- FTSE 100 closes down 45
- US first time jobless claims stubbornly remained above one million last week
- Fed signals easing of monetary policy
5.05pm: FTSE 100 closes below 6,000
FTSE 100 closed lower and below the 6,000 level on Thursday as US stocks continued to surge.
Britain’s blue-chip benchmark finished the day down over 45 points, or 0.75%, to 5,999.
European indices seemed little interested in the US Fed’s latest stance on monetary policy, seen as potentially easing as time goes on.
But on Wall Street the mood was different as traders digested Powell’s comments and a flurry of economic data, while in stocks Walmart ( NYSE:WMT) and Microsoft (NASDAQ:MSFT), up over 4% and 3% respectively, were both on a tear as reports emerged that the pair were partnering up in a bid to acquire social media group TikTok.
Microsoft has been in discussions for weeks to buy TikTok’s business in the US, Canada, Australia and New Zealand.
“US indices continues to be in a league of their own as the S&P 500 traded above 3,500 for the first time, and the NASDAQ 100 has set another record high by trading above 12,000,” said David Madden, analyst at CMC Markets.
“There were no major surprises from today’s economic releases. The jobless claims reading fell from 1.1 million to 1 million, meeting forecasts. The continuing claims update dropped to 14.4 million, from 14.8 million,” he said.
Gross domestic product (GDP) for the second quarter was revised to negative 31.7% from negative 32.9%, while economists had been expecting negative 32.5.
US and Canada 4.15pm/11.15am EST
Wall Street benchmarks were in the green in early deals in New York on Thursday. The Dow Jones Industrial Average surged over 227 points at 28,559. The broader-based S&P 500 added around 16 points at 3,493. The tech-heavy Nasdaq exchange added over
3.45pm: London a very dull sideshow to the US cabaret
Jerome Powell has now said his piece at the symposium of central bankers (virtually) hosted in Jackson Hole, and the reactions are beginning to come in.
“Fed chair Jay Powell announced a new monetary policy framework based on average inflation targeting (AIT), as had been anticipated. I read this as admission by the Fed that the monetary and fiscal response to the pandemic will ultimately prove inflationary (M1 increase, deglobalisation etc), but that the Fed does not want to pull the handbrake on a long and slow recovery by being constrained with a mandate to keep inflation level. It’s also increasingly politically tuned into recent events in prioritising jobs over price stability,” said Neil Wilson at markets.com.
“Powell stressed that if ‘excessive inflationary pressures’ were to build, or inflation expectations were to rise above levels consistent with its mandate, the Fed ‘would not hesitate to act’. This gives it a degree of latitude down the line should there be a major inflation overshoot,” Wilson added.
Powell spoke a short while after the latest figures showed the US economy contracted slightly less than previously thought in the second quarter.
Gross domestic product was down by an eye-popping annualised rate of 31.7% but that was an improvement on the flash estimate of 32.9%.
“At 31.7% down on the previous quarter, the collapse in US output during Q2 was more brutal even than that seen during the depths of the Great Depression a century ago.
“Against this backdrop, the frothiness of US equities is frankly baffling. With the S&P 500 hitting another record high on Wednesday, the question is increasingly when, not if, the bubble bursts,” suggested Richard Berry, the founder of goodmoneyguide.com.
“Then again the upward revision to GDP will take some of the sting out the ‘Buffett indicator’ – a useful market barometer which compares GDP to total stock market value and is currently suggesting that equities are overvalued.
“Yet with global cases of coronavirus still rising fast and earlier signs of economic recovery petering out, investors are struggling to square a market that is looking ever more detached from macroeconomic reality,” he suggested.
On the obs front, initial jobless last week remained above the one million mark but fell to 1.01mln from 1.10mln the week before – pretty much in line with the consensus forecast.
Continuing claims declined to 14.54mln from the previous week’s 14.76mln; economists had forecast a figure of 14.4mln.
“The weekly initial claims numbers are noisy but the underlying trend probably is still falling, albeit slowly,” speculated Ian Shepherdson, the chief economist at Pantheon.
“We had hoped that claims would be well under one million by now, but the second COVID wave scuppered that idea. Note that claims for Pandemic Unemployment Assistance rose by a hefty 83K this week, but the data are unadjusted and volatile. Still, to see total new claims, regular and PUA, running at 1,603K is depressing,” he added.
