FTSE 100 searches for direction; Biden takes US election lead in Georgia

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  • FTSE 100 index down 7 points
  • Insurers excited by bid approach for RSA
  • US election remains big focus for market

10.45am: UK house prices soften but markets leaning towards risk-on

Housebuilders have joined retailers, travel related stocks and US-focused corporates among the fallers on Friday, dragged down by a softer house prices report and rising economic uncertainty.

However, the Footsie is rollercoasting around, having been as much as 0.7% lower, is now almost flat at 5,899, a deficit of around seven points on the day.

Lender Halifax reported house prices rose 0.3% month-on-month in October, having previously risen 1.5% in September and 1.7% in both August and July.

Howard Archer, chief economic advisor to the EY ITEM Club, said this hinted that the recent robust monthly gains in house prices “could be coming to an end”.

Big builders Barratt (LON:BDEV), Taylor Wimpey (LON:TW.), Bellway (LON:BWY) and Vistry (LON:VTY) fell into the red, though others like Persimmon (LON:PSN) were flat and Redrow (LON:RDW) was up on the back of a solid trading update.

Wider financial markets are starting to lean towards a more positive attitude, said analyst Joshua Mahony at IG, with AstraZeneca’s claims that they could provide a vaccine before year-end and Joe Biden looking increasingly likely to take the White House, even though it’s clear Donald Trump will not go down without a fight.

Joe Biden has surpassed President Donald Trump in Georgia, a state where no Democratic presidential hopeful has won since 1992. The race is still too close to call, but it’s a major moment as Biden has now erased Trump’s edge. #gapol

— Greg Bluestein (@bluestein) November 6, 2020

“European markets are giving back some of their gains this morning, with an element of profit taking coming into play as we head into the weekend.

“The ongoing risk-on phase that has been driving stocks sharply higher appears to be borne of the fact that even if Biden does take the White House, his progressive wings could be clipped by the likely inability to take both Senate and House.

“With Biden now having taken the lead in Georgia, the likeliness of a shift in the White House continues to grow by the day.”

He added that a growing divide between both sides will do little to help either party to further any notable policy which would need to be pushed through congress.

“After months of fractured negotiations over a second stimulus package, another split congress means we are unlikely to see a swift financial boost in the aftermath of this election.”

9.40am: European markets slide into red

London’s blue chips have been unable to keep up the early positive pretence and have resorted to pre-open predictions with a pullback of 16 points or 0.3% to 5,890.66.

The eyes of the market remain fixed on the US presidential election, where vote counting will resume in several states on Friday morning, with no clear result yet.

With 473 out of 538 electoral college votes called, the split is leaning in favour of challenger Joe Biden as he leads the incumbent Donal Trump 264 to 214 and thus just six votes away from the 270 he requires to take the White House, with breaking news that Georgia swinging his way too.

IN BATTLEGROUND STATE OF GEORGIA, BIDEN PULLS AHEAD BY 917 VOTES WITH CURRENT TALLY -CNN

— *Walter Bloomberg (@DeItaone) November 6, 2020

Counting of votes in Pennsylvania, Nevada, North Carolina and Georgia continues with the majority of these ballots having been cast via post, which has been a major point of contention for the Trump campaign as many of the votes cast via post in these states are expected to be heavily weighted on the Democrat side, leading to an angry speech overnight and a spate of legal challenges.

With Trump making claiming the election is being stolen from him in a speech that aims to cast doubt on the very foundations of the electoral process, market analyst Connor Campbell said financial markets “are understandably more anxious than they have been since the early moments of Wednesday morning”.

Moreover, as it may only be once Georgia holds a run-off election for not only one but both of its two seats on January 5 that we will finally know who has gained or retained control of the upper house of Congress.

“Ultimately, the electoral balance suggests that either way, there will be less spending and less fiscal stimulus suggesting in turn that the Federal Reserve will maintain its current policy while growth and inflation will remain in check,” said analysts at Rabobank.

