- FTSE 100 index closes down 53 points
- US markets lower
- Sterling’s humbling fails to prevent Footsie falling
5.10pm: FTSE closes in red
FTSE 100 closed in the red on Friday, as no-deal Brexit talk ramped up and shares in big banks took a hit.
The UK index of leading shares closed the day down around 53 points at 6,546. The FTSE 250 also sank, falling almost 134 points to close at 19,622.
Sterling fell 0.75% against the dollar, prompting perhaps a less sharp decline by FTSE.
Chris Beauchamp, markets analyst at IG index, said the “no deal” talk was now at a level that would have seemed “unthinkable” a year ago.
“Still, given the potential for disruption even if a last-minute, eleventh-hour deal is struck, the market reaction seems rather muted, with sterling hanging on to most of its recent gains against a host of other currencies,” he said.
Top laggard though was Rolls Royce Holdings plc (LON:RR.), which dropped 7.8% to 117p following its latest trading statement, and was a perfect example of ‘buy the rumour, sell the news’, according to Beauchamp.
“Having doubled from the November low, the shares were rather priced for perfection, or at least for a bout of good news, which was distinctly lacking from today’s report. Having been pounced on as a recovery play in November, the shares are now at risk of fresh declines, with the deep value discount now largely gone. At the very least, the shares seem set to struggle into year-end,” he said.
3.00pm: Proactive North America headlines:
BioSig Technologies Inc (NASDAQ:BSGM) announces the first commercial sale of its PURE EP Systems
Esports Entertainment Group Inc (NASDAQ:GMBL) (FRA:40Y1) says EGL to manage Arsenal’s esports team
2.47pm: Wall Street opens in the red
The main indices on Wall Street have started Friday’s session on the back foot as concerns over stimulus negotiations and rising cases of COVID-19 rattled market sentiment.
In the first minutes of trading, the Dow Jones Industrial Average was down 0.39% at 29,882, while the S&P 500 fell 0.46% at 3,651 and the Nasdaq dropped 0.56% to 12,336.
Amid the uncertainty of the political landscape, with a bleak outlook for Brexit negotiations also doing little to excite investors, traders seem content to take some profits following recent rallies.
Even pharma firm Pfizer Inc (NYSE:PFE) fell 1.6% to US$41.20 despite news that its COVID-19 vaccine developed with BioNTech is likely to be approved for emergency use by the US Food and Drug Administration.
Back in London, the FTSE 100 was trading sideways in negative territory, down 42 points at 6,557 at 2.45pm.
1.55pm: FTSE 100 and FTSE 250 both down 0.7%
Sterling’s continued travails on foreign exchange markets are at least limiting the losses being suffered by many blue-chips.
The pound was down by 1.16 cents at US$1.3177 against the greenback while against the euro it was off by seven-tenths of a cent at €1.0878.
A cheaper pound translates into higher revenues for the many FTSE 100 companies that make a significant amount of their sales overseas and therefore coincides with a rise by the Footsie but not today; the UK’s best-known share index is down 43 points (0.7%) at 6,557.
The FTSE 250, which is generally deemed to be adverse, if anything, to a weak exchange rate (because many of its constituent companies buy from overseas and sell predominantly in the UK), was also down 0.7% (137 points), at 19,619.
Calisen PLC (LON:CLSN), the smart meter installation specialist, was the top mid-cap performer, soaring 25% to 257.9p after succumbing to a 261p a share cash offer from a consortium of private equity funds.
— Insight Investing (@Insight_Finance) December 11, 2020
12.25pm: US indices to open lower
Doubts over the speed with which a financial stimulus programme could be introduced in the US are set to deter investors on Wall Street today.
The Dow Jones industrial average is expected to open 200 points in the hole at a shade below 29,800 while the broader-based S&P 500 is seen shedding 32 points at 3,636.
Even the Nasdaq Composite, which so often makes headway when the other two major indices retreat, is expected to shed 111 points at 12,295.
“We’re only just starting to see the impact of Thanksgiving in the US, where record cases and fatalities is an enormous problem going into the holiday period. Obviously, this isn’t entirely the result of thanksgiving, it started before and not enough has been done to bring it under control, as we saw earlier in the year. The next couple of month will get ugly and the vaccines will do little to change that,” said Craig Erlam at OANDA Europe.
