- FTSE 100 index jumps 37 points
- Wall Street opens mixed
- Pound rises on Brexit deal hopes
2.41pm: Wall Street makes mixed start as US retail sales worse than expected
Despite expectations of a positive start, the picture on Wall Street was more mixed on Wednesday morning following a worse than expected set of US retail sales data.
Shortly after the opening bell, the Dow Jones Industrial Average was down 0.01% at 30,194 while the S&P 500 inched up 0.06% to 3,696 and the Nasdaq rose 0.04% to 12,599.
The subdued start followed new data which revealed that new lockdown restrictions and a surge in COVID-19 cases hurt US retail sales in December, with the figures showing a 1.1% decline month-on-month, worse than the 0.3% fall expected by analysts.
The biggest falls were electronics with a 3.5% decline, a 6.8% fall for clothing, a 7.7% drop in department store sales and a 4% fall for eating and drinking out.
“With an increasing number of city mayors and state governors warning of more movement restrictions to combat the rise in Covid-19 cases, the economy is facing a period of growing uncertainty. With more restaurants being forced to close and the threat of closure of non-essential retail in some areas the need for more support for the economy is growing. Hopefully we will get a fiscal package agreed to mitigate some of these headwinds, but it won’t be able to fully offset weaker consumer spending or the threat of rising joblessness”, analysts at ING said in a statement.
Back in London was trading sideways into late-afternoon and was up 37 points at 6,550 at around 2.40pm.
2.00pm: UK supply chains under pressure as Brexit stockpiling clogs ports
The UK’s manufacturing sector is facing “severe pressure” on its supply chains, according to analysts at IHS Markit, as congestion at the country’s ports caused delays to freight arriving at its destination.
In its flash PMI data for December, the information firm said 45% of its survey panel reported longer wait times from suppliers, adding that the lengthening of lead times in December was the third-steepest since 1992, exceeded only by those caused by the pandemic lockdowns in April and May.
The company also highlighted that stockpiling ahead of the Brexit deadline had applied additional pressure, with backlogs of work across the manufacturing sector having risen at their sharpest pace since 2010.
In the data, the IHS services business activity index for the UK in December rose to 50.7 from 49 in November, while the manufacturing PMI increased to 57.3 from 55.6.
The company said the data highlighted a “marginal expansion” of UK private sector output in December as the economy recovered from November’s lockdown.
However, IHS chief business economist Chris Williamson said the recovery “lacked vigour” and that the service industry remained “under particular strain” as tiered restrictions hit multiple areas of the sector.
Looking to the market, the FTSE 100 continued to shed its gains from earlier in the day and was up 36 points at 6,549 at around 2pm.
12.31pm: US markets to start higher as stimulus and Brexit talks show progress
Wall Street is expected to make a positive start on Wednesday morning as traders in New York drew optimism from progress in negotiations on both sides of the Atlantic.
Spread-betters are predicting that the Dow Jones Industrial Average will advance 78 points at the opening bell, while the S&P 500 is expected to rise 11 points and the Nasdaq is predicted to climb 29 points.
Market sentiment has been lifted by expectations that both talks over economic stimulus in the US and a Brexit trade deal will yield last-minute results ahead of their mutual December 31 deadlines.
“In both cases, there has been a painful lack of urgency to get a deal done which is why we find ourselves in the situation we are. But with critical deadlines now only days away, negotiations have seemingly become turbocharged and compromises are finally being made which is fuelling further optimism in the markets today”, said OANDA’s Craig Erlam.
“US stimulus talks have been going on for months and while emergency measures have bought some time, it’s now almost up. Programs are due to expire at the end of the year and the country is seeing its most severe surge in cases and fatalities since the start of the pandemic. The time for negotiation has passed, it’s time for action. A meeting of House and Senate majority and minority leaders on Tuesday appeared to go well with both sides appearing optimistic that a deal will be reached. With both wanting to tie a deal to the spending bill – which needs to be signed off by Friday to avoid a partial government shutdown – the prospects for a deal this week look good. They could technically back another temporary funding bill but that looks unlikely at this point”, he continued.
