- FTSE 100 index gains 5 points
- Bank of England significantly downgrades its projections for the UK economy
- Bank of England boosts bond-buying
9.30am: Bank of England finds a bit more ammo than expected
After a brightish start, the Footsie is meandering back towards last night’s closing level.
London’s benchmark of blue-chip shares was up 5 points (0.1%) at 5,888 after the Bank of England announced a further £150bn of quantitative easing (QE), which was £50bn more than the market had been expecting.
The £150bn in additional gilt purchases will begin in January once the existing programme of £100bn expires and will finish at around the end of 2021.
“The pace of purchases could remain at around its current level initially, with flexibility to slow the pace of purchases later. Should market functioning worsen materially again, however, the Bank of England stood ready to increase the pace of purchases to ensure the effective transmission of monetary policy,” the minutes to the November meeting of the central bank’s Monetary Policy Committee revealed.
“What about negative rates?” asks Berenberg’s senior economist, Kallum Pickering, rhetroically.
“Neither the minutes nor the Monetary Policy Report provide any update on the BoE’s assessment of the suitability of negative rates even though the bank has announced such policy option is under review. This could be a sign that the BoE is trying to reduce the growing speculation that such a move could be imminent. In the Monetary Policy Report the BoE notes that the current market-implied path for the bank rate, which falls below zero in 2021, ‘suggests that market participants attach some weight to the possibility of a negative Bank Rate’,” Pickering said.
“While the BoE has made clear that it wants to make negative rates operational within its toolkit, we continue to judge that such a move is far off and would not be appropriate for the UK under prevailing conditions,” he added.
As expected, the Bank of England left its key interest rate unchanged for November,
It also significantly downgraded its projections for the UK economy for 2020 and 2021.
— Bank of England (@bankofengland) November 5, 2020
“In the November quarterly report, the Bank of England provided significantly downgraded indicative projections for the UK economy for 2020 and 2021. These new forecasts saw GDP contracting 11% in 2020 then growing 7.25% in 2021, 6.25% in 2022 and 1.75% in 2023. In its August quarterly report, the indicative projections saw GDP contracting 9.5% in 2020 then growing 9% in 2021 and 3.5% in 2022,” reported Howard Archer, the chief economic advisor to the EY ITEM Club.
“This means that the Bank of England has put back its anticipated timing of when the economy will regain its level of the fourth quarter of 2019, from the end of 2021 to the first quarter of 2022.
“The unemployment rate is now seen reaching 6.25% in the fourth quarter of 2020, rising to a peak around 7.75% in the second quarter of 2021 before falling back to 6.75% in the fourth quarter of 2021, 5% in the fourth quarter of 2022 and 4.25% in the fourth quarter of 2023. In August, the forecasts had been 7.5% in the fourth quarter of 2020, falling back to 6% in the fourth quarter of 2021 and 4.5% in the fourth quarter of 2022.
“Consumer price inflation is seen as remaining around 0.5% over the winter. Headline inflation is then projected to rise in the spring as the VAT cut for the hospitality sector comes to an end and the large fall in energy prices from earlier in 2020 drops out of the annual comparison. Inflation is seen averaging 0.6% in the fourth quarter of 2020, 2.1% in the fourth quarter of 2021, 2.0% in the fourth quarter of 2022 and 2.1% in the fourth quarter of 2023.
“These forecasts are based on prevailing market interest rate expectations which saw interest rates becoming modestly negative in 2021,” Archer said.
8.45am: Gains continues for Footsie
With Joe Biden inching towards the US presidency, the FTSE 100 made a slow, but positive start to proceedings on Thursday.
London’s blue-chip benchmark opened 20 points to the good at 5,902.56.
Legal challenges could make this a long, drawn-out post-election fight for the White House so London traders were largely keeping their powder dry.
Here at home, the Bank of England made its market intervention in a bid to boost the locked down UK economy with a £150bn bond-buying exercise.
In its missive to the markets, the Bank’s Monetary Policy Committee said it saw “signs that consumer spending has softened across a range of high-frequency indicators, while investment intentions have remained weak”.
Laith Khalaf, analyst at AJ Bell, added: “This may not be the end of the Bank’s pandemic interventions, particularly if another lockdown becomes necessary further down the line.
“The Bank is beginning to run out of dry powder as it now holds almost half the gilt market, and interest rates are already close to zero. That means if the central bank wants to boost the economy further, it may resort to even more extraordinary measures than we have today.
“Negative interest rates are certainly on the table. The Bank is seriously weighing this up and has written to bank chiefs to see if they can handle it.”
On the market, top of the risers’ list with a 3.5% gain was Homeserve (LON:HSV), the Footsie boiler maintenance group.
