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FTSE 100 closes in the red as trader optimism fades

The benchmark of leading UK shares finished the afternoon session down over 46 points at 6,002

Speedy Hire PLC -
FTSE 100 closes lower but FTSE 250 added 90 points on the day
  • FTSE 100 index closes lower
  • OVO Energy cites change in consumer behaviour for job cuts 
  • US stocks mixed

5.05pm: FTSE 100 closes down

FTSE 100 index finished in the drink on Tuesday with defensive stocks taking a battering.

The benchmark of leading UK shares finished the afternoon session down over 46 points at 6,002.

On Wall Street, US stocks were mixed with the Dow Jones down around 13 points, but the S&P 500 index and Nasdaq ahead. It comes as traders remain optimistic after the Federal Reserve and US administration’s willingness to support the economy.

Analyst Joshua Mahony, senior market analyst at online trading group IG, said of European trading: "Once again we have seen the initial rally around a potential virus treatment breakthrough fail to maintain momentum given ongoing questions over how long any treatment will take to make a tangible difference to the battle against COVID-19."

Among the top laggards on Footsie was tobacco giant Imperial Brands (LON:IMB), which dropped nearly 6% to 1,554p after it cut its dividend for the first time since 1996 as it tries to deal with its debt.

Centrica (LON:CNA), the British Gas owner dropped 5.44% to stand at 37.22p and SSE (LON:SSE) also shed 4.7% following Ovo Energy's job cut news amid the pandemic.

3.45pm: SSE, Centrica lower on Ovo Energy’s job-cutting plan

FTSE 100 was firmly in the red heading to close, down 75 points to 5,973.

Energy firms Centrica PLC (LON:CNA) and SSE PLC (LON:SSE) were both down 5%, to 37.35p and 1,224.5p respectively, after private peer Ovo Energy announced job cuts.

The Bristol-based energy supplier is to axe 2,600 posts after acquiring the retail business of SSE in January, citing a change in consumer behaviour amid the coronavirus pandemic.

Ovo is planning to close its offices in Selkirk, Reading and Glasgow Waterloo Street as the crisis has “permanently reduced the demand for some functions and roles”.

Gas engineers, electricians, meter readers, and call centre staff are also expected to be affected as Ovo said the pandemic had resulted in a 69% drop in home service engineering work and a 92% reduction in Smart Meter installations in April. Meter reading had also ground to a complete halt in March.

“We are seeing a rapid increase in customers using digital channels to engage with us, and in our experience, once customers start to engage differently they do not go back,” said Ovo founder and chief executive Stephen Fitzpatrick.

“Like all businesses, we face a new reality and need to adapt quickly to enable us to better serve our customers and invest in a zero-carbon future.”      

2.20pm: Walmart rallies on strong quarterly sales

The Footsie dipped again just as Wall Street opened in the red.

London’s leading index fell 61 points to 5,987, while on the other side of the Atlantic the Dow Jones lost 101 points to 24,495 and the S&P 500 shed 5 points to 2,948.

Grocery giant Walmart Inc (NYSE:WMT) advanced 2% to US$130.28, a rise expected by analysts after posting its quarterly results.

Revenue jumped 8.6% to US$134bn, though keeping up with sanitation and higher wages came at the extra cost of US$900mln.

“A strong e-commence presence makes a firm stand out in the current environment,” said David Madden, analyst at CMC Markets.

“Walmart proved that they were able to thrive in difficult conditions, and so confidence in the firm is likely to be remain high.”

1.45pm: US markets to open modestly lower

US indices are expected to open modestly lower today, mirroring movements in European markets.

The Dow Jones industrial average is expected to open around 42 points lower at 24,555 while the S&P 500 is seen opening 7 points weaker at 2,954.

“Stock markets are pulling back a little on Tuesday after surging at the start of the week on some promising results for a potential coronavirus vaccine,”2reported OANDA’s Craig Erlam.

