results from the parcels delivery outfit.

“The coronavirus outbreak has revealed long suspected weaknesses at Royal Mail,” according to Nicholas Hyett, an equity analyst at Hargreaves Lansdown.

“The groups been over-reliant on the shrinking letters market, and with letter volumes down by a third in recent months thats left it horribly exposed. Meanwhile, the lack of investment in parcels infrastructure means catering for the sudden spike in online shopping has seen costs rocket, so that the extra revenue is more of a burden than a blessing. Put all that together with a likely recession this year and the result is some very large losses in 2020/21,” Hyett added.

Around 2,000 jobs are being cut at Royal Mail as the group announced a management overhaul to help slash costs in the face of the coronavirus crisis.

— Caroline Bettembourg (@CBettembourg) June 25, 2020

3.05pm: Back to square one

While the Footsie has crawled into positive territory, stateside the Dow has suffered another triple-digit fall.

The FTSE 100 was up 13 points at 6,136, while the Dow Jones industrial average was off 119 points (0.5%) at 25,327 while the S&P 500 was 13 points (0.4%) weaker at 3,037.

US sentiment was hit by a disappointing set of first-time jobless claims numbers.

“US weekly jobless claims are not falling as quickly as they should in an environment of businesses re-opening, suggesting significant ongoing economic stress. This will intensify pressure on government to extend the US$600 per week unemployment benefit boost,” suggested James Knightley, INGs chief international economist.

“With the number of Covid-19 cases clearly on the rise in many states we also have to be alive to the risk of containment measures being reinstated, which would add to economic stress and the risk of further lay-offs – consumers could of course vote with their feet if virus fears are not brought under control. Then with the US$600 boost to weekly unemployment benefits scheduled to end on 31 July, we may be about to enter an uncertain period for household incomes and, by extension, consumer spending. The pressure will undoubtedly build for additional fiscal support in the next few weeks, otherwise, forecasts for the 2H20 rebound may well need to be scaled back,” he added.

2.00pm: US indices to resume their retreat

After yesterdays shake-out, US indices are set to open in the red again today as the number of coronavirus (COVID-19) cases continues to mount.

Spread betting quotes indicate the Dow Jones will start 142 points lower at 25,446 while the S&P 500 was expected to shed 11 points at 3,050.

The US trade deficit in goods widened 5.1% in May to US$74.3bn from a revised US$70.7bn in April, as exports fell off a cliff.

On the plus side, durable goods orders rose 15.8% in May, although the market consensus forecast was for a rise of 17.7%.

Continuing with the macroeconomic theme, the final measure of US gross domestic product for the first quarter was showed a 5% fall, in line with forecasts.

A more recent economic gauge – first-time jobless claims last week – fell 4% to 1.48mln from 1.51mln the previous week, which was the smallest drop in percentage terms in new claims since the early days of the COVID-19 pandemic. Economists had expected the number to drop to 1.3mln.

JUST IN: Another 1.48 million U.S. workers filed jobless claims last week, the Department of Labor said.

Weekly unemployment filings, while slowly decreasing since peaking in late March, have remained historically high for over three months. https://t.co/2onkEvUNqt

— ABC News (@ABC) June 25, 2020

Continuing claims fell 767,000 to a still mind-boggling 19.5mln.

Jitters over a resurgence of the coronavirus epidemic continue to hit sentiment.

The number of new cases in the 50 states plus DC, recorded by the COVID Tracking Project, jumped to 38,500 yesterday, a 61.7%week-on-week increase.

“The rate of increase is rising rapidly, but even at the current pace, the US will see 100,000 new cases per day by July 8, two days earlier than we previously estimated,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.

“The number of people hospitalised nationally increased yesterday, for the third straight day. Hospitalisations lag cases, so they can be expected to surge over the next couple weeks, at least.

“If anecdotal evidence suggesting that a disproportionate share of the wave of cases in the South and West are among younger adults, hospitalisations won't rise as fast, relatively to cases, as was seen back in April,” he added.