One investment bank said Wednesday it had seen a lot of activity in the shares, adding that it expected it to be another busy, high-volume session for the stock. Reports of a positive broker circular couldn’t be confirmed.
The news of a potential 3,500 job cuts at Sainsbury (LON:SBRY) drove the shares 3.5% lower in the wake of annual results from the grocer.
“Sainsbury is on a conveyor belt of change to adapt to the way its customers now want to shop,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“It’s planning to shut 420 large Argos stores and also will remove deli counters from its supermarkets, given lower demand from customers for these products.”
Proactive news headlines:
IQ-AI Limited (LON:IQAI) said the Montgomery Cancer Center in Alabama has bought its Imaging Biometrics subsidiary’s IB Clinic product. The software suite includes the IB Neuro and IB Delta T1 mapping algorithms, which IQ-AI said, “continue to gain acceptance in brain tumour imaging and assessment”. The latter offers an “objective and rapid visual assist” for neuroradiologists that helps identify subtle regions of contrast enhancement on routine MR images.
Feedback PLC (LON:FDBK) is fully funded to execute its growth strategy, the specialist medical imaging technology company said in its annual general meeting statement. The company had a positive cash balance of £4.4mln as at the end of September 2020, which it will use to scale up its core product, Bleepa, a medical imaging communications app. Much of the groundwork now complete, Feedback told investors, and the focus is to further grow Bleepa’s market base and create a strong platform for revenue growth. In a separate announcement, Feedback revealed that Bleepa has been selected as a WISH 2020 Innovation Booster at the World Innovation Summit for Health (WISH), which is taking place later this month in Doha, Qatar.
Argo Blockchain PLC (LON:ARB) has reported increased revenues and wider margins in October from its cryptocurrency mining operations. In a monthly update, the AIM-listed firm reported revenues of £1.2mln, up from £1.1mln in September, while its average monthly mining margin rose to 40% from 37%. The company also reported that it had mined 126 Bitcoin or Bitcoin equivalent (BTC) in October compared to 127 in the prior month, taking the total amount of BTC mined in the year-to-date to 2,254.
Panther Metals PLC (LON:PALM) said reconnaissance work conducted at its Dotted Lake property in Ontario, Canada, has confirmed high-grade gold at surface. Panther submitted a total of seven samples from the under-explored Dotted Lake property for analysis at ALS Laboratories, taken from an area of stripped ground bordering the most northerly point on the Dotted Lake shoreline. This area was cleared in 2010 when four trenches were excavated to investigate gold in soil anomalies identified within small soil sampling grids conducted in 2008 and 2009. The 2010 channel sampling in historical trench Tr-10-4 returned two mineralised intervals – 1.14 grams per tonne (g/t) Au (gold) over 1.00 metre (m) and 9.02 g/t Au & 859 ppm [parts per million Zn (zinc) over 0.40 m with a further 2010 prospecting sample returning Au 16.95 g/t Au & 7.7 g/t Ag from nearby.
Angling Direct PLC (LON:ANG) said its stores are now closed as per the UK government’s new coronavirus lockdown restrictions but will remain trading through a call-and-collect service. Angling Direct added that its web store remains fully operational for both the UK and European sales, and its distribution centre is geared to fulfil increased demand through this channel, with the upcoming Black Friday and Christmas period. The largest specialist fishing tackle and equipment retailer in the UK continues to reel in the customers with the momentum achieved in the first half of its financial year (i.e. six months to end-July) being sustained and sales remaining robust through October.
Frontier IP Group PLC (LON:FIPP) has reported a sharp rise in the value of its investment portfolio as well as a profit surge following what it said was “strong commercial and technical progress” in its full year. For the year ended June 30, 2020, the AIM-listed firm reported a 47% increase in the fair value of its portfolio to £19.4mln, while its net asset value per share increased to 51p from 41.4p. Meanwhile, the company’s pre-tax profit surged 78% to £4.18mln while revenues and other operating income jumped 49% to £6.4mln reflecting a net unrealised profit on investment revaluations of £5.97mln.
Open Orphan PLC (LON:ORPH) said its hVIVO arm has won a £2.5mln contract to carry out an influenza human challenge study for an unnamed US biotechnology company. The latest deal builds on significant new business wins in the areas of respiratory syncytial virus and coronavirus (COVID-19). The challenge study will take place at the company’s 24-bedroom quarantine clinic in east London in the second half of next year with completion due by the end of 2021.