“Investors' new found optimism will be put to the test shortly after the open on Wall Street as Jerome Powell makes a virtual appearance before lawmakers with Steve Mnuchin. While Mnuchin will naturally talk up the prospects for the economy, Powell has previously been less so and spooked markets last week with his downbeat assessment,” he noted.

In London, the FTSE 100 remains in the red, down 31 points at 6,017.

Renew Holdings PLC (LON:RNWH), up 13% at 473p, defied the trend following its half-year report.

READ Renew Holdings says 80% of engineering activities have continued during the crisis

The infrastructure engineer said roughly 80% of group activities have continued during the crisis, with chairman David Forbes saying that following the government's coronavirus reopening statements this month, the business was “addressing immediate opportunities to remobilise” the remaining 20% of its operations.

12.15pm: easyJet says credit card details of 2,208 customers have been accessed by hackers

As the morning trading session ended the Footsie was attempting a modest rally.

London’s index of leading shares was down 33 points (0.6%) at 6,015, having fallen below 6,000 at one stage this morning.

The index was being weighed down by contract caterer Compass Group PLC (LON:CPG), which was 3.1% lower at 1,075p after tapping the market for a cool £2bn.

“Compass’s move to become the fourth FTSE 100 firm to raise fresh equity this year, after Auto Trader, Carnival and Informa, suggests that fund raising is about to step up a gear,” speculated AJ Bell’s quote-smith, Russ Mould.

“The experiences of the London market after the 2000-03 and 2007-09 recessions and bear markets would suggest that new listing activity may stay quiet as reduced risk appetite and lower equity valuations deter would-be buyers and would-be sellers alike,” he added.

Low-cost airline easyjet PLC (LON:EZJ), up 0.9% at 556.6p, was defying the trend despite revealing it had succumbed to a cyber-attack.

Email addresses and travel details of around 9mln customers were accessed and 2,208 of those had their credit card details stolen.

11.00am: UK productivity suffers a relapse

London’s leading shares remain in the doldrums after it was revealed UK productivity hit the skids in the first quarter of 2020.

The FTSE 100 was down 39 points (0.6%) at 6,010.

The Office for National Statistics (ONS) first stab at estimating the impact of the coronavirus (COVID-19) on productivity in the UK indicated that labour productivity, as measured by output per hour, fell by 0.4% year-on-year in the first quarter.

Output per worker fell by 2.9%, compared with the same quarter in the previous year; the steeper fall than output per hour reflects the impact of a government policy that retains workers as employees with zero hours, but is also drivONS said.

Quarter-on-quarter, output per hour fell by 1.1%, while output per worker fell by 2.6%.

“While the coronavirus impact magnified the problems in the first quarter, the UK’s productivity performance has been weak for some time and a source of concern. Indeed, the flat overall productivity performance over 2019 after an underwhelming 2018 extends the UK’s overall poor productivity record since the deep 2008/9 recession,” observed Howard Archer, the chief economic advisor to the EY ITEM Club.

“The UK’s ‘productivity puzzle’ is a source of much debate and analysis. Part of the UK’s recent poor labour productivity performance has undoubtedly been that low wage growth has increased the attractiveness of employment for companies. This helped employment to hold up well during the 2008/9 downturn and to pick up markedly as growth returned.

“Employment may have been lifted in recent times by some UK companies being keen to take on workers – or at least hold on to them – given increasing concerns over labour shortages in some sectors.

“It also is apparent that many companies have taken on labour rather than committing to costly investment, given the highly uncertain economic and political outlook. The low cost and flexibility of labour relative to capital has certainly supported employment over investment,” Archer suggested.

9.50am: Bright start quickly fades

The Footsie has turned south after a bright start, led by two companies – Imperial Brands PLC (LON:IMB) and Antofagasta PLC (LON:ANTO) – that have cut dividends.

The FTSE 100 was down 27 points (0.2%) at 6,037.

