- FTSE 100 index sheds 47 points
- US markets set for steady start
- GameStop doubles in pre-market trading
12.45pm: Some semblance of calm to return to US markets
US markets are expected to stabilise at the outset after a day yesterday when indices plunged and some stock market stars disappointed.
Spread betting quotes indicate the Dow Jones industrial average, which lost 2% of its value yesterday, will edge 36 points higher to open at around 30,339.
The S&P 500, down 2.6% yesterday, is expected to open little changed while the tech-heavy Nasdaq Composite, also down 2.6% yesterday, is expected to open around 211 points weaker at 13,060, thanks in part to glamour stocks Tesla and Apple losing favour.
Apple shares were lower in pre-market trading, despite the electronics gizmos pedlar topping forecasts with sales of its iPhone.
The Cupertino-based firm generated a mind-boggling generated revenue of US$111.4bn in its fiscal first quarter, compared to US$91.82bn in the same quarter a year ago and the market consensus forecast of US$103.27bn.
Tesla, the electric vee-hee-ical maker, also topped market forecasts on sales but fell short on earnings; the shares were off by around 2% in pre-market trading.
Fourth-quarter adjusted earnings per share of 80 cents fell well below Wall Street’s best guess of US$1.02 per share.
The company’s founder, Elon Musk, said he plans to remain in charge of the company for several years yet, which will come as a relief to those Tesla fans worried he might give up the gig to day-trade GameStop.
“We now go live to GameStop…” pic.twitter.com/YLiF4Dqj5B
— Pulp Librarian (@PulpLibrarian) January 28, 2021
The stock everyone – including Musk – seems to be talking about more than doubled in pre-market trading on (of course) zero news flow, other than the multitude of opinion pieces, message board postings and Tweets about the highly volatile stock of a loss-making old-fashioned bricks & mortar video games retailer.
The irony of the GameStop saga is that a bunch of traders on Reddit has proven more damaging to short sellers than years of angry bans from governments and regulators. #GameStop
— Ferdinando Giugliano (@FerdiGiugliano) January 28, 2021
Meanwhile, in the boring old world of macroeconomics, US gross domestic product data is due out in less than an hour.
“The market is going for +4.2% qoq SAAR, which works out to +1.0% qoq, in case you’re interested,” explained Marshall Gittler of BDSWiss, helpfully – although it might have been more helpful had he explained what qoq (quarter-on-quarter) and SAAR (seasonally adjusted annualised rate) are.
“The various Feds have their forecasts too, ranging from +2.6% for NY Fed Nowcast, +3.2% for the St. Louis Fed, to 7.5% for the Atlanta Fed’s GDPNow,” he added.
“The GDP figure is important not only as a measure of how the economy was doing then but also as the baseline for how it’s doing now. Most forecasters expect Q1 growth to be positive, too, but much depends on the fiscal package that the Biden administration is hoping to pass. Given the uncertainty around that package, the Q4 GDP figure is perhaps less important than it would normally be,” Gittler postulated.
London does not have its equivalent of GameStop but it has still been a fairly volatile day, with the FTSE 100 at one point falling as low as 6,440; it has now recovered to 6,520, down 47 points (0.7%).
Leading the rally has been British Airways owner International Consolidated Airlines (LON:IAG), which is up 3.7% at 144.2p.
11.30am: The Footsie recovers some poise
The FTSE 100 has halved its losses in the second half of the morning trading session.
The Pru is looking to raise up to US$3bn as the demerger of its US business, Jackson Financial.
In economic news, the Office for National Statistics (ONS) has released its latest coronavirus job retention scheme statistics.
More jobs were furloughed and supported by the job retention scheme in November and December than October. Compared with October 31, furloughing of staff was higher at December 31 in all sectors, except mining and quarrying, the ONS reported,
Across the UK, where it was possible to link the data, 1.92mln females were furloughed as at the end of November compared with 1.79mln men. Provisional estimates show the number of females furloughed decreased to 1.88mln at the end of the year while the number of males increased to 1.85mln.
