Bad Economy Headlines in Newspapers
  • FTSE 100 closes up 62 points
  • US shares reach fresh highs
  • Tullow Oil slumps after disappointing exploration well result

5pm: FTSE 100 joins global equities to head higher

FTSE 100 index closed above 7,600 on Thursday as there was a strong start to 2020 for global equities, as investor sentiment was buoyed by news of fresh stimulus measures from the People’s Bank of China.

The UK’s premier index finished up nearly 62 points at 7,604 on the day, while the more UK-focused FTSE 250 index surged almost 225 points higher to close at 22,083.

“Equity traders are in risk-on mode today as the US-China trade story is still fuelling the upbeat sentiment,” said David Madden, market analyst at London-based CMC Markets.

“Phase one of the trade deal will be signed in the middle of this month, and the feel-good factor is still circulating. Overnight, the Peoples Bank of China (PBoC) announced plans to cut the reserve requirement ratio (RRR) by 50 basis points. The news has been welcomed by buyers as the message from Beijing is that they are happy to assist the economy.”

US stocks were also soaring as the new year kicked in, with fresh intraday highs achieved by the three main benchmarks.

The Dow Jones Industrial Average added  nearly 183 points at 28,721, while the S&P 500 added nearly eight points. The Nasdaq index added around 55 points at 9,028.

Gold was up 0.42% on the day at US$1,529.50 an ounce as the yellow metal’s bullish move continues, made more impressive by the rise in stocks, which normally acts as a counter to gold – a safe haven asset

1.30pm: Footsie in consolidation mode

The UK’s leading shares went into consolidation mode in the lunchtime trading session ahead of what is expected to be a firm US start.

The FTSE 100 was up 69 points (0.9%) at 7,612.

The Dow Jones is tipped to open 155 points higher at 28,693 and the S&P 500 up 18 points at 3,247.

US jobless claims in the final week of 2019 eased by 2,000 to 222,000, in line with economists’ forecasts.

Back in the UK, EQTEC PLC (LON:EQT) was the top riser, jumping 30% to 0.15p after it signed the legal documentation to allow the financial close of the proposed construction and operation of the North Folk 2W biomass project in California.

Tullow Oil PLC (LON:TLW), which had a year to forget in 2019, has not had a particularly good start to 2020 with a disappointing well result off the coast of Guyana.

The shares slumped 6% to 60.12p after the company said the Carapa-1 exploration well’s drilling result did not come up to expectations.

11.15am: Manufacturing sector continues to struggle

The FTSE 100 has continued to make steady progress, with investors more focused on developments in China than insipid UK manufacturing data.

The index of blue-chip shares was up 77 points (1.0%) at 7,619, with sentiment boosted by the People’s Bank of China announcing a lowering of its reserve requirement ratio (RRR).

“This cut helps smooth out liquidity pressure from massive loan demand at the beginning of the year, which is a seasonal phenomenon,” explained Iris Pang at ING.

“Whether this RRR cut is too small or too large depends on whether the banks pass on the lower funding costs to borrowers.

“Some have commented that this CNY800 billion liquidity release will be absorbed by the maturity of the CNY257.5 billion one-year medium lending facility on 23 January, and therefore the size of the RRR cut is not enough to meet loan demand this month. We don’t agree. The central bank could have an MLF [medium-term lending facility] injection in mid-January to offset the maturity. This is quite possible because there is usually an MLF operation before the 20th of each month to indicate whether there will be a change in the loan prime rate,” Pang said.

Meanwhile, in the UK, economists have been pontificating about an underwhelming UK manufacturing purchasing managers’ index (PMI) for December.

“The final December manufacturing PMI was edged up to 47.5 from the ‘flash’ reading of 47.4. This was perhaps to be expected following the decisive General Election result, which likely eased some of manufacturers’ uncertainties, but the sector is likely disappointed that there was not a larger upward revision,” speculated Howard Archer, the chief economic advisor to the EY ITEM Club.

“It highlights that the manufacturing sector continues to struggle with both domestic and foreign demand under pressure.

“Domestic demand for manufactured goods has been hampered by businesses’ caution over investment amid a number of uncertainties – Brexit, domestic economic and political, global economic – which has limited expenditure on capital goods. Meanwhile, weakened global growth and an uncertain trading environment is weighing down on foreign demand for UK manufactured goods.

“Indeed, the survey reported that ongoing concerns relating to the economic, global trade and political outlooks weighed on manufacturing activity in December,” Archer noted.

In broker news, British Airways owner International Consolidated Airlines Group (LON:IAG) rose 1.0% to 631.4p after being upgraded to ‘buy’ from ‘neutral’ by Citigroup, according to market reports.

9.35am: UK manufacturing PMI fell in December

Resource stocks were driving London’s benchmark index higher on Thursday.