IMPS, a long-time favourite of income investors, was down 6.4% at 1,548p after it cut its dividend by a third.

“Cigarette maker Imperial Brands is one of the last high yielding FTSE 100 companies to finally cave in and slash its dividend, in its case to reduce debt pressures. Prior to the news it was trading on a prospective yield of 11.5% which seemed too good to be true. Having slashed the payment by a third, investors can now expect an 8.7% yield after adjusting for today’s share price movement,” explained Russ Mould, AJ Bell’s investment director.

Imperial Brands was a popular stock among retail investors because the shares were cheap and the dividends were generous; however, it was less popular among income funds with only 21 funds and investment trusts having it as a top 10 holding.

“Fund managers may have been put off by the business disappointing with earnings in recent years as a result of tighter regulation hurting its efforts to sell vaping products.

“The business has also lost favour with many investors who now prefer more ethical investments. The idea of owning shares in a company whose products create significant health problems and are addictive is unthinkable for a lot of people,” he added.

Antofagasta fell 3.8% to 822.6p after it responded to an increase in new coronavirus infections in Chile, where the company has its major copper operations, by belatedly binning the final dividend in respect of fiscal 2019.

READ Antofagasta changes its mind and cuts dividend payments by a total of US$160.7mln

https://www.proactiveinvestors.co.uk/companies/news/919911/antofagasta-changes-its-mind-and-cuts-dividend-payments-by-a-total-of-us1607mln-919911.html
 

8.45am: Further advance for Footsie

The FTSE 100 built on Monday’s 249-point gain and pushed higher in early trade on Tuesday as traders digested better than anticipated UK jobs data.

London’s blue-chip benchmark opened 29 points better at 6,077.36.

Okay, the March jobless update is something of a lagging indicator of the health of UK PLC; however, the print came in significantly better than expected. Against expectations of a rise in unemployment to 4.4%, the read-out was 3.9%.

“It must be stressed that these numbers are for March, which for the UK only saw lockdown begin on the 23rd of the month,” pointed out James Hughes of Scope Markets.

On the oil market, Brent crude and WTI both continued their ascent. Tuesday sees the expiry of the June futures contract. Remember the fun and games a month ago as the May contract lapsed and oil prices dived into negative territory?

“We think fundamental right steps have been taken to get us on sounder footing,” Helima Croft, head of global commodities strategy at RBC, told CNBC.

She said the “green shoots of recovery in place,” as Chinese and US demand are improving, and OPEC plus ended its feuding and agreed to sharply cut output.

Turning to the stock movers, it was a second day airborne for British Airways owner IAG (LON:IAG), which climbed 7.8% amid hopes the possible discovery of a coronavirus vaccine could pave the way to a recovery in international travel.

Budget rival easyJet (LON:EZJ) followed in IAG’s vapour trails, rising 5.7%.

Cigarette maker Imperial Brands (LON:IMB) led the fallers with a 7.6% drop after it cut the dividend by a third to save cash during the coronavirus pandemic.

Proactive news headlines:

Aminex PLC (LON:AEX) has told investors it is now set to complete its pivotal farm-out transaction as the Tanzanian authorities have now issued a Tax Clearance Certificate, following the payment of a capital gains tax bill. It means that Aminex and new partner ARA Petroleum have satisfied all requirements for the government to approve the transfer of a 50% interest in the Ruvuma PSA. "This is a major milestone. With the receipt of the Tax Clearance Certificate from the TRA and with the onward submission to the TPDC, Aminex has now accomplished all of the conditions within our control in order to complete the Ruvuma farm-out," Robert Ambrose, Aminex chief executive said in a statement.

