Britain

FTSE 100 closes sharply lower as fears over US, China relations spook markets

  • FTSE 100 index closes 157 points lower
  • Chicago Purchasing Managers Index for May falls to 32.3 from 35.4 in April
  • Eyes on President Trump's press conference

5.00pm: FTSE 100 closes deeply in red

FTSE 100 index closed Friday firmly in the red as markets fretted over a potential further deterioration in US/China relations.

Britain's blue chip benchmark finished around 157 points lower at 6,061 on the day, but over the week as a whole, the index was up around 1.13%

On Wall Street, the Dow Jones is off 184 points at 22,215, while the S&P 500 lost over 11 points at 3,018.

President Donald trump is due to deliver a press conference later, which will reportedly deal with relations between the two superpowers.

"Animosity between the two governments has been growing lately as the US are not happy with the way the Beijing administration is treating minority communities," noted David Madden, analyst at CMC Markets.

"In addition to that, the Chinese government are keen to tighten their grip on Hong Kong and that has vexed the US too," said Madden, who added that the possibility of another prolonged spat between Washington and Beijing may be on the cards.

3.10pm: Dull end to an otherwise bright week

The Footsie was nursing a triple-digit decline heading into the final 90 minutes of this weeks trading.

The index of Londons heavyweight shares was down 113 points (1.8%) at 6,106.

Stateside, the Chicago Purchasing Managers Index for May fell to 32.3 from 35.4 in April; the consensus forecast was for a reading of 40.0.

“The consensus always looked a bit ambitious, despite gains in other regional surveys, because the Chicago report is uniquely vulnerable to the troubles at Boeing, whose HQ is in the city,” observed Ian Shepherdson, the chief economist at Pantheon Macroeconomics.

“Boeing was in deep trouble even before the COVID pandemic, due to the 737MAX crashes. Accordingly, were still inclined to look next week for a modest increase in the national ISM manufacturing index, though a full recovery in the sector will take many months, at least,” he added.

2.40pm: US stocks mostly lower

US indices opened lower, except for the NASDAQ Composite, which went its own way today, as it did at yesterdays open.

The Dow Jones industrial average was down 120 points (0.5%) at 25,281 and the S&P 500 was off 9 points (0.3%) at 3,021 but the NASDAQ Composite was up 19 points (0.2%) at 9,388.

In London, the FTSE 100 was down 85 points (1.4%) at 6,134.

Away from the blue-chips, SIG PLC (LON:SHI) was wanted, despite announcing a £150mln cash call.

The insulation, roofing and building exteriors maker said sales fell 37% in March and April due to the impact of coronavirus but are now returning to previous levels in most of its operations.

The shares were up 3.9% at 29.1p.

1.40pm:"Nightmare" presidential election year for Trump

UK blue-chips have perked up a bit an hour ahead of the US open but remain lower on balance.

The FTSE 100 was down 54 points (0.9%) at 6,165.

“We're seeing a far more cautious tone at the end of the week as deteriorating relations between the US and China weigh on sentiment,” said OANDAs Craig Erlam.

“Trump is due to hold a press conference on China today, which will likely involve laying out the country's response to the National People's Congress passing of the controversial security bill legislation. There's a wide range of ways the US could respond which is what's making people nervous, especially as it's likely to lead to another tit-for-tat spar between the two countries.

“This is turning into a nightmare election year for the President. Everything was going so well heading into the new year and now with only five months until the election, he's facing a global pandemic that's claimed more than 100,000 US lives, a severe recession, another fight with China and riots in Minneapolis following the killing of George Floyd by police officers. Not the backdrop he had in mind six months ago,” Erlam suggested.

Travel stocks are back in the doghouse in London. Cruises operator Carnival PLC (LON:CCL), which is nailed on to lose its Footsie status in the next reshuffle, is the hardest hit, down 11% at 1,089.5p while low-cost airline easyJet PLC (LON:EZJ), which could join it in the second division, is off 5.5% at 700.6p.

British Airways owner International Consolidated Airlines PLC (LON:IAG) is 7.7% lighter at 233p while mid-cap TUI AG (LON:TUI), the package tours and airline operator, was down 15% at 442.5p.

Elsewhere in the mid-cap space, cut-price retailer B&M European Value Retail (LOIN:BME) defied the trend, climbing 5.4% to 389.3p, after its fiscal fourth-quarter trading update.

The general merchandise seller said it put in a strong finish to the quarter with an especially strong performance in its grocery sales.

Discount retailer B&M European Value Retail has posted a 22.7% increase in like-for-like revenues in the first eight weeks of its financial year, across its UK retail estate. #retail @bmstores #uKhttps://t.co/FCgfbMOIIP

— ESM Magazine (@esm_magazine) May 29, 2020

1.00pm: US indices to open mixed

US markets, which earlier today were expected to open lower are now tipped to open mixed but that has not lifted the Footsie much.

