• FTSE 100 closes up 12 points
  • But US benchmarks and European indices fall
  • Intu throws in the towel

5.05pm: FTSE 100 closes 12 points up

FTSE 100 index closed in positive territory on Friday but gave up earlier gains as US markets tanked on fears that states would have to go into lock-down again amid rising virus cases.

Britain’s index of leading shares was the ‘odd one out’ among global markets, closing the day, up around just 12 points, or 0.20%, at 6,159.

Over the week as a whole, the benchmark index lost around 2%, dropping from 6,292, where it started on Monday.

“Stocks lost ground this afternoon due to health concerns in the US. The FTSE 100 is still up on the day, but it has handed back much of its gains as the US markets are weighing on sentiment,” said David Madden, market analyst at CMC Markets.

“Today, it was revealed that Texas will order bars to close as hospitals are under pressure from coronavirus cases. The development in Texas is worrying because re-imposing restrictions could become the norm,” he added.

On fears other US states might have to do the same, the Dow Jones Industrial Average plunged over 564 points at 25,175, while the S&P 500 shed over 53 at 3,030.

3pm: FTSE gives back gains

US markets have opened sharply lower as bank shares are eschewed following the latest directive on dividend caps from the US central bank.

The Dow Jones was down 279 points (1.1%) at 25,467 and the S&P 500 was off 22 points (0.7%) at 3,060.

Banks were under pressure after the Federal Reserve put a limit on dividend payouts by banks and forbade them to buy back any shares in the third quarter.

In London, the FTSE 100 was slowly giving back the morning’s gains but remained 69 points (1.1%) higher on the day at 6,216.

One of the index’s banks, HSBC (LON:HSBA), is slightly in the red as it confirmed the plan to make 35,000 job cuts around the world was resuming, having temporarily halted the redundancies in March because of the coronavirus pandemic. 

As widely expected, shopping centres owner Intu Properties PLC (LON:INTU) has thrown in the towel and called in the administrators. Trading in the company’s shares have been suspended.

1.55pm: Tesco shareholders get the hump with “Drastic” Dave’s remuneration

Shareholders gave a big thumbs down to the executive rewards scheme at the annual general meeting of supermarket giant Tesco PLC (LON:TSCO).

More than two-thirds of votes were cast against accepting the remuneration report, which included a pay rise by more than third to £6.42mln to chief executive officer “Drastic” Dave Lewis, who is on his bike soon anyway.

Although the vote was a decisive one, the board of Tesco can – and probably will – ignore it.

It appears that a number of shareholders were miffed that the committee had decided to remove stock market star and sector peer Ocado from the equation when calculating the rewards.

“We are disappointed that the advisory vote on the directors’ remuneration report was not passed,” Tesco said.

“Following recent engagement on our Remuneration Report with a number of our larger shareholders, we have been reassured that the majority agree that the overall outcome of the 2017 PSP award is proportionate given the outstanding turnaround delivered by management,” the company said in a statement.

“We recognise, however, that a significant number of shareholders had concerns with the principle of the committee’s adjustment to the TSR comparator group,” it added. (Read more here.)

Shares in Tesco PLC (LON:TSCO) were up 1.2% at 229p, contributing to a 94 point (1.5%) rise to 6,241 on the Footsie.

12.55pm: Ton-up

London’s index of leading shares looks to be in consolidation mode in lunchtime trading after a very satisfactory morning.

The FTSE 100 was up 103 points at 6,250, after the Chancellor of the Exchequer, Rishi Sunak, hinted in an interview with Bloomberg TV that he may yet have more things in his locker to throw at the problems afflicting the UK economy.

“Obviously the government can do things to help with the recovery. The prime minister will be making a speech later as well. I will be outlining further things in the coming weeks,” he told the news agency.

Across the pond, investors are in a more cautious mood as the rate of new coronavirus cases continues to rise.

Spread betting quotes suggest the Dow Jones will open at around 25,643, down 103 points. The S&P 500 is tipped to open at 3,079, down 5 points.

“There is no doubt that the second coronavirus wave news has been glum and it may maintain this narrative for some time but the fact is that smart money does see the Texas governor’s recent action of halting the further re-open efforts as a positive sign,” said Naeem Aslam, the chief market analyst at AvaTrade.

“For them, this is the step in the right direction to stamp out the current spike in Covid-19. Measures like this have put an end to the drumbeat of coronavirus news,” he added.

Back in London, the FTSE 250 is faring less well than the FTSE 250 despite a warm reception given to the updates to online casino operator 888 Holdings PLC (LON:888) and engineering company Weir Group PLC (LON:WEIR).