“Brexit talks continue to make progress on the more contentious issues, most notably level playing field, with Ursula von der Leyen echoing Michel Barnier’s view that a narrow path to a deal exists. Ignoring all of the drama for a second, it seems like the progress we’ve seen this week is significant after Boris Johnson and Ursula von der Leyen agreed to push ahead with negotiations on Sunday, despite previously wanting a deal by then…While both sides admit fishing remains a massive problem that little progress has been made on, it’s impossible to imagine a deal failing on this. Level playing field plays into the fundamentals of the single market for the EU and sovereignty for the UK, making it theoretically a potential deal breaker. Fishing is very political which is probably why it’s being left late in the day when final compromises can be struck. A deal this week is very possible, although it is Brexit so let’s not get too carried away”, Erlam added.
Away from the political wrangling, investors will also be closely eyeing any developments and commentary from the Federal Reserve later today following its final meeting of 2020.
Back in London, the FTSE 100 had lost some of its earlier gains but was still up 56 points at 6,569 at around 12.30pm.
11.22am: Sterling ticks higher amid hopes for Brexit deal
As the morning part of Wednesday’s session entered its final hour, the FTSE 100 has managed to retain most of its gains from earlier in the day and was up 77 points at 6,590 at around 11.20am.
Leading the blue-chip risers was stockbroker Hargreaves Lansdown PLC (LON:HL.), which was up 4.9% at 1,519p, followed by British Airways owner International Consolidated Airlines Group SA (LON:IAG) following news the group is reviewing a potential acquisition of Spanish carrier Air Europa.
However, one bright spot was on currency markets as the pound rose 0.29% against the dollar to US$1.35 amid renewed hopes that the UK and the EU will manage to secure a last-minute Brexit trade deal before the December 31 deadline.
Optimism may have been boosted by comments made earlier today by European Commission president Ursula von der Leyen, who told the European Parliament that there is “a path to an agreement” before the end of the month, although she added that such a route was “narrow” as both sides remain apart on a number of key issues.
Markets.com’s Neil Wilson said that sterling could reach as high as US$1.40 if a comprehensive deal is agreed at the last minute, however, he also warned that the currency could fall to as low as US$1.20 in the event of a no-deal outcome.
“No deal is not an end state, but it would obviously spark massive volatility in sterling crosses. The spot market is inclined to think a deal is coming, while options markets also show traders are scaling back bets on a no-deal collapse”, Wilson added.
10.18am: Rail fares to rise faster than inflation for first time in eight years
The cost of rail travel in England will increase above the rate of inflation for the first time in eight years from March as the government decides to make commuters pay for its bailout of the railways during the COVID-19 pandemic.
The Department for Transport said rail fares will be hiked by 2.6% in 2021, above the retail prices index (RPI) reading of 1.6% last July which is usually used as the barometer for fare increases.
The increase will add around GBP80 to the average price of an annual season ticket, which currently stands at just over GBP3,000, although the government said the hike will come into force two months later than normal to give passengers time to purchase season tickets at a reduced rate as they emerge from the pandemic.
The decision has attracted criticism from transport campaigners, some of whom have called for fares to be frozen in an effort to draw passengers back to the railways after the pandemic caused a plunge in traffic as offices closed and home working took over.
“We understand that the Treasury needs to recoup some of the money it has spent on the railway during the pandemic, but the way to do that is by encouraging passengers back onto the trains, not by pricing them off. Raising rail fares sends entirely the wrong message on transport choices”, said Paul Tuohy, chief executive of the Campaign for Better Transport.
The government’s move comes despite inflation slowing to a crawl in November to 0.3%, driven down by heavy discounting from retailers during the Black Friday sales period, particularly in clothing and footwear.
Despite the outcry, the fare rise appeared to be good news for London’s listed rail operators, with shares in FirstGroup PLC (LON:FGP) rising 1.9% to 70.9p while Stagecoach Group PLC (LON:SGC) climbed 4.4% to 80.4p and Go-Ahead Group PLC (LON:GOG) was up 2.5% to 947p.
The FTSE 100, meanwhile, has lost a little steam into mid-morning but was still up 59 points at 6,572 at around 10.15am.
9.27am: UK inflation falls to 0.3% amid Black Friday price cutting
UK inflation slowed sharply in November, weighed down by price cutting by firms during the Black Friday sales period.
