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FTSE 100 big guns in the red as Wall Street eyes mixed start

  • FTSE 100 index sheds 55 points
  • Melrose descends after update
  • US stocks expected to be up and down
  • Tech in focus as Tesla and Microsoft results awaited later

12.40pm: Wall Street set for mixed start

Wall Street is expected to make a mixed start on Wednesday, while London stocks are chipping away at their losses from earlier in the morning.

The Dow Jones and S&P 500 are both expected to retreat after the opening bell, while the tech-jammed Nasdaq is seen buzzing higher, all three reversing their respective moves from the day before.

Commodities prices, such as crude oil and copper, plus a rally in US Treasuries, comes as “investors fear escalating tensions between the US-China will dampen the global outlook for technology and trade”, said market analyst Edward Maya at Oanda.

The US closed the Chinese consulate in Houston, with the State Department saying this was based on the need to protect American intellectual property and Americans private information, prompting China to consider the closure of the US consulate in Wuhan.

With Wall Street little apprehensive going into todays big tech earnings day, with Tesla and Microsoft reporting after the closing bell, Moya said “the China consulate action made it an easy decision for traders to head for the sidelines”.

In London, the FTSE has moved to 6,214, reducing its losses to 55 points or 0.9% on the day.

Almost all of the Footsies largest companies are firmly in the red, with only Reckitt Benckiser (LON:RB.) and LSE (LON:LSE) in the green among the indexs 20 biggest PLCs.

11.40am: Mid caps reverse gains

The FTSE 100 has taken a breather at a level 1% below where it finished yesterday as traders cast about for new catalysts, but small caps have reversed earlier gains.

London's large cap benchmark was down 65 points at just over 6,206.

However, the mid caps of the FTSE 250 are heading lower after starting the day on the front foot, down 0.5% to 17,408.

Property groups Hammerson (LON:HMSO) and St Modwen Properties (LON:SMP) are leading the falls after the latter sharply wrote down the value of two assets.

Hammerson was the most shorted UK-listed company this month, with 13.9% of its shares subject to short positions by hedge funds, according to new research.

Also of interest to property and retail investors, there was a leftfield report out earlier from the Social Market Foundation thinktank, suggesting UK town centres should be turned into residential hubs, creating at least 800,000 homes.

The thinktank said the decline of the traditional high street and the rise of homeworking meant policies to revitalise high streets were futile and that empty stores should turned into homes or be torn down to allow the building of apartments to support “new and more beneficial uses for town-centre sites”.

10.45am: FTSE fall steepens

Stocks are falling in London and across Europe as investors take profits and China tensions creep back up.

The Footsie index has steepened its descent as Wednesday morning went on, now down 64 points or 1% to 6,206.22.

Stock markets were handing back some of the gains that were achieved in the past few sessions, said market analyst David Madden at CMC.

“The bullish move in recent days was connected to the EUs €750 billion rescue fund meeting, and confirmation came through yesterday that a deal was struck.

“Now that the dust has settled, some dealers are banking their profits.”

In the past hour, it was announced the US government ordered one of its Chinese consulates to close, which Madden said had added to the cautious mood.

“Tensions between the US and China have been brewing recently in relation to Hong Kong, and this could be the next chapter of the frosty relations between the two countries.”

Bringing the UK back into the mix after relations were soured by the Huawei telecoms network decision this month, tensions were further elevated yesterday by unsubstantiated comments from US Secretary of State Mike Pompeo and his day trip to London to meet MPs yesterday, where he accused the Peoples Republic of “buying” support from the World Health Organisation.

“I cant say more, but I can tell, Im saying this on a firm intelligence foundation, a deal was made … there was a deal making election and when push came to shove, you get dead Britons,” Pompeo is quoted as saying.

9.40am: Dull turns to distinctly downbeat

The FTSE 100 has continued its downward path, in sync with other European indices.

Londons blue chip index has fallen 39 points or 0.6% to 6,230.26, led by travel and leisure stocks, aerospace and financials.

With aero and auto engineer Melrose leading the way, other major fallers include Asia-focused Burberry (LON:BRBY), HSBC (LON:HSBA) and Prudential (LON:PRU).

The Footsies high proportion over overseas focused stocks is under extra pressure with the pound having hit its best level in a month.

Sterling could not keep up the momentum, however, and has retreated 0.6% to US$1.2655.

“It has been an interesting start to the second half for the markets as they swing between despair at the mounting number of Covid-19 cases across the globe and hope driven by financial stimulus and developments on a potential vaccine,” said Russ Mould, investment director at AJ Bell.

The downbeat feel to markets on Wednesday followed a mixed session in the US after President Trump admitted the coronavirus pandemic is likely to “get worse before it gets better”, which fed into a mostly negative session in Asia.

“Earnings later from Microsoft and Tesla could help define the trading pattern for the remainder of the week,” said Mould. (PREVIEW: Microsoft and Tesla earnings put tech sector in spotlight.)

“Corporate news should also pick up in the UK from next week onwards as first-half results reveal the full damage wrought by coronavirus.”

8.50am: Dull early progress

The FTSE 100 index retreated in early trade on Wednesday as investors piled into gold again as the price of the yellow metal, a haven in times of uncertainty, appeared to signal something that world stock markets are continuing to ignore.

The UK benchmark was down 29 points to 6,240.62.

The value of an ounce of the yellow metal is currently bubbling just under the record levels last seen in 2011, and is set to hit US$2,000 this year, according to American investment bank Citi.

This momentum perhaps reflects a more realistic assessment of the prospects for the world economy faced with a worsening coronavirus (COVID-19) pandemic in the US and a second spike in countries with the spread supposedly under control.