This view was essentially reflected in the conclusion of yesterday’s two-day policy meeting from the Fed, where chairman Jerome Powell offered no surprises, saying policymakers would maintain its loose monetary policy while pledging to do what it can to sustain an economic recovery.

Later on, there will be further economic focus stateside as the US jobs report for last month drops. 

It’s that day of the month again!????

Drop those #NFPGuesses below ???? pic.twitter.com/XpipaGJR4z

— Newsquawk (@Newsquawk) November 6, 2020

8.35am: Predictions defied

The FTSE 100 defied the early predictions of a ‘down’ start to proceedings in London on Friday to kick off firmly in the green.

The index of UK blue-chips opened 27 points higher at  5,933.27, extending the week’s gains so far to almost 350 points.

The ebb and flow of the US election could yet alter sentiment in the Square Mile, however, as could a surprise US monthly jobs number.

“With the Federal Reserve pledging to support the economy for as long as needed without announcing any further action, the [non-farm payroll] release could well underline the need for fiscal stimulus as the economy falters in the face of a second wave,” said Richard Hunter, head of markets at Interactive Investor.

Here in the UK, it is day-two of the second lockdown with Liverpool set to become the first city to be mass tested for coronavirus (COVID-19)

The pilot project aims to limit the spread of the virus by identifying as many infected people in the city as possible and taking action to break chains of transmission.

On the market, a £7bn Canadian-Swedish bid for insurance group RSA (LON:RSA) lit the blue touch paper under the sector.

Rival Aviva (LON:AV.) gained 3.8%, while fund manager M&G (LON:MNG) was somehow swept up in the excitement as it jumped 3.2% higher. Legal & General (LON: LGEN) nudged up 2.3%.

RSA’s stock, up 55% since the start of the week, marked time at a smidge below the 675p offer price.

On the FTSE 250, builder Redrow (LON:RDW) advanced a respectable 3.2% after its trading update.

Proactive news headlines:

European Metals Holdings Limited (LON:EMH) (ASX:EMH) (FRA:E861.F) (OTCPINK:EMHLF) has announced that due to increasing interest in its Cinovec project, the largest hard rock lithium deposit in Europe, the company will pursue a US-based OTCQX listing and has commenced trading on the OTC Pink Market. The group said its entry to the US-based OTC markets – and in particular the actively-traded OTCQX market – increases the ease with which North American investors can purchase European Metals securities. The ASX will continue to be the company’s primary listing, it added, with investors able to purchase shares through the OTCQX, OTC Pink, UK-based AIM market and Germany’s Frankfurt Börse.

US Oil & Gas PLC (PRIVATE:USOP), the oil and gas exploration company with assets in Nevada, said it has raised gross proceeds of around $102,216 from a share placing with private investors. The company said it placed 245,669 new ordinary shares of .0001 Euro each at a placing price of 32p per share including a share premium of 0.3399 Euro on each placing share. US Oil & Gas said the proceeds of the placing will be used to provide the group with additional working capital, including the funding of drilling operations.

Remote Monitored Systems PLC (LON:RMS) said it has been notified that Paul Ryan, non-executive chairman of the company, has elected to convert his entire Convertible Loan Note (CLN) which was issued on July 24, 2020, into ordinary shares. The CLN was for a principal amount of £35,334, has a conversion price of 0.28p and a 6% payment in kind coupon. Accordingly, Ryan will be issued with 12,824,042 ordinary shares in the company in full settlement of the loan and associated interest. At the same time, it added, Ryan has exercised warrants associated with the CLN representing 12,618,928 ordinary shares in the company, at 0.28p per warrant and has also sold 12,821,995 ordinary shares in the company. Following these transactions, the group said, Ryan’s shareholding in the company will increase to 67,593,249 shares, representing 4.41% of the enlarged issued share capital and total voting rights of the company.