Personal Group PLC (LON:PGH), a leading provider of employee services in the UK, has said it anticipates the payment of its fourth and final dividend in respect of its financial year ending Decembet 31, 2020, following publication of its audited full-year results in March 2021. The group said its board has taken a more prudent approach to the fourth dividend for 2020 which has historically been declared and paid during the fourth quarter. Given the recent UK government announcement of further national lockdown restrictions and ongoing uncertainty, it added, the final amount will now be determined and announced following the year-end.
Jubilee Metals Group PLC (LON:JLP) said it has executed a number of copper cobalt tailings transactions that have nearly doubled its rights to copper tailings in Zambia. The AIM-listed firm said the transactions have secured the rights to an additional 115mln tonnes of copper and cobalt-containing surface tailings as part of its strategy to expand operations in the country, taking its total access to around 270mln tonnes of tailings. The deal, secured through Jubilee’s subsidiary Braemore Platinum Limited, provides the firm with the exclusive right to process the 115mln tonnes of tailings through the implementation of a copper and cobalt processing facility.
Anglo Pacific Group PLC (LON:APF) chief executive Julian Treger has described the company as encouraged by the operational performance across its mine royalty portfolio over the third quarter. Mines have continued to function without material disruption due to the coronavirus (COVID-19) pandemic, he noted in a trading update. “The actions taken by the underlying operators suggests that we could see a stronger finish to the year across the portfolio at a time when certain commodity prices are showing signs of improvement,” Treger said.
The royalty company reported that a total of £6.4mln was generated from its portfolio in the quarter ended September 30, 2020, compared to £6.5mln in the second quarter.
FastForward Innovations Ltd (LON:FFWD) has highlighted an update from its investee company, EMMAC Life Sciences Group, in which the European cannabis firm noted growth in its key markets. In the update, EMMAC said the growth in its European markets coincided with rising demand for premium medical cannabis and wellness products. The company also said UK cannabis markets, in particular, were witnessing “significant momentum” with the firm “leading the way in enabling greater patient access in terms of product accessibility and cost for patients”. EMMAC also said that despite significant efforts by all parties involved, the negotiations regarding the proposed business combination between Andina Acquisition Corp and EMMAC have been mutually terminated as it was not possible to finalise negotiations to the satisfaction of both parties.
Deltic Energy PLC (LON:DELT) told investors that Royal Dutch Shell PLC, operator of Licence P2252 in the North Sea, has confirmed its commitment to the drilling of a well on the Pensacola prospect in 2021. Well planning including design work and rig scoping has already begun, the company added. It noted that Shell has been given a short extension for P2252, to the end of March, in light of the coronavirus (COVID-19) pandemic to allow analysis of seismic data ahead of a formal drill decision.
Zoetic International PLC (LON:ZOE) has announced revised terms for the sale of its 75% interest in the DT Ultravert to Path Investments PLC. Under the new terms, the buyer will issue 30mln Path shares to Zoetic rather than 15mln shares as agreed originally in May. Path will no longer additionally issue 15mln share warrants to Zoetic, and, a previously envisaged orderly market agreement will no longer apply to the shares issued by Path. Zoetic is no longer selling the Kansas nitrogen assets to Path, and, Path will no longer pay royalties on future revenues back to Zoetic.
Conroy Gold and Natural Resources PLC (LON:CGNR), the gold exploration and development company focused on Ireland and Finland, announced on Thursday that it has received a notice to exercise warrants over a total of 208,333 ordinary shares of €0.001 each at an exercise price of 16p each, for which funds of around £33,333 have been received by the company. The warrants were issued as part of the fundraising announced on February 18, 2020, and the proceeds from the exercise of the warrants will be used by the company for general working capital purposes.
Seeing Machines Limited (LON:SEE), the advanced computer vision technology company that designs AI-powered operator monitoring systems to improve transport safety, has announced that it will hold its annual general meeting at its head office in Canberra, Australia at 5.00pm Australian Eastern Daylight Time (AEDT) on Monday November 30, 2020. The meeting will be held virtually from 80 Mildura Street, Fyshwick ACT 2609. Shareholders may choose to participate online. To view the live webcast online, shareholders will need to visit: https://seeingmachines.zoom.us/j/92458597003pwd=V0NjQzcxaVFYZFVDS2k4eklvdUZyQT09
6.50am: Positive opening predicted
The FTSE 100 is seen in positive territory ahead of Thursday’s open as America remains in a tense political limbo, with vote counting continuing in five key undeclared states after Tuesday’s US presidential election.
CFD and spreadbetting firm IG sees London’s blue-chip benchmark around 21 points higher, making the price 5,892 to 5,895.
It remains unclear who will be named as American president for the next four years though forecasters see the probabilities favouring Democrat challenger Joe Biden.