“This was the pre-lockdown lull, and when the country closed for business on 4 January, the furlough floodgates will have opened,” warned Sarah Coles, a personal finance analyst at Hargreaves Lansdown.
“Government support is unlikely to hit the heights of the first lockdown, not only because more of the economy is open, but also because many people have already lost their jobs or been forced to give up self-employment – so they can’t get any help at all from these schemes,” she explained.
“In the early days of the crisis, men were more likely to have been furloughed, but since the summer, women have overtaken them.
“As schools closed again, women will have borne the brunt of the childcare, and will have had to request furlough in enormous numbers. The longer this goes on, the higher the price women will have to pay, and the bigger the risk that these furloughs will eventually turn to redundancies,” Coles warned.
The latest set of official statistics for the Coronavirus Job Retention Scheme has been published today. It contains national, regional and trade data for CJRS extension claims submitted between 1 November to 31 December. https://t.co/B0xLOTsbYn
— HMRC Press Office (@HMRCpressoffice) January 28, 2021
10.00am: It’s all beginning to look a bit dot.com bubbly
Traders’ screens are the proverbial sea of red this morning with markets unsettled by the “flash mob” versus “flash Harry” battle taking place on Wall Street.
The FTSE 100 was down 121 points (1.8%) at 6,446.
“There is a clear sense markets are upset and concerned about what they are seeing from the Reddit ramps. The mechanics of the latest craze are rather new, which makes it hard for us market watchers to be fully versed in all that is happening and yet the point I’d like to stress is that this kind of behaviour among investors – chasing individual stocks to the moon – has been seen a million times in the past. It usually ends one way – many profit, but most lose out,” warned Neil Wilson, talking about the ongoing battle over the shares of loss-making video games retailer GameStop in the US.
None of this should really have much of an effect on UK blue-chips but if the mania brings about a fin de siecle mood reminiscent of the bursting of the dot.com bubble, then it could have wider ramifications.
For those who look for practical reasons why stocks are moving it is a relief to be able to point to low-cost airline Wizz Air Holdings PLC (LON:WIZZ) and its fiscal third-quarter results and say with a reasonable degree of confidence the results are responsible for the shares defying the trend in rising 1.3% to 4,260p.
“The experts we’re speaking to are consistently bullish on Wizz Air’s prospects against its European competitors. Wizz Air has a best-in-class cost structure, it has been able to flex capacity effectively, and it has been profitable at lower load factors than many of its peers,” said Jack Winchester an analyst at Third Bridge, in exposition mode.
“While revenue numbers disappointed against expectations, with a 76.5% reduction year-on-year, Wizz beat expectations on profitability. EBITDA, a proxy for cash flow, hit negative 41mEUR for the quarter.
“One of the biggest questions facing Wizz Air is how it will stand up to pressure from the Ryanair scale advantage,” Winchester suggested.
Fellow FTSE 250 airline stock easyJet PLC (LON:EZJ), down 1.3% at 704.6p, fared less well following its fiscal first-quarter statement.
“This morning’s update from EasyJet has thrown into sharp focus the pressure on the balance sheets of all the major airlines, with the airline announcing an 88% drop in Q1 revenue, a much bigger fall than expected, while saying that it expects to operate only 10% of its flights in Q2,” reported Michael Hewson.
“While the airline has said that it has enough liquidity headroom to survive a prolonged drop in capacity, the outlook for the sector still remains enormously uncertain.
“Having secured another £1.4bn in additional liquidity to keep going over the summer, that may well be true; however, it still remains highly unlikely that anything like a semblance of normal demand will return this year, which means the airline may well be forced to sell and lease back more of its fleet over the course of the rest of this year,” Hewson suggested.
8.40am: Millenials inspired sell-off gains pace
The FTSE 100 opened firmly in the red on Thursday as Reddit hysteria continued to hit stock markets on both sides of the Atlantic.
London’s blue-chip index was down 41 points at 6,526.32 in the early exchanges.
Hedge fund losses incurred on short positions in GameStop and AMC – prompted by a wave of buying from a bunch of bulletin board warriors on r/WallStreetBets – has apparently caused a domino effect.