The UKs benchmark index was down 59 points (1.0%) at 6,160 and has been hovering around that level for two hours or so.

Spread betting quotes suggest that while the 30-share Dow Jones will kick off at about 25,370, down 31 points on last nights close, the S&P 500 will open some four points higher at around 3,034.

US investors appear to be relatively sanguine about the prospect of President Trump introducing some sanctions on China.

“Markets are rightly worrying about escalating tensions between the US and China. At a press conference later today, US President Donald Trump may announce some targeted sanctions against China in response to the Peoples Congress decision to curtail the autonomy of Hong Kong. Exports from Hong Kong may no longer be exempt from US tariffs against China. This dispute is serious,” declared Holger Schmieding at Berenberg Capital Markets.

“To some extent, the very fact that US-Chinese tensions are now a top issue shows that concerns about the pandemic have receded a little. In our view, the risk of a major second wave continues to loom large, especially in the US where many federal states are easing lockdowns while the spread of the virus has not yet slowed down by as much as in continental Europe,” Schmieding said, adding that a US rebuke for Chinas actions in Hng Kong might not be a bad thing.

Schmieding also suggested both the US and China might appreciate a bit of trade war argie-bargie now to distract from their responses to the coronavirus.

11.15am: Oil price rally fails to boost oil giants

The Footsie has given back most of yesterdays gains as traders bank profits ahead of what is expected to be a soft US opening.

The FTSE 100 was down 63 points (1.0%) at 6,155. According to the futures markets, US benchmarks are expected to open around 0.6% lower.

Housebuilders are prominent among those copping some flak ahead of the release of the Nationwide House Price Index, which is now expected on Tuesday (it was originally scheduled for release today).

Taylor Wimpey PLC (LON:TW.) led the sector lower with a 5.3% fall to 146.54p.

Oil stocks are also friendless despite the price of oil rallying to levels not seen since mid-March.

BP PLC (LON:BP.) was off 3.8% at 305.65p and Royal Dutch Shell PLC (LON:RDSB) was down 2.5% at 1,236.6p.

“Rystad Energy estimates that the oil market was oversupplied by around 16MMbopd [16 mln barrels of oil per day] in April, a massive overhang,” reported broker, SP Angel.

“The rapid shut in of around 12MMbopd (largely shouldered by OPEC+) has erased a huge portion of the surplus.

“The widely-publicised rebound in demand – of around 4MMbopd, according to Rystad – puts the market close to balanced in June,” the broker added.

US oil production (#crude and #condensate) should recover towards 11 million bpd by early fall. Strong #WTI price dynamics will encourage a swift bounce back of the nearly 1 million bpd in curtailed volumes. #oil #shale #OOTT https://t.co/8PoPZed1Ty

— Rystad Energy Oil Markets (@RystadEnergyOil) May 27, 2020

10.00am: Investors turn to defensive stocks

About four-fifths of the Footsies constituents are in the red and you know it is a “risk off” day when utilities are in favour.

The FTSE 100 was down 64 points (1.0%) at 6,155 but there was some support for miners as well as utilities.

Centrica PLC (LON:CNA), however, was not one of those utilities feeling the love; its shares were down 3.0% at 37.87p as investors wait to see whether it will retain its FTSE 100 status in the next reshuffle.

Helal Miah, an investment research analyst at The Share Centre, has been looking at the relegation candidates and has identified Carnival, easyJet, Centrica and Meggitt as the most likely candidates.

“Among this months relegation candidates, Centrica is probably the one least affected by the current crisis. It has been in the relegation zone for some time now down to many other factors, biggest of which is the tough trading environment in the UK as new rival utility providers sweep away its customer base through offering lower bills,” Miah said.

“Energy price caps from the regulator limits its profits while its upstream business has felt the direct impact of lower oil and gas prices. The global crisis has helped mask many of the troubles at the owner of British Gas. Many felt a dividend cut was already on the cards even before the current crisis, making it easier for them to cancel the final dividend at the time of the publication of the full-year results,” he added.

9.40am: Red screens return

Red screens have been an unfamiliar sight for traders this week but they are back today.

The FTSE 100 was down 64 points, or 1.0% at 6,153 as traders wait for US President Trump to make the next move in his campaign against China.

“Global equities had been willing to look past the risk of escalating US-China tensions over recent weeks because the threats had largely been confined to mere sabre-rattling. Sometime today, that Trump rhetoric is set to evolve into actual policies, potentially in the form of sanctions, which could shatter the stability that the world sorely needs in these early days of the post-pandemic era,” said the improbably named Han Tan, a market analyst at FXTM.

