FTSE 100 tanks over 2% as global economic cost of pandemic begins to sink in
- FTSE 100 index closes down over 136 points
- US indices mainly down
- IATA warns of "worst year" ever for airlines
5.15pm: FTSE 100 closes sharply lower
FTSE 100 index closed deeply in the red as global markets took a pounding again as the harsh reality of the damage caused by the pandemic began to sink in.
Britain's benchmark index of the biggest UK companies closed down over 136 points down, or 2.12%, at 6,335. FTSE 250 also staggered to the close, plunging 381 points at 17,755.
"Yesterday, the World Bank forecasted the global economy will contract by 5.2% in 2020, which would be the largest contraction since the second world war," noted analyst David Madden, at CMC Markets.
Moreover, the fact that so many countries have suffered means the scale of the downturn is worse than any recession in 150 years, the World Bank also added on Monday.
Madden suggested that share dealers have been shrugging off the "terrible economic indicators that were released recently as they just focused on the reopening of economies, but now it seems they are facing up to the harsh reality of the situation".
In London, the sell-off was broad, with mining, oil, banking, airline, hospitality, and house building stocks all heading south.
Meggitt PLC (LON: MGGT), the engineering titan, was the biggest Footsie laggard, dropping almost 8% to 329p.
3.35pm: FTSE 100 in the doldrums
Heading into the final hour of Tuesdays session, the FTSE 100 had failed to make much positive headway and was down 141 points at 6,330 at around 3.35pm.
The blue-chip index is being followed by the US markets, which are also in a sea of red as optimism carried over from last weeks job report seems to have finally worn off and traders seem content to wait for the outcome of the Feds meeting on Wednesday.
Sentiment is also likely to have been shaken by sharp falls in trade from France, Germany and the rest of the eurozone, while bleak forecasts for the airline industry from the IATA are unlikely to have helped matters.
Coming at the bottom of the FTSE 100s fallers was engineering group Meggitt PLC (LON:MGGT), which was down 7.6% at 330.4p in late-afternoon, while at the top of the risers list was industrial software group AVEVA Group PLC (LON:AVV), which jumped 4.6% to 4,203p following a 97% surge in full-year profits.
2.40pm: Wall Street opens lower
The US markets have opened in negative territory as investor enthusiasm continued to pull back from Mondays highs.
Shortly after the opening bell, the Dow Jones Industrial Average fell 1.28% to 27,218 while the S&P 500 slipped 1.08% to 3,197 and the Nasdaq dropped 0.6% to 9,865.
Wall Street seems unlikely to lodge any new records as traders seem to have begun questioning the wisdom of the market as optimism seems to have pulled too far from the situation on the ground, particularly the continuation of a global pandemic and social unrest across the world.
An indication of the economic damage wrought by the coronavirus gained more clarity earlier today when the International Air Transport Association (IATA) warned that the airline industry could suffer the worst year in its history with 2020 losses expected to total US$84bn.
Investors may also be looking to keep their powder dry ahead of the Feds economic forecasts due after its meeting tomorrow.
Meanwhile, in London, the FTSE 100 was also firmly in the red, down 116 points at 6,356 shortly before 2.40pm.
12.55pm: US indices to step back
Investors have allowed an element of doubt to creep in after a run that saw the Footsie return to pre-lockdown levels.
Londons index of blue-chip shares was down 103 points (1.6%) at 6,370.
“All this comes after a stellar Monday session in the US, one that saw the Nasdaq hit an all-time high and the Dow Jones reach a 15-week peak,” observed Spreadexs Connor Campbell.
“Those long- and short-term records, however, may well have inspired Tuesdays losses. Investors might be questioning the wisdom of such highs in a world still very firmly in the middle of a pandemic.
“The Dow Jones looks like it has been infected by Europes concerns. The futures have the index losing 300 points when trading gets underway stateside, a decline that would send the Dow back under 27.300,” he added.
In the UK, the NFIB index of small business activity and sentiment for May rose to 94.4 from 90.9 in April. The consensus forecast had been for a reading of 92.5.