The FTSE 100 was 69 points (0.9%) better at 7,612, with commodities trader and miner Glencore PLC (LON:GLEN) leading the way with a 3.0% rise at 242.45p as investors look forward to US and Chinese officials signing on the dotted line on the phase one trade agreement.

In the UK, macroeconomic developments were a little less warmly received. The headline seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to 47.5 in December, which was the second weakest level for almost seven-and-a-half years.

The PMI has posted below the 50.0 level, which marks the crossover between contraction and expansion, in each of the past eight months.

“The UK manufacturing sector took a turn for the worse at the end of 2019. Output fell at the quickest pace in seven-and-a-half years as new order inflows decreased and Brexit safety stocks were reduced. With demand weak and confidence remaining subdued, input purchasing was pared back sharply and jobs cut for the ninth successive month,” commented Rob Dobson at IHS Markit.

“The downturn is still being hardest felt at companies reliant on investment and business-to-business spending. The steepest reduction in output was at investment goods producers, as continued uncertainty meant new orders and new export business suffered the steepest contractions in over a decade. Intermediate goods producers also experienced marked drops in output and new work received,” he continued.

“There was a pocket of growth, however, as consumer goods production edged higher. On this basis, it looks like UK manufacturing and the broader economy may both start the new decade as they began the last, too reliant on consumer spending and still waiting for a sustained improvement in investment levels,” he added.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said the pace of manufacturing’s decline in December will set alarm bells ringing.

“As the downturn deepened, Brexit uncertainty continued to dominate the business landscape and impact on client confidence. Combined with the effects of a slowing global economy, new orders from domestic and export markets dried up at one of the fastest rates seen in seven-and-a-half years,” Brock said.

“This impact trickled down to job creation strategies, as the pace of job losses intensified and companies were reluctant to commit to additional expense. Businesses continued to be squeezed as input prices rose as a result of shortages and transportation costs.

“In the closing stages of the year, the sector has ended on a dreary note. Though the result of the General Election will bring some clarity to businesses, it still feels like a long road ahead for manufacturing to recover its losses from this year and there will still be some obstacles to overcome in 2020,” Brock concluded.

8.45am: Good start to 2020

The FTSE 100 index pushed higher as a soft pound and lowering of the reserve requirement ratio by the Chinese national bank boosted sentiment early doors.

The UK benchmark was up 61 points at 7,604, as the pound slipped by more than a third of a cent to US$1.3217.

“Following on from three cuts in 2019, Beijing announced it will slash the country’s reserve requirement ratio by a further 50 basis points to 12.5% from January 6th. That reduces the amount of capital banks need to hold in reserve, in turn freeing up more funds for economy-supporting loans and the like,” said Connor Campbell at Spreadex.

“That this comes after the ‘phase one’ trade agreement with the USA – set to be signed on January 15th – caused the markets to have a very merry start to the New Year. It also meant investors could choose to ignore a worsening Caixin manufacturing PMI of 51.5, against the previous month’s 51.8,” he added.

China’s Caixin manufacturing Purchasing Managers’ Index (PMI) “was well above its uptrend, so a decline is not surprising”, according to Pantheon Macroeconomics.

“Without the Phase One trade deal, it would have been worse. With the index in correction mode, we are reticent to read too much into the details, but the loss of momentum in new orders is disappointing, chiming with the official report. Export orders appear to have been aided by the deal prospects, falling by less than the overall orders gauge, though the subindex remained only slightly above 50,” it added.

As expected on the first trading day of the new year, there was not a lot of corporate news.

Investors were tucking into Tasty PLC (LON:TAST), the casual dining restaurants operator, after it sold its dim t More London restaurant site for £2mln in cash and said trading is in line with forecasts. The shares were up 23% at 3.35p.

The top riser in London was EQTEC PLC (LON:EQT), which jumped 39% to 0.16p after it signed the legal documentation to allow the financial close of the proposed construction and operation of the North Folk 2W biomass project in California.

Proactive news headlines:

EQTEC PLC (LON:EQT) said it has signed the legal documentation to allow the financial close of the proposed construction and operation of the North Folk 2W biomass project in California. In a statement, the AIM-listed firm said it co-operated closely with partner Phoenix Biomass Energy, which is also a shareholder in North Fork Community Project (NFCP), the project’s manager, to achieve the milestone.

i3 Energy PLC (LON:i3E) told investors it is preparing for a new appraisal campaign for the Serenity and Liberator fields, with work set to start in mid-2020. The aim will be to further delineate the two fields which are estimated to host more than 600mln barrels of in-place crude oil.

Argo Blockchain Plc (LON:ARB) has appointed Peter Wall, one of its co-founders and current vice president of operations, as its new chief executive with immediate effect. The cryptocurrency miner also said that one of its non-executive directors, Gil Penchina, had stepped down from the board on 1 January and been succeeded by Ian Macleod, the former corporate secretary of Canadian social networking services firm Teligence.