“Its ironic that President Trump, who has often touted the rise in stock markets as a measure of his administrations success, may now be the cause for its decline. Should his soon-to-be-unveiled policies prove to have more bite than bark, this could trigger more unwinding of the advances seen in global equities over the last few weeks,” Tan added.

Cruises operator Carnival PLC (LON:CCL) was down 6.6% at 1,106p as it faces the prospect of being booted out of the Footsie at the next quarterly reshuffle to be announced on June 3.

Rolls-Royce Holdings PLC (LON:RR.) remained the top Footsie faller, down 9.1% at 290p, after hedge fund AKO Capital dumped its 5.2% stake in the propulsion systems developer yesterday and its debt was cut to junk status.

9.00am: Friday falls for Footsie

The FTSE 100 opened in negative territory on Friday, reversing some of the week's gains as traders factored in growing concerns over deteriorating US-China relations.

The index of UK blue-chips fell 52 points to 6,166.32.

The bone of contention is Hong Kong, which is expected to become subject to strict new laws aimed at clamping down further on civil unrest in the former British territory.

“US markets turned tail sharply late last night on reports that President Trump was going to be holding a press conference later today on China,” said Michael Hewson of CMC Markets.

“Earlier this week US Secretary of State Mike Pompeo said that the US no longer considered Hong Kong as no longer autonomous from China, and as such would mean that the region would no longer be subject to the favourable trade relationship currently in place.”

The downgrade of Rolls Royces (LON:RR.) debt to junk status continued to weigh on the shares, which fell a further 7.5% early on. GKN owner Melrose (LON:MLRO) was rocked by Rolls as it fell 3.7%.

Profit-takers moved in on contract caterer Compass Group (LON:CPG), which was off 4%. Buyers of TUI (LON:TUI), up 60% this week, also took some of their money off the table, with the holiday firm's shares down 8%.

Proactive news headlines:

Botswana Diamonds PLC (LON:BOD) told investors it has now recovered over 100 macro diamonds from bulk sampling operations at the Marsfontein development project in South Africas Limpopo Province. The company said it sampled 58 tons of fresh high-interest kimberlite and 62 tons of kimberlitic material from a residual stockpile, known as 'Dump E'. A total of 87 macro diamonds were recovered from the fresh kimberlite with a modelled grade of 50 carats per hundred tonnes, while 24 macro diamonds came from Dump E with a modelled grade of 16 carats per hundred tonnes.

Tiziana Life Sciences PLC (LON:TILS) (NASDAQ:TLSA) has said that two poster presentations at a top medical conference underline the potential of its technology in predicting the recurrence of breast cancer. The group's StemPrintER stem cell-based genomic prognostic tool showed superiority over the market leader, Oncotype DX, when it came to predicting the recurrence of the disease in ER+/HER2- postmenopausal patients. More than 800 women took part in the study to be presented at a session of the American Society of Clinical Oncology (ASCO) virtual conference starting later on Friday.

Catenae Innovation PLC (LON:CTEA) has teamed up with north-east occupational health and wellness business, Newcastle Premier Health, which will provide its know-how to the group's Cov-ID project. Cov-ID is GDPR compliant identity documentation exchange system to record an individual's coronavirus (COVID-19) test status through a mobile app that is intended to be marketed to businesses and organisations. Earlier this month, Catenae said it had begun trialling and finalising the app having created a prototype.

Zoetic International PLC (LON:ZOE) has filed a US patent application for the method of manufacturing its tetrahydrocannabinol (THC)-free Chill brand of smokable cannabidiol (CBD) products. The CBD specialist said the patent-pending method also includes a variation smoking cessation product, employing combinations of nicotine and CBD, and has been in development for over a year. Zoetic added that it believes CBD may play “a rapidly increasing role in smoking cessation aides” and that its Chill branded tobacco-free, THC-free and nicotine-free products were “well-placed to take an increasing share of this market”. The company noted that, if issued, the patent will provide it with “a protected market-leading offering”.

United Oil & Gas PLC (LON:UOG) has posted financial results that celebrated significant progress in 2019, as the companys growth continued. During the year it agreed the transformational acquisition of the Rockhopper Egypt business; advanced permitting for the Selva gas development project in Italy, where first gas is slated for 2021; realised a profit with the sale of the Crown discovery in the North Sea; and also expanded its footprint via the UK offshore licensing round. Since completing the Rockhopper Egypt acquisition in February 2020, the producing Abu Sennan asset has performed strongly, with the new ASH-2 achieving rates ahead of expectations, and presently remaining above 3,000 barrels of oil per day, the group said.