New data from the Office for National Statistics (ONS) showed that inflation last month was 0.3%, down from 0.7% in October, as upward pressures from games, toys and accommodation were offset by falling prices of food, clothing and non-alcoholic beverages.
The fall in inflation was also attributed to the second round of UK lockdown restrictions across November as the country battled a second wave of COVID-19 infections by closing down shops, bars and restaurants, as well as the ongoing effects of the temporary cut to VAT introduced in mid-July.
However, analysts at EY ITEM Club highlighted that the low pace of inflation will be good news for the purchasing power of consumers, particularly amid rising levels of unemployment and reduced chance of pay rises.
EY ITEM’s chief economic adviser Howard Archer added that they expected inflation to rise back to 0.5% in December, although any increases were likely to be limited going forward by “price conscious consumers, excess capacity, limited earnings and curtailed economic activity”.
Looking to the market, the FTSE 100 was continuing its ascent following a strong open and was up 80 points at 6,593 shortly before 9.30am.
8.40am: Strong early progress
Bounce-back and Brexit stocks dominated the FTSE 100, which opened in the green on Wednesday for the first time this week.
The UK index of blue-chip stocks was 72 points higher at 6,585.12 in early trading.
The mood appeared to be a positive one ahead of the Federal Reserve meeting – though the consensus is that US rate-setters will sit on their hands.
Worries over tighter Christmas coronavirus (COVID-19) restrictions have abated, which may have helped lighten the mood in the Square Mile.
Traders, meanwhile, were betting once more on a return to near normality as vaccines are rolled out on both sides of the Atlantic.
The logic follows that international travel may soon become a viable option for millions, which at least in part explains the presence of British Airways and Iberia owner IAG (LON:IAG) at the top of the Footsie list of risers with a 2.6% advance.
Whitbread nudged 2.1% higher ‘early doors’ with its Premier Inn chain seen as a beneficiary of an uptick in travel post-restrictions.
The builders, meanwhile, were also well bid. As oft-discussed in this column, they are a proxy for the state of Brexit talks on the assumption that a no-deal exit from the EU will likely act as a bromide for the sector, while an accord could provide an economic tonic.
On the FTSE 250, there was an abundance of Christmas cheer for electronics retailer Dixons Carphone (LON:DC.), which jumped 12.5% after its latest trading update.
“Dixons Carphone has again delivered a blockbusting set of numbers, driven by its agility in negotiating a rapidly changing trading environment,” said Richard Hunter, head of markets at Interactive Investor.
Proactive news headlines:
Canadian Overseas Petroleum Limited (LON:COPL) shares soared in Wednesday’s early deals after the company unveiled what is described as a “game changing” acquisition, picking up Atomic Oil & Gas LLC. The transaction has a reported deal value of US$54mln – comprising a US$1mln deposit, US$26mln of assumed debt, US$23mln of debt and cash payments, plus US$4mln in shares. It delivers producing assets in the US state of Wyoming, the Barron Flats Shannon Unit (57.7% owned by Atomic) and Cole Creek Unit (66.7% owned by Atomic).
AFC Energy (LON:AFC) has signed a strategic partnership with Swiss electrical systems giant ABB to develop products for the electric vehicle charger market. The non-exclusive agreement will see the two companies work together to develop a bespoke high power EV charger that will be sold through ABB’s market channels from the second half of 2021. AFC said it will supply its fuel cell technology with ABB providing the energy storage know-how and market-leading DC high power EV charge points.
Genedrive PLC (LON:GDR) has told the US Food & Drug Administration (FDA) it intends to import and distribute its 96 SARS-CoV-2 kit in the US prior to emergency use authorisation (EUA). The company said it had taken the decision in order to support its collaboration agreement with Beckman Coulter that will see the pair bring to the market a fully automated coronavirus (COVID-19) testing solution. It also wants to “exploit commercial opportunities”. Genedrive pointed out the FDA does not object to the distribution of SARS-CoV-2 test kits without emergency use sign-off under certain defined conditions as coronavirus cases in the US continue to soar.
