Economy

FTSE 100 slowly recovering; NASDAQ Composite hits new high

US continuing claims for unemployment benefit subsided to 18.06mln from 18.29mln the previous week

  • FTSE 100 index sheds 33 points
  • US indices open mixed
  • US initial jobless claims last week eased to 1.31mln from 1.43mln the week before

3.00pm: NASDAQ hits a new high

Once again, the NASDAQ Composite is ploughing (not plowing) its own furrow, heading to a new high while the S&P 500 and Dow Jones dip a little.

The NASDAQ was up 59 points (0.6%) at 10,552 but the S&P 500 was down by just under two points (0.0%) at 3,168 while the Dow Jones was off 99 points (0.4%) at 25,968.

There was mixed news on the US employment front.

“Jobless claims continue to head in right direction,” was the headline from Edward Moya at OANDA.

“Initial jobless claims fell to 1.31 million, lower than the 1.37 million consensus estimate but still the 16th straight time above the 1-million mark. Continuing claims dropped but are still at an eye-dropping 18 million level. The recent wave of new coronavirus cases is not yet impacting the labour market yet and many investors are breathing a temporary sigh of relief,” Moya reported.

Ian Shepherdson, the chief economist at Pantheon Macroeconomics, noted it was the biggest fall in initial claims – people who have just been fired – in four weeks but the July 4 holiday might have helped push the number down.

“Claims remain very high and appear likely to remain above one million per week until early August. Still, we’re relieved that claims have not risen outright in the wake of the reimposition of controls in some southern and western states, coupled with the impact of people choosing to stay home more in states where the virus is spreading rapidly. That said, the number of people making initial claims for Pandemic Unemployment Assistance—PUA, available to gig workers and freelancers—rose by 42K to 1,038K, the fourth straight weekly increase after a sharp drop in late May, suggesting that the impact of the retrenchment in the South and West is not falling evenly on the workforce,” he added,

“US unemployment claims at an all-time high,” was the headline from James Knightley, the chief international economist at ING.

Weekly initial jobless claims may not have been as high as expected but remained more than double the level seen during the credit crunch crisis.

“Focusing initially on the jobs claims (as that is what the market will do), they have proved to be far stickier than most analysts thought likely as the re-opening got underway. Unfortunately we don’t expect to see meaningful declines from these huge numbers anytime soon. High-frequency data from Homebase suggest that employment gains are already plateauing as the spike in Covid-19 cases has led several states to announce renewed containment measures while other states delay their phased re-opening.

“This is forcing renewed businesses closures (leisure and hospitality in particular) while others are taking the view that it simply isn’t viable for them to stay open. This is only adding to the problems in the jobs market, while at the same time the ISM business surveys indicate that larger firms are looking to shrink their workforces in the face of lower revenues and weaker corporate profits,” Knightley said.

Knightley makes the point that to be classified as “officially” unemployed, people have to be actively searching for work, and if, for instance, all the bars are shut, there is not much point bartenders looking for work, so they won’t count as unemployed.

BLS versus DoI measures of unemployment

Source: Macrobond, ING

In London, the FTSE 100 was down 33 points (0.5%) at 6,123, continuing its half-hearted afternoon rally.

1.35pm: US indices to move higher after jobless numbers

US stocks are set to open higher after weekly first-time jobless claims were lower than anticipated.

Initial jobless claims last week eased to 1.31mln from 1.43mln the week before; economists had plumped for a figure of 1.38mln.

Continuing claims subsided to 18.06mln from 18.29mln the previous week; the consensus forecast was 18.95mln.

Spread betting quotes suggest the S&P 500 will kick off 7 points firmer at 3,177 while the Dow Jones is expected to limp 12 points higher to 16,079.

As ever, coronavirus cases are occupying the minds of investors, with The Johns Hopkins database indicating yesterday that there were 58,600 new cases reported yesterday, up 14.5% reported the day before.

“A sharp drop in testing—down 28% from last Wednesday—likely flatters the new case numbers, but the trend rate of increase is slowing. The seven-day average increase in new cases compared to a week ago slowed to 20.6%, the lowest rate since June 19 and down from a peak of 43.7% on June 28,” observed Ian Shepherdson of Pantheon Macroeconomics.

“The seven-day average number of deaths rose both yesterday and Tuesday but the numbers are erratic because of delays in reporting, so this is not yet definitive evidence that deaths are trending higher. Rising deaths are likely, though, despite the lower mortality rate—due to the lower median age of people infected compared to the spring, and improvements in treatment—because the number of cases has increased so much,” he added.