“All the more reason why it’s essential that Congress puts aside differences and finds agreement on a stimulus programme before the end of the year when past programmes expire. The bipartisan package put forward a couple of weeks ago may be the basis for what will be agreed and lawmakers are running out of time to make whatever concessions is necessary,” he added.
On the subject of coronavirus cases, the US reported a worrying 224,000 new cases yesterday, was a record level for daily cases, albeit up a mere 3.1% week-on-week, which represents a slowing in the growth rate after Wednesday’s 10.6% increase and Tuesday’s 19.5% surge.
“The seven-day average appears to be flattening, but this might just be due to last week’s post-Thanksgiving catch-up in testing dropping out of the calculation. We’ll have a much better idea of the underlying trend by early next week, but for now, it is fair to say that the spike after the holiday has been smaller than we feared,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.
“The rate of change of hospitalisations has nudged up slightly in recent days, thanks to the upturn in cases since Thanksgiving, but daily deaths are still reflecting the sharp rising trend in cases before the holiday. Deaths, therefore, likely will rise substantially further even if cases now run flat,” Shepherdson said.
Looks like US #markets have decided they need more stimulus to keep moving higher. Meanwhile Powell needs congress to up the deficits with another trillion dollar package so he has more #bonds to buy. https://t.co/La1iDcvkCA
— Crush The Market (@crushthemarket) December 11, 2020
In London, the FTSE 100’s losses lengthened in the afternoon session to 71 points (1.1%) at 6,529, with Rolls-Royce Holdings PLC (LON:RR.), down 8.2% at 116.65p, leading the retreat after its trading update.
“Historically Rolls-Royce has been shorthand for a smooth well-oiled machine – that association looks increasingly at odds with the current sputtering iteration of the group,” said Russ Mould at AJ Bell.
“Even before the pandemic CEO Warren East had been focusing his repair job, launched in the mid-2010s after a string of profit warnings, on addressing cash flow issues within the business.
“Any progress has flown out of the window as its business making, fitting and servicing aircraft engines has all but disappeared overnight thanks to the impact on the aviation sector of Covid and its accompanying restrictions.
“Now cash is flowing out at an alarming rate with the second wave meaning the situation is markedly worse than it thought in August.
“The company is ahead of schedule with its restructuring efforts and is still flagging a return to positive cash flow in the second half of 2021; however, there has to be a chance it will be forced to revisit this view too,” Mould said, citing doubts over the recovery of the travel sector even with vaccines on the way.
11.40am: Banks “getting it in the nexit”
The FTSE 100 is down by 1% this morning on fears that Britain will leave the EU without having secured a trade deal.
US investment bank Morgan Stanley reckons the fall could extend to -% – 10% if both the EU and the UK remain entrenched in their negotiation positions and a deal is not agreed before the end of the transition period.
Banks, according to Morgan Stanley, could see one-tenth or even one-fifths sliced off their values in a “no-deal” scenario. The insurance, property and housebuilding sectors could also take a hit, the bank reckons.
A similar song was being sung by another US investment bank, JP Morgan (JPM).
There could be “more near-term downside” for the banks from a no-deal Brexit. JPM also said regardless of the Brexit outcome the risk of negative interest rates “remains elevated especially if the economic recovery lags other developed economies, creating an overhang on valuation”.
The FTSE 100 was off 64 points at 6,536.
11.05am: Deal or no deal? It’s looking increasingly likely that it will be the latter
Barring an unlikely change of heart, it is looking as if a “no-deal” Brexit is nailed on.
At the end of an all-night summit meeting of the European Union’s head honchos. European Commission president Ursula von der Leyen told her colleagues she reckoned it was more likely than not that the UK would exit the community without a deal having been agreed.
If and when the EU raises standards, UK can make a sovereign choice whether to follow or not. “We would simply adapt the conditions for access to our market accordingly”, says @vonderleyen #brexit pic.twitter.com/gEGYlcaEhY
— Georg von Harrach (@georgvh) December 11, 2020
The realisation certainly seems to be having a dampening effect on sentiment in the City, where the FTSE 100 is down 52 points (0.8%) at 6,547.
