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FTSE 100 stays negative after Bank of England caution

  • FTSE 100 index drops 16 points
  • US stocks start higher
  • Bank of England warns on outlook

5pm: Traders very nearly rally the FTSE 100 to positive territory but fall short

The FTSE 100 ended very nearly flat, down 4 points, less than 0.1%, at 6,504, while the FTSE 250 jumped 57 points, 0.3%, to 20,809.

“Continental equity benchmarks are higher as we approach the close of business as optimism that the Biden administration will sign off on a stimulus package has helped the mood,” CMC Markets UK analyst David Madden wrote Thursday. “Sterling is stronger in the wake of the Bank of England‘s (BoE) update, which is a factor in the FTSE 100’s underperformance. In light of the restrictions in the UK, the BoE warned that first quarter growth will be negatively impacted versus the forecasts issued in November, GDP in the first quarter is tipped on contract by 4%.”

The gains in the pound have helped some but hurt others.

“Internationally focused stocks like Reckitt Benckiser, British American Tobacco and Imperial Brands are feeling the squeeze of the firmer pound, their overseas revenue will be hurt,” Madden wrote. “That is being balanced out to an extent by the rally in NatWest Group, Lloyds and Barclays. British banks stand a better chance of increasing their lending margins if the BoE doesn’t apply negative rates.”

In the US, the Dow was up 262 points, 0.9%, to 30,985.5 at midday. The Nasdaq climbed 98 points, 0.7%, to 13,709, and the S&P 500 improved 28 points, 0.7%, to 3,859.

Equities are showing modest gains as the mood is being helped by hopes the US government will provide assistance to the economy by pursuing a stimulus plan,” Madden wrote. “Also aiding the mood is the positive jobs data. The jobless claims reading fell from 812,000 to 779,000 – it’s lowest in two months. Continuing claims were 4.59 million, down from 4.78 million.”

3.55pm: Footsie remains in the red

It was the proverbial tale of two halves. Before the Bank of England‘s monthly update the FTSE 100 was chugging along quite nicely, buoyed by hopes the the vaccination rollout meant there was light at the end of the tunnel. A number of well-received big name results also helped the mood.

Then the Bank unveiled a cautious outlook for the economy and the mood soured. After rising to touch 6553, the index has fallen 22.93 points or 0.35% to 6485.02.

The Bank did not entirely rule out the much discussed negative interest rates, even though most analysts believe them unlikely anyway. But it did at least tell commercial banks they would not be introduced for at least six months, if at all, to give them time to prepare.

So the banks are among the leading risers in the blue chip index. NatWestGroup PLC (LON.NWG) is up 6.8% or 10.55p at 165.8p, Lloyds Banking Group (LON.LLOY) has climbed 6.58% or 2.25p to 36.43p and Barclays PLC (LON.BARC) is 3.64% or 5.16p better at 146.96p.

Travel and leisure groups were lifted by hopes of an end to lockdown before too many more weeks have passed, with hotel owner Whitbread PLC (LON.WTB) adding 4.98% or 149p to 3143p and International Consolidated Airlines Group (LON.IAG) climbing 3.53% or 5.25p to 154.05p.

Among the results catering group Compass Group (LON.CPG) has added 5.74% or77.5p to 1427p.

2.45pm: Wall Street opens higher

Wall Street’s main indices managed to start in the green on Thursday after US jobless claims for the last week of January came in lower than expected, lifting hopes that the economy could be recovering better than expected.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.3% at 30,815 while the S&P 500 climbed 0.35% to 3,843 and the Nasdaq rose 0.5% to 13,678.

The more optimistic start followed news that in the week to January 30, 779,000 Americans filed for unemployment benefits, down from 847,000 the week before and well below analyst estimates of 830,000. The number marks the lowest level of jobless claims since November, however, it remains elevated indicating that the coronavirus (COVID-19) pandemic is still dragging on the US economy.

“The dip in jobless claims is a pleasant surprise, and it reinforces our view that the trend in claims has levelled-off, after rising last year when the Covid third wave triggered restrictions on activity. The turn-of-the-year seasonal noise has now faded, so we expect claims now gradually to fall as some states begin to reopen parts of the services sector. Further openings will follow over the next few months, provided the more infectious Covid variants don’t drive cases back up before vaccinations begin meaningfully to slow the spread”, said Ian Shepherdson at Pantheon Macroeconomics.

