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FTSE 100 flounders; Bitcoin goes bonkers after enigmatic move by Elon Musk

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  • FTSE 100 index drops 70 points
  • Evraz defies the trend after fourth-quarter update
  • Bitcoin back in vogue after Elon Musk Twitter intervention

11.35am: Forget GameStop, that’s so five minutes ago …

There has not been much corporate news for traders to get their teeth into today.

Steelmaker Evraz (LON:EVR) was up 0.1% at 502.8p after its fourth-quarter trading update but that certainly was not enough to stop the FTSE 100 from sliding 70 points (1.1%) to 6,456.

READ Evraz enjoys steel export recovery, says energy uncertainty hitting North America

Polymetal International PLC (LON:POLY) dipped 1% to 1,588.5p after its fourth-quarter production results.

“The company beat production guidance, enjoyed record free cash flow and continued to execute development projects on schedule”, said Vitaly Nesis, the chief executive officer of Polymetal.

Across the pond, because the mayhem in trading (when allowed) GameStop was not bonkers enough, the cryptocurrency market has gone bat-poo crazy again, all because Elon Musk, on paper the world’s richest man, change his bio entry on Twitter to just one word: #bitcoin.

The eponymous cryptocurrency responded by soaring 11% to US$37,070.

Just what the world needs, a combo of Tesla mania and Bitcoin ramping.

“We have seen this week the power of social media to drive markets, with the Reddit situation in full public glare. Elon Musk was involved there too, tweeting ‘Gametonk!!’ and a link to the /wallstreetbets Reddit, fuelling a surge in the GME share price after hours,” reported Neil Wilson at markets.com.

“It’s not quite apparent what the material difference between Elon Musk – admittedly the world’s richest man – having Bitcoin in his Twitter bio and not having it there really is. Does this mean he’s buying? Or does he simply think it’s a good thing. We should note that Musk’s record on Twitter with Tesla shares (‘funding secured’) is chequered. Clearly the move is being cheered by the Bitcoin bulls.

“It clearly indicates support for the crypto in some form, but I don’t think this particularly comes as a surprise. It does indicate that markets are in a febrile mood and trading around some of the ‘hot’ securities, whether it’s Bitcoin or GME, is risky. Assets that can be moved this easily by social media, whether Twitter or Reddit, are liable for large intra-day moves and subsequently could be too hot to handle for many. It’s getting wild out there,” Wilson said.

It may be getting wild “out there” but over here, it is still more mild than wild.

10.30am: Germany just about escapes recession

London’s leading shares are back on the slide again as fears over recent stock market volatility has prompted some to take some money off the table.

The FTSE 100 was down 67 points (1.0%) at 6,459.

“The two largest economies of the EU announced their flash readings of GDP for the fourth quarter. The French reading was weaker as it showed a contraction of 1.3% on a quarterly basis, but economists were expecting a decline of 4%. It was a huge drop from the 18.5% growth registered in the third quarter,” reported CMC’s David Madden.

“In the final three months of 2020, the German economy expanded by a minuscule 0.1%, fractionally topping the 0.0% consensus estimate. It was also a big fall from the 8.5% growth posted in the previous quarter. Seeing as Germany’s lockdown has been extended until mid-February and France could be heading for another national lockdown, there isn’t much hope that growth in the first quarter of 2021 will be impressive. Today’s growth reports highlight the economic impact of the tough restrictions that were introduced at the back end of 2020,” he added.

According to Carsten Brzeski at ING, Germany avoided a black eye – but only just, as it escaped the double-dip that is supposed to give economists licence to call “recession”.

“Given the current lockdown and vaccination situation, it is hard to see how it can perform the same magic again in the current quarter,” the ING economist said.

As for France, another recession looks “all but certain”, according to Brzeski’s colleague, Charlotte de Montpellier.

“Everything will depend on the decisions taken by the government on the restrictive measures to be put in place to fight the pandemic. Announcements are expected this weekend,” she said.

9.30am: Hindsight is 2020; foresight is 2021

The month looks like ending on a dull note although the FTSE 100 index has at least pruned back early losses.

London’s index of leading shares is down 60 points (0.9%) at 6,466, which is more or less the level at which the index started the month (6,460 to be precise).

It may just be a case of traders banking profits, what with their world having been turned upside down, apparently, by a show of strength of the usually ignored retail investors (cf. the hoo-hah over GameStop and the battle between the soldier ants of the Reddit community and the hyenas of the hedge fund management world).