With all of the above going on across the pond, the FTSE 100 remained a not very interesting sideshow. The index initially moved into positive territory after Powell’s speech but is back in the doldrums, down a couple of points (0.0%) at 6,043.
3.30pm/ 10.30am EST: Proactive North America headlines:
China Xiangtai Food’s (NASDAQ:PLIN) first hot pot restaurant to hold grand opening on Friday
Orogen Resources Inc (CVE:OGN) options Sarape gold property to Hochschild Mining subsidiary in Mexico
Todos Medical Ltd (OTCQB: TOMDF) to supply New York lab with COVID-19 PCR testing equipment and supplies
2.45pm: Wall Street starts higher as Fed adopts new inflation policy
Wall Street shrugged off predictions of a mixed open to start higher across the board on Thursday after the Federal Reserve announced a new strategy that was widely interpreted as pointing towards an easier monetary policy stance.
Shortly after the opening bell, the Dow Jones Industrial Average was up 0.38% at 28,438 while the S&P 500 climbed 0.23% to 3,481 and the Nasdaq rose 0.2% to 11,685.
The central bank said it has adopted an average inflation target of 2%, adding that they also sought to “mitigate shortfalls of employment”.
The announcement was timed simultaneously with the start of Fed chair Jerome Powell’s speech at the Jackson Hole conference which is now underway.
Back in London, the FTSE 100 was just in the green, up 3 points at 6,048 at around 2.45pm.
12.35pm: NASDAQ expected to move higher in mixed Wall Street open
Once again, the tech-heavy NASDAQ is set to provide a bit of glitz in an otherwise dull market when trading starts stateside this afternoon.
The NASDAQ Composite, which rose nigh-on 200 points yesterday, is set to open around 110 points higher today at 11,975, putting the Dow and the S&P firmly in the shade.
The Dow Jones industrial average is expected to open 51 points lower at 28,281 while the S&P 500, which exerted itself yesterday in climbing 35 points, is tipped to sit down for a bit of a breather and open at around 3,475, down 4 points.
“Stock markets are paring gains on Thursday as investors eagerly await the appearance of Fed Chairman Jerome Powell at this year’s virtual Jackson Hole event,” said Craig Erlam, the senior market analyst at OANDA.
If you say so.
“The central bank’s monetary policy framework has been the hot topic this week, with everyone speculating about what changes the Fed will consider that will allow interest rates to remain lower for longer.
“Despite central banks offering unprecedented amounts of stimulus and stock markets hitting new highs on a regular basis, investors are craving another stimulus fix. With rates already at record lows, attention is turning to the timeframe, with investors effectively looking for guarantees that they won’t move for a considerable period of time,” Erlam continued
If investors really are the fiscal stimulus junkies Erlam believes them to be then perhaps they are, indeed, eagerly awaiting Powell’s pronouncements.
Econ Calendar Th 8/27/2020
JEROME POWELL Speaks
9:10 AM ET https://t.co/cLVy6xY7nn
— why weren’t u clean before the virus? ???????? (@bondskew2) August 27, 2020
“Whilst Jerome Powell is the star performer, warm-up acts in the form of US GDP data (2nd revision) and initial jobless claims will also be in focus,” noted Fiona Cincotta of City Index.
“US GDP is expected to see a very slight downward revision to 32.6% from 32.9%. Initial jobless claims could garner more interest. Last week they rose back above 1 million, potentially the first sign of trouble after the Federal additional $600 unemployment benefit expired. Should claims remain over 1 million pressure will ramp up on Congress to agree to an additional rescue package,” she added.
In London, traders, having used make-up kits to paint eyeballs on their closed eyelids, snoozed their way through the wait for the US open.
The FTSE 100 was down 9 points (0.2%) at 6,036.
Sterling was down a quarter of a cent at US$1.3186, which would normally give a boost to blue-chips but today it is looking like even attaching electrodes to sensitive parts of the market would not provide much of a burst.
11.45am: Quiet morning (very quiet) for the Footsie
Paint continues to dry in London.
In other (less exciting) news, the FTSE 100 is down 14 points (0.2%) at 6,031.
The major source of excitement until Federal Reserve chairman Jerome Powell does his stint at the Jackson Hole symposium could be speculation on companies due for the chop in next month’s FTSE 100 reshuffle.
