- FTSE 100 index tumbles 92 points at the close
- Gold holds near record highs
- IAG confirms massive rights issue
- Wall Street gets off to mixed start
5.10pm: Footsie loses 92 points on the day
The FTSE 100 erased any gains to end at 10-week lows on Friday after Britain postponed the easing of a coronavirus-induced lockdown thanks to surging cases in the country.
The UK's blue-chip index lost 1.5% at the closing bell to finish at 5,898 — a 92-point loss.
“The UKs move away from further easing of lockdowns… put bullish sentiment on the back foot, and further reduced the desire to move back into stocks at month end,” said Chris Beauchamp, chief market analyst at IG on Friday.
US/Canada 5pm/12pm EST
Stocks were mixed on Wall Street, with the big tech firms leading the Nasdaq into positive territory at the midday point.
The Dow Jones was down 177 points at 26,137, while the S&P 500 lost 12 points at 3,234. Only the Nasdaq was in the green, up nearly 33 points at 10,620.
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3.55pm: Footsie flops and
London and Wall Street blue chips are extending their falls, apart from the big US tech stocks.
The FTSE 100 has taken a further leg lower as investors digest the newly cautious stance from the UK government about the coronavirus and worsening US economic data.
Down 70 points or 1.2% to 5,919, the Footsie is on course for almost a 4% decline for the month of July.
After a renewed lockdown was announced for a large part of northern England overnight, today PM Boris Johnson warned the country “cannot be complacent” about the coronavirus.
This came as the Office for National Statistics said that the prevalence of COVID-19 in the community is likely to be rising in the country for the first time since May, while the Sage advisory group said it “does not have confidence that R [the reproduction rate of the virus] is currently below 1 in England”.
Feeling that a new slogan might try and help matters, Johnson unveiled a strapline for his Downing Street podium: “hands, face, space”.
This is designed to encourage the public to wash their hands assiduously, wear face masks and maintain suitable space between themselves and others.
There are some very simple ways we can all protect ourselves and others from the spread of coronavirus.
— Boris Johnson (@BorisJohnson) July 31, 2020
Meanwhile, across the Atlantic, the Dow and the S&P are both in the red now, though tera-caps of Apple and Amazon are helping keep the Nasdaq above water, though earlier gains have been cut.
“The markets attempt at a rebound was all but gone by Friday afternoon, the Western indices wilting in the face of a two-day GDP reality check,” said Connor Campbell, market analyst at Spreadex.
Looking at the Footsie he noted the UK index is trading levels last seen in the middle of May.
“Though it has been erring lower for the past couple of weeks, it is the losses encountered on Thursday and Friday that really did the damage. And this is even before the UK is served its own Q2 GDP damnation.”
European stocks have outperformed the US and UK, despite the region recording a record contraction in economic growth for the second quarter.
3pm: Mixed start for US stocks
Wall Street stocks have made a mixed start, though tech stocks are rattling higher after knockout earnings numbers from some of the big names.
The Dow Jones had dropped in the negative territory in early trading, falling 0.2% to 26,268, while the tech-fuelled Nasdaq Composite shot up 1% to above 10,700 and the S&P 500 was somewhere in between with a 0.2% rise.
Apple (NASDAQ:AAPL) has climbed 6% to add several more billion dollars to its valuations, while Amazon (NASDAQ:AMZN) was up 4% and Facebook (NASDAQ:FB) surged 7% after their earnings reports overnight.
A small torrent of US economic data added to the uncertain vibe, with some of it better than expected and some worse.
Personal income fell and spending slowed in June, according to the Bureau of Economic Analysis, and that month was before the past months resurgence in coronavirus cases.
Household income fell 1.1% in June compared to the prior month, worse than the 0.8% economists expected, while consumer spending rose 5.6%, which was down from the 8.5% improvement in May, although slightly better than forecast.
