FTSE 100 closes in red as markets await US Fed’s economic projections

  • FTSE 100 index closes six points lower
  • Markets jittery ahead of Fed statement
  • Zoos and outdoor venues allowed to open on June 15

5.05pm; FTSE closes in the red

FTSE 100 index closed slightly in the red midweek as markets await the US Fed's economic projections for 2020.

The US central bank didn't put out a March summary understandably due to the unfolding pandemic but today's analysis is expected to show a collapse in economic output for this year in the USA , the world's largest economy, and near-zero interest rates for the next few years.

Footsie closed Wednesday down over six points at 6,329, while midcap cousin FTSE 250 was also off, losing over 149 points to finish at 17,605.

"Todays event is unlikely to be the blockbuster, shock and awe outing that we have become used to in recent months, which perhaps accounts for the markets nervousness," said Chris Beauchamp, chief market analyst at IG, in a note.

"The relative improvement in data and the huge market surge sets up a very different scenario than was the case the last time Powell and his committee met, with a vastly increased potential for a sudden move to the downside as the bubble of market euphoria pops."

Top Footsie laggard was Just Eat Takeaway.com NV (LON: JET), which shed over 13% on the day at 7,626p. Reports emerged the European takeaway firm was in advanced talks to buy GrubHub Inc (NYSE:GRUB) in an all paper deal. Last month, the ride hailing group Uber had also approached the US firm.

“Should this go ahead, then it will give Just Eat a foothold in the huge American market through an already established player while Uber may have to look overseas themselves for another partner," said Helal Mial, an analyst at The Share Centre, adding the industry was ripe for consolidation.

3.45pm: Bank of England sees recovery signs from easier lockdown restrictions

The Footsie was underwater again ahead of the close, dropping 15 points to 6,319.

The markets were shaken earlier today after the OECD warned the UK will take the hardest hit among the most developed economies, with a 11.5% GDP contraction this year.

However, investors were not crushed since it was a better prediction than the 14% slump previously estimated by the Bank of England.

Meanwhile, BoE governor Andrew Bailey said on Wednesday afternoon that lifting lockdown restrictions was providing some signs of economic recovery, though long-term damage cannot be avoided.

“If there is any such thing as a normal recession … this one will be different. There will be elements of a faster recovery, because the first stage of the recovery is literally lifting restrictions and allowing people to go out,” he told a panel at the World Economic Forum.

“We dont know how much scarring there will be. I think it is reasonable to say there will be some but it is very hard to judge.”

2.30pm: FTSE 100 back in the green as Wall Street opens higher

The Footsie swung back in the green as US indices opened higher.

Londons big caps added 12 points to 6,347, while the Dow Jones added 4 points to 27,276 and the S&P500 gained 6 points to 3,214.

Markets are eager to hear this evenings Fed statement on the economic forecast.

Chairman Jerome Powell is expected to acknowledge the recovery is on its way, though risks remain.

“The Fed will signal no change in interest rates are expected over the next two years and that the next move will be a hike when the labour situation improves significantly,” said Edward Moya, analyst at OANDA.

“Given the strong start to the economic rebound, negative rates seem unnecessary now and Fed watchers will want to find out if discussions begun about adopting yield curve control. The Fed will do their part to ensure a low interest rate environment stays in place over the next few years.”

12.50pm: Wall Street to open on a flatline

FTSE 100 trimmed its earlier losses at lunchtime, dipping only 6 points to 6,329, while Wall Street is expected to open flat.

Connor Campbell, analyst at Spreadex, said the US indices may be influenced by “by both this mornings alarming headlines, and the fact that more are likely on their way from the Fed later today”.

Meanwhile, Ashtead Group PLC (LON:AHT) lost 2% to 2,493p after a downgrade by RBC Capital Markets due to uncertainty over the US economic outlook.

While the construction equipment hire group “is an excellent business and is well-positioned to take share into a recovery”, the analysts said “the size and shape of a recovery is uncertain”.

The Canadian bank downgraded to sector perform from outperform but the price target was lifted to 2,600p from 2,200p.

The last update from the company was in late April, when it said it has slashed its cash spending but the level of US fleet on rent had stabilised in the preceding weeks.

12noon: Zoos, drive in cinemas to reopen next week

FTSE 100 was still down 17 points to 6,318 as it got closer to lunchtime.

Meanwhile, zoos, safari parks and drive-in cinemas in England will be allowed to reopen from June 15, alongside all non-essential retailers.

Prime Minister Boris Johnson is expected to make these announcements at the daily press conference in Downing Street later today.

Back to the Footsie, International Consolidated Airlines Groups (LON:IAG) British Airways is reportedly selling artwork to cope with its financial woes.

The airline brought in valuers from Sothebys to put price tags on its art collection, including works by Damien Hirst and Peter Doig, the Evening Standard reported.

Some of the pieces, displayed in its lounges for decades, are worth over £1mln each.

Last week, BA said it is burning £178mln while unions continue to accuse the firm of firing staff only to rehire them on worse terms and lower salaries amid the crisis.

Shares in IAG were 6% lower at 293.2p on Wednesday.

10.50am: UK to be hardest-hit economy

The Footsie slipped into the red as the Organisation for Economic Co-operation and Development (OECD) warned the UK will take the hardest hit among the most developed economies.

The intergovernmental organisation forecast an 11.5% fall in Britains national income (GDP) this year, outstripping France, Italy and Spain which will drop by 11.4%, 11.3% and 11.1% respectively.

The contraction could be as much as 14% in the case of a second wave of infections, while the world economy is expected to shrink by 6%.

Goodbye V-shaped recovery.