The squeeze has forced certain funds to start to liquidate profitable positions to pay margin calls on others, prompting stocks to tumble.
Jet engine maker Rolls-Royce (LON:RR.), a lockdown loser, topped the fallers’ board in the early exchanges in London.
On the up was the Guinness and Smirnoff international drinks giant Diageo (LON:DGE), which added 3.8% after its latest trading update. Lockdown, drink … no brainer.
Providing slightly more reasoned analysis, Richard Hunter, head of markets at Interactive Investor, said: “Diageo may not fully have lived up to its defensive qualities in times of economic stress, but has nonetheless provided grounds for optimism.
“The company remains profitable and cash-rich, and an additional increase to its proud dividend record shows confidence in looking through the current situation to the longer-term growth as previously enjoyed.”
Proactive news headlines:
Eurasia Mining PLC (LON:EUA) said it noted the adverse movement in the company’s share price on Wednesday following the announcement of the trade for 27,400,000 shares by Alexei Churakov. The company said it had received no notification of this trade before it being reported by Churakov himself via RNS on January 27, 2021. Eurasia said it has made initial enquiries Churakov regarding the sale of the shares, and he has now notified the company that he sold the shares to cover an urgent and critical cash call; that all the shares were acquired by Veles International, a subsidiary of an investment company Veles Capital; and that he has no intention to sell his remaining shares and/or options.
genedrive PLC (LON:GDR) has said its coronavirus (COVID-19) testing technology will be sold in the US and Europe by partner Beckman Coulter Life Sciences, taking the pair’s previous collaboration agreement to the “next stage”. The company said its 96 SARS-CoV-2 kit is ideally suited for use on Beckman’s high throughput robotic Biomek i7 instrument. “The ready-to-go nature of the test removes many of the fluid dispensing steps required in competitor assays, increasing the overall throughput of the Biomek compared to using a liquid reagent-based test formulation,” investors were told.
Greatland Gold PLC (LON:GGP) has told investors that its latest ‘excellent’ drill results at the Havieron project confirm the continuity of higher-grade mineralisation. The company highlighted the quarterly exploration report released by project operator Newcrest Mining Ltd (ASX:NCM) which included some of the findings from the Havieron deposit, in the Paterson region of Western Australia. Greatland noted that drilling programmes since May 2019 have outlined an ovoid-shaped zone and mineralisation has been observed to over 1,000 metres, vertically, and the mineralisation remains open at depth.
Panthera Resources PLC (LON:PAT), the diversified gold exploration and development company with assets in West Africa and India announced that it has issued 1,777,935 new ordinary Panthera shares following the conversion of 1,777,935 warrants at an exercise price of 6.68p each for gross proceeds of £118,766. The warrant conversion was under the commitments announced on December 14, 2020, and all warrants under the commitments announced then and on November 9, 2020, have now been exercised. There are no transaction and advisory fees payable for the early conversion of the warrants.
Belvoir Group PLC (LON:BLV) has said its profits this year will exceed expectations after house sales and mortgage demand rebounded strongly after the first coronavirus (COVID-19) lockdown. The company said revenues for the year to end-December 2020 rose by 12% to £21.6mln, which was higher than pre-COVID-19 forecasts, helped by the performance of the Lovelle network acquired in January. House sale commissions rose by 12%, of which 10% came from Lovelle, while recurring franchise income rose by 2% to £9mln as Belvoir said the March lockdown had a minimal impact on lettings.
One Media IP Group PLC (LON:OMIP), the digital music rights specialist, has said it is to launch a new Men & Motors TV channel, augmenting the YouTube offering. The channel will be hosted by Shane Lynch, the Boyzone member, and Torie Campbell, best known for fronting “One Second in F1 Racing”, and will open up a new revenue stream for One Media, which acquired the rights to Men & Motors from Granada Television Products and ITV Digital Channels in 2012. Since then, the channel has been thriving as a YouTube offering and in 2020 the channel clocked up 134mln minutes of viewing, which is equivalent to 2.5mln viewing minutes per week.