Tower Resources PLC (LON:TRP) has told investors that its 50% owned Algoa-Gamtoos license joint venture, offshore South Africa, will advance the project into the next phase of exploration. Operator New Age Energy, which also has 50% of the project, has formally agreed a second exploration period under the licence, Tower said in a statement. It will run for a two-year period and includes the obligation to shoot 300 square kilometres of 3D seismic data.
Alpha Growth PLC (LON:ALGW), the financial services specialist in the growing Senior Life Settlement asset class is announced that it has qualified for trading on the OTCQB in the United States operated by OTC Markets Group Inc. Alpha’s ordinary shares of GBP0.001 each will commence trading today on the OTCQB Market under the ticker symbol “ALPGF”. Alpha’s Ordinary Shares will continue to trade on the London Stock Exchange’s Standard List market under the symbol “ALGW”. Gobind Sahney, CEO of Alpha, commented: “This is another milestone in Alpha’s development as we drive increased awareness in the US of our BlackOak Alpha Growth Fund. We are marketing to over 30,000 Registered Investment Advisors who wish to learn more about the fund’s general partner and follow Alpha’s growth and invest in its shares.”
KR1 PLC (LON:KR1) said it has invested a total of US$150,000 in return for 15mln tokens in the Lido project. Lido is a liquid Ethereum 2.0 staking solution that allows users to earn Ethereum (ETH) staking rewards with no lock-ups or minimum deposits, while also contributing to the security of the Ethereum 2.0 blockchain. Staking is when cryptocurrency held in a digital wallet are used to support the security and operations of a blockchain network. The tokens are locked in the wallet and in return, the staker receives financial or another form of reward.
Condor Gold (LON:CNR) said it has started initial site preparation for the processing plant facility at its Mina La India in Nicaragua, including laying down access roads and ground clearance. The total area being cleared is 11.26 hectares with the work estimated to be completed in 3 to 4 months, Condor added. In a statement, Mark Child, chairman and chief executive, said: “The initiation of site preparation at Mina La India marks a significant landmark in the Company’s development as it transitions from a gold exploration and development company to a gold producer.”
Live Company Group PLC (LON:LVCG) said it has confirmed an order for 251 bespoke sets from Inveraray Castle in Scotland. The AIM-listed firm said the order has followed a successful tour of its BRICKLIVE Fantasy Kingdom exhibition at the castle earlier this year. The sets, which are of the building itself, are being designed using drone footage and will consist of 1,200 bricks each.
Shanta Gold Limited (LON:SHG) has updated investors on ongoing exploration drilling at the New Luika gold mine (NLGM) in South Western Tanzania, which it said has unveiled “encouraging results”. The AIM-listed Africa-focused gold explorer said nine diamond core holes have been drilled at the Luika deposit totalling 4,042 metres with further drilling ongoing, while 28 holes have been drilled at the new open pit Porcupine South target totalling 2,466 metres. Highlights of the Luika drilling included 3.58 metres grading at 14.71 grams per tonne (g/t) of gold while drilling at Porcupine South included an intersection of 7 metres grading at 7.26 g/t of gold.
FastForward Innovations Ltd (LON:FFWD) said it has been issued with GBP750,000-worth of convertible loan notes in EMMAC Life Sciences as part of a GBP15mln fundraiser by the medical cannabis specialist. The investment company said the 12-month notes were acquired at a discount with FastForward paying GBP705,000 for the freshly issued debt. Remaining conservative, FastForward said it will carry the 2.3% EMMAC stake on the balance sheet at its current valuation of GBP2.4mln.
Kromek Group PLC (LON:KMK) said its chief operating officer, Berry Beumer, has been appointed as an executive director of the company with immediate effect. Beumer initially joined the detection technology specialist as COO in 2015 and has “played an instrumental role in the growth of the business through the expansion of Kromek’s US customer base and operations in both medical imaging and nuclear detection”, the company said. Meanwhile, Kromek said Rakesh Sharma, who joined the group as a non-executive director in October, will become its non-executive chairman after incumbent Sir Peter Williams retires from the board on January 1, 2021.