AFC Energy PLC (LON:AFC) has told investors it is advancing plans for its teams to return to their offices towards the end of May. In a statement, the group said key teams in the AFC business - science, engineering and manufacturing - have seen no slow down due to the coronavirus (COVID-19) pandemic and they are actively responding to new project development opportunities. No AFC staff were furloughed. It noted that it previously made arrangements so that certain staff members who were unable to work from home could access their offices and labs. The continued efforts of many staff members have ensured the continuity of validation work in AFC’s labs and manufacturing activities over these past few months, the group said.

Itaconix PLC (LON:ITX) said it has received US$200,000 in funding from a US government programme designed to help businesses keep their workforce employed during the coronavirus (COVID-19) crisis. The company said it received the maximum amount allowed under the programme based on its payroll and may qualify for partial forgiveness under the terms of the loan if certain payroll conditions are met. If these conditions are not met or the board chooses not to seek forgiveness, the loan is repayable in equal instalments over eighteen months commencing in December 2020.

FastForward Innovations Ltd’s (LON:FFWD) has noted that its portfolio firm, EMMAC Life Sciences, has become the first European cannabis company licensed to manufacture medical cannabis extracts as active pharmaceutical ingredients containing delta 9-tetrahydrocannabinol (THC) for commercial purposes at its Medalchemy manufacturing site in Spain. EMMAC said Medalchemy will immediately begin production and distribution of a number of medical cannabis products across multiple jurisdictions in Europe and beyond as well as supplying white-label medical cannabis products. FastForward holds a 2.3% interest in EMMAC.

AdEPT Technology Group PLC (LON:ADT) has unveiled a strategic partnership with 8x8, a global provider of pure cloud solutions. The two companies will jointly address the unified communications as a service (UCaaS) and contact centre as a service (CCaaS) markets. AdEPT said the partnership would allow it to win more unified communications (UC) business, with an initial focus on public sector organisations and healthcare providers.

Live Company Group PLC (LON:LVCG) has updated on its business activities as several countries began to ease their coronavirus pandemic lockdown restrictions. In a statement, the media group and owner of the BRICKLIVE brand said the first zoos were beginning to open in Germany, providing it with an opportunity to expand sales in the country, and added that it is also working with the JB Zoo in Michigan in the US to install its Animal Paradise tour ahead of a planned reopening at the end of May. The firm also confirmed that despite around a third of its events being postponed to the second half of 2020 and the first half of 2021, none have been cancelled at this time.

Rainbow Rare Earths Ltd (LON:RBW) has completed a structural and lithological review of the Gakara rare earths project in Burundi which has confirmed high priority areas for the group's ongoing exploration programme. The results of the structural review and other historical mining and exploration data are being incorporated into 3D models of mineral resources and exploration targets in compliance with the standards defined in the JORC Code, the company said. Trial mining and processing continues to demonstrate that high total rare earth oxide (TREO) grade ore sourced from across the licence area has similar metallurgical and mineralogical characteristics

Metal Tiger PLC (LON:MTR) noted that Cobre Ltd (ASX:CBE), a company in which it holds a 19.99% interest, has revealed plans to drill 6,000 metres at the Perrinvale project in Western Australia. Cobre’s upcoming drill programme includes 3,400 metres of reverse circulation drilling and 2,600 metres of diamond drilling (DD). The field crews have begun mobilising to site in preparation for the arrival of drill rigs later this month. Separately, Metal Tiger also announced the death of Terry Grammer, a non-executive director of the company.

Seeing Machines Limited (LON:SEE) said it has made the “difficult but necessary” decision to cut the cost base by A$12mln as it looks to navigate the “challenges” created by the global coronavirus pandemic. Among the initiatives being enacted by the company, the developer of in-vehicle eye-tracking technology, is the implementation of a four-day working week. Alongside this, chief executive Paul McGlone is taking a 20% pay cut and deferring his bonus for the year, while the chairman’s fees will be reduced by 30%. Operationally, Seeing Machines said it has restructured its business to “improve the focus on profits” for its three main units - automotive, fleet/off-road and aviation.