“The NFIB small business jobs report, released last Thursday, clearly hinted at a rebound in the headline index today, reporting a seven-point jump in hiring plans. The full report today also shows sales expectations surging 18 points—a result of the reopening—and economic expectations rising five points,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.
“Earnings expectations fell, though, perhaps suggesting that business owners recognise that not all of the lost ground will be recovered. Elsewhere, capex plans rose two points, and selling prices rose four points, though thats probably due mostly to the rebound in gasoline prices. All the numbers, however, remain depressed, with the exception of the economic expectations component, which is the most sensitive to the near-term performance of the stock market,” he added.
11.40am: Gloomy jobs outlook
File under “Things we probably didnt need to be told”. An employment survey by recruitment firm Manpower says the outlook for jobs is very gloomy.
The survey reported that companies in all big sectors of the economy are more likely to cut jobs than to hire people over the next three months, from July to September.
The net employment outlook figure, calculated simply by subtracting the number of employers per 100 who are looking to cut staff from the number per hundred who are looking to recruit, fell to -12.
Its the weakest forecast since Manpower began the survey in 1992.
"The level of disruption is unprecedented and many will be looking closely at what happens next with how COVID-19 progresses, how consumers respond and what all this means for their own operations,” said Mark Cahill, the managing director of ManpowerGroup UK.
Meanwhile, in the stock market, the FTSE 100 was ending the morning shuffling sideways. The index was down 115 points (1.8%) at 6,358.
10.20am: Oil majors add to the Footsie's woes as Brent crude price slides
Londons index of leading shares is nursing a triple-digit loss despite sterling losing almost a cent against the dollar on forex markets.
The FTSE 100 was down 111 points (1.7%) at 6,382, with the heavily-weighted oilers adding to the woe, as the price of Brent crude slides to US$39.97 a barrel on the futures market from US$40.80 overnight.
Royal Dutch Shell (LON:RDSB) was down 5.1% at 1,388p while BP PLC (LON:BP.) was down 2.4% at 357.15p.
Software company AVEVA Group PLC (LON:AVV), which derives around 40% of its revenues from the oil and gas industry, defied the trend with a 4.6% hike to 4,203p following its full-year results.
Adjusted underlying earnings (EBIT) surged 23.3% to £216.8mln from £1754.9mln the year before.
9.20am: Retail sales "less terrible" in May
“About turn,” was the command this morning, with the Footsie led lower mostly by those companies that have led it higher recently.
Londons index of leading shares was down 43 points (0.7%) at 6,429, with British Airways owner International Consolidated Airlines (LON:IAG) the top faller, down 6.5% at 309.9p.
Retailers were holding up well reasonably well after data from the British Retail Consortium (BRC).
The BRCs survey of its members indicated that the value of retail sales at High Street retailers was down 5.9% year-on-year in May, which was the second-sharpest drop since the survey started but was a big improvement on the 19.9% plunge in April.
“Sales in May demonstrated yet another month of struggle for retailers across the country, despite an improvement on the previous month. Nonetheless, as the sun came out and restaurants lay dormant, food sales rose with consumers taking to their local parks for beers, BBQs and picnics. Clothing and beauty sales improved slightly on April, as people left their homes to meet outside with friends and family,” commented Helen Dickinson, the chief executive of the BRC.
“Continuing the lockdown trend, office supplies, fitness equipment and bicycles all performed well, thanks to strong online sales and DIY was boosted by the opening of garden centres; however, for those shops whose doors remain shuttered it was once again a tough month and even those who stayed open suffered reduced footfall and huge costs implementing social distancing measures,” she added.
Bike seller Halfords PLC (LON:HFD) did not derive any boost from the BRCs comment about booming bicycle sales – the shares were down 1.4% at 182.4p – and likewise, DIY retailer Kingfisher PLC (LON:KGF), down 3.5% at 203.5p, felt no benefit from reports of the smell of burning meat in Britains back gardens, probably because traders had spotted these trends a while back.