accesso Technology Group PLC (LON:ACSO), the premier technology solutions provider to leisure, entertainment and cultural markets, announced that Jody Madden has been appointed as a non-executive director of the group, effective from January 1, 2021. Madden is an experienced technology leader, and is currently chief executive officer of Foundry, a London-based creative software developer for the Media and Entertainment and Digital Design industries. She has 20 years of experience in Media and Entertainment and held a range of senior roles at Digital Domain, Lucasfilm and Industrial Light & Magic prior to joining Foundry. Bill Russell, non-executive chairman of accesso commented: “Jody’s leadership experience at the intersection of the software and entertainment industries will be a great asset for us. She understands our mission to redefine the guest experience through technology and will provide invaluable stewardship as we drive forward with our long-term growth plan. We are delighted to add Jody’s passion and expertise to the Board and look forward to welcoming her to Accesso.” Madden added: “I’m excited to be joining Accesso at a crucial moment in the Company’s development. The business has shown great resilience and adaptability in managing a challenging year so far and remains well-set to execute a very exciting strategy for the future. I look forward to using my own experience to help support the management team as it executes that plan and builds Accesso back towards growth.”
Custodian REIT PLC (LON:CREI), the UK property investment company, has announced that, after nearly seven years of service, Professor Barry Gilbertson will retire as senior independent non-executive director of the company with effect from January 1, 202, as part of its board succession plan. The group’s board said it would like to thank him for his significant contribution to the development of the company since his appointment at IPO in February 2014. Gilbertson will take on the role of executive chairman of Custodian Capital Limited, which is owned by Mattioli Woods PLC, the company’s discretionary investment manager, with effect from January 1, 2021. Custodian REIT added that, with immediate effect, Matthew Thorne, currently a non-executive director has been appointed to the senior independent director role. It said the process to appoint a further non-executive director is underway.
Bahamas Petroleum Company PLC (LON:BPC) has provided additional details related to the US$20mln funding arrangement announced on Monday. It noted that the counterparty in the funding agreement is 1798 Volantis Fund Ltd, a fund managed by Lombard Odier Asset Management. The company also detailed that a cash payment back to the fund may be required if any sale of new shares is made by Volantis at a price less than 115% of the subscription price (which would be 2.3p). The payment would make up the difference and the company said the agreement has no capacity for the payment to be made in shares.
Vast Resources PLC (LON:VAST), the AIM-listed mining company, has said the previously announced detailed term sheet from the international banking institution, linked to Vast’s now 100%-owned Baita Plai Polymetallic Mine in Romania, was presented to the bank’s credit committee at its meeting held yesterday, December 15, 2020, and the final decision is being considered by the committee members. The company said it will update the market regarding approval status once confirmed by the bank.
Power Metal Resources PLC (LON:POW) the AIM-listed metals exploration and development company said it has received notices to exercise warrants over 43,000,000 new ordinary shares of 0.1p each in the company at an exercise price of 0.p each, with subscription monies of GBP301,000 received by the company. Paul Johnson, chief executive officer of Power Metal Resources commented: “With this announcement today Power Metal has now received over GBP1.2 million from warrant exercises since August 2020. Today with the exercise monies received, the Company’s working capital of cash and listed investments exceeded GBP2 million putting Power Metal Resources in a robust financial position as we approach the calendar year-end. Power Metal is currently on track or ahead of all corporate and exploration programme costs and has no debt. As we enter 2021 our strong financial position will enable us to keep extensive exploration activities running across the Company. In addition, as announced the Company is working on corporate activities around a number of its projects with a view to providing shareholders with regular news flow in 2021.”
Impax Asset Management Group PLC (LON:IPX) has said its AGM will be held at the company’s offices, 7th floor, 30 Panton Street, London SW1Y 4AJ at 3.0 pm on March 18, 2021. By that time, the company hopes that conditions relating to the ongoing coronavirus pandemic will have improved sufficiently such that it can welcome shareholders to the meeting. However, the present situation is evolving and the safety of shareholders is paramount. Nearer the time, the group’s directors will consider whether it is appropriate, and in compliance with government guidelines, to invite shareholders to join the AGM in person. The company will notify shareholders of the arrangements for the AGM through its website at www.impaxam.com
6.50am: Front foot start predicted
The FTSE 100 is expected to open on the front foot on Wednesday as traders await any commentary from the final meeting for 2020 of the US Federal Reserve.