“The last few turbulent trading sessions have all but wiped out what had been a strong start to the year,” observed Richard Hunter at interactive investor.

“The year’s early gains, as evidenced by a spike of 6% just in the first week, had been driven by recovery and demand hopes which benefited the likes of the banks and oils. In addition, there had been some signs that the UK was slowly coming back into favour as an investment destination.

“For the moment, however, the pandemic continues to cast a dark shadow and the timing of any recovery, economic or social, remains unclear,” Hunter said.

While retail investors stick the boot into the “hedgies”, bovver-boot maker Dr Martens has set the price for its initial public offering (IPO) at 370p a pop, thus valuing the company at £3.7bn.

It’s a nice result for the company’s owners, who in the manner of private equity groups (Redditors have yet to find a way of bringing private equity groups to their knees) bought the group, gave it a buff, loaded it up with debt and then lobbed the company on to the market.

A total of 350 million shares are being sold by majority shareholder IngreLux Sarl, which is a company owned by funds advised by Permira, and other existing shareholders.

The shares stomped 17% higher to 432.1p in early deals.

8.45am: Furious Friday Fall

The FTSE 100 posted a triple-digit opening loss on Friday with the market volatility sparked by the guerrilla attacks on short-sellers by a group of traders using the Reddit sub-domain r/Wallstreetbets.

The index of UK blue-chip stocks fell 114 points to 6,411.73.

If the move by the Robinhood brokerage platform to curtail trading activity in the affected stocks was designed to shore up market confidence, it had quite the opposite effect.

The overriding fear is the ‘retail horde’, as one commentator dubbed the day traders that have bid up stocks such as GameStop and AMC, will continue to use hit-and-run tactics to target certain, heavily shorted stocks. Then will continue a process called ‘de-grossing’, where hedge funds are forced to liquidate profitable positions to meet margin calls on affected short investments.

Robinhood, which has been the platform of choice for the millennial masses, has secured US$1bn from investors and has tapped banks for finance to shore up its financial position after a torrid week.

“The last few turbulent trading sessions have all but wiped out what had been a strong start to the year,” said Richard Hunter, head of markets at Interactive Investor.

On the Footsie, Barratt Developments fell 2.4% after a downgrade to ‘hold’ by Berenberg, while Citi cut Imperial Brands (LON:IMB) to ‘neutral’.

Among the mid-caps, beleaguered Trainline (LON:TRN) fell a further 7.9% after Barclays cut its recommendation to ‘underweight’.

Proactive news headlines:

Xpediator PLC (LON:XPD), the freight management firm, has said it expects to deliver profits for the year just ended that are significantly ahead of market expectations. Following higher than anticipated demand for its services in the UK and Europe during November and throughout December, the group now expects to report adjusted profit before tax of about £7.2mln for 2020, up 40% on 2019’s £5.15mln. The group said it traded well ahead of budget in the final two months of the year with strong performances from Central and Eastern European (CEE) countries, particularly Lithuania.

Bloomsbury Publishing PLC (LON:BMY), the independent publisher, has raised revenue and profit expectations for the year to the end of February 2021. The company said revenue for the current fiscal year is expected to be ahead of market expectations while profit is tipped to be “well ahead” of the current consensus forecasts. The publisher said the better-than-expected performance has been driven by continued strong trading in the Consumer division, for both Adult and Children’s publishing.

Pelatro PLC (LON:PTRO) said it has landed a new contract, with the company selected by an Asian telecoms company for campaign management operations. The marketing software firm described it as a recurring contract and over a three-year term said it is expected to generate US$1.0mln-US$1.2mln of revenue. The company is to provide a variety of services as well as its software product. Additionally, the company noted that it has also won additional business from an existing company. Pelatro is to provide advanced analytics to the client under the contract which is set to be a highly collaborative engagement with the client.

OPG Power Ventures PLC (LON:OPG) has said electricity demand in India is starting to recover from the impact of the coronavirus (COVID-19) pandemic and it still expects to resume dividend payments this year. The coal-fired power station owner also said it will unveil a series of ESG in initiatives alongside its full-year results as criticism of the use of thermal power mounts. These plans will gradually reduce and offset carbon emissions from its Chennai plant, the group added, in recognition that a comprehensive decarbonisation strategy is critical for the company.