“With a No-Deal departure from the EU now arguably odds-on, the UK is heading for the worst possible outcome at the worst possible time,” according to Ayush Ansal, the chief investment officer at the hedge fund, Crimson Black Capital.
“The UK economy, as seen this week, was flailing even before November’s circuit-breaker lockdowns, and the unrelenting pressure on the pound says all you need to know about what the markets think,” suggested Ansal.
“Some market watchers are even suggesting the Pound could fall to parity with the Dollar in the event of No-Deal, which would be a symbolic coup de grace for sterling.
“The UK economy is currently set to enter 2021 not just reeling from the impact of Covid-19 but amid the chaos of a No-Deal. The stakes couldn’t be much higher,” he suggested.
The prospect of a “no-deal” outcome seems to be hitting the banks particularly hard. NatWest Group PLC (LON:NWG) took a kicking from JP Morgan while it was down as the broker downgraded the stock to ‘neutral’ from ‘overweight’.
The shares fell 6.7% to 150.3p, comfortably below JP Morgan’s 180p target price.
— Joumanna Bercetche ???????? (@CNBCJou) December 11, 2020
9.50am: Vaccine delay adds to the gloom
Disappointment over a delay to the coronavirus vaccine developed by GlaxoSmithKline PLC and Sanofi has soured sentiment this morning.
The FTSE 100 was down 35 points (0.5%) at 6,564, despite sterling taking another tonking on the foreign exchange markets. Against the US dollar, the pond was six-tenths of a cent lower at US$1.3230 while against the euro it was down by four-tenths of a cent at €1.0908.
READ GlaxoSmithKline: Back to the drawing board for UK drugs giant and French partner in their bid to deliver coronavirus vaccine
There has been some great news on #Covid19 vaccine trials but this kind of ends that streak. Sanofi runs into a problem that sets back one of the world’s largest vaccine producers — and every country that hoped to buy from them. https://t.co/jz9WvBeMG1
— Helen Branswell (@HelenBranswell) December 11, 2020
Banking stocks are out of favour, which may surprise some given that they have been given the OK to resume paying dividends in the New Year.
“It was clear from the recent third-quarter reporting season that the banks were adequately capitalised and capable of returning to dividend payments. Indeed, most of the banks expressed a desire to be allowed to announce dividends at their full-year results in the new year, and subject to certain limitations set by the Prudential Regulation Authority, will now be able to do so,” said interactive investor’s Richard Hunter.
“It remains to be seen whether the banks will return to such payments with all guns blazing, depending on the economic situation at that time; however, given the level of the dividend yield prior to the imposition of the cuts, it is clear to see why this could have a positive effect on the FTSE100 as a whole as an investment destination for income investors in particular – as of March, Lloyds Banking was yielding around 10%, Barclays 9.6%, HSBC 8.2%, Standard Chartered 4.4% and NatWest 4.3%,” he noted.
NatWest Group PLC (LON:NWG), down 4.9% at 153.25p, was the worst performer of the banking giants but only just – Lloyds Banking Group PLC (LON:LLOY) was off 4.5% at 34.05p and Barclays PLC (LON:BARC) was 4.3% weaker at 135.7p.
8.40am: Dull end to a nervous week
My colleague opened this morning’s preview with a gag (see below). And the state of Brexit negotiations would be laughable if it wasn’t so serious.
The modest fall in the blue-chip index on Friday morning isn’t exactly suggestive of panic at the growing prospect of a no-deal exit from the EU – particularly set against a 1,000-point rise in the Footsie in the last six weeks.
The index of UK blue-chips was down 26 points to 6,574.23
Price makers are either in a state of denial, or the pain of departing the bloc without a trade accord has already been factored into their calculations.
Both the UK and the EU seem to be guiding that there is unlikely to be a break in the logjam significant enough as to facilitate agreement by Sunday night’s deadline.
The City still seems to believe that both sides will step away from the precipice, the current rhetoric notwithstanding.
“The pound did come under pressure but overall, there still seems to be some optimism that pragmatism will prevail as the December 31 deadline gets closer, and the realisation slowly dawns of the potential economic damage that could ensue in the days after a no-deal outcome,” said Michael Hewson, an analyst at CMC Markets.
“An outcome that in the current circumstances would simply heap economic pain on top of economic pain.”
However, Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, is not so sure pragmatism will win out.