Keywords Studios PLC (LON:KWS) has said it expects its full-year profits will be “marginally ahead” of guidance after a strong finish to 2020. In a trading update for the year to December 31, 2020, the provider of video game development services said it expects its revenues and adjusted pre-tax profit for the period to be €373mln and €55mln respectively compared to guidance of €367mln and €52mln issued on November 24. The company attributed the performance to “robust demand” for its services continuing through the second half of the year, although production constraints caused by the coronavirus (COVID-19) had continued to delay the flow of some of its service lines.
IQ-AI Ltd (LON:IQAI) said its artificial intelligence model for generating simulated brain images without contrast agents has been refined and improved – so much so the AI model now very closely mimics actual, with-contrast images. IQ-AI said it will now present “full datasets” of images to a select team of neuro-radiologists who will qualitatively assess the quality of the simulated output images. Further validation will include a quantitative, voxel-wise, statistical comparison to understand how closely the model’s simulated results match real-world images.
Guild Esports PLC (LON:GILD) has announced the signing of its second sponsorship deal since making its London stock market debut on October 2, 2020. The UK-based owner and developer of esports teams said the new agreement is with HyperX, a leading gaming peripherals brand of Kingston Technology Company Inc, the world’s largest independent manufacturer of memory products, based in Fountain Valley, California. The company said the confidential contract value is in line with the company’s expectations at the time of IPO.
Canadian Overseas Petroleum Ltd (LON:COPL) (CVE:XOP) told investors it believes that new measures brought in by President Biden will have a “largely positive” effect on its acquisition of Atomic Oil and Gas. “The issues surrounding Federal Oil and Gas Leases enacted today by the President of the United States are complicated politically and possibly legislatively,” said Arthur Millholland, COPL chief executive in a statement. “However, we have done enough due diligence on Atomic and can safely say that the policy enacted today will have no undue influence on Atomic and its assets going forward and have therefore not hindered our resolve to complete the acquisition.”
accesso Technology Group PLC (LON:ACSO) has said it expects revenues for 2020 to be ahead of its previous expectations following what the group said was a strong trading performance for its fourth quarter. In an update, the provider of queuing, ticketing and planning software said a “solid trading performance” reported in November had continued through the remainder of 2020, particularly over the North American holiday period, and as a result, it now expects to deliver revenue of “not less than US$55mln” for the full year with net cash of just under US$30mln.
Union Jack Oil PLC (LON:UJO) chairman David Bramhill has said that, in the company’s opinion, considerable upside remains in the West Newton project in Yorkshire. The company’s chairman made the comments as the group relayed details from a new technical presentation about the results of the West Newton B-1 and B-1Z appraisal wells. It noted that the presentation gave new significant technical data that is material to the ongoing commercial evaluation of the West Newton project.
AFC Energy PLC (LON:AFC) has unveiled its new zero-emission power generator that will be featured in the inaugural Extreme E electric SUV racing series. The Extreme E electric SUV (sport utility vehicle) series, which begins in April of this year, aims to highlight the impact of climate change on some of the world’s most fragile ecosystems. The series will start in (of all places) Saudi Arabia. AFC got involved in the project in July of last year when it agreed to provide its proprietary, zero-emission, hydrogen fuel cell technology to power the vehicles.
Zoetic International PLC (LON:ZOE) has reported sharply reduced losses in its first half as the firm completed its transition to purely focus on cannabidiol (CBD) and away from its legacy natural resources business. In its results for the six months to September 30, 2020, the company reported a pre-tax loss of £1.13mln, narrowed from a £4.04mln loss a year earlier, while revenues came in at £0.05mln. The company said its transition to a CBD company was now “substantially complete” and that it has commenced a “significant roll out” of cannabis products post period end while operating expenses had been cut by 65% year-on-year.
Salt Lake Potash Ltd (ASX:SO4) (LON:SO4) (FRA:W1D) has completed its share purchase plan after increasing the offer size to $8 million from the initial $5 million targeted, following strong demand from existing retail shareholders. A total of 20 million new fully paid ordinary shares will be issued under the SPP at an issue price of 40 cents per share. It represents about 2.7% of SO4’s ordinary shares on issue post-completion of Tranche 2 of the placement.