Oracle Power PLC (LON:ORCP), the UK energy developer of a combined lignite coal mine and mine mouth power plant located in Block VI of the Thar desert in the south-east of the Sindh Province of Pakistan, said it has received a notice from Andreas Migge, a non-executive director of the company, that, on 31 December 2019, he exercised certain pre-existing warrants to subscribe for 4,400,000 ordinary shares at a price of 0.50p each. The group said the exercise of these warrants amounts to a cash subscription of approximately £22,000.

Vast Resources (LON:VAST), the AIM-listed mining company, said that, further to its announcement of 18 December 2019 regarding the funding update, the company has submitted a drawdown request for the first tranche issuance to Atlas Capital Markets.

Tally Ltd is planning to launch a new version of its banking phone app at the end of January less than a year after its debut in June 2019. The company, which offers customers the chance to buy currency backed by physical gold, said the second version of the app will see a new design as well as improvements to customer experience.

G3 Exploration Limited (LON:G3E) said, as expected, liquidators have been appointed to assist with the China-focused gas group’s restructuring. The joint provisional liquidators (JPLs) have been appointed by the Grand Court of the Cayman Islands to preserve and protect the company’s assets and identify any opportunities that may exist to restructure or refinance the company.

Metal Tiger PLC (LON:MTR), the AIM-listed investor in strategic natural resource opportunities announced that, under its share buyback programme, the company’s broker, Arden Partners has purchased 850,000 of its shares at a volume-weighted average price per share of 1.375p.

Diversified Gas & Oil PLC (LON:DGO), the US-based owner and operator of natural gas, natural gas liquids, oil wells and midstream assets, said that, in accordance with the terms of its share buyback programme announced on 30 April 2019, it has purchased 246,049 ordinary shares in the market at a volume-weighted average price of 107.887p per share through broker Stifel Nicolaus Europe. The shares acquired will, in due course, be cancelled.

Nektan PLC (LON:NKTN), the fast-growing, award-winning international gaming technology platform and services provider, confirmed that it has not been able to publish its audited annual report and accounts for the year ended 30 June 2019 by 31 December 2019, as required AIM Rules for Companies and therefore dealings in its ordinary shares will therefore be temporarily suspended from trading with effect from 7.30 am on 2 January 2020, until such time as the Accounts have been duly published which the group expects will be during January 2020.  Notwithstanding the temporary suspension of share trading, the company will continue to make announcements as and when required.

7.00am: New Year spring in Footsie’s step

The FTSE 100 is set to start positively on the first trading day of this new year and decade, as macro attentions remain minded towards China and US policymakers.

CFD and spread-betting firm IG Markets sees London’s blue-chip benchmark around 25 points higher, making a price of 7,584 to 7,587 with just over an hour to go until Thursday’s open.

“Global equity markets had a great finish to 2019 thanks to the announcement the US and China agreed upon phase one of the trade deal,” said David Madden, analyst at CMC Markets.

“President Trump said that phase one of the trade deal will be signed on 15 January, and even though a lot of the good news has already been factored in, it should assist with the bullish mood.”

The analyst added: “The European manufacturing industry has been caught in the crossfire of the US-China trade spat. The eurozone has yet to fully recover from the debt crisis, and the uncertainty surrounding Brexit has played a role in the sector’s poor performance too.

“Some people are fearful that President Trump will turn up the heat on the EU in relation to tariffs. Donald Trump will be seeking re-election at the back end of the year, and playing the American first card is likely to play well with his voter base.

“Even though the trade relationship with China is looking positive at the moment, in the coming months the talk from both sides could toughen up as they move on to phase two of the trade deal.”

In Asia, this morning, Hong Kong’s Hang Seng rallied 1.19% to trade at 28,520 whilst the Shanghai Composite moved 1.15% higher to 3,085.

Significant announcements due Thursday January 2:

Economic data: UK manufacturing PMI; US weekly jobless claims

FTSE 100 ex-dividends to knock 1 point off the index: Auto Trader Group plc (LON:AUTO), Experian PLC (LON:EXPN), British Land Company PLC (LON:BLND)

Around the markets:

The pound: US$1.3220, down 0.26%

Gold: US$1,520 per ounce, up 0.08%

Brent Crude: US$66.27 per barrel, up 0.4%

Bitcoin: US$7,114, down 1.23%

City headlines:

  • China cuts bank reserve ratio again – The Times
  • British Airways begins offsetting carbon from domestic flights – ITV News
  • Reliance takes on Amazon with launch of ecommerce platform – Financial Times
  • Google says it will no longer use ‘Double Irish, Dutch sandwich’ tax loophole – The Guardian
  • Online banking crashes for Lloyds, Halifax and Bank of Scotland – Evening Standard
  • Greggs launches meatless steak bake to beef up its vegan range – The Guardian
  • UK economy starting 2020 in ‘stagnation’ and uncertainty – The Independent