Terrestrial broadcaster ITV PLC (LON:ITV) looks certain to be relegated to the Footsie equivalent of the graveyard shift while according to AJ Bell’s investment director, Russ Mould, British Land PLC’s (LON:BLND) grip on FTSE 100 membership is “looking wobbly”.
“B&M European Value Retail looks best placed to vault into the FTSE 100, as its market cap is currently high enough to rank above the 90th position that merits automatic promotion. This would be B&M European Value Retail’s first time in the FTSE 100 and promotion would come just over six years after the company’s flotation at 270p a share,” Mould noted.
“Meanwhile, British Land is teetering on the brink. Its market cap of £3.3 billion leaves the real estate investment trust ranked right on the cut-off point of 110th. Any further slippage could open the door to a FTSE 250 firm and a number of companies are jockeying for position,” said Mould.
The AJ Bell investment director is a keen follower of the nags and went on to list some of the runners and riders for possible elevation.
“They include former FTSE 100 members Direct Line, ConvaTec, Weir and Foreign & Colonial Investment Trust, who were last relegated in September 2019, December 2017, September 2015 and September 2009 respectively.
“Potential debutants include student housing provider UNITE, Bill Ackman-led investment vehicle Pershing Square, precision instruments specialist Renishaw and Dechra Pharmaceuticals,” Mould said.
If Direct Line does get promoted it would mark a return to the top-flight for the firm that was once regarded as a disruptive force in the insurance but which has started to look a bit “me too” in the age of price comparison web sites (which it spurns).
The promotion and relegation spots will be determined at the close business nest Tuesday, possibly with fake crowd noise piped in.
As it happens, while the FTSE 100 is labouring in the red this morning the mid-cap FTSE 250 is modestly in credit, up 10 points (0.1%) at 17,763.
Grafton Group PLC (LON:GFTU), the DIY retailer, was up 6.0% at 791p following its half-year report.
“It is a positive sign that Grafton has provided H2 [second half] forecasts that are beyond expectations and as a result, we now believe that it is more likely that 2019 levels of profitability will be earned in 2022 versus the previous assumption of 2023,” said Irish broker, Goodbody.
“The group has posted consistently strong like for like sales trends since May and coupled with the impressive cash generation again highlights why Grafton is a quality option for investors,” it added.
— RTÉ Business (@RTEbusiness) August 27, 2020
9.50am: Boardroom merry-go-round picks up speed
You know it’s a quiet morning when most of the big news from the Footsie companies concerns directors getting on their bikes.
Or maybe those directors know something about the economy that we don’t?
Perhaps we’ll find out this afternoon when US Federal Reserve chairman Jerome Powell gives his virtual presentation at the Jackson Hole talking shop.
The aerospace engines maker hit the skids again after its half-year results and news that chief financial officer Stephen Daintith is quitting to take up a similar gig at groceries delivery technology firm Ocado Group PLC (LON:OCDO).
Ocado’s current chief bean-counter (see what I did there?), Duncan Tatton-Brown, is stepping down for family reasons.
Online supermarket and technology group @Ocado has announced that Duncan Tatton-Brown will step down as chief financial officer after eight years in the role and be replaced by @RollsRoyce finance chief Stephen Daintith. #retail #ecommerce #online #ocadohttps://t.co/6TxVCrYvol
— ESM Magazine (@esm_magazine) August 27, 2020
The bookie has also lost a director; non-executive Rafael Ashkenazi, who joined when Flutter took over The Stars Group, has quit the board.
Final news from the Footsie merry-go-round/revolving pig’s trough came from accountancy software group Sage Group PLC (LON:SGE), where the chairman, Sir Donald Brydon, is stepping down after nine years in the chair.
Shares in Ocado were 0.2% lower at 2,530p while Sage was 0.3% weaker at 756.4p.
Proactive news headlines
BATM Advanced Communications Ltd (LON:BVC) has signed its first tier-1 customer for its NFVTime virtual networking solution. The customer, an Asia-headquartered telecommunications provider to multi-national enterprises and communication service providers globally, has entered a three-year licensing agreement after carrying out a proof-of-concept trial.
Keywords Studios PLC (LON:KWS) has acquired Maverick Media Limited, a video games creative marketing agency, in a deal worth up to £3.6mln.