In London, the FTSE 100 was down 25 points (0.4%) at 6,131.

11.55am: Royal Institution of Chartered Surveyors reports recovery in house prices

The net balance of surveyors reporting that house prices have risen over the last three months recovered to -15 in June, from -32 in May.

Economists had expected a reading of -25.

“Housing demand has returned quickly to pre-COVID levels, though we expect lenders’ caution to prevent transactions this year from recovering completely to 2019 levels,” said Samuel Tombs, the chief UK economist at Pantheon Macreconomics.

“The net balance of surveyors reporting that buyer enquiries were higher than in the previous month rocketed to +61 in June, from -7 in May. This chimes with online search data suggesting home-buyer interest currently exceeds its pre-lockdown level. Property listings also have surged, with the new sale instructions balance jumping to +42, from -22, and the stock of homes on estate agents’ books nearly returning to pre-virus levels,” Tombs continued.

“Nonetheless, new mortgage rates have merely held steady this year, despite the MPC’s [Bank of England’s Monetary Policy Committee] efforts, while a big question mark hangs over the future incomes of the near-30% of the workforce that recently has been furloughed. GfK’s composite index of consumers’ confidence also remains very low, consistent with housing demand fading once the current pent-up demand has fizzled out. Admittedly, the Chancellor’s decision to raise the threshold for stamp duty land tax to £500K, from £150K, will help to shore up prices. Nonetheless, past experience shows that stamp duty cuts fail to boost transactions if employment is declining and/or credit availability is deteriorating. Accordingly, we think the housing market will be lacklustre once again in Q4.” Tombs said.

The FTSE 100 was down 39 points (0.6%) at 6,118.

11.20am: Housebuilders defy the trend

The Footsie’ losses have lengthened despite investors’ enthusiasm this morning for housebuilding stocks.

The FTSE 100 was down 36 points (0.6%) at 6,119, despite PLC () rising 6.0% to 2,578p after its trading update this morning.

“While ’s update showed that completions were understandably down 35% in H1, pricing remains firm, sales rates continue to improve, build rates have recovered and the cash position has improved,” said David O’Brien, an equity analyst at Irish broker Goodbody.

“In the context of a 35% fall in completions, this is a very strong performance. The context is similar to peers in that pricing is firm, sales rates have rebounded strongly and build capacity is increasing. However, completions are stronger and on build rates, is well ahead of its competition.

“While the economic impact of COVID-19 means that demand and prices are likely to fall significantly from Q3 onwards, there is no sign of that yet. The stock has outperformed the sector and the market recently, but there is enough in today’s figures to drive it on a bit more,” he noted.

9.45am: Drab and overcast – and so is the weather

The weather in London is not the only thing that is dull and overcast; London’s stock market is matching the weather.

The FTSE 100 was down 11 points (0.2%) at 6,145, largely thanks to an 8.5% fall for propulsion systems designer ().

The aerospace engineer revealed in its half-year trading update that widebody engine flying hours were down to about half normal levels in the first half of the year and a quarter of normal levels in the second quarter – all of which affects the revenue the company earns from maintenance activities.

PLC () retreated 3.3% to 869.6p after industry regulator Ofgem’s latest price control review.

The electricity grid operator said it was “extremely disappointed” with the draft determination published by Ofgem.

Sector peer (), down 0.9% at 1,329p, was also less than gruntled, saying it was “disappointed and deeply concerned by today’s publication of Ofgem’s Draft Determination for the RIIO-T2 price control period.”

 

8.55am: Dull early progress

The FTSE 100 defied early predictions to open in the red as traders kept a weather eye on the upsurge in new coronavirus cases amid fears of a pandemic second wave.

The index of UK blue-chips fell 12 points to 6,144.55 early on.

Treasury figures, meanwhile, revealed the cost of the outbreak here in the UK has soared to nearly £190bn following Rishi Sunak’s £30bn package to combat the crisis.

Wednesday’s mini-budget, meanwhile, which included stamp duty relief and offered significant financial help to employers, continued to receive a lukewarm response.

On the market, (), up 4%, topped the Footsie risers after a guardedly optimistic trading update and was also buoyed by the chancellor’s stamp duty cut.

There were very few reasons to be cheerful about Rolls-Royce’s () outlook statement, however, and, reflecting this, the stock lost 7%.