Back in London, the FTSE 100 was still languishing in negative territory in late afternoon, down 16 points at 6,491 at around 2.45pm.

2.05pm: Bank says no negative rates for at least six months

The FTSE 100 has recovered from its worst levels but is still in the red after the Bank of England‘s caution about the economic outlook.

Alongside its latest update, the Bank has also written to bank bosses saying that it would not implement negative rates – if it does at all – for at least six months to give them time to prepare. Otherwise there could be “increased operational risks.” So while not ruling out negative rates, the Bank has at least kicked the idea a bit further down the road, and this has given a lift to sterling. The pound is up 0.37% against the dollar to $1.3698.

Dean Turner, UBS Global Wealth Management economist, said: “Markets were given some clarity on the negative rates debate. The Bank has indicated that it will take six months for the financial sector to prepare for such a move. The MPC were clear that it is not their intention to take rates lower, but it is worth preparing for the possibility in case it is needed in the future.

“We do not expect the BoE to take rates into negative territory. In our view, they will remain on hold for the year. The economy should see a marked improvement in the coming months, which will change the tone of the debate for policymakers.”

Laith Khalaf, financial analyst at AJ Bell, said: “The Bank of England is asking the market to watch its feet and not its eyes, as it looks to add negative interest rates into its toolkit, but says this isn’t a signal of future policy. Commercial banks need at least six months to prepare for negative rates and the central bank has now put them on notice, potentially paving the way for negative interest rates from August. Irrespective of what the Bank of England says, it’s likely markets will take this as a negative sign for longer term UK interest rate policy, even if it is designed simply to cover all bases as the pandemic continues to elevate economic uncertainty.”

After falling as low as 6478, the FTSE 100 is now down 13.01 points or 02% at 6494.81.

12.40pm: Wall Street heads for mixed open

The main indices on Wall Street seem set to open on a mixed footing on Thursday ahead of jobless claims data later.

Spread-betters IG expect the Dow Jones Industrial Average to start around 20 points lower while the Nasdaq is predicted to open up 42 points. The S&P 500, meanwhile, is forecast to open almost flat.

The mixed picture may mean investors are looking to hold fire somewhat ahead of Friday’s jobs figures, which will provide some more information on the pace of the US economic recovery into early 2021. In this vein, today’s jobless claims figures for the final week of January will also provide some clarity.

Analysts are predicting around 830,000 Americans filed for unemployment benefits last week, down from 847,000 the week before. Continuing claims, meanwhile, are expected to fall to 4.7mln from 4.77mln.

Meanwhile, US earnings season continues to roll on, with numbers due today from telecoms giant T-Mobile US Inc (NASDAQ:TMUS) and pharmaceuticals firm Bristol-Myers Squibb Co (NYSE:BMY).

Also in the limelight will be yet another tech brand, Snapchat owner Snap Inc (NYSE:SNAP), which will be looking to cap off what has been a mostly strong performance among the big tech firms this week.

Meanwhile, in London, the FTSE 100 had stumbled into the red as the lunchtime portion of the session began, down 22 points at 6,485 at around 12.40pm.

12.15pm: Bank warns of uncertain outlook

The FTSE 100 was already starting to fall into the red ahead of the Bank of England‘s noon statement, but the fall accelerated as the policymakers warned of an “unusually uncertain” outlook for the economy.

The Bank said the prospects depended on “the evolution of the pandemic, measures taken to protect public health and how households, businesses and financial markets respond to these developments.” It said it expected GDP to fall by around 4% in the first quarter of this year, in contrast to its forecast of a rise in its November report.

So as a result, and to no one’s surprise, it kept rates on hold at 0.1% and maintained its bond buying programme (aka quantitative easing). But it did not rule out the much-discussed move to negative rates, saying it would “take whatever additional action is necessary to achieve its remit.”

In the wake of the Bank’s update, the FTSE 100 has fallen 22.45 points or 0.35% to 6485.01, the lowest point of the day so far.