This comes a day after initial jobless claims rose for the second consecutive week and US gross domestic product in the second quarter was shown to have collapsed 32.9% year-on-year — the worst fall on record — though this roughly equates to a true second-quarter decline of nearer 9% on a quarterly basis.
Back in London, the FTSE 100 has extended its decline, dropping 28 points or 0.5% to 5,961.86.
A softer dollar, leading to the pound being up 0.5% at 1.3161 is not helping many UK blue chips.
12.45pm: PM says reopening must slow
The FTSE is meandering lower but not by much, despite a warning from Prime Minister Boris Johnson that the UK needs to slow the reopening of the economy.
Now is the time to “squeeze that brake pedal in order to keep that virus under control”, he said, reversing the previous decision to allow the reopening of leisure businesses including casinos and bowling alleys.
This would seem to put the kibosh on hopes for a V-shaped recovery for the UK and put a definite dent in the shares of Hollywood Bowl (LON:BOWL).
These previously planned opening-up measures, including allowing certain beauty treatments to resume, will be postponed until at least August 15, Downing Street said.
The FTSE has fallen 11 points to 5,978.73.
Looking across the pond, traders at IG were calling the Dow Jones around 64 points higher ahead of the open.
“With this unprecedented pandemic causing a near-term consumer/enterprise spending abyss, the FAANG names have been viewed as relative safety blankets in this scary Category 5 storm”, said broker Wedbush.
Analysts at the US broker said they believed the tech stocks “could still go another 20%-30% higher” (Read more here).
11.59am: Blue chips into the red
Londons blue chip benchmark has dropped into negative territory for the day, led lower by a mix of companies.
The Footsie has lost eight points or 0.1% to 5,981.71, with British Airways owner IAG (LON:IAG) and host of other consumer-focused corporations among the big losers.
This includes media groups ITV (LON:ITV) and WPP (LON:WPP), bookies GVC (LON:GVC) and Flutter (LON:FLTR), hotels group Whitbread (LON:WTB), along with BT (LON:BT.A), Imperial Brands (LON:IMB) and Diageo (LON:DGE), offering internet, fags and booze, perhaps the modern trio of home comforts.
The dollar has also resumed its move lower after gains the previous day, with market analyst David Madden at CMC Markets saying this comes as dealers are “back in risk-on mode”.
Having yesterday appeared to act as a safe haven asset, the new move lower again “underlines the sour sentiment surrounding the currency”, said Madden.
This has benefitted the pound, which creates headwinds for the many overseas earners on the FTSE 100.
10.50am: Footsie flattens off
The FTSE 100 has given up almost all of its early gains now, dropping below the 6,000 mark with just 4 points added for the day at 5,994.
If the session finished around that level it would mean the month has seen a 2.8% loss and down more than 7% since early June and 22% since Januarys highest point.
“July has been a second bad month in a row for investors in UK stocks with the FTSE 100 index now trading at lows last seen in late-May,” noted Russ Mould, investment director at AJ Bell.
“The market has most certainly lost momentum and is slowly drifting down as many companies continue to struggle from the pandemic.”
Tobacco, banks and media have been the three worst performing sectors on the LSE in July, with gains for NatWest (LON:NWG) and British American Tobacco (LON:BAT) slight gains on the back of results today making hardly a difference.
Following the hefty provisions for bad debts announced by several of its peers earlier in the week, amid worsening expectations for the economy, NatWest guided full-year impairment charges of £3.5-4.5bn.
“Interestingly, it said customer deposits increased by £39.1bn in the first-half period to £408.3bn,” observed Mould.
“This is probably as a result of lower spending and people taking steps to have back-up cash in case of emergencies or a change in their circumstances.
While NatWests shares advanced, Mould said "this must be seen in the context of a big sell-off earlier this week following gloomy updates from other listed banks”.
Over at BAT, the shares is only just in positive territory this morning after its first-half earnings per share number came in 3% below expectations but full year guidance was held.