Spread-better IG expects the FTSE 100 to open up 20 points after ending Tuesday’s session 18 points lower at 6,513.
While the Fed is not expected to make any changes to interest rates today or unveil any new quantitative easing, investors will be looking for any commentary on the central bank’s willingness to take action should the need arise, particularly with recent data showing signs the US economy could be stalling.
“[Fed Chairman Jerome] Powell has always been very insistent that further central bank support can be relied upon the support the US economy, but he has also been insistent on the need for further fiscal support from those on Capitol Hill as well”, said Michael Hewson at CMC Markets.
“In the wake of the recent weaker US payrolls number, and the sharp jump in weekly jobless claims, there does appear to have been progress in this, with the discussions over a new economic aid package currently expected to yield some form of outcome by the end of this week”, he added.
Expectations of a higher open followed a positive performance for Wall Street overnight, with the Dow Jones Industrial Average closing up 1.13% at 30,199 while the S&P 500 climbed 1.29% to 3,694 and the Nasdaq Composite rose 1.25% to 12,595 amid optimism over stimulus negotiations and COVID-19 vaccinations.
The optimism continued in Asia this morning with Japan’s Nikkei 225 up 0.26% while Hong Kong’s Hang Seng climbed 0.82%.
On currency markets, the pound was trading relatively flat against the dollar at US$1.345, with UK PMI data later today and any developments in Brexit negotiations likely to provide movement catalysts for sterling.
Around the markets:
- Sterling: US$1.345, down 0.08%
- Brent crude: US$50.67 a barrel, down 0.18%
- Gold: US$1,857 an ounce, up 0.21%
- Bitcoin: US$19,404, up 1.3%
6.45am: Early Markets – Asia/ ustralia
Shares in Asia-Pacific were mostly higher on Wednesday following an overnight rebound on Wall Street as optimism grew over the prospect of another US stimulus package.
In Japan, the Nikkei 225 gained 0.26% even as Japan’s exports declined 4.2% in November as compared with a year ago.
China’s Shanghai Composite fell 0.03% while Hong Kong’s Hang Seng index added 0.75% and South Korea’s Kospi gained 0.54%.
In Australia, the S&P/ASX 200 closed 0.72% higher as banking, mining and tech stocks made significant gains.
Proactive Australia news:
Elixinol Global Ltd (ASX:EXL) (OTCQB:ELLXF) (FRA:E8M) has significantly increased the size of its share purchase plan (SPP) from the initial A$2 million target to around A$12.3 million to accommodate strong shareholder demand after it was significantly oversubscribed.
Artemis Resources Ltd (ASX:ARV) has received results described by the company as outstanding in new assays from a recently completed 42-hole, multi-rig drilling campaign at the Carlow Castle Gold-Copper Project in WA’s west Pilbara.
Archer Materials Ltd (ASX:AXE) (OTCMKTS:ARRXF) (FRA:38A) has received approval from the South Australian Government for its Program for Environment Protection and Rehabilitation (PEPR) for the Campoona Graphite Project.
Technology Metals Australia Ltd (ASX:TMT) (FRA:TN6) has completed a share purchase plan (SPP) for proceeds of $742,000 taking total capital raising funds to $8.742 million following a recent placement.
Alkane Resources Ltd (ASX:ALK) has enhanced the golden bounty of regional resources within proximity to its Tomingley Gold Operations in Central West NSW with infill results of up to 3 metres at 58.3 g/t from 175 metres at the San Antonio inferred resource.
Matador Mining Ltd (ASX:MZZ) resource expansion and greenfields exploration drilling at the Cape Ray Gold Project in Newfoundland, Canada, has continued to deliver shallow hiigh-grade gold intersections including 20 metres at 5.08 g/t at the Isle aux Morts target.
Creso Pharma Ltd‘s (ASX:CPH) (OTCMKTS:COPHF) (FRA:1X8) wholly-owned subsidiary Mernova Medical Inc has secured an agreement with the Ontario Cannabis Retail Corporation (OCRC), operating as the Ontario Cannabis Store (OCS), formally recognising Mernova as a supplier.