11.45am: Barratt gives housebuilders a lift

A positive update from Britain’s biggest housebuilder Barratt Developments PLC (LON.BDEV) has lifted the whole sector and helped pull the flagging FTSE 100 back into positive territory after a brief dip into the red.

Barratt said it would resume paying dividends as it reported a 10.1% rise in half-year revenues to GBP2.49bn, albeit profits only rose 1.7%to GBP430.2m after it set aside GBP63.4mln for cladding rectification work at various developments following the Grenfell Tower inquiry.

Chris Beauchamp, chief market analyst at IG, said: “Housebuilders have been given a lift by Barratt Developments, which has declared its intention to resume dividend payments after a solid first half – with the UK vaccinating at an increasingly fast pace a return to normality this year still looks possible, and this points towards a much more robust outlook for the market as buying and selling activity picks up too.”

Barratt shares have built up a 2.38% or 16p rise to 689.4p while Persimmon PLC (LON.PSN) has put on 77p or 2.85% to 2777p and Taylor Wimpey PLC (LON.TW) has added 4.05p or 2.6% to 159.85p.

With that, the FTSE 100 is up 8.72 points or 0.13% at 6516.54.

10.15am: Car sales and construction activity fall

Ahead of the Bank of England‘s latest interest rate decision at noon, a couple of pieces of downbeat economic news.

UK car sales were the worst for January in more than 50 years. Just 90,248 new cars were registered last month, according to industry body the SMMT, down 39.5% on January last year, as car showrooms remained shut due to the pandemic. These were the weakest January figures since 1970. And it is not a good sign ahead of the critical month of March which is the most important for the sector.

Samuel Tombs at Pantheon Macro said: “The terrible start to the year for car dealers can be attributed to the third lockdown and to uncertainty about the likelihood of a trade deal with the EU late last year, which persuaded some buyers to bring forward intended purchases in order to avoid tariff-related price rises. The near-term pipeline of demand still looks weak; Google Trends data show that the number of people searching online for one of the top five bestselling cars was down 20% year-over-year in January, worse than December’s 10% decline”.

January also saw a decline in UK construction activity, ending a seven month period of expansion. The latest IHS Markit/CIPS index fell from 54.6 in December to 49.2 in January, while new order growth slowed to its weakest since June 2020. IHS said: “Construction companies often noted that the third national lockdown and concerns about the near-term economic outlook had led to greater hesitancy among clients, especially for new commercial projects. Meanwhile, transport shortages and delays at UK ports resulted in another severe downturn in supplier performance during January. Around 45% of the survey panel reported longer lead times for the delivery of construction inputs, while only 1% noted an improvement.”

So food for thought for the Bank at its latest meeting. Neil Wilson at said: “The Bank of England is expected to leave its benchmark rate on hold and maintain the size of its asset purchase programme… The only thing the market will care about today is the likelihood of negative rates. The Bank will publish an update on its work with banks on their preparedness and operational requirements for dealing with negative rates. Whilst there are one or two super doves who think negative rates are a ‘good thing’, it’s clear (governor) Andrew Bailey prefers to keep them at the bottom of the toolkit – there but out of sight. My feeling is the MPC is keen to kick negative rates down the road until the economy recovers and they’re no longer a topic”.

The downbeat news has taken the shine off the FTSE 100, which is now up just 3.3 points or 0.05%

9.40am: Leading shares continue their buoyant mood.

As is usual on a Thursday, it’s a big day for results. Catering group Compass Group (LON.CPG) appears to have shaken off the controversy over a subsidiary’s rip-off free school meals. Its shares are up 3.63% to 1398.5p despite announcing a 33.75 fall in first-quarter revenues in its annual meeting statement. It said that despite being hit by the coronavirus lockdowns like the rest of the hospitality industry, margins had improved as a result of cost-cutting measures.

Compass pointed out that the vaccination rollout was encouraging but the pace of recovery was still uncertain, so the second quarter was likely to be broadly in line with the first.