‘’With the UK now looking like its hurtling towards a no-deal Brexit, investors should adopt the brace position for swings in sterling and shares in domestic-focused companies,” she said.
On the market, Aero-engines maker Rolls-Royce (LON:RR.) fell 5.5% after predicting the cash outflow from the business would be larger than expected thanks to the continued upsurge in coronavirus cases.
The banks, meanwhile, responded negatively to news they will be allowed to restart dividend payments after the hiatus imposed towards the start of the pandemic.
“It remains to be seen whether the banks will return to such payments with all guns blazing, depending on the economic situation at that time,” said Richard Hunter, head of markets at Interactive Investor.
Proactive news headlines:
Genel Energy PLC (LON:GENL) said it has received notice from the Kurdistan Regional Government (KRG) that override payments, whereby the company receives 4.5% of monthly Tawke gross field revenues, will resume with the January 2021 invoice, to be paid in February 2021. Assuming the prevailing oil price, this translates into over US$5mln of additional cash proceeds every month.
Crossword Cybersecurity PLC (LON:CCS) said it is working with the Sultan Qaboos University in Oman as well as the UK Oman Digital Hub to develop a series of technical cybersecurity challenges for the qualifying rounds of the national cybersecurity capture the flag tournament, due to take place on January 14, 2021. The AIM-listed firm said the competition will see students from across the region use their cybersecurity skills and learn from their peers, with topics in the competition to include web security, digital forensics, reverse engineering, network security and cryptography. Crossword noted that the contest forms part of a wider programme in Oman to promote cybersecurity as a career and build a cyber eco-system through coherent initiatives across education, economy and government.
Westminster Group PLC (LON:WSG) said its guarding subsidiary, Keyguard UK, has expanded its guarding and security services to one of the UK’s leading home builders. The contract, which extends a relationship that started in 2018, is valued at more than £750,000 over three years, starting from the beginning of 2021. Keyguard will provide static and mobile guarding and security services at one of the home builders’ many sites in the UK.
Zaim Credit Systems PLC (LON:ZAIM), the Russian small loans specialist, has said it continues to exceed expectations with another record month for the online business in November. Amounts funded online rose by 63% to £854,000 in November from September’s level and are up 490% since June. The amount funded offline totalled £303,000, down 17% since September as the lender’s focus switches to its online business.
DeepVerge PLC (LON:DVRG) said a new R&D service designed to quickly validate the impact of ingredients such as probiotics and prebiotics on the skin microbiome has enjoyed significant success. ‘Soft launched’ in August, it has already generated £400,000 in completed sales in the fourth-quarter having inked agreements with 10 new clients that had previously not used the company’s Labskin offering. The deals include framework master services agreements with two of the world’s largest suppliers of consumer products related to skincare, DeepVerge revealed.
U.S. Oil & Gas PLC, the oil and gas exploration company with assets in Nevada, said it has successfully plugged the Eblana-9 well, with the site now ready for remediation. The group said its technical team is currently reviewing downhole data from the Eblana-9 well, along with all previously collected and analysed data, to revise the company’s picture of the oil system in the East and to identify possible additional drill targets. During the Eblana-9 drill, downhole data fully corroborated the pre-drill interpretation of the 2-D seismic lines used to target the well. Structures were encountered as predicted by the interpretation. The company said it believes this development is highly significant, as it greatly increases confidence in the potential of existing seismic lines to accurately identify structures of interest.
Anglesey Mining PLC (LON:AYM) said it is “much encouraged” by a positive outlook for commodity prices and “increased investor interest” over the last few months and the group added that it has made advances on many fronts. In an outlook statement accompanying its results for the six months to September 30, 2020, the company said it is confident that a rise in iron ore prices, as well as other base and precious metals due to the impact of the coronavirus pandemic “, will continue” and that the fundamentals driving the rise in commodity prices will “provide solid support” for its projects.
Inspired Energy PLC (LON:INSE) said it has completed the disposal of its SME division to its management team by way of a buyout for a total consideration of up to £10.5mln. The energy procurement consultant said the sale will enable it to focus exclusively on its strategy of providing expert assurance and utility cost optimisation services to corporate energy consumers. Inspired said it considered the SME division to be a “non-core activity”, contributing 7% of total revenues during the first half of 2020, and that the division’s performance had also been impacted by the coronavirus (COVID-19) pandemic.