The OECD massively cuts GDP growth estimates. pic.twitter.com/qGaR4SrgqG

— Daniel Lacalle (@dlacalle_IA) June 10, 2020

Londons leading index shed 28 points to 6,307, while sterling was up 0.2% to US$1.2749.

9.50am: Whitbread and Segro dip on fundraising plans

FTSE 100 trimmed its gains in mid-morning, adding 20 points to 6,356.

In the index, Whitbread PLC (LON:WTB) and Segro PLC (LON:SGRO) were lower on their plans to raise fresh funds.

Hotel operator Whitbread dipped 2% to 2,600p after receiving a 91.4% take-up for its deeply-discounted 1-for-2 £1bn rights issue that was priced at 1,500p a share.

The Premier Inn owner announced it in May to cover what it said would be cash outflows of around £600mln while its hotels remained closed amid lockdowns.

The current monthly cash burn was £80mln, with an extra £100mln outflow predicted for customer refunds as well as £130mln of capital expenditure earmarked for committed projects.

Meanwhile, Segro lost 1% to 850.6p after revealing it placed 82mln shares at 820p each, a 4.5% discount to Tuesdays closing price, representing 7.5% of its issued ordinary share capital.

The size was increased to £680mln from £650mln after high demand from investors.

The warehouse owner is eyeing £1bn worth of deals over the next year and a half, through pre-let developments as well as acquisitions of land and investment assets.

8.45am: Modest rally

As the recent impressive rally stalled on Wall Street, so the FTSE 100 sparked back to life in early trade on Wednesday morning in the wake in what is fast becoming an 'opposite week' for transatlantic stock markets.

The index of UK blue-chips opened 41 points to the good at 6,377.13.

But beware, the positivity this side of the Pond may quickly wane as the US Federal Reserve makes its first economic predictions since December later today.

This quote from the Financial Times sums up the predicament of the Fed chair and his team of tea leaf readers: “In some of his last public remarks at the end of May, [Jerome] Powell trotted out the old quip by the late economist John Kenneth Galbraith that economic forecasting existed to make astrology look respectable."

The magical mystery tour of cruise operator Carnival (LON:CCL) continued Wednesday with a further 4% gain. Had you bought a month ago youd be sitting on a 60% profit.

Not bad. However, buyers at the start of the year, when the stock was £37, are still nursing losses of around 58%.

Banking stocks were also in demand with Lloyds (LON:LLOY) leading the way with a 4% gain. In Germany, an activist investor is threatening to shake things up at Commerzbank.

Proactive news headlines:

e-therapeutics PLC (LON: ETX.L) is teaming up with Belgian life sciences giant Galapagos to uncover a new means of treating idiopathic pulmonary fibrosis, a serious lung disease with a poor prognosis. The work, which will lean into ETXs expertise in network biology and in-silico phenotypic screening, will focus on approaches to modulate one specific mechanism involved in IPF and other fibrotic conditions. Financial details were not provided; however, the UK company said it will receive “upfront and near-term payments material to [its] cash position”. It is also eligible for pre-clinical and clinical development and commercial milestone payments.

Ergomed PLC (LON:ERGO) executive chairman, Dr Miroslav Reljanović has told shareholders in advance of Wednesdays closed annual general meeting that the company, which is focused on providing specialised services to the pharmaceutical industry, “had a good first quarter, with solid overall growth in revenue.” In a statement released ahead of the AGM, Reljanović concluded: “At this time the Company is confident that results will be in line with current market expectations for the 2020 financial year.”

Metal Tiger PLC (LON:MTR) has completed a third financing arrangement with its lender under an umbrella facility, which will see it borrow a further A$1.17mln. The natural resources investor said it has entered a stock lending arrangement under which the lender will be able to borrow up to 289,109 shares in Australian explorer Sandfire Resources (ASX:SFR), while the company also has the right to sell 289,109 Sandfire shares to the lender in three years at 80% of the A$5.05 reference price. The lender also has the right to buy 289,109 Sandfire shares in three years at a premium of 145% to the reference price. Metal Tiger said it will use the proceeds to fund potential investment opportunities, adding that it can also agree with the lender to increase the size of the financing arrangement at later date.

Tower Resources PLC (LON:TRP) has told investors that its projects in Cameroon, South Africa and Namibia remain attractive even amidst crude oil market volatility. Posting its 2019 full-year results, the company noted that Brent crude is now trading at around US$40 per barrel, longer-term pricing (the December 2025 future) is pitched above US$52 per barrel, and there is potential for a tightening of supply in the coming years due to industry-wide cuts in capital investment. Even if prices slide back to US$45 per barrel the company believes its projects are attractive.

DP Poland PLC (LON:DPP) has announced that its annual general meeting will be held at Shafts Farm, West Meon, Hampshire GU32 1LU on June 26, 2020, at 9.00am. In light of the current coronavirus (COVID-19) situation and related legal and other requirements of governmental authorities, it is required that shareholders do not attend in person but instead appoint the chairman of the meeting as their proxy (either electronically or by post) with their voting instructions. If any shareholder has a question they would like to put to the board relating to the business to be conducted at the AGM, this should be submitted to the chairman via [email protected].

Adamas Finance Asia Limited (LON:ADAM), the London quoted company focused on providing shareholders with attractive uncorrelated, risk-adjusted returns from a diversified portfolio of pan-Asian investments has said that it will hold its delayed 2019 AGM and 2020 AGM concurrently on August 14, 2020. The company announced on November 14, 2019 that due to the civil unrest in Hong Kong at the end of 2019 it was further postponing the 2019 AGM. Since then, the coronavirus (COVID-19) pandemic has presented further issues in convening such a meeting. Given the extenuating circumstRead More – Source

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