The dollar fell for a fourth day as US President, Donald Trump warned the coronavirus spread will likely get worse before it improves, while receding crude oil futures reflected widespread pessimism over global growth.

Scores on the doors

Fresnillo (LON:FRES), a Mexican silver miner whose share price is closely aligned to the fortunes of gold, was up 6.7% early on, as it posted a mixed quarterly production update. Polymetal (LON:POLY) rose 3.2%.

A coronavirus lockdown DIY boom was behind the strong showing from B&Q owner Kingfisher (LON:KGF), which advanced 10.9% in the wake of an upbeat trading update.

Melrose Industries (LON:MLRO), owner of aero-engineer GKN, tumbled 13% after it said its losses had continued to mount up and it warned job cuts were “inevitable”.

Proactive news headlines:

Itaconix PLC (LON:ITX) (OTCQB:ITXXF) said it has continued to enjoy improved momentum in its first-half with strong demand for its range of specialty polymers. In a trading update for the half-year to June 30, 2020, the leading innovator in sustainable specialty polymers, said unaudited revenues for the first six months of the year were US$1.1mln, representing around 80% growth over the equivalent period in 2019 and about 62% over the second half of 2019. Itaconix said volumes and revenues increased from new and recurring orders in detergent, odour control, and personal care applications.

Zoetic International PLC (LON:ZOE) has made a three-pronged change to streamline its cultivation strategy. The cannabinoid (CBD) specialist is expanding its seed testing programme via a partnership with GVB Biopharma; it is terminating the lease on its Colorado production facility; and it has struck a European joint-venture to grow high-quality hemp seeds.

ADM Energy PLC (LON:ADME) (FSE:P4JC), a natural resources investing company, has announced the appointment of influential German industry investor Dr Stefan Liebing to its board as a non-executive director with immediate effect. Liebing is the chairman of Afrika-Verein der deutschen Wirtschaft e.V., the prestigious German-African Business Association, where, as part of his role, he advises the German Government on investment in Africa. He chaired the G20 Compact with Africa investment summits in 2018 and 2019, held under the patronage of Chancellor Angela Merkel. He is the CEO of Conjuncta GmbH, a boutique investment and project development company. Previously, Liebing was a director of International Gas Business at EnBW Energie Baden-Wuerttemberg AG, one of the largest energy supply companies in Europe, and earlier in his career held various senior positions at Royal Dutch Shell.

Scancell Holdings PLC (LON:SCLP) has unveiled plans to raise up to £15mln to support the continued initial development of a coronavirus (COVID-19) vaccine as well as clinical trials and partnering discussions for its antibody technology. The immunotherapy developer said it is planning to raise £5mln through a subscription of 90.9mln new shares at a price of 5.5p each, a 19.7% discount to its closing price on Tuesday, to US specialist healthcare investor Redmile Group. Scancell said it will also offer a subscription for convertible loan notes with an aggregate principal amount of £6mln and conversion price of 6.2p per share, with £5mln to be subscribed for by Redmile and £1mln in to be subscribed for by Vulpes, one of its substantial shareholders. The company is also planning to raise £2mln through a placing with new and existing shareholders at 5.5p, of which Vulpes intends to subscribe for 18.18mln shares for £1mln, as well as an open offer of up to £2mln at the same price to qualifying shareholders.

Metal Tiger PLC (LON:MTR) said it has invested in Toronto-listed Pan Global Resources Inc (CVE:PGZ) via a share subscription. It has invested the equivalent of £146,000, buying 1.38mln units – comprising one share and one half-share warrant – priced at 18 Canadian cents per unit. Pan Global is a Spain-focused base-metals explorer with two projects, Aguilas and Escacena, with the latter being the main focus.

Iofina PLC (LON:IOF) said its performance in the first half has been “solid in spite of the difficult events affecting the world” as it updated on production from its iodine plants during the coronavirus (COVID-19) pandemic. The AIM-listed chemical products group said it produced 284.4 metric tonnes (MT) of crystalline iodine in the first half of 2020, in line with the 286.7 MT produced a year earlier. With all five plants running as normal, the firm expects iodine production for the second half to be between 340-360 MT, noting that prices had remained “encouragingly” steady at US$35 per kilo or above in the second quarter of 2020 and into the third. Iofina also said that it is continuing to progress a debt refinancing package with a new lender, although the process has been impacted by the pandemic and the new terms are likely to include a term loan as well as a revolving line of credit to meet the companys debt repayment obligations.

Nuformix PLC (LON:NFX) said there has been increased interest in its assets and their potential treatment for coronavirus (COVID-19), as well as the resultant fibrosis. “These business discussions are confidential and further announcements will be made as and when appropriate,” the drug developer told investors as it reported its preliminary results for the year ended March 31, 2020. The group, a specialist in cocrystal technology, also touched on its strategy review in the few weeks since the resignation of chief executive Dan Gooding. The new approach will focus on licensing agreements and fee-for-service work; the use of its technology to create out-licensing opportunities; co-development tie-ups to extend the patent life of generic products.

Kodal Minerals PLC (LON:KOD) has told investors it is looking ahead to a challenging but exciting period with full permitting of the Bougouni Lithium project targeted. Posting full-year results for the period to March 31, 2020, the group said it expects to see Bougouni move into the next stage of development, including final engineering design and financing negotiations for construction. The pre-revenue explorer reported a £629,504 loss for the year ended March 31, down from £712,611 in the preceding year.

Base Resources Limited (LON:BSE) (ASX:BSE) has advised shareholders that Numis Securities has ceased to be a joint broker of the company. It added that Berenberg continues as Base Resources broker.

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