As for the row over school meals, it said: “We recognise that the quality and quantity of some food parcels fell short of our usual high standards. We have apologised to everyone who has been affected. After conducting a thorough investigation, we have taken several corrective measures that include improved supply chain processes, additional guidance and resources for our employees, and stronger quality assurance checks.

“Since 25 January, (its subsidiary) Chartwells has been providing breakfasts to all children currently receiving a lunch parcel from us for the duration of school closures. We will also provide those same children with lunch and breakfast parcels through the February half-term break. The costs of these initiatives will be covered by Compass,” the FTSE group added.

The news that 10m people in the UK had now received their first jab supported Compass and other companies in the hospitality and travel sectors. Whitbread PLC (LON.WTB) is up 4.54% to 3130p – helped by a refinancing this week – and InterContinental Hotels is 3.14% better at 5000p.

But results from Unilever PLC (LON.ULVR) have gone down like a lukewarm Ben & Jerry’s. Its shares are down 3.83% at 4170p.

Michael Hewson, chief market analyst at CMC Markets, said: “Unilever’s final results appear to have underwhelmed investors despite reporting underlying operating profits of EUR9.4bn, a decline of 5.8%. In the fourth quarter underlying sales growth did show signs of picking up, rising 3.5%, however a decline in operating margins of 60bps maybe undermining sentiment a touch.”

Focusing on the good news, the FTSE 100 is now ahead 39.17 points or 0.6% at 6,546.99.

8.30am: Modest gains appreciated

The FTSE 100 opened modestly higher on Thursday, taking its cue from Wall Street rather than Asia where Chinese liquidity concerns rattled stock markets.

The UK blue-chip index opened 11 points higher at 6,518.67.

Sentiment in London was driven by the coronavirus vaccine roll-out, which continues apace with 10mln people inoculated, offering hope of a return to something closer to normality in the Spring.

A trial got underway Thursday assessing the impact of giving two different shots as part of the mass roll-out with scientists saying it is possible the new approach could provide better protection than giving the same jab twice.

The day’s big corporate news came from Shell (LON:RDSA), which, in common with its rival BP (LON:BP.), bore the financial scars of a tough year. The oil major’s shares opened flat.

“The pandemic has clearly had a severe impact on performance and the oil price in particular,” said Richard Hunter, head of markets at Interactive Investor.

“The dual effect of over-supply and crippled demand as aircraft stood idle, travel reduced to a trickle and manufacturing all but ceased during lockdown, has shown itself in these numbers.”

Consumer goods giant Unilever’s (LON:ULVR) final results and restoration of growth targets (after scrapping them at the start of the pandemic) were met with a collective yawn as the shares drifted 3.2% lower and to the top of the Footsie losers’ list.

By contrast, third-quarter numbers from BT (LON:BT.A) appeared to be marginally better than expected, propelling the stock, up 2.5%, to the top of the blue-chip leader board.

Proactive news headlines:

Conroy Gold and Natural Resources PLC (LON:CGNR) has announced further gold discoveries on its Glenish gold licence in Ireland. In a statement, Conroy said it had identified a new gold-in-soil anomaly and a new gold mineralised outcrop indicating an extension of the Glenish gold target. The new anomaly is 2 kilometres northeast of the Glenish gold target on the border with the Clontibret gold licence.

SigmaRoc PLC (LONM:SRC), the construction materials group, has said it expects to report full-year results that are ahead of current market expectations. The group said the strong trading reported in its December 9, 2020, market update continued through to the end of the year. SigmaRoc expects to report revenues for 2020 of around GBP124mln, up 77% year-on-year, while underlying earnings (EBITDA) are expected to be 54% higher than the year at before at GBP23.8mln.

MaxCyte Inc (LON:MXCT), the cell-engineering and life sciences company, has raised GBP40mln by placing shares at 700p each – a premium to last night’s closing price of 670p. Proceeds from the share subscription will be used to strengthen MaxCyte’s balance sheet to enable the company to accelerate projects in its development pipeline. The newly issued shares represent around 6.9% of the company’s enlarged share capital. Subscribers to the share issue featured a mixture of new and existing investors, including D1 Capital Partners, T. Rowe Price, ArrowMark Partners, Baron Capital Group and First Light Asset Management, alongside existing investors Casdin Capital and Sofinnova Partners.