The video game development services group said London-based Maverick had “little client overlap” with its other marketing studios and so will further extend its client relationships in a growing area.
Gaming Realms PLC (LON:GMR) said it has signed its first multi-state direct-integration agreement with its existing partner, Rush Street Interactive (RSI), one of the fastest-growing gaming firms in the US. The AIM-listed firm’s existing partnership with RSI, which currently sees its Slingo Originals portfolio distributed in New Jersey through a remote game server, is being extended to incorporate the addition US state of Pennsylvania, RSI’s largest territory.
MetalNRG PLC (LON:MNRG) said it is close to completing a deal to acquire a UK oil and gas business, although due to COVID-19 restrictions the formal completion of the transaction has been delayed. Technical, financial and legal due diligence has been completed and deemed satisfactory and the company is now finalising a share purchase agreement to acquire the privately-owned company.
AEX Gold Inc’s (LON:AEXG) chief executive has hailed a “significant increase in activity” across its portfolio in the first half of its current year. CEO Eldur Olafsson added that following a C$72.7mln fundraise and AIM listing in July, the Greenland-focused gold group “is in a very strong position” and funded for planned work at its Nalunaq project, where it is currently performing exploration and pre-development work.
Pembridge Resources PLC (LON:PERE) has announced the departure of another shipment of copper concentrate from the Minto mine in Canada’s Yukon region. It is the second shipment since the Minto mine re-opened and is expected to arrive at the port of Niihama, Japan, by mid-September.
Ariana Resources PLC (LON:AAU) saw an 18% increase in gross income from its Kiziltepe Mine in Turkey, buoyed by a fall in costs below US$500 per gold ounce, a rise in stockpiled silver sold and higher precious metals prices. The company, which owns the operation with local partner Proccea Construction, said precious metal sales generated US$9.9mln in the second quarter.
Galantas Gold Corporation (LON:GAL) said in its second-quarter results statement that certain underground work continued at its Omagh mine in the first half of 2020. Ore production remains suspended until finance is available to expand the underground operation but following the suspension of blasting operations at the mine the processing plant has continued to operate on a limited basis.
IronRidge Resources Limited (LON:IRR) announced it has been accepted as a member of the European Battery Alliance (EBA250). The AIM-listed firm said membership will provide access to a network of potential industrial, academic and government partners throughout the value chain, from mining to recycling, as well as market research information, visibility and cooperation opportunities.
Metal Tiger PLC (LON:MTR) told investors it has subscribed new equity in Sable Resources Ltd (CVE:SAE), with the investment set to give it a 1.05% stake in the company. Toronto-listed Sable is a precious and base metals explorer in Latin America with assets in Mexico, Argentina, and Peru.
Sunrise Resources PLC (LON:SRES) has now raised a total of £1mln as further shares were issued to satisfy demand from existing shareholders.
Peterhouse Capital raised an extra £250,000 through the issue of 89,285,714 shares as part of a broker option facility at a price of 0.28p per share.
Scancell Holdings PLC (LON:SCLP) said a consortium led by its chief scientific officer will receive government funding to kick start clinical development of a long-acting COVID-19 vaccine based on the company’s technology. The drug developer said it expects to receive around £2mln of the sum awarded by Innovate UK, which should underwrite the majority of the costs of the phase I trial, which gets underway next year.
Tiziana Life Sciences PLC (NASDAQ:TLSA, LON:TILS) noted that an interview with its chief executive and chief scientific officer Kunwar Shailubhai is now available for investors on YouTube. In the interview, Shailubhai updates shareholders on its three patented treatments, including methods and use of anti-CD3 monoclonal antibodies for treatment of Crohn’s Disease, including Tiziana’s lead drug Foralumab; as well as comments on the company’s clinical pipeline and near-term milestones for reporting data for its oral and nasal Phase 2 clinical studies with Foralumab and its plans for clinical development of a novel fully human monoclonal antibody for COVID-19.
Live Company Group (LON:LVCG) said it will be hosting an investor webinar via Monecor UK Ltd on Wednesday September 2 at 17:00.
8.50am: Waiting for Jerome Powell
The FTSE 100 made a subdued start with traders keeping their powder dry ahead of a virtual conference for central bankers in lieu of the usual bash in Jackson Hole, Wyoming.