888 was up 14% at 172p after it raised full-year guidance while Weir was up 7.5% at 1,110.5p after the company said it would be refinancing a US$950mln and a £200mln loan.

11.55am: FTSE 100 scores a ton 

It is clearly, to use the stock market jargon, a “risk-on” day, with investors encouraged by yesterday’s results of the Fed’s banking stress tests.

The FTSE 100 was up 100 points (1.6%) at 6,247.

“After the close of trading in New York last night, the Federal Reserve issued the results of the banks stress test, and by and large they are in good shape,” reported CMC’s David Madden.

“When the central bank ran an extreme pandemic related scenario, a number of banks came close to the minimum capital requirement. Bank’s dividends will be capped at their current levels. Traders reacted well to the news and that has lifted the mood on this side of the Atlantic. The rising number of COVID-19 cases around the globe is still an issue, but dealers are ignoring it for now,” he added.

Did someone mention the coronavirus?

The latest coronavirus update from Pantheon Macroeconomics noted that new US cases yesterday jumped to 40,000, from 27,800 on Thursday of last week, which is a 44.0% increase.

“This slightly overstates the true increase, however, because Wisconsin reported a large number of probable cases for the first time. Adjusting for this, cases in the 50 states plus DC rose 41.5%,” calculated Ian Shepherdson, the chief economist at Pantheon.

The US remains on course for 100K new cases per day before mid-July, unless changes in peoples’ behaviour in the worst-hit states cause a slowdown in the rate of increase. It’s too early to see that in the case data, but restaurant diner numbers and employment at small firms is falling across the South and West,” Shepherdson said.

The Pantheon economist is a bit more sanguine about the situation where the number of cases continues to fall, although he is alarmed at the “scenes of hugely overcrowded beaches on the south coast yesterday will result in an increase in cases in a couple weeks’ time, mirroring the post-Memorial Day rise in many US states”.

Of course, he’s not the first person to be aghast at the sight of semi-naked Brits revelling in the sunshine.

10.15am: Intu plunges as refinancing talks founder

Just nine Footsie stocks are failing to make progress this morning (and one of those is a non-mover) as investors continue to accentuate the positive.

(Thanks, Bing).

The FTSE 100 was up 72 points at 6,219, helped by Tesco PLC (LON:TSCO) moving into positive territory (up 0.6%) after an initially negative reaction to today’s trading statement.

“COVID-19 cases are still rising in the US but so, too, are financial markets,” was the pithy observation of ING’s Chris Turner.

AJ Bell investment director Russ Mould observed that: “Governments and central banks continue to shield equities from the bad news on fresh spikes in coronavirus and evidence of the economic damage wrought by the pandemic.”

That’s his explanation for a strong end to the week for the FTSE 100, which is up more than 1%.

The question is how long fiscal and monetary largesse can keep the rally going.

“The upcoming second-quarter results season could result in a collision with reality as the impact of COVID-19 really hits corporate profits,” he cautioned.

A collision with reality has already taken place at shopping centres owner Intu Properties PLC (LON:INTU), where the shares have halved as investors bale out ahead of a highly probably call to the administrators this evening.

“Intu had clearly been in distress due to the rapidly deteriorating retail market conditions especially under COVID-19; however, this outcome will still make some retail landlords and investors pause. Many would have thought that Intu could have avoided administration since investment markets remain effectively closed, with landlords unable to sell assets – particularly shopping centres.

“Administrators will face considerable challenges given the significant asset management requirements to stabilise these shopping centres. The threat of a fire sale looms large and would cause a negative ripple across the sector,” warned Colm Lauder, the property sector analyst at Irish stockbroker, Goodbody.

Shares in British Land PLC (LON:BLND) and Land Securities PLC (LON:LAND) declined in sympathy, with the former off 1% and the latter down by 0.4%.

8.30am: Tesco falls as investors assess costs of growth 

The FTSE 100 opened strongly, mirroring similar moves globally, with the lure of cheaper money and other fiscal stimulus policies outweighing evidence of a growing global economic calamity.

The Dow Jones closed Thursday’s session 300 points to the good after US regulators removed some restrictions as to just how banks can invest their cash, while Asia was buoyant too.

“The intense expectation of more fiscal and monetary stimulus wouldn’t let a downside correction develop healthily despite the continuous flow of news getting from bad to worse,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Major US stock indices rebounded more than 1% on Thursday, even though the business reopening was halted in Texas due to the rapidly rising new cases. Infections jumped in Arizona and California and Apple closed 14 shops in Florida.

