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FTSE 100 little changed, potential US coronavirus stimulus delivers small spike

  • FTSE 100 little changed
  • US stimulus talks lift UK markets, but not for long
  • Rolls-Royce drops on capital raise news

5pm: FTSE makes modest gains

The FTSE 100 closed ever so slightly higher at 5,879.5, a gain of 13 points or 0.2%. The FTSE 250 ended 68 points, 0.4%, higher at 17,383.5.

The positivity traders derived from renewed stimulus talks in the US fueled a rally in the afternoon, but it mostly faded by the close.

"Stock markets are largely showing gains on the back of the optimism surrounding the US stimulus package," CMC Markets UK analyst David Madden wrote Thursday. "The volatility in the pound because of the UK-EU trade talks caused some big swings in the FTSE 100."

Madden also noted the dampening effect of the oil markets.

"The sharp fall in oil has hit BP and Royal Dutch Shell – this is another factor as to why the British market is underperforming against some of its continental counterparts."

Royal Dutch Shell plc's B shares (LON:RDSB) , for its part, finished 3.5% lower at £907.30 in London.

Traders also pumped the brakes on Rolls-Royce Holdings PLC (LON:RR), after the company announced plans to raise £3 billion to bolster its balance sheet, Madden said. Shares dropped 10% to £116.80.

In the US, markets started hot but began to cool by midday, The Dow was up 91 points, 0.3%, to 27,872.9; the Nasdaq grew 95 points, 0.9% to 11,264.6; and the S&P 500 improved 15 points, 0.4%, to 3,377.9.

3.30pm: FTSE flattish in the afternoon

Londons downward drift in the afternoon session has been arrested, with the FTSE 100 back to be little changed.

Londons index of leading shares was back to last nights level of 5,866 after sliding to 5,850 at one point.

Nothing much has happened this afternoon to get traders motivated; when the top riser is a utility company – SSE PLC (LON:SSE), up 3.6%) – then you know it is a quiet day.

Ocado Group PLC (LON:OCDO), the gorceries delivery technology company, slipped 2.8% to 2,667p on reports that it has been sued by Norwegian robotics technolgy outfit AutoStore.

Grocery retailer @OcadoGroup has signed agreements with major partners for systems that unlawfully infringe @AutoStoresystem intellectual property. In defense of our patented technology, AutoStore has filed lawsuits against Ocado. Learn more here: https://t.co/9tJMQoMFdJ

— AutoStore (@AutoStoresystem) October 1, 2020

Across the pond, the US has provided a bit of data to ponder over.

The ISM manufacturing index dipped to 55.4 from 56.0, below the consensus forecast of 56.4.

“This is a surprise, because most of the regional reports pointed to a further increase in the national ISM. Instead, the index was pushed down by a sharp fall in orders, to 60.2 from 67.6, while production dipped by 2.3 points to 61.0 but delivery times, inventories and employment – which lag orders – all rose,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.

“The employment component remains just below the 50 mark, at 49.6, but it likely will climb further over the next couple months. The bigger picture here is that the manufacturing rebound continues, though it seems no longer to be accelerating,” Shepherdson said.

Weaker than expected September @ISM Manufacturing PMI at 55.4 vs. 56.5 est. & 56 in prior month; new orders & production slowed but are still expanding; prices paid up along with backlogs … employment ticked up but still in contractionary territory pic.twitter.com/t0j4cfyU7h

— Liz Ann Sonders (@LizAnnSonders) October 1, 2020

Earlier, the first-time jobless claims numbers were “reasonably encouraging”, according to James Knightley, the chief international economist at ING.

“US initial jobless claims fell 33k to 837k for the week of September 26 versus expectations they would drop to 850k. Continuing claims moved down to 11.767mn from 12.58mn, better than the 12.2mn consensus. The total number of people claiming unemployment benefits (including pandemic unemployment assistance) unfortunately rose to 26.53mln from 26.04mln,” Knightley reported.

“One big surprise was that the core PCE deflator – the Federal Reserves often favoured measure of inflation – rose more than anticipated to 1.6% from 1.4% year-on-year, which has put a little upside pressure on Treasury yields; however, the Fed are not going to be changing their outlook anytime soon and remain firmly backing the view that rates won't be raised until 2024 given medium-term price pressures remain muted on the back of a significant output gap and high levels of unemployment that will keep wage growth depressed for some time,” he added.