Critical Metals Plc (LON:CRTM), a mining investment company established to target opportunities in the overlooked and under-analysed mining sector, has announced that at the Company’s annual general meeting held on Wednesday, all resolutions were duly passed. Russell Fryer, the group’s CEO, commented: “As we indicated in our recent CEO Newsletter announced to the market, to advance our strategy to identify and acquire brownfield mining opportunities in the strategic metals sector while building value for shareholders, we continue to consider a number of operators or near-term production operators within the natural resources development and production sector in the continent of Africa. This has led to a very small number of targets having been narrowed down with preliminary discussions continuing and I look forward to updating shareholders on developments as they arise.”
W Resources PLC (LON:WRES), the tungsten, tin and gold mining and exploration company with assets in Spain and Portugal said it has received a conversion notice from Atlas Capital Markets for £100,000 of convertible bonds, the fourth tranche of the first £500,000 tranche drawn from the £4mln facility. The company said, as a result, it will issue 96,899,224 ordinary shares of 0.1p each at a conversion price of 0.1032p per ordinary share.
Cobra Resources PLC (LON:COBR), the mining exploration company focused on the Wudinna Gold Project in South Australia, announced that it has received notice of exercise of 934,800 warrants to acquire 934,800 new ordinary shares at a price of 3p per share and notice of exercise of 1,000,000 warrants to acquire 1,000,000 new ordinary shares at a price of 2p per share.
Oriole Resources PLC (LON:ORR), the AIM-quoted exploration company focused on West Africa announced that, following an exercise of warrants over ordinary shares in the company, an application has been made for 5,742,473 new ordinary shares of 0.1p each in the company to be admitted to trading on AIM on February 2, 2021. The exercise prices of the warrants were 842,473 warrants at 0.60p each and 4,900,000 warrants at 0.68 each.
Anglo Asian Mining PLC (LON:AAZ), the AIM-listed gold, copper and silver producer in Azerbaijan, has said that an updated corporate presentation is now available on the company’s website. The presentation will be given by the company this evening at the virtual One2One Investor Forum, hosted by Proactive Investors, from 6.00pm onwards. You can register to watch the virtual event using the following link: https://www.proactiveinvestors.co.uk/register/event_details/314
6.50am: Sell-off on the cards
The FTSE 100 is set to start more than 1% lower on Thursday after ‘Gamestop fever’ triggered widespread stock sell-offs for US and European equities.
IG Markets sees London’s blue-chip index down about 70 points, making the price 6,501 to 6,504 with just over an hour to go until the open.
As the Reddit ‘army’ of retail investors continued to buy up GameStop Corp and AMC shares, squeezing short-selling hedge funds, it sent shockwaves through the stock market ecosystem.
Hedge funds are believed to have lost billions of dollars and triggered a major liquidity event and market-wide stock sell-off as margin calls and trading positions were shut-out.
Evidently, such was the hysteria on Wall Street, that even a record quarter from Apple Inc – showing US$111.4bn of revenue for the three months – was overlooked.
“Large hedge fund short positions were getting liquidated, prompting margin calls, and the cashing out of more profitable positions to fund the losses being caused by the Reddit surge in the likes of heavily shorted stocks like GameStop as well as AMC Entertainment, owners of Odeon Cinemas amongst others, which have seen huge gains, amidst big eye-watering price swings,” said Michael Hewson, senior analyst at CMC Markets.
“While few people are shedding many tears about large scale hedge fund losses, after all, if you play with fire, be prepared to get burned, the market turmoil is highlighting a number of areas within the market, that might prompt regulatory scrutiny in the future, the monitoring of retail trade chat forums and message boards, and how they drive markets.”
On Wall Street, the Dow Jones Industrials Average slumped 633 points or 2.05% to 30,303 whilst the S&P 500 ditched 2.57% to 3,750 and the Nasdaq Composite shed 2.61% to finish Wednesday at 12,270. The small-cap centred Russell 2000 fell 1.91% to 2,108.