“The problems in the aerospace sector continued to be laid bare this morning as Airbus the European plane maker reported that it had failed to obtain any new aircraft orders for the third month in succession,” said Michael Hewson of CMC Markets.

“This is equally bad news for Rolls Royce who have been having difficulties of their own, as they reported their latest first-half numbers this morning.”

Proactive news headlines:

() shares soared on Thursday as the Russia-focused miner returned to AIM following the clarification of its relationship with Chinese group CITIC Merchant Co Limited. The company confirmed that it has entered a success fee-based engagement letter with CITIC to explore possible strategic options for its mining assets. Eurasia also reiterated its announcement from July 1 that it has appointed UBS as its leading adviser to assist in a review of its strategic options including asset sales or a sale of the company.

() has reported higher quarterly chrome production as its sales of platinum group metals (PGM) returned to pre-pandemic levels. For the quarter ended June 30, 2020, the miner said its activities in South Africa recommenced in full at the start of May and that in the three month period it had produced 321.4 kilotons of chrome, up 3.6% on the prior quarter, while PGM production rose 9% to 35-kilo ounces (koz). The firm said its co-product model utilising mechanised and low labour-intensive mining in an open pit had allowed it to maintain production at reduced measures despite the lockdown in South Africa and also to “significantly increase output during May and June”.

said gold production at the Kiziltepe Mine in Turkey in the three months to the end of June was higher than anticipated. Kiziltepe, which is part of the Red Rabbit 50/50 joint venture with Proccea Construction, produced 4,679 ounces, down from 5,129 ounces but in line with guidance issued for the half-year. Total ore processed in the quarter was 54,862 tonnes at an average head grade of 3.02 grams per tonne (g/t). Quarterly open-pit ore mined was 77,179 tonnes, at an average mined grade of 2.79 g/t gold, and total material movement for the quarter was 973,603 tonnes.

() has said it ended the last 12 months in a strong position with operational momentum maintained against the headwinds caused by the coronavirus outbreak. The clean energy specialist said revenue for the period to June 30, 2020, will be in the region of £20mln, representing year-on-year growth of 20-25%. Cash and short-term investments were £108mln as of that date. Looking ahead, the fuel cells specialist said it expects to sign new customer partnerships “as commercial demand remains strong”.

(LON:CALE) has described its production performance in the last quarter as an outstanding achievement, with gold output rising 6.2% at 13,499 ounces in the three months ended June 30, 2020. It marked production for the first half of 2020 at 27,732 ounces, up 12.5% versus the same period last year. Guidance for the full year – pitched at 53,000 to 56,000 ounces – is retained and the company told investors it is on-track with its progress towards its 2022 production target of 80,000 ounces.

Highland Gold Mining Limited’s () has said its four operating mines produced 61,357 ounces of gold and gold equivalent in the second quarter, in line with forecasts, In the same period of last year, 70,293 ounces of gold were produced. Total production in the first half of 2020 was 125,347 ounces, down from 142,254 ounces in the same period of last year but in line with internal production targets. The company expects to produce between 290,000 and 300,000 ounces over the whole of 2020.

() has hailed “ excellent” production metrics for the second quarter of 2020. The company said its Hellyer gold mine in Tasmania produced a total of 8,762 tonnes of lead concentrate in the three months ended June 30, 2020, while zinc concentrate volumes amounted to 4,241 tonnes. It also produced 1,223 ounces of gold and 229,947 ounces of silver in the quarter, with sales payable precious via credits in the lead and zinc concentrate streams.

() has released initial drill results from its ongoing second phase programme at the Zaranou gold project in Côte d’Ivoire. They comprise multiple high-grade and also broad low-grade results from the Ehuasso target area. Results so far come from 5,910 metres of air-core drilling and 15,000 metres of combined AC-reverse circulation drilling. IronRidge noted that mineralisation continuity is now confirmed over multiple growing targets at Zaranou, with targets growing to over 500 metres in length and up to 100 metres width. All remain open along strike and at depth.

() proposes to raise around £120mln through a share placing, with the funds to be used on the company’s pipeline of acquisitions and to improve its existing portfolio of medical centres. During the current year, the company said it has continued to see opportunities for funding new developments, both in Ireland and in the United Kingdom, and has a short-term pipeline of 11 new developments to be forward funded, totalling £92mln, of which £44mln are in Ireland. In a separate announcement, the company said its operational and financial performance so far this year continued to demonstrate good resilience. Adjusted earnings per share in the first half of the year rose by 7.1% to 3.0pm from 2.8p in the first half of last year.