Arc Minerals Ltd (LON:ARCM) has acquired a further 20% interest in Zaco Investments Ltd, increasing Arc's interest to 72.5% from 52.5%. The additional interest has been acquired from Mumena Mushinge, a non-executive director of Arc and founder of the Zamsort project in Zambia, via an all-equity deal for 10 million new ordinary shares of no par value in the company. Mumena's stake in the Arc will increase to 6.87% of the company.  The remaining interest in Zaco will be held by Kopara Investments, Arc's partner at the Zamsort project.

Gfinity PLC (LON:GFIN), a leading esports and gaming solutions provider, announced that it has received warrant exercise notices over an aggregate of 14,650,000 new ordinary in the company with an exercise price of 1p per share, providing it with proceeds of £146,500.

Faron Pharmaceuticals Oy (LON:FARN) (NASDAQFIRSTNORTH:FARON) said its annual general meeting, which took place in Turku, Finland on Monday, May 18, approved all the proposals of the board of directors and its committees as set out in the notice of the AGM published on April 14. It added that the minutes of the AGM will be available on the company's website from June 1 at the latest.

Oriole Resources PLC (LON:ORR), the AIM-quoted exploration company focused on West Africa, has posted on its website a pre-recorded shareholder presentation and question and answer session ahead of the company's annual general meeting on May 26 which can be viewed via the following link: https://orioleresources.com/investors/reports-presentations/

Bluebird Merchant Ventures PLC (LON:BMV), the Korean focused gold development group, announced that Align Research Limited has initiated coverage on the company.  The research note is available from Align's website: http://www.alignresearch.co.uk/cpt-company/bluebird-merchant-ventures/

Benchmark Holdings PLC (LON:BMK), the aquaculture health, advanced nutrition, and genetics business, has said it will announce its Q2 and Interim results for the three and six month periods ended March 31, 2020, on Friday May 29.  It added that Peter George, its executive chairman, Septima Maguire, chief financial officer, and Trond Williksen, incoming CEO, will host a webcast for analysts on that day at 9.30am. To register your interest, please contact [email protected].

Shield Therapeutics PLC (LON:STX), a commercial-stage pharmaceutical company with a focus on addressing iron deficiency with its lead product Feraccru/Accrufer (ferric maltol), a novel oral iron treatment, has said it will announce its preliminary results for the year ended December 31, 2019, on Thursday, May 21.

6.45 am: Further gains expected 

The FTSE 100 is predicted to continue climbing on Tuesday as traders are optimistic about a potential recovery from the coronavirus (COVID-19) pandemic. 

London’s blue-chip benchmark was called 22 points higher by spread-betters, after a stonking 249-point, 4.3% gain on Monday to finish at 6,048.59.

Positivity in Europe extended to Wall Street, with the Dow Jones Industrials Average adding 912 points or 3.9% to close at 24,597.4, while the S&P 500 rose 3.2% and the Nasdaq Composite finished 2.4% higher. 

Asian stock indices were all in the green on Tuesday, with the Nikkei 225 up 2%, the Hang Seng up 1.9% and the Shanghai Composite up 0.6%.

“A mixture of optimism in relation to economies being opened up again, upbeat commentary from Fed Chair Jerome Powell, and positive results in relation to progress on a potential COVID-19 vaccine [is all helping],” said market analyst David Madden at CMC Markets.

Tuesday will bring more comments from Powell as he provides further congressional testimony, having expressed his confidence that the US economy will see a solid recovery in the second half of 2020 and declared there is “no limit” to what the US central bank is willing to do in terms of lending.

UK unemployment figures will be published at 7am this morning, covering the three months to the end of March, so they will only catch a small effect of the coronavirus lockdown.

There will be more timely data in the form of the claimant count rate for April, showing the shape of joblessness during the pandemic. 

In among the corporate announcements, there are half-year results from tobacco giant Imperial Brands PLC (LON:IMB), the last numbers before new boss Stefan Bomhard takes over in July.