“Meanwhile, the US jobless claims rose 1.48mln last week, more than the analyst forecasts hinting that the post-COVID recovery in the jobs market isn’t as strong as expectations, and more damage is to come with the renewed containment measures in several places.”

In London, Tesco (LON:TSCO) led the fallers after profit-takers shaved 2% off the value of the supermarket group in the wake of the latest trading statement.

While underlying sales growth was strong, the market’s focus appeared to be on the uptick in costs to support the increased demand.

Sainsbury (LON:SBRY) was pulled 1.5% lower in Tesco’s wake.

On the up during what has been a fairly turbulent year was British Airways owner IAG (LON:IAG), which opened 3% higher.

This was as much a technical bounce after recent falls than buying activity based on fundamentals, analysts said.

On the FTSE 250, rise of just over a third in its daily revenues boosted shares in online gambling specialist 888 Holdings (LON:888) 11%.

Proactive news summary

Supermarket Income REIT (LON:SUPR) confirmed it is in discussions to acquire a portfolio of assets via a sale and leaseback transaction with a major grocery operator. The trust earlier reported that it received 100% of rents due in the June 2020 quarter renewal.

Keywords Studios PLC (LON:KWS) has acquired Coconut Lizard Limited, a company providing specialised video game development services, for up to £2mln.

Med-tech specialist Inspiration Healthcare Group PLC (LON:IHC) said it expects to see revenues “increase significantly” after a strong start to the year.

Bahamas Petroleum Company PLC (LON:BPC) told investors that it has completed the administrative formalities to set up its Bahamian mutual fund and is ready to start the drilling of the Perseverance #1 well between December and next February.

Iofina PLC (LON:IOF) said its IO#8 iodine extraction plant in the US is back on stream after the restart of supplies of source material brine, which comes from onshore oilfields.

Immotion Group PLC (LON:IMMO), the immersive virtual reality (VR) out-of-home entertainment business, said it was close to hitting break-even before the coronavirus pandemic hit.

Live Company Group PLC (LON:LVCG) said it has raised £400,000 in a share placing to help fund its planned build programme for 2020 and to “take advantage of post lockdown operating conditions”.

Zanaga Iron Ore Company Ltd (LON:ZIOC) told investors it has entered a subscription agreement with Shard Merchant Capital, under which some 21mln shares will be issued in up to three tranches.

Amur Minerals Corporation (LON:AMC) said it is expecting “some high-value outputs” in 2020 after the mineral explorer reported narrowed losses in its 2019 financial year.

Sativa Group PLC (LON:SATI), the medicinal cannabis group, has welcomed the clarity of the regulatory framework concerning the use of cannabidiol (CBD) products in food.

PowerHouse Energy Group PLC (LON:PHE) said a shareholder proxy vote will take place July 14 to decide whether to allow the company to issue the 1,437,440,277 shares to acquire Waste2Tricity Limited, a specialist solutions provider to the energy-from-waste sector. Chairman William Davies has sent a letter to shareholders that includes the background to and reasons for the acquisition, a copy of which will be available on the company’s website, www.powerhouseenergy.net.

Shield Therapeutics PLC (LON:STX) has brought co-founder Dr Christian Schweiger back onto the board as a non-executive director, with immediate effect. 

SkinBioTherapeutics PLC (LON:SBTX) has appointed Cenkos Securities as its Nominated Adviser and sole broker.

6.37 am: London called higher

London is set for a positive start after US markets recovered from a soft start yesterday to finish in positive territory.

Spread betting quotes suggest the FTSE 100, which rose 23 points to close at 6,147 yesterday, will open around 69 points to the good at 6,216.

Stateside, the Federal Reserve has elected to ask banks to preserve capital by suspending share purchases and put a cap on dividend payments.

The Fed released its stress test results yesterday that suggested banks remain well capitalised for what might be called a normal scenario but it also did tests under a “worst-case” scenario and these indicated that banks could end up sailing close to the wind in terms of capital needs.

“The late comeback overnight was driven by banks, who celebrated further easings of the Volcker-era rules yesterday, allowing them extra capital to dabble more widely. That overcame the increasing disquiet at a rising pace of COVID-19 cases in America’s Southern and Western states,” said Jeffrey Halley at OANDA.

The Dow Jones reversed early losses to close 300 points higher at 25,746 while the S&P 500 added 33 points to finish at 3,084.

Equities in Japan have followed the trend this morning but not so share in Hong Kong. Tokyo’s Nikkei 225 was 275 points better at 22,535 but Hong Kong’s Hang Seng was 110 points weaker at 24,671.