Discounts didn't help UK fashion retail in May say Barclaycard, BRC https://t.co/xFM9Mi7l1z pic.twitter.com/UFTaJ2dcT1
— FashionNetwork Worldwide (@FNW_WW) June 9, 2020
8.40am: Profit-takers move in
Traders apparently neglected to read the script with the FTSE 100 opening lower on Tuesday in spite of a bumper close to proceedings on Wall Street overnight, US markets having now clawed back almost all of their losses since February's collapse.
The UK large-caps index, however, opened down 24 points at 6,449.02, reversing some of its recent rally.
Here in the UK, irrational exuberance has been replaced by circumspection with the UK blue-chip index seemingly stalled around the 6,500-mark, more than a 1,000-points below its year high.
Eurozone GDP numbers later may offer a guide, but not a definitive reading on how the near continent has fared during the coronavirus lockdown – and may account for the caution.
On the market, the travel stocks continued to bubble along in positive territory, buoyed by hopes restrictions on international movement may be further lifted.
Cruise operator Carnival (LON:CCL) steamed to the top of the Footsie risers list with a 9% gain. British Airways owner IAG (LON:IAG) was up 3.3%.
British American Tobacco (LON:BAT) fell 3% after stricter than expected lockdowns in some of its major Latin American territories resulted in a mini-earnings alert.
But as Interactive Investor stocks guru Richard Hunter pointed out: “The road ahead may be strewn with obstacles, but BATS historic resilience will likely give the company a fighting chance in maintaining its premier position.
“Providing guidance and confirming dividend aspirations are becoming increasingly rare in the current environment, but in a refreshing change BATS has delivered both.”
Proactive news headlines:
Bahamas Petroleum Company PLC (LON:BPC) has expanded its footprint, acquiring acreage offshore Uruguay. The company said it has been awarded the OFF-1 licence which has been estimated internally to host 1bn barrels of oil equivalent resource potential. Specifically, the company noted the presence of multiple exploration plays in relatively shallow waters across the new licence, which spans some 15,000 square kilometres.
Braveheart Investment Group PLC (LON:BRH) has delivered an update on the development of a coronavirus (COVID-19) test by its investee company, Paraytec Limited, in partnership with the University of Sheffield. The AIM-listed firm said the required affinity macromolecule, an aptamer that binds to the SPIKE glycoprotein on the surface of the virus, has now been successfully synthesised and supplied to Paraytec. The aptamer is designed to trap the virus on the testing service so it can be coated with a fluorescent module that allows detection.
Blue Star Capital PLC (LON:BLU) said it has raised £500,000 via a stock placing at 0.12p a share, a modest discount to Mondays closing price. Backing the fundraiser was Paniolo Ventures Inc, a Canadian investment fund, which bought £250,000 of stock and now has 5.55% of Blue Star's enlarged equity base. Existing investor Nicholas Slater has increased his shareholding to 13.41% from 10.72% after buying shares worth £175,000.
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Caledonia Mining Corporation PLC (LON:CMCL) said it has been notified that Mark Learmonth, a director of the company has sold 10,000 depositary interests in common shares of the company at a price of 12.025p each. It noted that Learmonth now holds 139,775 depositary interests which represent a holding of approximately 1.2% of the share capital of the company.
ADES International Holding PLC (LON:ADES), a leading oil & gas drilling and production services provider in the Middle East and North Africa (MENA), has said it will be posting its first-quarter 2020 trading update on June 11, 2020, through which the group will update the market on its key financial and operational highlights for the first three months ending March 31, 2020.
Alien Metals Ltd (LON:UFO), a minerals exploration and development company, has said it will be hosting a webinar presentation and Q&A session which will go live on Tuesday, June 23 at 3.00pm GMT. The presentation will be made by Bill Brodie Good, Alien Metals technical director, who will update shareholders and interested parties on the company's current exploration programs. Any questions investors have to be submitted via [email protected] by Monday, June 15, 2020, so they can be incorporated into the Q&A session. Those looking to take part will be able to access the webinar shortly before 3pm on Tuesday, June 23 via the following link: https://www.bigmarker.com/share-talk/Alien-Metals-PLC-Investor-Presentation-and-Q-A-Session
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