It is not often the UK can feel smug about its record on COVID-19 cases but if government data is to be believed, the number of new casts dropped 41% yesterday.

“That's the seventh straight decline, and the rate of fall appears to be accelerating,” Shephderson observed.

Boris accuses Keir Starmer of using misleading Cornonavirus statistics.

Keir Starmer responds with: The figures that the Prime Minister says are inadvertently misleading are from the slide at his press conference yesterday.”

Ooof! #PMQs

— Jonathan Pie (@JonathanPieNews) June 24, 2020

The FTSE 100 was down 14 points (0.2%) at 6,109.

11.45am: Footsie becalmed

The Footsie has shrugged off another gloomy report on the UK retail sector and remains just a few points in arrears.

On the day when most retailers in the UK have to pay the rent for the second quarter, the CBIs Distributive Trades Survey revealed that the retail sales balance was still negative at -37 in June but that was at least an improvement on Mays -50%.

“With high street shops, department stores and shopping centres re-opening across England last week amid some scenes of long queues, youd be forgiven for thinking retailers difficulties are coming to an end. But the health of the retail sector remains in the balance,” said Rain Newton-Smith, the CBIs chief economist.

“Despite retailers working flat out to make sure they are safe and ready to open their doors, outside the grocery sector most retailers expect sales to be far below where they were this time last year.

“Enabling these businesses to open is a critical step on the road to restarting our economy and will help support hundreds of thousands of jobs across the UK,” Newton-Smith added.

Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said the sales balance was never likely to recover much in June, “given that retailers are asked if sales are higher or lower than a year ago”.

“Most retailers will continue to report that sales are lower in year-over-year terms in June, even though they have recovered further since May. Note too that the CBIs survey was conducted between May 27 and June 12, before all "non-essential" shops were allowed to reopen on June 15. We expect retail sales to recover strongly over the next couple of months, perhaps even briefly touching their pre-COVID level but retail sales will benefit from a rotation of spending away from services—which is twice as large as spending on goods—given virus concerns,” Tombs said.

“The completion of purchases of durable goods by people who postponed them during the lockdown also will provide a temporary fillip to sales. Indeed, the pick-up in the broad money holdings of households in March and April suggests that they have accumulated savings that they now might partially run down. Nonetheless, with job losses likely coming when the Coronavirus Job Retention Scheme is wound down between August and October, wages likely to fall outright as labour market slack builds, and mortgage payments set to resume soon for the one-in-six borrowers that have taken payment holidays, we expect households overall spending still to be about 5% below its pre-COVID level in Q4,” he added.

The FTSE 100 was down 24 points (0.4%) at 6,100.

11.00am: CBI Distributive Trades survey reveals gloomy outlook for retailers

The CBIs latest monthly Distributive Trades Survey revealed that retailers expect sales volumes to fall at a slightly faster pace in the year to July.

The survey, conducted between 27 May and 12 June, said the gloomy outlook mostly reflected slower growth for grocers and a decline in sales for specialist food & drink retailers.

Retail sales fell sharply in the year to June, albeit at a slower pace than last month, with the balance (essentially the percentage of respondents expecting a decline subtracted from the percentage expecting an increase) improving to -37%, from -50% the month before.

No further improvement is expected next month, with the pace of decline expected to be steeper in the year to July (balance of -48%), said the bosses lobbying group.

The volume of orders placed with suppliers fell at a slower rate in the year to June (balance of -42%, from -56%), and is expected to fall at broadly a similar rate next month (-44%).

As might be expected given the lockdown restrictions in the UK, internet sales growth picked up, with the volumes balance improving to +50% from Mays +27%; online sales are expected to grow at an even faster pace next month (+56%).

Sales were seen as poor for the time of year (balance of -34%, from -48%) and are expected to remain poor next month (-41%).

The volume of stocks concerning expected sales fell in June (+24% from +45%). Relative stock levels are expected to increase next month (+38%).