ReNeuron Group PLC (LON:RENE), a UK-based global leader in the development of cell-based therapeutics, announced that it has conditionally raised total gross proceeds of approximately £2.5mln through the open offer announced on November 23, 2020, representing the full amount proposed. Accordingly, the company has conditionally raised total gross proceeds of approximately £17.5mln (before expenses) in aggregate by way of the placing and subscription and the open offer. In a statement, Olav Hellebø, chief executive officer of ReNeuron, commented: “Our thanks go to the shareholders that participated in this Open Offer, which has resulted in a total of £17.5 million gross being raised in this significantly over-subscribed fundraising. We are at a very exciting time in the development of the Company. During the months ahead, we will continue to advance our pioneering Phase 2a clinical study in retinitis pigmentosa, including the opening of a UK trial site, and to deliver further clinical data. We will also pursue licensing deals from our exosome platform and from our induced pluripotent stem cell (iPSC) technology with the overall objective of creating significant value in the year ahead.”
genedrive PLC (LON:GDR), the near-patient molecular diagnostics company, announced that BGF Investments Ltd has exercised its right to convert the remaining £1,500,000 of its Loan Note Instrument into new ordinary shares of 1.5p each in the company. Following this conversion, the company will be debt-free. Under the terms of the conversion, BGF will be allotted and issued 6,718,022 new genedrive ordinary shares and will also be paid approximately £226,000 in cash reflecting the accrued interest owed on this tranche of the loan.
Falcon Oil & Gas Ltd. (LON:FOG) (CVE: FO) said that at its general & special shareholders meeting, held via conference call on Thursday, December 10, 2020, all resolutions considered and voted upon by the shareholders were approved. The meeting presentation is available on the Falcon website at https://falconoilandgas.com/
Power Metal Resources PLC (LON:POW) the AIM-listed metals exploration and development company said it has received notices to exercise warrants over 10,899,400 new ordinary shares of 0.1p each in the company. The group said 2,899,400 warrants are being exercised at 1.0p per ordinary share, 6,500,000 warrants at an exercise price of 0.70p each, and 1,500,000 warrants at an exercise price of 0.75p per ordinary shares. Subscription monies of £85,744 have been received by Power Metal in respect of these exercises.
Braveheart Investment Group PLC (LON:BRH) said it was notified on Thursday that Trevor Brown and Vivian Hallam, both directors of Braveheart and persons discharging managerial responsibilities of the company have sold 945,000 and 260,980 Ordinary Shares of 2p each in the group, respectively, at an average price of 22.55p and 20.74p per share, respectively, in on-market transactions. It noted that Brown now holds a total beneficial interest in 7,643,288 ordinary shares (equivalent to 20.60% of the company’s voting rights) and Vivian Hallam now holds a total beneficial interest in 775,562 ordinary shares (equivalent to 2.09% of the company’s voting rights).
Eco (Atlantic) Oil & Gas Ltd. (LON:ECO) (CVE:EOG) announces that its annual and special meeting will be held at 10.00am (Toronto time) on December 30, 2020, at the offices of the chief financial officer of the company at 559 Briar Hill Avenue, Toronto ON M5N 1N1.
6.50am: Is this thing on?
If the FTSE 100 were a microphone, a stand-up comedian would be tapping it this morning, asking, “Is this thing on?”.
Despite the rapidly approaching Brexit negotiations deadline, London’s benchmark of blue-chip shares is set to open little changed, in line with sterling, which has stabilised on foreign exchange markets.
“With UK/EU trade talks extended to the weekend, both the EU and the UK have started to prepare the ground for a no-deal outcome. EU Commission President Ursula Von Der Leyen outlined several contingency plans, or mini deals, which included various measures to deal with aviation safety, air and road connectivity, as well as fisheries, to ensure no disruption on the 1st January 2021.
“Prime Minister Boris Johnson also put the UK on notice for a no-deal outcome, saying that he was sceptical about the prospect of an agreement,” reported Michael Hewson at CMC Markets.
US markets eased overnight with the Dow Jones Industrials Average closing down 70 points at 29,999 and the S&P 500 off 5 points at 3,668 after US weekly jobless claims rose to 853,000, which was well above the consensus forecast of 725,000.