Gamestop gained 134% to end Wednesday at US$347.51 per share, AMC Entertainment Holdings Inc (NYSE:AMC) similarly climbed 301% to US$19.90, whilst record-breaking Apple Inc (NASDAQ:AAPL) was down 0.77% at US$142.06.
In Asia, Japan’s Nikkei lost 1.53% to 28,187 and the Hang Seng was dumped 2.39% lower to 28,597. The Shanghai Composite gave up 1.96% to 3,503.
Around the markets:
- The pound: US$1,3676, down 0.08%
- Gold price: US$1,837 per ounce, down 0.13%
- Silver price: US$25.07 per ounce, down 0.31%
- Brent crude: US$55.46 per barrel, down 0.8%
- WTI crude: US$52.52 per barrel, down 0.17%
- Bitcoin: US$31,694, down 0.13%
6.45am: Early Markets – Asia / Australia
Shares in the Asia-Pacific region fell on Thursday following an overnight plunge on Wall Street amid concerns about heightened speculative trading.
In China, the Shanghai Composite dipped 1.97% while Hong Kong’s Hang Seng index shed 2.3%.
Japan’s Nikkei 225 declined 1.53% in afternoon trade and South Korea’s Kospi also fell 1.71%.
Shares in Australia slipped, with the S&P/ASX 200 closing 1.93% lower.
Proactive Australia news:
WA Kaolin Ltd (ASX:WAK) is looking at a robust year ahead following the solid steps taken by the company in the December quarter that includes listing on the Australian Securities Exchange and beginning the first stage construction of a 200,000 tonnes per annum processing facility at its Wickepin operation.
Buru Energy Limited (ASX:BRU) (OTCMKTS:BRNGF) (FRA:BUD) Executive Chairman Eric Streitberg said the last quarter of 2020 was a “seminal period” for the company with the execution of two farm-out transactions with Origin Energy Ltd (ASX:ORG) (OTCMKTS:OGFGF) (FRA:ORL) for a Canning Basin exploration program.
Argonaut Resources NL (ASX:ARE) has executed a drilling contract for an initial 3,750 metres of diamond drilling at its Murdie Copper Project in South Australia, which involves drilling five holes to an average depth of 750 metres.
Strategic Elements Ltd (ASX:SOR) has achieved another significant milestone with its self-charging battery technology successfully generating an output of over 4V from moisture in the air over a testing period of around 5 hours.
Southern Gold Limited (ASX:SAU) (FRA:UH4) via its Singaporean subsidiary, International Gold Private Limited (IGPL) is in an incorporated joint venture with Bluebird Merchant Ventures Ltd (LON:BMV) at the Gubong and Kochang (Geochang) projects in the Republic of Korea.
Salt Lake Potash Ltd (ASX:SO4) (LON:SO4) (FRA:W1D) has completed its share purchase plan after increasing the offer size to $8 million from the initial $5 million targeted, following strong demand from existing retail shareholders.
Brookside Energy Ltd (ASX:BRK) (OTCMKTS:RDFEF) has successfully pooled the 80-acres ‘held by production’ (HBP) associated with the Mitchell Well at low cost in the SWISH Area of Interest (AOI) in the SCOOP play in the world-class Anadarko Basin.
Anson Resources Ltd (ASX:ASN) (FRA:9MY) has decided to accelerate the production of lithium chemicals to Stage-1 of its Paradox Brine Project in Utah, US, following a strategic review and recognition of changing market conditions for lithium.
Orthocell Ltd (ASX:OCC) has published a case study focusing on the combination of CelGro® collagen medical device and autologous tenocyte implantation (Ortho-ATI®) for the surgical repair of a large degenerate tear of the gluteal medius tendon.
Auteco Minerals Ltd (ASX:AUT) (OTCMKTS:MNXMF) has secured a large, highly strategic landholding, along strike from its 1 million ounce Pickle Crow Gold Project in Ontario, Canada increasing its land position around the high-grade tenure to more than 496 square kilometres.