Perhaps significant in terms of policy status-quo, it appears that the Democrats will retain control of the House of Representatives and Republicans will retain the Senate which commentators suggest means Biden won’t easily be able to push through partisan manifesto pledges that would impact ‘big tech’ or drive taxes higher.
In the meantime, as vote counting continues uncertainty remains.
“Going into the election, the view was that a decisive victory for either President Trump or Joe Biden would be much preferred to an uncertain outcome – but that is exactly the situation we are now in,” said David Madden, analyst at CMC Markets.
“Mr Biden is fractionally ahead but several states have yet to declare their results. Some outcomes should be known in the next day or two, but Pennsylvania’s result might not be known until next week.
The analyst added: “The argument has been made previously that postal voting could bring about voting fraud, but it is clear that Mr Trump will probably dispute votes that don’t go his way, so this entire process could be dragged out for weeks or perhaps months.”
On Wall Street on Wednesday, the Dow Jones Industrials Average closed 367 points or 1.34% higher, at 27,847, whilst the S&P 500 marked a 2.2% rise to finish the session at 3,443.
The Nasdaq Composite, meanwhile, climbed further adding 3.85% to end Wednesday at 3.85%. The small-cap focussed Russel 2000 index was more muted, finishing the day at 1,615.
In Asia on Thursday, Japan’s Nikkei 225 index traded up 410 points or 1.73% at 24,105, while Hong Kong’s Hang Seng rose by 2.65% to 25,545, and the Shanghai Composite gained 1.22% to 3,317.
Around the markets:
- The pound: US$1.2964, down 0.18%
- Gold price: US$1,908, up 0.22%
- Silver price: US$24.22, up 1.24%
- Brent crude: US$40.51, up 2.01%
- WTI crude: US$38.44, up 2.07%
- Bitcoin: US$14,335, up 3.79%
6.45am: Early Markets – Asia/Australia
Stocks in the Asia-Pacific region were higher on Thursday as investors continue to await the US election result.
In Japan, the Nikkei 225 surged 1.73% higher, while South Korea’s Kospi added 2.1%.
Hong Kong’s Hang Seng index led gains among the Asian markets by rising 2.60%.
Chinese stocks were also higher, with the Shanghai Composite up 1.26% while Australia’s S&P/ASX 200 closed 1.28% higher.
Proactive Australia news:
Latin Resources Ltd (ASX:LRS) (FRA:XL5) has extended its holdings in the prolific yet underexplored Lachlan Fold Belt of NSW, which hosts world-class gold and copper-gold deposits, through obtaining the Manildra Gold Project in the heart of the belt.
MGC Pharmaceuticals Ltd (ASX:MXC) (OTCMKTS:MGCLF) (FRA:MGC) has completed its 50-patient Phase II double-blind, placebo-controlled clinical trial for anti-inflammatory treatment, ArtemiC, on patients diagnosed with COVID-19 to evaluate its safety and efficacy.
Great Southern Mining Ltd (ASX:GSN) has completed an in-house review of four strategic and highly prospective tenement applications immediately adjacent to its 100%-owned Cox’s Find Gold Project in Western Australia.
Archer Materials Limited (ASX:AXE) (OTCMKTS:ARRXF) (FRA:38A) has commenced building a lab-on-a-chip device (biochip) named A1 Biochip™ that is capable of simplifying disease detection at the point-of-care.
Bardoc Gold Ltd (ASX:BDC) (FRA:4SF) has identified multiple new zones of strong gold anomalism at its North Kanowna Star Project, just 29 kilometres southeast of the proposed mill and mine site at its flagship 100%-owned 3.03 million Bardoc Gold Project in Western Australia.
Emmerson Resources Ltd (ASX:ERM) (FRA:42E) has kicked off a 1,700-metre diamond drill program at its Kadungle project in New South Wales, to test below shallow epithermal gold mineralisation and also for deeper, porphyry-style copper-gold.
Element 25 Ltd (ASX:E25) is on track for the Butcherbird Project in Western Australia to become a globally significant, low-cost, high-purity manganese project, with commissioning scheduled for quarter one of 2021.
MMJ Group Holdings Ltd (ASX:MMJ) (OTCMKTS:MMJJF) investee Harvest One Cannabis Inc (CVE:HVT) anticipates sales volumes, net revenues and adjusted EBITDA to improve this fiscal year due to a full year of new cannabis 2.0 derivative products sales in Canada, improvements in gross margin and a continued focus on reducing costs.
Strategic Elements Ltd (ASX:SOR) will collaborate with a leading US-based Autonomous Drone technology company to enable drones to autonomously launch and land from a ground-based autonomous vehicle platform (AxV).