Falcon Oil & Gas Ltd (LON:FOG) (CVE:FO) has highlighted a strong financial position, debt-free and US$11.5mln of cash in the bank, as it filed its interim statement for the three months ended March 31, 2020. The company noted that it has continued to focus on strict cost management and efficient operation of its portfolio. G&A expenses were US$400,000 which represents a 12% reduction quarter-on-quarter. In April, the companys financial position was bolstered as it sold a further 7.5% holding in the Beetaloo project to joint venture partner Origin Energy in return for A$150mln worth of additional project spending cover.

Learning Technologies Group PLC (LON:LTG) has raised just under £82mln through a share placing to take advantage of what it said were “numerous attractive acquisition opportunities” arising from the disruption caused by the coronavirus pandemic. The digital learning specialist said the placing was for around 64.4mln new shares at a price of 127p each, a 7.6% discount to its closing price on Thursday of 137.50p, and raised a total of £81.8mln. The firm said any acquisition opportunities would require “readily available capital” to deploy for fast execution, adding that it anticipated these purchases would be executed over the next nine to 12 months.

Benchmark Holdings PLC (LON:BMK) has said continued weakness in shrimp markets overshadowed a robust second-quarter performance by the groups genetics business. In the three months to the end of March – Benchmarks second-quarter – group revenue eased to £32.0mln from £37.7mln in the corresponding period of 2019. Revenues in the Advanced Nutrition business fell to £19.9mln from £25.0mln the previous year, which Benchmark ascribed to weak shrimp markets plus oversupply and price competition in the Artemia (brine shrimp) market.

SIMEC Atlantis Energy Limited (LON:SAE), which is developing the Uskmouth Conversion Project, has announced the start of a 28-day pre-application consultation (PAC) for the project. The group said the PAC will run from June 1, 2020, to June 29, 2020. In view of the current coronavirus pandemic, the Uskmouth Conversion Project PAC will be hosted online on the SIMEC Atlantis Energy website.

Providence Resources PLC (LON:PVR), the Ireland-based resource development company, has confirmed that it is now in receipt of £200,000 in respect of the second tranche of SpotOn Energys investment in the company and it has therefore issued a total of 6,116,208 new ordinary shares to SpotOn at an issue price of 3.27p each, the closing price on the London Stock Exchange on May 21, 2020, the date funds were originally expected to be received. The group noted that SpotOn Energy experienced some delays in closing out the necessary arrangements with its consortium because of current working and travel restrictions. As announced on April 6, 2020, SpotOn invested £300,000 into Providence as part of a recent $3.3mln fundraising and committed to invest a further £200,000 within six weeks of that announcement. Following the receipt of the second tranche of the investment, SpotOn will become a substantial shareholder in Providence owning 26,116,208 ordinary shares, representing 3.1% of the enlarged issued share capital of the company.

Afarak Group PLC (LON:AFRK) said that, due to changed circumstances, one of two directed share issues, first announced on May 29, 2019, that was to be done through a share exchange has been terminated. These share issues were related to two signed agreements for Afarak to acquire additional ownership in certain South African mining assets. Afarak said it has instead resolved on a direct share issue of a total of 2,123,343 of its treasury shares to its South African subsidiary, Chromex Mining Company (Pty) Ltd in order to enable ownership arrangement in Chromex SA that will result in additional ownership of mining assets in South Africa. This will benefit the company as the group's parent as, from its point of view, especially weighty financial reasons exist for the deviation from the shareholders pre-emptive right. Due to the relevantly modest size of the transaction and the fact that the company is increasing its ownership in assets that it already controls, Afrarak said it is not expecting the transaction to affect the financial performance of the group in 2020.

Power Metal Resources PLC (LON:POW) the AIM-listed metals exploration and development company has said it has been notified that on May 28, 2020, Value Generation Limited, a company beneficially owned by its CEO, Paul Johnson purchased on market a total of 3,500,000 ordinary shares in the company at a price of 0.39p each. Following this purchase, the group added, Johnson has a beneficial interest in a total of 31,600,000 Ordinary Shares, representing approximately 5.72% of the issued share capital of the Company.

Emmerson PLC (LON:EMM), the Moroccan focused potash development company, has announced that its annual general meeting will be held at 11.00am on June 24, 2020, at 55 Athol Street, Douglas Isle of Man, IM1 1LA.

Bidstack Group PLC (LON:BID), the native in-game advertising group, announced that, at its annual general meeting held on Thursday each of the resolutions were passed by the requisite majority.

Instem PLC (LON:INS), a leading provider of IT solutions to the global life sciences market, has said it will announce results for the year ended December 31, 2019, on Wednesday, June 3, 2020. The group added that its management will be hosting a presentation via web conference on the day of the results at 10.30am. Analysts wishing to join should register their interest by emailing [email protected] or by telephoning Read More – Source