On the corporate front in London, we probably don’t need reminding that supermarkets have done all right in lockdown and pubs have had a terrible time but we’re going to get a reminder anyway from Tesco PLC (LON:TSCO) and Marston’s PLC (LON:MARS).

However, things are not perfectly smooth at Tesco, as the company is facing a shareholder revolt at the annual general meeting over the pay packet of soon-to-depart chief executive Dave Lewis. 

Lewis’s £6.4mln wage package is facing opposition from a large number of investors, with a majority vote against the payment fast becoming a possible outcome, according to some reports.

There is also likely to be more detail from Lewis about profits and perhaps about the size of the special dividend that the company has promised to pay out from the planned £8bn sale of its Thai and Malaysian businesses.

Broker Shore Capital is expecting like-for-like (LFL) retail sales growth of 4.8% for the period, with 9% LFL growth in the UK division as “very strong” grocery retail sales are offset by weak catering activity from the Booker wholesale arm and poor general merchandising sales.

Analysts at UBS also recently said their research suggested that the threat from discounters Aldi and Lidl “is past its peak in the UK”, with Tesco a ‘buy’ for its sector-leading margins and cash returns.

Marston’s PLC will serve up an update on its progress in the first half to 31 March on Friday, with the pub industry having been hit hard since the onset of the coronavirus pandemic.

Like-for-like sales were down 1% after 24 weeks up until the lockdown came in and due to the virus are now forecast to have been down 42% in March, according to broker Peel Hunt, taking 6% off first half LFL sales and an estimated £17mln off first-half profit before tax.

The shares recovered some losses last month when the brewer and pub company agreed to spin off its brewery business into a joint venture with Danish giant Carlsberg, of which the Wolverhampton-headquartered outfit will own 40% and receive a £273mln cash payment.

The FTSE 250 pubs group will use the cash to pay down its debt, which stood at £1.4bn at the end of its September financial year and which the company has been aiming to reduce significantly by 2023.

There will be interest from non-investors in the group’s plans for pub reopenings after the Prime Minister said on Tuesday that Saturday, July 4 will be the date when many people will be able to meet down the old rub-a-dub to share lockdown stories and pathogens.

Significant announcements expected

Trading updateTesco PLC (LON:TSCO)

InterimsMarston’s PLC (LON:MARS)

Around the markets

  • Sterling: US$1.2427, up 0.08 cents
  • 10-year gilt: 0.157%, down 3.43 basis points
  • Gold: US$1,769.00 an ounce, down US$1.60
  • Brent crude: US$41.62 a barrel, up 50 cents
  • Bitcoin: US$9,029, down US$68

Business headline

Financial Times

A €9 billion bailout package that allows the German government to raise its holding to a blocking minority in the event of a hostile takeover bid has been approved by Lufthansa’s shareholders.

The Times

The German fintech group Wirecard has filed for insolvency owing €3.5 billion in one of Europe’s biggest corporate failures.

The US Federal Reserve has ordered big American banks to curtail shareholder payouts in coming months in a move to cushion them from further coronavirus shocks.

Pret A Manger chief executive Pano Christou has told landlords to expect no more than 30% of the June quarter rent due this week.

Reducing VAT to boost growth would be better left until later in the year, the Institute for Fiscal Studies has said.

Ryanair has filed a complaint to the European Commission accusing Air Dolomiti, Lufthansa’s Italian offshoot, and three local rivals of colluding on prices in Italy and Austria.

The Daily Telegraph

Up to 500,000 furloughed employees have returned to work in the past two weeks as the UK economy stutters back into life, according to the Office for National Statistics.

Corporate debt piles have surged to “unmanageable” levels during the severe recessions caused by Covid-19, which could trigger a lethal cascade of insolvencies, the International Monetary Fund has warned.

The Government is offering to narrow the scope of its digital tax after the US threatened tariffs on nations that target its technology companies.

The Guardian

UK retailers stumped up just 14% of the £2.5 billion quarterly rent bill due this week.

Royal Mail has announced a cost-cutting plan that will involve slashing about 2,000 jobs in a move accelerated by the Covid-19 crisis.

British Airways has told its longest-serving cabin crew they will have to take a 20% basic pay cut and change working patterns if they are to be retained.

Australia’s flag carrier to sack 6,000 people and continue to stand down half its 30,000-strong workforce as it struggles to cope with the coronavirus crisis.

Another 1.48 million people filed for unemployment insurance across the US last week, as the grim economic toll of the coronavirus pandemic continued.

Daily Mail

Doorstep lender Non-Standard Finance said there was ‘material uncertainty’ surrounding its ability to keep operating.