Catenae Innovation PLC (LON:CTEA) has said it will provide the data management platform for a pilot coronavirus (COVID-19) programme being rolled out by an unnamed Fortune 500 American professional services and construction company. The tests will be supplied and administered its partner BHA-Medical Limited with Catenae securely processing the results via its GDPR-compliant technology before sending them to the individual employees. The data will also be fed into Public Health England’s database for use by the NHS Test and Trace service.

Guild Esports PLC (LON:GILD) said it is “on track to deliver strong growth” in 2021 as it reported results covering the period prior to its flotation on the London Stock Exchange on October 2, 2020. For the period from incorporation on September 3, 2019, to September 30, 2020, the developer of esports teams said it had secured investments prior to its initial public offering totalling £5mln while ending the period with net cash of £1mln alongside a pre-tax loss of £2.7mln representing start-up and listing costs and its pre-revenue status. Post-period, Guild said it had raised £20mln through its IPO, as well as clinching its maiden sponsorship deal with contracted revenues of £3.6mln over three years and setting up two esports teams comprised of top-ranked video game players. The company also said as of January 28 its cash balance stood at £18mln.

Argo Blockchain PLC (LON:ARB) said it has brought 1,295 S19 and S19 pro cryptocurrency mining machines into production this week. The company said the machines, which were ordered in November and delivered ahead of schedule, will add around 127 petahash of computing power to its existing fleet of mining machines, bringing its total computing power to 772 petahash.

Scancell Holdings PLC (LON:SCLP) said it has “significantly strengthened” its cash position which it noted will accelerate its pipeline of novel therapies for cancer and advance its vaccine candidate for coronavirus (COVID-19). In its results for the six months ended October 31, 2020, the developer of immunotherapies said it ended the period with £25.7mln in cash compared to £3.6mln in April last year, while post-period another £20.5mln had been raised from the issue of convertible loan notes and an open offer to shareholders. In the figures, the pre-revenue company reported a pre-tax loss for the period of £4.3mln compared to £3.08mln in the prior year.

IQGeo Group Plc (LON:IQG) has announced a large contract for software and services with a major telecoms network operator that serves more than 3.2mln customers in central and western Canada. The new customer contract has an order value to be recognised over the next two financial years of £1.3mln for perpetual software licences, associated implementation services, and annual maintenance and support, the group added.

ANGLE PLC (LON:AGL) (OTCQX:ANPCY) said a five-year study of five circulating tumour cell (CTC) isolation platforms has identified the “key advantages” of the company’s liquid biopsy system. The group said the research showed that Parsortix’s performance was “robust”, with mean cell capture rates of 71% and 67% for the two cell types targeted. The leading US-approved antibody-based CTC system was unable to enrich one particular line, called EpCAM low cells.

Great Western Mining Corporation PLC (LON:GWMO) said a follow-up magnetic survey at its Olympic gold project in Nevada has indicated where a previous productive gold vein might lie. A strong anomaly was detected on the prospect to the west of the former OMCO mine, which stopped producing in the 1940s, and has provided enough information to start drilling, the company said. The survey also indicated a strong magnetic anomaly underneath the Trafalgar Hill target at Olympic and money for drilling in both areas is in the budget for this year subject to coronavirus (COVID-19) restrictions.

Scotgold Resources Limited (LON:SGZ) has provided an update on its progress ramping up production at its newly commissioned Cononish Gold and Silver Mine in Scotland, as well as its exploration activities on the Cononish Project and Grampian Project.  The gold exploration and production company focused on Scotland noted that its ongoing exploration programme is focused on increasing the mineral resources in the area around the Cononish Gold and Silver Mine where first gold pour was achieved on November 30, 2020, further delineating existing prospects, and making new discoveries.

Aminex PLC (LON:AEX) has told investors it is to restructure its board and further cut costs, as it seeks to take advantage of opportunities provided by the recently sealed farm-out deal for the Ruvuma project. The company said it plans to reduce gross general and administrative costs by 30% this year plus by a further 25%-30% next year. It aims to lower these costs to below £1mln per year, which would equate to a 75% reduction since 2018.

Sirius Real Estate Limited (LON:SRE) said it has collected almost all rent due from its portfolio of German business parks despite the coronavirus (COVID-19) pandemic. For the first nine months of its financial year, which ends on March 31, 2021, Sirius said it has received 97.7% of rents with 98% receipts for calendar year 2020. Write-offs had amounted to €205,000 out of a total rent and service charge invoicing of €141.2mln, Sirus added.