3pm: US stocks start higher

Stocks jumped on Thursday in the first session of October amid rising hopes for further coronavirus stimulus money for a recovery that may be losing momentum.

The Dow Jones Industrial Average opened at around 215.15 points, or 0.8% higher to 27,996.85.

Meanwhile, the tech-laden Nasdaq Composite index was sharply higher by 136.55 points, or 1.2% to 11,304, arresting the wave of selling that overtook technology stocks for much of September. Wall Street investors are bullish on stocks heading into the fourth quarter, but they are concerned about a second coronavirus wave.

1.15pm: Morning gains evaporate

The morning gains have almost entirely dissipated, with the FTSE 100 up just 4 points (0.1%) at 5,870.

Sentiment was not much helped by the latest weekly jobless figures from the US, which showed that first-time unemployment benefit claims fell to 837,000 from 873,000 claims the week before.

Continuing claims fell to 11.77mln from 12.75mln.

First-time claims for unemployment insurance totaled 837,000 last week, the Labor Department said Thursday. https://t.co/ZuzZqERtni

— NBC DFW (@NBCDFW) October 1, 2020

12.45pm: US fiscal stimulus hopes drive equities higher

Hopes are rising for a breakthrough in the negotiations over a new US stimulus package., and that's feeding through to US equities.

Based on current spread betting quotes, the S&P 500 should open 29 points higher at 3,392 and the Dow 231 points heavier at 28,013.

The tech-heavy NASDAQ Composite is expected to kick on by around 400 points to 11,567.

“US Treasury Secretary Mnuchin said post-Wednesdays US close that an agreement had been reached on the contentious issue of direct payment to Americans, clearing a significant hurdle in moving forward,” reported Stephen Innes at Axi.

“He also said that President Trump had instructed them to come up significantly, although a gap remains in terms of the size of any stimulus package with the Democrats at about US$2.2 trillion while the GOP is at around US$1.5 bn.

“The escalator clause could be the special sauce and maybe how the Republicans try to meet the Democrats where they are, and House Speaker Nancy Pelosi can still feel like she can claim victory in getting the number closer to her US$2.2 trillion target,” Innes added.

“The stimulus deal is very much needed and will come as a massive relief to many unemployed Americans who were having a vision of that proverbial lump of coal in their holiday stocking this year. Mind you, more than a few traders were too,2 he quipped.

Pundits have had over a day now to take soundings on who came out better in Tuesday nights ill-tempered presidential debate and the consensus seems to be that if Trump needed to land a knock-out blow to close the gap in the opinion polls, he failed to land one on Tuesday night.

Thats a figurative “knockout blow”, not a literal one; no one knows what happened after the cameras stopped rolling but the prospect of two septuagenarians getting involved in a physical tear-up doesnt bear thinking about.

“So far the stock market doesnt seem too upset at the prospect of Biden winning, despite Trumps more market-friendly policies. Perhaps folks think their stocks and 401(k)s will do better with higher taxes and increased regulation than with nastiness and scorched earth,” suggested Lloyd Blankfein, once the head honcho at investment bank Goldman Sachs.

According to Marshall Gittler at BDSwiss, the market took the view that the debate increased the likelihood of the Democrats taking the Senate, too, “although the odds there are close,” Gittler observed.

There will be plenty of other US economic releases today to take traders minds off politics, including the personal income and spending figures for August.

“These are expected to show that income declined as the impact of job growth was more than offset by the waning of fiscal transfers. Even so, retail and auto sales data point to a further lift in consumer spending during the month. The reverse of spring discounts should see the core PCE deflator post a further 0.3%M/M [month-on-month]lift, nudging annual inflation up 0.1ppt [percentage points] to 1.4%Y/Y [year-on-year],” said Daiwa Capital Markets.

Also due out today are automobile sales data for September and the manufacturing Institute for Supply Management (ISM) survey, also for September.

“Regarding the latter, while the manufacturing sector remains in recovery mode, the recent pace of activity appears to have waned and we might well see the headline ISM fall back from the elevated level seen in August (56.0) which was the highest since late 2018,” Daiwa predicted.

In the UK, economists are still weighing in on the purchasing managers report for UK manufacturing activity.