10.25am: European economic growth crashes
European and UK shares are remaining in positive territory but coming off their highs after Eurozone gross domestic product fell by 12.1% in the second quarter of the year compared to the first
The shrinking in the eurozone economy was the largest since the bloc was founded, but only slightly worse than the 12% forecast by economists.
"Some records are never to be beaten," said Bert Colijn, ING senior economist. "Think of Alan Shearers Premier League goals, Wilt Chamberlains 100 point basketball game, Eddy Merckxs victories in cycling. The second quarter eurozone GDP figure should probably go on that list as well; it would be great if it were never to be beaten.
"The -12.1% quarter-on-quarter growth rate is the worst ever recorded and a pretty difficult one to interpret. It is a shocking drop, but completely understandable as the economy was shut for a considerable period during the quarter.
"It, therefore, doesnt tell us all that much about the general state of the economy, which is usually why one would look at GDP figures in the first place.
"Still, the deeper the lockdown, the higher the chance of more significant lasting damage to the economy and therefore the extent of the decline is still relevant."
10am: House prices crash looks unlikely
The FTSE 100 has faltered slightly but remains in positive territory, up 15 points or 0.3% to 6,005, with support coming from a traditional end-of-month buying by funds and housebuilding companies after some positive news on house prices.
House prices rose by 1.7% in July compared to the month before, according to building society Nationwide, which more than reversed a 1.6% fall in June.
On an annual basis, prices are now up 1.5%, gaining ground from the negative figure of 0.1% seen the previous month.
"Along with the pickup in lending in June, this reinforces our view that a house price crash is now unlikely," said Hansen Lu at Capital Economics.
"Although, with the mortgage holiday and furlough schemes due to end soon, further modest price falls may still be on the horizon."
The positive tone in markets was helped by "end of the month recovery mode", said market analyst Connor Campbell at Spreadex, more noticeably over in the continent.
"As ever during this pandemic, the reasons behind Fridays gains feel quite arbitrary, almost counterintuitive. After all, investors have woken up to a 13.8% second quarter collapse in France, wiping out 18 years worth of growth, a worse than forecast 18.5% contraction in Spain, and a 12.4% fall in Italy."
Euro area reports 12.1 percent #GDP drop in Q2 – a sharper fall than in the US (9.5pc) but not as negative as the @OBR_UK projection of a UK contraction of around 20pc. May be that the #OBR is being too pessimistic – it will depend on how far economic activity rebounds in June.
— Andrew Sentance (@asentance) July 31, 2020
The UK is also shrugging off a new lockdown announced overnight by the government to cover swathes of Greater Manchester, East and West Yorkshire.
"And yet, in part thanks to some blockbuster earnings from the likes of Apple and Amazon, and solid updates from Facebook and Alphabet, the tone of trading was positive," Campbell said.
8.55am: Friday starts positively
Traders cast aside their coronavirus worries as the FTSE 100 opened in positive territory.
The index of UK blue-chip shares rose 35 points to 6,025.69.
Still, underlying concerns about the fragile state of the world economy reheated the gold price, which was bubbling around US$1,975 an ounce.
Remember, the yellow metal acts as a haven investment in times of turmoil, so the fact it is nearing record territory underlines the markets skittish mood.
What does Roman Abramovich know about the gold price?
On the eve of his teams appearance in the FA Cup final, Russian billionaire Roman Abramovich has, according to Bloomberg, decided to offload his shares in Highland Gold Mining (LON:HGM).
The proceeds may help fund Chelsea manager Frank Lampards future forays into the transfer market.
Elsewhere, the big, but expected, news was provided by British Airways owner IAG (LON:IAG), which fell 5.8% after the announcement of its long-mooted £2.5bn rights issue. The carrier also warned that international travel was unlikely to recover until 2023.
After delivering a seemingly gloomy message as it significantly increased bad debt provisions, NatWest (LON:NWG) found itself in the list of risers with a 2.2% gain. Much of that was a recovery from Thursdays sector-wide sell-off prompted by the rather grim update from Lloyds (LON:LLOY).
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