Landore Resources Limited (LON:LND) announced that it has received a notice to exercise warrants over a total of 533,223 ordinary shares at an exercise price of 2p each, for which funds of £106,644.60 have been received by the company. The exercised warrants were issued as part of the fundraising announced on June 29, 2020.

Ariana Resources PLC (LON:AAU), the AIM-listed exploration and development company operating in Europe, said it has been informed that on November 5, 2020, its chairman, Michael de Villiers disposed of 400,000 ordinary shares in the company at a price of 4.8652p per share, and, on the same date, Mrs de Villiers, his wife, purchased 403,858 ordinary shares in her SIPP at 4.98p per share. Accordingly, the holding of de Villiers now stands at 55,803,000 ordinary shares in the company, representing a holding of 5.22% of the group’s enlarged share capital.

Naked Wines Plc (LON:WINE) has said it intends to announce half-year results for the 26 weeks ended September 28, 2020, on Thursday, November 19, 2020.

6:50am: Spread betters predict some profit-taking 

The FTSE 100 index looks set to retreat at the start on Friday following four sessions of gains so far this week, dipping back below the recaptured 5,900 level as investors take some risk off the table ahead of the weekend and today’s US non-farm payrolls data, plus the still too-close-to-call US presidential election outcome.

Spread betting firm IG expects the blue-chip index to open around 28 points lower at 5,878, having gained 22.92 points on Thursday to close at 5,906.18 – over a 300 point advance over the week.

The gains continued yesterday in New York, the Dow Jones Industrials Average ended 542 points, or 2% higher at 28,390, while the broader S&P 500 index gained 2.0% and the tech-laden Nasdaq Composite jumped 2.6%.

However, US index futures were weak today, probably on profit-taking, as well as some uncertainty on the incredibly close continuing vote counts in the US swing states still to complete, plus cautious comments from the latest Federal Reserve meeting and with the US jobs report to come.

Asian markets were mixed in response on Friday, with Japan’s Nikkei 225 index up 1.0%, but Hong Kong’s Hang Seng index losing 0.5%.

Jeffrey Halley, senior market analyst, Asia Pacific at OANDA commented: “Charge the flux capacitors, the world’s financial markets appear to be moving back to a pre-US-election future. In that past future, industries directly tied to the COVID-19 work-from-home mega-trend outperformed (read ‘tech). A never-ending tsunami of loose monetary policy, notably from the US, inflates asset prices everywhere as investors scramble for any sort of yield on capital that is above zero per cent.”

He noted: “Overnight, the FOMC hinted that more easing is on the way, likely in December. The FOMC left everything unchanged but signalled ongoing concern about the economic impact of the COVID-19 pandemic, now pushing record daily levels in the US. With any hope of meaningful fiscal stimulus disappearing rapidly, it will be left to the Federal Reserve to do the heavy lifting once again. For a picture of what that means for financial markets, go to mid-March and scroll forward to early October.”

Halley added: “With the impasse in Washington DC, the US recovery is almost certain to underperform versus Asia, with the region nicely tucked up on China’s event horizon. The arrival of COVID-19 vaccines in 2021 will amplify that divide.”

He thinks that today’s US non-farm payrolls could hurry that process along if they underperform.

“The street is forecasting a lower gain than last month of around 600,000 jobs. There is a danger of this underperforming though, if temporary census workers drop out of the data tonight. Any dip in equities is likely to be temporary though, as the street will quickly realise that more monetary easing will definitely happen in December. As we advance, unless the US starts getting COVID-19 under control, the data, including the Non-Farms, will begin reflecting that,” Halley concluded.

UK housing sideshow; RSA bid?

In the UK, there will be some macro data in the form of Halifax house prices. Last month’s report showed a 1.6% month-on-month increase or up 7.3% on the year. For October the monthly rise is seen softening to 0.5% but the annual gain growing to 8.2%.