Argo Blockchain PLC (LON:ARB) said it has taken a 25% stake and become the lead investor in Pluto Digital Assets PLC, a crypto venture capital and technology firm focused on projects in the decentralised technology and finance spaces. The crypto mining firm said it has invested GBP1mln into Pluto at 3p per share as part of an investment round to raise GBP2.5mln. Argo said its contribution was satisfied entirely by the holding of 75,000 Polkadot tokens it had originally purchased in the first quarter of 2019 for US$75,000 (GBP55,163).

Amryt Pharma PLC (NASDAQ:AMYT; LON:AMYT) said it has signed multi-regional distribution agreements with a company called Medison Pharma. Medison will sell Amryt’s Juxtapid product in Canada and Lojuxta and Myalept in Israel. In a statement, Amryt chief executive, Dr Joe Wiley, said: “Today’s announcement is another positive development as we continue to grow our commercial assets in existing and new territories and we further progress towards our goal of becoming a global leader in rare and orphan diseases.”

IronRidge Resources Ltd (LON:IRR) said it has completed the acquisition of Joy Transporters Ltd, giving it full ownership of the Saltpond and Cape Coast projects in Ghana. The company described the Saltpond and Cape Coast portfolio as a highly prospective ground holding with high priority pegmatite targets. The exploration area is positioned adjacent to IronRidge’s Ewoyaa lithium project, which is host to a 14.5mln tonne mineral resource.

Panther Metals PLC (LON:PALM) said its wholly-owned Aussie subsidiary, Panther Metals Pty, has beefed up its board with two appointments. Ranko Matic and Daniel Tuffin have joined the team down under. Matic is a qualified chartered accountant with more than 30 years’ experience in the areas of financial and executive management, accounting, audit, business and advising companies. Tuffin has a wealth of experience specific to Panther Metals Pty, Panther said.

Sativa Wellness Group Inc (LON:SWEL) has updated investors on appointments to its board, saying Geremy Thomas and George Thomas have both been appointed as directors, with the former becoming its executive chairman. The cannabidiol (CBD) specialist said following a meeting of shareholders on January 26, 2021, Henry Lees-Buckley is no longer its chief executive as of February 3, adding that Geremy Thomas will act as interim CEO until a replacement is appointed.

Cellular Goods PLC, a company producing synthetic cannabinoids products that is understood to be backed by David Beckham’s DB Ventures has announced float plans. Cellular Goods is raising GBP8mln through a share offering that would value it at GBP20mln. Proceeds from the IPO will be used to develop and launch a new range of premium consumer products, prospective investors were told. Cellular said it is aiming to be the London Stock Exchange’s first pure-play consumer CBD brands business.

[email protected] Capital PLC (LON:SYME) has said that following the publication of Audited Accounts for the period ended December 31, 2019, and Interim Results for the six months ended June 30, 2020, last week, the company has successfully addressed the technical DTR breach regarding the timing of financial statements. Immediately following publication, [email protected] made a formal request to the FCA for the lifting of the temporary suspension of its Listing and the resumption of dealings in the company’s ordinary shares. The FCA is currently performing the regulatory steps required for the restoration of the listing and re-commencement of dealings. The process has taken longer and is more complex than normal due to the change in accounting reference date, reverse takeover transaction occurring during the period, and multiple financial statements that have been issued. The company also confirmed that no FCA investigation is underway. [email protected] expects to make a further announcement regarding the lifting of the temporary suspension and resumption of dealings in the company’s shares as soon as possible.

6.50am: Buy stocks and keep calm

The FTSE 100 index is set to start Thursday slightly higher as some of the recent volatility in global equities has becalmed in the past 24 hours.

CFD firm IG Markets sees the blue-chip benchmark some 10 points higher, making a price of 6,511 to 6,514 around an hour before the open.

A winding down of the trading hysteria in some of the Reddit ‘meme’ stocks, like GameStop, has been a factor and, perhaps more importantly, investments are returning their focus to more typical features in the market.