() said it has filed its appearance and several motions in the bankruptcy case of its investee firm, Factom Inc. The investment group said it is requesting the court in Delaware dismiss Factom’s bankruptcy case so that a receiver may be appointed to liquidate the company’s assets in a Texas state court. Alternatively, FastForward has requested that Factom’s bankruptcy case be converted to a liquidation proceeding under Chapter 7 of the US Bankruptcy Code, or to transfer the case from the Delaware Court to the US Bankruptcy Court for the Western District of Texas, Austin Division.

() has been granted the opportunity to carry out a new phase III clinical study on its short-course birch pollen inoculation after a tranche of data was declared invalid. In March, it was revealed Birch MATA MPL had failed to reach what in the technical jargon is referred to as its primary endpoint. In layman’s terms, it didn’t appear to provide therapeutic value. However, at the time there Allergy Therapeutics hinted at contradictory results from the study. The company has since taken advice from the Paul Ehrlich Institute (PEI), the scientific regulator for Germany where the trial was carried out, which has agreed that a new phase III trial can be conducted.

() has brought in £1.5mln of new capital and put in place a further £45mln financing facility with Riverfort Global Capital. The initial £1.5mln is being raised via a share subscription deed, with new shares to be issued in tranches over eighteen months. To land the £45mln facility the company is entering into a placing subscription facility (PSF) which will similarly make funds available against equity tranches, over 60 months, to support future project expenditures. The company said that the PSF increases its funding flexibility as current commercial activities at Thar Block VI continue.

() is planning to raise around £10mln through a share placing and subscription to accelerate project development amid what it said was “increasing” demand for its waste gasification to energy technology. The AIM-listed firm said the placing will commence immediately through an accelerated bookbuild with the shares priced at 0.45p each, a 33.8% discount to its closing price on Thursday. EQTEC also said it has launched a subscription through at the same price. Meanwhile, the group also said certain directors had agreed to reinvest 40% of their salaries and fees for the next 12 months into shares at the placing price.

Group PLC (AIM: AGFX), the provider of foreign exchange services to institutions, corporates and high net worth private individuals has said it will announce its full-year results for 2019 at 7am on Monday, August 3, 2020. The company said it will host an online analyst presentation at 9.30am on that day and analysts wishing to register should RSVP to Ambrose Fullalove at FTI Consulting: [email protected] 

6.55am: Footsie called higher 

The FTSE 100 index is seen opening nearly 30 points higher on Thursday, with IG Markets making the price at 6,183 and 6,186 with just over an hour to go until the open.

Yesterday’s mini-budget from the chancellor of exchequer Rishi Sunak supported the market, but, on the world stage attentions remain on the evident pockets where coronavirus (COVID-19) is again increasing as economic activity ramps back up.

“Traders in this part of the world continue to monitor the situation in the US, where the majority of states continue to see the number of new Covid-19 cases increase,” said David Madden, an analyst at CMC Markets (UK).

“As of yesterday, the number of confirmed cases in the US exceeded 3 million. On Tuesday, the WHO cautioned there could be an increase in the fatality rate as there has been a rise in infections, but the death rate so far has lagged,” he noted.

That latest Chinese economic stats (June CPI) arrived precisely on the market’s forecasts and expectations helped investor sentiments on the positive side, meanwhile, attentions will later today focus on German trade and US weekly jobs data.

Wednesday saw Wall Street benchmarks market positive sessions. The Dow Jones Industrials Average climbed 0.68% higher to end at 26,067, whilst the S&P 500 was 0.78% higher at 3,169. The Nasdaq Composite was up 1.44% closing at 10,492 and the small-cap focused Russell 2000 advanced 0.81% to 1,427.

In Asia, meanwhile, Japan’s Nikkei 225 index gained 124 points or 0.55% to 22,562 while Hong Kong’s Hang Seng similarly rose by 108 points or 0.4% to 26,237, and the Shanghai Composite moved 1.28% higher to 3,447.

Around the markets:

  • The pound: US$1.2632, up 0.17%
  • Gold: US$1,811 per ounce, up 0.09%
  • Brent crude: US$43.28 per barrel, up 0.46%
  • WTI: US$40.85 per barrel, up 0.56%
  • Bitcoin: US$9,391, down 0.78%

Forrest Morton

Organizer. Zombie aficionado. Wannabe reader. Passionate writer. Twitter lover. Music scholar. Web expert.

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