Custodian REIT PLC (LON:CREI), the UK property investment company, has announced the disposal of four properties from its portfolio. The company said it has sold retail properties at auction in Chester, Scarborough, Bedford and Llandudno for an aggregate £1.6mln, in line with the most recent valuations. Custodian REIT said these disposals have reduced the company’s high street retail sector weighting from 11% to 10%.

Jubilee Metals Group Plc (LON:JLP), the AIM and Altx traded metals processing company, has said it was notified on January 28, 2021, that Colin Bird, its non-executive chairperson purchased 500 000 Jubilee ordinary shares of 1p each at a price of 10.77p (223.26 rand cents) each and that Leon Coetzer, its chief executive officer purchased 500 000 ordinary shares of 1p each at a price of 10.90p (225.96 rand cents) each. Following the share purchases, Bird is interested in 500,000 Jubilee ordinary shares, representing approximately 0.022%, and Coetzer is interested in 527 810 ordinary shares, representing approximately 0.024% of the issued share capital. Coetzer commented: “Along with my Chairperson, I am pleased to be acquiring a further stake in Jubilee at this exciting stage in the Company’s development. The strong support we experience from our shareholders, institutional and retail, is an endorsement of Jubilee’s developments to date and I am very excited about the future growth and prospects of our Company.”

IronRidge Resources Limited (LON:IRR), the African focused minerals exploration company, has announced the appointment of Amanda Harsas as its full-time company secretary, to take effect from February 1, 2021. It said Harsas is a senior finance executive with a demonstrable track record and over 20 years’ experience in strategic finance, business transformation, commercial finance, customer and supplier negotiations and capital management. Prior to joining IronRidge, she worked across several sectors including healthcare, insurance, retail and professional services. Her appointment as company secretary will run in conjunction with her new role as chief financial officer to the company, as announced on November 16, 2020, and she replaces Karl Schlobohm, who has acted as IronRidge’s company secretary since 2009. In conjunction with the appointment, the company also announced a change of registered office to Level 33, Australia Square, 264 George Street Sydney NSW 2000, Australia. The group said the Harsas appointment and change of registered office are in line with the company’s strategy to gradually migrate all management and administrative services in house, as mutually agreed with DGR Global Limited. The company noted that DGR Global intends to maintain its equity interest in IronRidge following the completion of the administrative services contract.

Galileo Resources PLC (LON:GLR) confirmed that it has issued a total of 750,000 fully paid ordinary shares in the company at a price of 0.6p per share following the exercise of warrants in terms of the placing agreement dated October 17, and 3,375,000 fully paid ordinary shares in the company at a price of 1.25p per share in terms of the placing agreement dated May 31, 2020.

Power Metal Resources PLC (LON:POW), the AIM-listed metals exploration and development company said it has received notices to exercise warrants over a total of 11,773,926 new ordinary shares of 0.1p each, 7,563,400 warrants at an exercise price of 1.0p for and 4,210,526 warrants at an exercise price of 0.75p for. Subscription monies of £107,213 have been received by Power Metal in respect of these exercises.

Landore Resources Limited (LON:LND) announced that it has received a notice to exercise warrants over a total of 357,142 ordinary shares,  for which funds of £62,499.85 have been received by the company.

Panther Metals PLC (LON:PALM), the company focused on mineral exploration in Canada and Australia, has announced that a new, updated, corporate presentation is available on the company website via the Investors tab, under Presentation: www.panthermetals.co.uk 

6.50am: 100-point loss predicted 

UK stocks look set to take their lead from Asian markets rather than the US and open lower on Friday.

The FTSE 100 is expected to open just shy of 100 points lower at 6,430.

In another eventful day on US markets, in which the focus was once again on hot stock GameStop, the Dow Jones Industrials Average shot up 300 points to close at 30,603 and the S&P 500 leapt 37 points to 3,787.

The tech-heavy Nasdaq Composite, weighed down by laggards Apple and Tesla after Wednesday night trading updates, looked less sprightly in comparison, rising 66 points to 13,337.

“While the main focus remained on GameStop, the airline sector became a focal point after American Airlines surged sharply on the US open after it was identified on Reddit as the most heavily shorted US airline stock,” reported CMC’s Michael Hewson.