“Trader’s attention drifted back to topics such as lockdowns, vaccination rates as well as a US stimulus package,” said David Madden analyst at CMC Markets. “The prospect of the Biden administration signing off on a relief package of some shape or form has been the biggest driver of stocks recently,”

On Wall Street, the Dow Jones Industrials Average edged to a 36 point or 0.12% gain on Wednesday to finish at 30,723. The S&P 500 notched a 0.1% gain for the day, closing at 3,930, whilst the Nasdaq Composite dipped 0.01% to 13,610.

Trading conditions are presently less calm in Asia, however, with Chinese volatility impacted on stocks.

Madden added: “Equity markets in Asia have fallen on tighter liquidity conditions in China. Short-term borrowing costs in the country ticked up so that lead to fears the Beijing administration are trying to rein in credit, possibly to curb growth in property and stock prices. European indices are on track to open lower.”

Japan’s Nikkei 225 index gave up 304 points or 1.06% to 28,341 whilst Hong Kong’s Hang Seng similarly slipped, losing 0.8% to 29,065. Meanwhile, the Shanghai Composite was 0.45% lower at 3,501.

Around the markets:

  • The pound: US$1.3604, down 0.32%
  • Gold: US$1,823 per ounce, down 0.58%
  • Silver: US$26.61 per ounce, down 1%
  • Brent crude: US$58.88 per barrel, up 2.4%
  • WTI crude: US$56.14 per barrel, up 2.5%
  • Bitcoin: US$38,073, up 3.65%

6.45am: Early Markets – Asia / Australia

Shares in the Asia-Pacific region were lower on Thursday, with South Korea leading the losses as the Kospi fell 1.35%.

Mainland Chinese stocks were also lower, with the Shanghai composite down 0.47% while Hong Kong’s Hang Seng index slipped 0.83%.

In Japan, the Nikkei 225 shed 1.06% and Australia’s S&P/ASX 200 closed 0.87% lower.


Proactive Australia news:

Core Lithium Ltd (ASX:CXO) has raised $40 million to advance the development of the Finniss Lithium Project in a placement to global institutional investors.

K2fly Ltd (ASX:K2F) has signed a 3 year SaaS contract with Rio Tinto PLC (LON:RIO) to replace its Heritage Management system for the Rio Tinto Iron Ore Division.

Red River Resources Limited (ASX:RVR) (FRA:R1R) is focused on building an Australian multi asset mining business, recently restarting the Hillgrove Gold mine in New South Wales and reporting a strong performance from its Thalanga Base Metal operations in Queensland.

Blue Star Helium Ltd (ASX:BNL) (OTCMKTS:AZZEF) has taken some concrete measures, including increasing land holding, expanding drilling program and raising capital, in the December quarter to boost operations

Element 25 Ltd (ASX:E25) remains focused on its long-term goal of producing ethical manganese products for world markets in 2021 and beyond, with hopes to become a globally relevant manganese producer, as stated in a letter to stakeholders today.

MGC Pharmaceuticals Ltd (ASX:MXC) (OTCMKTS:MGCLF) (FRA:H5O) (LON:MXC) is set to become the first medicinal cannabis company to be admitted to the main market of the London Stock Exchange (LSE) on Tuesday, February 9.

Blackstone Minerals Ltd (ASX:BSX) (OTCMKTS:BLSTF) (FRA:B9S) has hit massive sulfide vein (MSV) mineralisation in multiple drill holes from its maiden exploration program at the King Snake prospect at its Ta Khoa Nickel Project in Vietnam.

Artemis Resources Ltd‘s (ASX:ARV) (FRA:ATY) (OTCQB:ARTTF) further assays from the 2020 42-hole multi-rig drilling campaign has found up to 2.62% cobalt and 7.44% copper to complement the excellent gold results from its 100%-owned Carlow Castle Gold and Copper Project in the west Pilbara region of Western Australia.

Brookside Energy Ltd (ASX:BRK) (OTCMKTS:RDFEF) and Stonehorse Energy Ltd (ASX:SHE) have successfully made the second sale for the Thelma 12-1 well, located in the SCOOP Play, northeast of Brookside’s SWISH Area of Interest (SWISH AOI).

US January jobs data the big draw on an otherwise quiet Friday

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