It has not been a smooth-smoking time for the maker of Lambert & Butler and Gauloises, having over the past year stubbed out its target of 10% dividend growth and changed both its chief executive and chairman in the wake of a big profit warning last September related to its vaping business.

In its latest updates, the FTSE 100 group maintained that there had been no material impact from the coronavirus pandemic on its business so far, guiding to first-half adjusted earnings per share down 10% due to around £85mln of writedowns and provisions in vaping.

With Imperial being one of the few dividend-payers among London's blue chips, any changes in the payout would be a surprise, though an unchanged dividend for this year would imply a dividend yield of nearly 13%, the third-highest level in the FTSE 100.

Interim results from Greencore Group PLC (LON:GNC) come with analysts at Jefferies pointing to industry data for the three weeks to 30 April that showed sandwich sales via supermarkets, Greencore’s main market, dropped 60% - way worse than the 30% drop expected.

“[In March] we expected a short, sharp, shock that the balance sheet would be big enough to take,” analysts commented.

“Now, with more insight post-lockdown, we anticipate a deeper and longer shock — one that the balance sheet is still big enough to take, but which is likely to require a more fundamental re-positioning and adjustment of expectations.”

Around the markets:

  • Pound up 0.1% to US$1.2204
  • Oil flat, with Brent at US$32.50
  • Gold still rising, up 1.3% to US$1756.90

Significant announcements expected on Tuesday:

FinalsSpeedy Hire PLC (LON:SDY), DCC PLC (LON:DCC), Homeserve PLC (LON:HSV)

InterimsImperial Brands PLC (LON:IMB), Greencore Group PLC (LON:GNC), Shoe Zone PLC (LON:SHOE), Topps Tiles PLC (LON:TPT), UDG Healthcare PLC (LON:UDG), Avon Rubber PLC (LON:AVON), Hardide Plc (LON:HDD), Renew Holdings PLC (LON:RNWH), Tritax Eurobox PLC (LON:EBOX)

Trading statementsGlenveagh Properties PLC (LON:GLV)

AGMsRoyal Dutch Shell PLC (LON:RDSB)

Economic data: UK unemployment

City headlines:

Financial Times

  • US to back away from WHO move on Covid-19 drug patents as African states support call for medicine makers to share intellectual property
  • Private equity misses out on bailout loans as losses fall foul of EU rules
  • - Portfolio companies have been rejected because of a financial model that has also reduced taxes
  • Bond investors balk at use of ‘ebitdac’ to skirt debt restrictions - investors warn companies not to make coronavirus-related adjustments to boost profits

The Times

  • Britons were given fresh hope of a summer holiday abroad yesterday after the transport secretary announced plans for “air bridges” between countries with low coronavirus infection rates
  • Almost two thirds of fund managers and traders think that they will work from home for at least one day a week after the pandemic, according to a survey by Deutsche Bank that suggests a dramatic shift in City working patterns
  • Hurricanes, typhoons and cyclones are growing stronger in every region of the world because of climate change, new research suggests

Telegraph

  • France and Germany back €500bn fund to help save EU - new fund will offer grants instead of loans to hardest hit member states
  • Financial districts strive to become more family friendly - calls mount for new ways of working to become permanent as the City prepares for thousands of staff to come back to work
  • Al fresco dining ‘will not save restaurants’ - permissions for restaurants to use public squares or pedestrianised streets to seat customers are among plans being considered by ministers

Guardian

  • Aldi partners with Deliveroo for 30-minute grocery delivery service - supermarket to initially sell 150 essentials as online demand rises in lockdown
  • Renewable energy investors increasingly look to UK, says report, with decision to lift blocks on wind and solar projects having boosted ‘attractiveness’ ranking
  • UK gambling addiction much worse than thought, says YouGov, with research also warning that half of those with a problem are not getting help

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