“The PMI dipped to 54.1 in September (revised down slightly from the flash reading of 54.3) after rising to 55.2 in August from 53.3 in July, 50.1 in June, 40.7 in May and a record low of 32.6 in April. It had previously fallen to Aprils low from 48.0 in March and 51.7 in February, which had indicated the first expansion since April 2019.,” reported Howard Archer, the chief economic advisor to the EY ITEM Club.

“Confidence was essentially stable in the manufacturing sector in September, close to Julys 28-month high. Significantly though, Markit revealed that there were also increased numbers of firms noting uncertainty about the future, particularly regarding COVID-19 and Brexit,” Archer noted.

Talking of COVID-19, according to the latest Business Impact of Coronavirus (COVID-19) Survey, 11% of the workforce were on furlough and 85% of businesses were currently trading, which is broadly comparable with the previous wave (12% and 84%, respectively), the Office for National Statistics (ONS) reported today.

The proportion of working adults who travelled to work at some point during the week fell to 59%, from 64% the previous week according to the ONSs latest Opinions and Lifestyle Survey.

Between 18 and 25 September, total online job adverts increased from 55% to 59% of their 2019 average, their highest recorded level since 3 April 2020.

Prices of items in the food and drink basket increased by 0.4% in the latest week, driven by milk, cheese and eggs and soft drinks, the ONS said.

Blessed are the cheesemakers …

Hopes of sustained economic recovery for the UK have taken a blow with fresh indications of the likelihood of mass jobs losses in the months to come,” said Susannah Streeter of Hargreaves Lansdown, commenting on the furlough statistics.

“The double whammy of Brexit and Covid 19 is clearly increasing anxiety among the UKs business community and there is a big risk that by hunkering down this winter and tightening the purse strings, cuts to workforces and investment could lead to a spiralling down of consumer demand and make the recovery longer and harder,” she added.

For now, the market is not worried about the prospect of a double-whammy and the FTSE 100 is up 29 points (0.5%) at 5,895.

9.55am: Manufacturing PMI eases a bit

The Footsie is back above 5,900 again and holding on – just – in the wake of the IHS Markit / CIPS UK Manufacturing Purchasing Managers Index.

The FTSE 100 was up 36 points (0.6%) at 5,902.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers Index (PMI) eased to 54.1 in September, down from August's two-and-a-half-year high of 55.2.

The PMI is one of those indices where a value above 50 indicates a positive reading; IHS Markit noted the index has remained above its no-change mark of 50.0 for four successive months, which is its longest sequence in expansion territory since early-2019.

Output increased for the fourth consecutive month in September, while new order intakes also improved. New business rose for the third successive month, reflecting a combination of improving customer demand, rising export orders, signs of recovery in the retail sector and the reopening of schools.

“The impetus behind this resurgence, lies in the release of delayed projects and more people returning to work but the employment picture overall darkened significantly,” said Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS).

“Some firms continued to make use of the furlough scheme to retain their workforce, but larger numbers of redundancies this month means we have a wretched end to the third quarter as job numbers fell for the eighth month in a row.

“This in turn placed a strain on production capacity further down the supply chain. Longer delivery times and increased competition for raw materials caused the highest rate of input price inflation since December 2018. The increase in prices to customers followed closely behind and is set to continue for the remainder of the year,” Brock predicted.

Brock noted that some businesses were building stocks ahead of Christmas and Brexit “but it is anyones guess whether more lockdown disruptions derail this hope,” Brock said.

Purchasing managers report #UK #manufacturing activity lost a little momentum in September after reaching 30-month high in August but sector still saw marked rebound over third quarter. PMI down to 54.1 (flash 54.3; 55.2 in August). Output still at elevated level in September

— Howard Archer (@HowardArcherUK) October 1, 2020

Rob Dobson, a director at IHS Markit, said that although the sector is making positive strides, “keep in mind that there remain considerable challenges ahead,” especially for the labour market.

“The full economic cost incurred by 2020 will likely rise further as governments look to re-introduce some restrictions, job support schemes are tapered and rising numbers of firms start focussing on Brexit as a further cause of uncertainty and disruption during the remainder of the year,” he said.

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9.55am: Footsie gets back its bottle

The FTSE 100 made a sprightly start to proceedings, taking its cue from Wall Street and Asias main markets.

The start of the final quarter of the year has led to some early stock-taking. While the UK blue-chip index is around 1,700 points, or 22%, off its peak, US markets have remained resilient in the face of COVID.