In Asia this morning the Nikkei 225 in Tokyo and the Hang Seng in Hong Kong went their separate ways; the former was down 86 points at 26,624 and the latter was 106 points heavier at 26,516.
In London, the end of the week will be marked by trading updates from engine maker Rolls-Royce and housebuilder Bellway.
Rolls-Royce Holdings PLC (LON:RR.) finally got its mammoth £2bn rights issue away a few weeks ago and investors will want to know if the money is to be used just to batten down the hatches during the pandemic or whether the company has more inventive plans in mind.
The market will also be interested in management’s view on the outlook for the aviation markets following recent news of coronavirus vaccine successes, which could help pull the air travel sector and its engine customers out of their slump.
There may also be interest in whether the company could be in place to benefit from the recent multi-billion defence spending package unveiled by the UK government, as well as any updates on the company’s efforts to secure £217mln of government funding to build 16 mini nuclear power stations as part of a consortium of firms.
Bellway PLC (LON:BWY) will provide an update on the period since its July year-end, having said with its final results in October that the new financial year had got off to an “exceptionally strong” start.
With house reservations up by 30.6% to 239 per week in the nine weeks since August 1, 2020, the FTSE 250 builder said sales completions should total around 9,000 for the full year.
A couple of worries are looming on the horizon; a “no-deal” Brexit has had most UK-focused companies worried this week while further down the road the stamp duty holiday is set to end.
Around the markets:
- Sterling: US$1.3315, up 0.2 cents
- 10-year gilt: 0.203%, up 6 basis points
- Gold: US$1,838.50 an ounce, up 90 cents
- Oil: US$50.26 a barrel, up 1 cent
- Bitcoin: US$17,943, down US$409
6.45am: Early Markets – Asia/Australia
Asia-Pacific markets were mixed on Friday as negotiations dragged on with regards to a coronavirus (COVID-19) relief package in the US.
In Japan, the Nikkei 225 fell 0.39% while South Korea’s Kospi index gained 0.90% after the country’s exports in the first 10 days of December jumped by 26.9% from a year ago.
Hong Kong’s Hang Seng index advanced 0.29% but Chinese shares declined with Shanghai composite down 0.93%.
Australia’s benchmark ASX 200 closed 0.61% lower with the health care sector declining by 2.59%.
Proactive Australia news:
Aeris Resources Ltd (ASX:AIS) continues to intersect sulphides during initial drilling of the new Constellation prospect within the Tritton copper tenement package in NSW with the third hole returning a 26.2-metre zone of disseminated and banded sulphides.
Creso Pharma Limited (ASX:CPH) (OTCMKTS:COPHF) (FRA:1X8) is poised to capitalise on opportunities in the Australian cannabidiol (CBD) market through a heads of agreement with leading natural, sustainable health and lifestyle brand supplier Martin & Pleasance Pty Ltd.
Kingston Resources Ltd (ASX:KSN) (FRA:RZZ) has secured binding commitments to raise $12.5 million via a single-tranche institutional share placement to advance its Misima Gold Project in PNG to the next stage – as the foundation for a substantial new Asia-Pacific gold business
GTI Resources Ltd (ASX:GTR) has settled the acquisition and been granted prospecting licences P40/1513 and P40/1518 at the Niagara Gold Project that help create a contiguous package of prospecting licences covering around 5 kilometres of the historical Niagara gold trend.
Roots Sustainable Agricultural Technologies Limited (ASX:ROO) has secured a non-binding letter of intent (LOI) with existing partner, smart technology provider Humboldt CCTV, to integrate its proprietary Root Zone Temperature Optimisation (RZTO) technology and revolutionary heat exchange stub product into Humboldt’s Smart Agriculture solution.
Euro Manganese Inc’s (ASX:EMN) (CVE:EMN) (FRA:E06) shareholders have given the green light to the company’s oversubscribed two-tranche private placement to raise a total of C$11.4 million to fund the further development of its flagship Chvaletice Manganese Project in the Czech Republic.
Element 25 Ltd (ASX:E25) (FRA:QFP) has secured key final approvals for its Butcherbird Manganese Project in Western Australia, paving the way for stage-1 construction and mining operations to begin immediately.