Any comments from the US Federal Reserve will be picked over with relish by commentators looking for so-far-lacking forward guidance from America’s rate-setting body.
Turning to the market, Rolls Royce shares were down 5.5% after the aero-engines maker revealed just how tough the market was as it pledged to sell assets worth £2bn to shore up its finances
Self-help measures have led to £350mln in cost reductions that will help towards its target of £1bn this year.
“The company’s troubles have been well known and in today’s update, it revealed plans to help whip itself into shape,” said CMC Markets’ analyst David Madden.
Heading the Footsie list of risers was WPP (LON:WPP), which advanced 5% after better than expected interims, which were accompanied by a pledge to restart dividend payments.
6.36 am: Footsie headed higher?
The FTSE 100 is set to mark a sliver higher on Thursday as the opening of the Jackson Hole symposium comes into focus for equity markets.
CFD and spreadbetting firm IG Index sees London’s blue-chip benchmark about 4 points higher, making a price of 6,047 to 6,050 with just over an hour to go until the open.
US Federal Reserve chair Jay Powell will address online attendees later today and the central banker is very much in people’s attention.
Speculation points to expectations that he may let slip that the Fed is preparing to tolerate above-target inflation in the short term in order to support broader economic stability.
“He is also likely to ram home the message from his previous press conference that the recovery still largely depends on the virus, and the Fed remains ready to do whatever is necessary to support the economy,” said Michael Hewson, analyst at CMC Markets.
“At the risk of coming across as rather glib, I’m not altogether sure how this is any different to what central banks have been doing for the past twelve years, and appears to come across as rather desperate.”
The analyst added: “The Fed may well be able to anchor market expectations about its inflation targeting, however we already know from the Bank of England’s experience of the last 12 years, when it let inflation roar up to 5%, without nudging rates up, that it is easier to say than it is to do.
“As such this could well be a buy the rumour, sell the news type of move as we head towards the weekend.”
Powell’s comments will come against a backdrop of at least superficially strong equity pricing on Wall Street, meanwhile, the latest hurricane warnings in the vicinity of the Gulf of Mexico stimulated crude oil levels.
Wednesday saw the Dow Jones gain 83 points or 0.3% to close at 28,331 while the S&P 500 climbed another 1% to finish the day at 3,478 and the tech-heavy Nasdaq index advanced further, rising 1.73% to close at 11,665.
In Asia, meanwhile, Japan’s Nikkei fell 104 points or 0.45% to 23,186.
Hong Kong’s Hang Seng moved 0..83% lower to 25,281 and the Shanghai Composite added 0.47% to 3,348.
Around the markets
The pound: US$1.3206, down 0.03%
Gold: US$1,943 per ounce, down 0.44%
Silver: US$27.21 per ounce, down 0.56%
Brent crude: US$45.76 per barrel, 0.2%
WTI crude: US$43.39 per barrel, up 0.09%
Bitcoin: US$11,369, down 0.07%
6.45 am: Early Markets: Asia / Australia
Shares in Asia Pacific were mixed today as the latest data showed China’s industrial sector grew 19.6% in July compared to last year, an increase from the 11.5% gain in June.
China’s Shanghai Composite was up 0.44%, while the Shenzhen Composite jumped 0.58%.
Over in Hong Kong, the Hang Seng index fell 0.91% and in Japan, the Nikkei 225 shed 0.46%.
The S&P/ASX 200 is easing back in the final 90 minutes of trade with a 0.18% gain as financials traded lower but mining and health stocks were still ahead.
Proactive Australia news:
Predictive Discovery Ltd (ASX:PDI) has further expanded the Bankan Creek zone at Bankan Gold Project in Guinea after receiving results of up to 42 metres at 2.8 g/t gold from 12 metres to the end-of-hole.
Lake Resources NL (ASX:LKE) (OTC:LLKKF) has taken another big step in its strategy to deliver ‘clean’ lithium to the growing global green energy push by appointing leading battery technology and materials company Novonix to produce high-performance lithium-ion battery test cells.
Lithium Australia NL’s (ASX:LIT) 90% subsidiary Envirostream expects to begin regular recycling end-of-life (EOL) electric vehicle (EV) batteries in coming weeks after signing further agreements with two additional battery suppliers.