In related microeconomic data, there should also be an update from housebuilder Redrow PLC (LON:RDW) alongside its annual shareholder meeting, which will be an online-only affair.

Back in September’s full-year results, the FTSE 250-listed group said it expected to resume dividend payments next year as it scales back London investment to focus on regional growth plans, with the coronavirus pandemic changing house-buyers’ priorities towards larger homes with more outside space, closer to green spaces.

Redrow, which reported a 66% fall in full-year profits as its numbers of completed house sales fell even before the impact of the coronavirus pandemic, entered the new financial year with a record order book of £1.42bn, inflated from £1.02bn in 2019 by a lockdown backlog and a demand spike ahead of changes to the Help to Buy scheme.

The other UK corporate focus should be on RSA Insurance PLC (LON:RSA) which, after issuing a third-quarter trading update yesterday, revealed after the London market close that it was in talks with two overseas insurers over a £7bn deal which could result in the takeover and break-up of one of the FTSE 100’s oldest companies.

The two possible buyers are Canadian insurer Intact Financial Corpor and Danish insurer Tryg. Under the terms of the offer they would pay £6.9bn for RSA’s shares, while investors in the More Than insurance brand group would also receive an already announced £83m dividend.

Around the Markets:

  • Pound up 0.2% to US$1.3123
  • Gold down 0.5% to US$1,940.80
  • Brent Crude Oil down 0.5% to US$39.88

6.45am: Early Markets – Asia/Australia

Stocks in the Asia-Pacific egion were mixed on Friday as investors continue to wait for a clear result from the US election.

Mainland Chinese stocks were lower with the Shanghai Composite down 0.36% while the Hong Kong’s Hang Seng index slipped 0.24%.

In Japan, the Nikkei 225 gained 0.91% and South Korea’s Kospi was up by 0.10%.

Australia’s S&P/ASX 200 surged 0.82% adding to what has been a positive week for Aussie shares with the index ~4% higher.

READ OUR ASX REPORT HERE

Proactive Australia news:

RPM Automotive Group Ltd (ASX:RPM) has completed all transaction-related conditions for the acquisition of Citic Autoparts Pty Ltd and took ownership of the business on November 1, 2020.

VRX Silica Ltd (ASX:VRX) has taken another key step towards production at the Arrowsmith North and Arrowsmith Central silica sand projects north of Perth in Western Australia after receiving Aboriginal heritage clearance.

Red River Resources Limited (ASX:RVR) is trading higher after mining high-grade polymetallic ore described as exceptional at the Far West underground mine, part of its Thalanga Operations in northern Queensland.

ioneer Ltd (ASX:INR) (OTCMKTS:GSCCF) (FRA:4G1) is targeting first production in mid-2023 from the Rhyolite Ridge Lithium-Boron project in the US as it moves closer to gaining environmental approval.

IG Group Holdings plc’s (LON:IGG) institutional prime services arm IG Prime has released a new white paper predicting that the pharma and tech sectors are set to grow and keep on growing post-pandemic.

St George Mining Ltd (ASX:SGQ) is strongly focused on progressing its key projects in areas of Western Australia that are attracting strong interest – Paterson Province and the Agnew-Wiluna Belt of the North-Eastern Goldfields.

VIP Gloves Ltd (ASX:VIP) is planning to construct a new production facility in the outskirts of Kuala Lumpur in Malaysia to increase the production of gloves.

Cauldron Energy Ltd (ASX:CXU) has raised $1.6 million in a placement to new sophisticated and professional investors and will fast-track exploration at the Blackwood Gold Project in Victoria.

Carnavale Resources Limited (ASX:CAV) has completed the phase one drilling campaign targeting nickel sulphide at its Grey Dam Nickel Project, with all assays received.

Megado Gold Ltd’s (ASX:MEG) fieldwork at Babicho Gold Project in the Adola Gold Belt of southern Ethiopia has confirmed strong upside at a number of targets ahead of its first drilling next week.

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