“This surge in US airlines prompted a similarly sharp snap-back in European airline stocks with the likes of EasyJet, IAG and Lufthansa all posting strong gains. Not unexpectedly all of this volatility has attracted the attention of not only the regulators, who appear content to remain watchful for now, but also politicians on Capitol Hill, who keen to score political points, were keen to criticise some of the trading halts that were seen yesterday.

“Nonetheless, it is clear that US politicians will want to have a look at the events of the last few days in order to discover what exactly went on, as GameStop closed down 44%, its first decline in six days,” he added.

In Asian markets on Friday morning, the Nikkei 225 was off 486 points at 27,711 in Japan and the Hang Seng down 141 points at 28,410 in Hong Kong.

“Today’s focus is the EMA [European Medicines Agency] meeting which is set to discuss (and approve) the AstraZeneca vaccine. This got another layer of interest as Germany has said that they will not use it for the 65y+ age group, as rumoured by Handelsblatt earlier this week,” said Danske Bank in its morning preview notes.

“Positive news on the vaccine front, however, is that both the Moderna and Pfizer vaccines appear effective against the British and South African mutations,” it added. “The US biotech company Novavax yesterday reported that its product has an efficacy of close to 90% in phase 3 trials, however, is less effective towards the South African variant.”

On the London stock market, it is set to be a typically quiet Friday, with trading updates from blue-chip miners Evraz PLC (LON:EVR) and Polymetal International PLC (LON:POLY) taking up a large portion of the diary.

There will also be an update from Paragon Banking Group PLC (LON:PAG) and interim results from Real Good Food PLC (LON:RGD), while over in the US investors may be eyeing earnings news from oil giant Chevron Corp (NYSE:CVX) and pharma firm Eli Lilly & Co (NYSE:LLY).

Around the markets:

  • Sterling: US$1.3701, down 0.2 cents
  • 10-year gilt: 0.292%, up 2.34 basis points
  • Gold: US$1,844.80 an ounce, up US$6.90
  • Oil: US$55.07 a barrel, down 3 cents
  • Bitcoin: US$32,791, down US$483

6.45am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were lower on Friday, with South Korea’s Kospi leading the losses with a fall of 2.6%.

Japan’s Nikkei 225 dropped 1.89% while the Shanghai Composite in China slipped 1.62%.

Hong Kong’s Hang Seng index dipped 0.92% while Australia’s S&P/ASX 200 closed 0.64% lower.

READ OUR ASX REPORT HERE

Proactive Australia news:

Australian Potash Ltd (ASX:APC) is poised for a robust year ahead banking on the numbers of steps taken by the company in the December quarter for the development of its 100%-owned Lake Wells Sulphate of Potash Project (LSOP) in Western Australia.

Poseidon Nickel Ltd (ASX:POS) (FRA:NYG1) continued its focus on progressing the Golden Swan high-grade nickel sulphide discovery at its Black Swan Project over the December 2020 quarter.

Theta Gold Mines (ASX:TGM) (OTCQB: TGMGF) has highlighted its strategy to become a high-growth gold producer at the Mines & Money Online Connect Precious Metals webinar, a three day event showcasing 60 leading mining companies between January 27 – 29.

Artemis Resources Ltd (ASX:ARV) is set to kick-start diamond drilling at the Carlow Castle Gold-Copper-Cobalt Project in late January to finish 1,000 metres within the eastern mineral resource area in Western Australia.

European Lithium Ltd (ASX:EUR) (FRA:PF8) (VSE:ELI) (NEX:EUR) is on schedule to achieve another key milestone of the definitive feasibility study (DFS) at its advanced Wolfsberg Lithium Project in Austria.

Venture Minerals Ltd (ASX:VMS) has completed a share placement to sophisticated, professional and institutional investors to raise A$10 million, fully funding the development of the Riley Iron Ore Project in northwest Tasmania and paving the way for the first iron ore shipment next quarter.

Oklo Resources Ltd (ASX:OKU) continued to advance its flagship Dandoko Project in Mali, West Africa, with resource definition drilling at the Seko deposit commencing during the December quarter.

Aeris Resources Ltd (ASX:AIS) is gearing up for a memorable year ahead in the wake of measures taken by the company to make new copper discoveries at its Tritton Copper operations in New South Wales along with an updated mineral resource at its Cracow Gold operations in Queensland.

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