The FTSE 100 was down 7 points (0.1%) at 6,117.

9.40am: ECB intervention provides a lift

The trading session is barely 90 minutes old and its already been a game of two halves.

After a weak opening, the FTSE 100 has recovered to 6,113 and is down just 10 points (0.2%).

Equity bulls drew encouragement from the announcement by the European Central Bank that it will offer loans to central banks outside the Eurozone.

“In response to the coronavirus (COVID-19) crisis, the Governing Council of the European Central Bank (ECB) decided to set up a new backstop facility, called the Eurosystem repo [repurchase] facility for central banks (EUREP), to provide precautionary euro repo lines to central banks outside the euro area.

“EUREP addresses possible euro liquidity needs in case of market dysfunction resulting from the COVID-19 shock that might adversely impact the smooth transmission of ECB monetary policy,” a statement from the ECB said.

Press release: New Eurosystem repo facility to provide euro liquidity to non-euro area central banks https://t.co/LlkkWWpfW0

— European Central Bank (@ecb) June 25, 2020

The results from Auto Trader Group plc (LON:AUTO) sent the share price into reverse.

The operator of a car sale listings website opted not to pay a final dividend in respect of the year to the end of March given the impact of the lockdown restrictions in the UK, which resulted in many car dealers closing their doors.

“Despite an increased number of vehicles on our platforms, the number of retailers has declined by 3%,” the company reported, referring to trading in the second quarter of 2020.

8.50am: Coronavirus resurgence hits shares

The surge in US coronavirus infections allied to worries over Sino-American trade relations sent the FTSE 100 into an early tailspin.

Wall Streets sell-off was felt in Asia too, though the markets of Hong Kong, Taiwan, and mainland China were closed for a public holiday.

Earlier Japan supplied an economic reality check as activity in April plunged to a level below the troughs in the global financial crisis and following the 2011 earthquake.

Back here in the UK, struggling Royal Mail Group (LON:RMG) hogged the corporate headlines with plans to cut 2,000 management jobs in a radical reshaping of the delivery business. The shares fell 6.6%, though the news was welcomed by market commentators.

“[The company] clearly needs sorting and the latest plan to transform the business seeks to address its legacy issues,” said Richard Hunter, a stock picker at Interactive Investor.

“The main thrust of the strategy is for the business to be an internationally-focused parcel business, as opposed to the traditionally UK-focused letters business. Of itself, this transformation is not only obvious and required but long overdue.”

Tuesdays dour trading update from property portal Rightmove (LON:RMV) continued to depress the share price, which fell 4.6%. The pressure is also mounting from disenchanted estate agents disgruntled at the companys charging structure.

On the FTSE 250, there was a reality check for pubs group Mitchells & Butlers (LON:MAB) and Cineworld (LON:CINE) which fell respectively 7.9% and 7.2% after the recent strong rises following the easing of lockdown strictures.

Proactive news headlines

BATM Advanced Communications Limited (LON:BVC) shares jumped to 19-year highs on Wednesday after the real-time technologies company hiked its full-year revenue and earnings expectations.

Blue Star Capital PLC (LON:BLU) said its investee company, Guild Esports PLC, has announced its global launch and an association with David Beckham as it looks to develop a talent pipeline in the UK. Beckham and Blue Star have both taken part in a £25mln fundraising by Guild.

ReNeuron Group PLC (LON:RENE) has signed a research evaluation agreement with an unnamed “major biotechnology company” with the pair set to collaborate on a technology that can deliver gene-silencing therapeutics.

Westminster Group PLC (LON:WSG), the security and managed services specialist, has started a new project to introduce specialist 'unattended retail' vending machines that will dispense masks and facial coverings in the UK.

Rosslyn Data Technologies PLC (LON:RDT) said it has secured renewals for several client contracts with extended durations that it says will underpin its current annual recurring revenue (ARR) expectations in future periods.

Advanced Material Development subsidiary CoM3D has completed a £1mln funding round to coRead More – Source

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