- FTSE 100 dips 7 points
- US indices open sharply lower
- Trump resurrects trade war motif as election draws nearer
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.
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.
Proactive news headlines:
Union Jack Oil PLC (LON:UJO) has relayed communications by West Newton operator Rathlin Energy to the communities in the vicinity of the project in East Yorkshire relating to the coronavirus (COVID-19) pandemic. “This update is to let you know that we are moving our programme of works forward, in line with the latest government and public health guidance on COVID-19. We continue to follow the advice closely,” Rathlin said in a letter. Rathlin detailed that, as from today, it is starting the construction of an access track to the West Newton B site.
Open Orphan PLC (LON:ORPH) has signed a new contract with a US biotechnology company for the provision of a respiratory syncytial virus human challenge study. The group said the contract is projected to deliver £3.5mln in revenue all of which is expected to be recognised in 2020. This new contract follows the signing in March of another respiratory syncytial virus (RSV) human challenge contract, now underway, for an initial £3.2mln. Open Orphan said the contract wins underscore its position as a world leader in the provision of viral challenge studies, vaccine and viral laboratory services, which is a particularly hot topic following the onset of coronavirus (COVID-19). Meanwhile, the company also revealed that Trevor Phillips is going to stand down as its chief executive officer.
Gfinity PLC (LON:GFIN) has revealed that is to run a second instalment of the ePremier League Invitational tournament that sees professional players and celebrities represent teams in electronic matches. Participants will play each other in a knock-out format using EA SPORTS FIFA 20 on a PlayStation 4 console. Among the players taking part are Phil Foden (Manchester City), Billy Gilmour (Chelsea), James Maddison (Leicester City), John Egan (Sheffield United), Ryan Sessegnon (Tottenham Hotspur) and Callum Wilson (Bournemouth). Games will be broadcast on SkySports, YouTube and Twitch with the final also to be shown on Sky Sports Premier League, Main Event and worldwide.
OptiBiotix Health PLC (LON:OPTI) announced that it has entered into a non-exclusive license agreement for its SlimBiome trademark with Smart For Life, Inc. and related launch of cookies containing OptiBiotix's SlimBiome proprietary weight management technology in the USA and Canada. The life sciences group, which is developing compounds to tackle obesity, high cholesterol, diabetes and skincare, said the license is contingent on an annual minimum order quantity and the first order within thirty days of signing the agreement. Smart For Life – https://www.smartforlife.com – is a US-based company that was founded in 2002 by Dr Sasson Moulavi, a bariatric doctor.
ANGLE PLC (LON:AGL) (OTCQX:ANPCY) has said its liquid biopsy system provides a “straightforward and scalable approach” to analysing and assessing treatment options for men with advanced prostate cancer. That was the conclusion of associate professor Amir Goldkorn, whose team at the University of Southern California, used ANGLEs Parsortix device as part of its workflow to decide which drugs or drug combinations to give patients. Partsortix harvests the tell-tale signs of cancer called circulating tumour cells (CTCs) so that they can then be assessed. It offers an alternative to physical biopsies, which are invasive and painful, and antibody-based methods of capturing of cells.
Diversified Gas & Oil PLC (LON:DGOC) has told investors it maintained production levels in the first quarter and it is to pay a 3.5p per share dividend for the period. In a trading update, the company said its production in the three months ended March 31, 2020, was marked at 94,000 barrels of oil equivalent per day (boepd) – 564mln cubic feet equivalent per day – helped by the groups well management programme which offset natural declines. Adjusted underlying earnings (EBITDA) were reported at US$78mln for the period, in line with the prior period, with sales prices supported by a hedged price of US$2.73 per mln, the group added.
Bushveld Minerals Ltd (LON:BMN) has said it produced a net attributable 482.5 metric tons of vanadium (mtV) in the form of Nitrovan during the first quarter of 2020, marginally ahead of production in the corresponding period a year ago, with this quarter affected by shut-downs related to the coronavirus. In an operational update, the company also noted that it booked sales of 898 mtV, or 664.5 mtV 74% net attributable. Underlying production costs rang in at US$18.90 per kilogramme, an 8% decrease relative to the first quarter of 2019, supported by a weaker ZAR/USD exchange rate.
Vast Resources PLC (LON:VAST) has commented on articles published in the Zimbabwean press, in the course of the week commencing April 27, 2020, regarding the Chiadzwa Community concession block joint venture in the Eastern Highlands of the country, for which it is currently awaiting finalisation. In a statement, the company noted that it, and its subsidiaries have, throughout the joint venture process, maintained constant dialogue and interaction with the community and all stakeholders who have formally written to the company maintaining their support. The company said it continues to act in good faith to the benefit of the Republic of Zimbabwe and the entire community, and always in accordance with the instructions and direction of the relevant governmental authorities.
Cadogan Petroleum Plc (LON:CAD) has confirmed a 15% increase in year-on-year production during 2019, although losses in its gas trading and services divisions impacted profit for the year. In its annual financial report, the Ukraine-based producer said some 104,816 barrels oil equivalent flowed in 2019, up from 91,085 barrels the year before. Cadogan generateRead More – Source