How long that can continue with the presidential race now starting to ramp up remains to be seen.

Richard Hunter, the head of markets at Interactive Investor, expects the election to be “an aggressive affair” that will challenge “brittle” recovery Stateside.

Meanwhile “in the background unemployment remains a thorn in the politicians side”, he added.

Back here at home, the lockdown of large swathes of the north looks set to hobble any recovery, while fears of further, more draconian action continues to keep a lid on any positivity.

It's the real thing….

Topping the Footsie was bottler and distribution group Coca Cola HBC (LON:CCB), which was up 3.5% after a Goldman Sachs upgrade to buy.

A 5% rise in the share price of Rank (LON:RNK) had the market wondering whether the bingo and casinos group would be the next sector takeover target now that William Hill (LON:WMH) has agreed to be acquired.

Among the tiddlers, Digitalbox (LON:DBOX) rose 16% after it said it was buying the student publisher The Tab for what looks like a bargain £750,000.

Proactive news headlines

Corero Network Security PLC (LON:CNS) has reported a record order intake in the three months to September 30, with over US$6mln booked. The provider of real-time DDoS defence solutions said it includes its largest ever customer order, nine new customer wins, including three customers in Asia-Pacific and continued traction with partners such as Juniper and GTT.

Digitalbox PLC (LON:DBOX) is adding the student publisher Tab Media to its stable of digital titles that includes The Daily Mash and Entertainment Daily. The £750,000 acquisition will be funded from a £1.2mln direct subscription by the Downing Strategic Micro-Cap Investment Trust at 4.9p a share.

Tally said customer numbers for its gold-backed bank account topped 7,000 at the end of the quarter to September 30. Ahead of a planned return to a public listing and a disposal of some assets, the company completed a private capital raising round at 2p per share to bring in £300,000, with the board subscribing £20,000.

Oriole Resources PLC (LON:ORR) told investors that drilling at the Hesdaba gold project, in Djibouti, has unearthed significant grades. The Thani Stratex Djibouti (TSD) venture, 11.8% owned by Oriole, has drilled a total of 3,460 metres with highlights including 16 metres at a grade of 3.84 grams per tonne gold.

Alien Metals Ltd (LON:UFO) said it set to acquire 117sq km of acreage adjacent to its Elizabeth Hill silver project in Western Australia. The acquisition comes with historical technical data on precious and base metal prospects identified by previous operators.

Anglesey Mining PLC (LON:AYM) told investors that a preliminary economic assessment (PEA) is now underway at the Parys Mountain project, in North Wales. It is expected that the production rate can be expanded from that envisaged in a scoping study and that the prior eight-year life-of-mine can be extended significantly.

Caledonia Mining Corporation PLC (LON:CMCL) has increased its quarterly dividend payment by 18% to 10c per share, making a 45% cumulative increase over the past twelve months. The Zimbabwe-focused gold miner said equipping the central shaft at the Blanket Mine is on schedule to be completed in the final quarter of this year with commissioning by end first quarter 2021.

Primary Health Properties PLC (LON:PHP) said its fourth quarterly interim dividend in 2020 of 1.475p will be paid on 20 November to shareholders on the register on 9 October.

In spite of the difficult times faces by the aviation industry, Stobart Group Limited (LON:STOB) is trading much as expected at the time of its June fundraising and has a healthy cash balance and undrawn bank facilities of around £119mln.

Immotion Group PLC (LON:IMMO) announced the launch of its brand new 'in-home' product, the 'Let's Explore Oceans' mega pack. The new offering comes as a complete boxed solution, including virtual reality (VR) goggles, carry case, holographic cube, hardback colour factbook, plus ten VR movies and four augmented reality (AR) experiences.

Learning Technologies Group PLC (LON:LTG) confirmed that all conditions relating to the acquisition of eCreators have been satisfied and that the transaction completed on October 1.

Scott Maybury, chief executive of PCF Group Plc (LON:PCF), said the specialist lenders most recent performance exhibited an "encouraging combination of operational resilience, cautious lending and continuing profitability”.
A trading statement revealed PCF had progressively tightened risk credit appetite, meaning prime lending for the year would be 83% of the total, up from 74% a year earlier.

Coinsilium Group Limited (LON:COIN) told investors it is well positioned to capitalise on the burgeoning decentralised finance and crypto finance sectors after shifting its focus in 2020.

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