- FTSE 100 sheds 13 points
- Private new car registrations fall 83.8% in May from a year earlier
- Lookers wanted as it announces more showroom closures
10.30am: Car sales plunge 89% year-on-year in May
If the construction sector is in a bad way, things are not much better in the motor trade.
Private new car registrations fell 83.8% in May from a year earlier, which at least represented an improvement on April’s 98.7% plummet.
Total registrations, including fleet and business sales, fell 89.0% in May.
“Car dealerships remained closed throughout May, making it operationally difficult for customers to receive cars they ordered earlier this year. Registrations likely will spike this month, now that dealerships have reopened to the public and a backlog of orders has to be worked through,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“Nonetheless, car sales will be well below pre-virus levels in the second half of this year. The volume of people searching online for one of the top five bestselling cars rebounded last month, but still was down 14% year-over-year in the final week of May. In addition, consumers’ confidence remained consistent in May with a 20% shortfall in new car sales relative to last year,” Tombs noted.
“Even if confidence recovers later this year, it will be a while before car sales recover, given that buyers can defer purchases easily, and they represent a big, long-lasting financial outlay. Interest rates for car finance packages also might rise, as lenders price-in a higher chance of default. And so far, the government is showing no sign of caving in to industry lobbying for another scrappage scheme, similar to that seen in the 2008-to-09 recession,” Tombs said.
The company revealed plans to lower its headcount by 1,500 as the company intends to close 12 dealerships.
“Keep in mind the company announced the closure of 15 sites in late 2019. The group said that it has resumed trading across all areas of the business, but not surprisingly, the capacity levels are far lower. The restructuring plan that was revealed today will incur a one-off cost of approximately £9 million, but it will equate to payrolls savings of £50 million,” reported CMC’s David Madden.
The FTSE 100 was down 26 points (0.4%) at 6,356.
— Dee (@DeeJ722) June 4, 2020
10.10am: “Job losses will follow without a strong pipeline of work waiting in the wings”
London’s index of leading shares reacted phlegmatically to the release of another grim temperature reading of the UK construction activity.
The FTSE 100 index was down 13 points (0.2%) at 6,370, despite some support for airline stocks easyJet PLC (LON:EZJ) and British Airways owner International Consolidated Airlines (LON:IAG). The former was up 4.5% at 819.4p and the latter was 3.3% better at 288.4p.
The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) for May recovered to 28.9 in May from 8.2 in April, which was a bit of a no-score draw for the sector.
“A gradual restart of work on site helped to alleviate the downturn in total UK construction output during May, but the latest survey highlighted that ongoing business closures and disruptions across the supply chain held back the extent of recovery,” said Tim Moore, the economics director at IHS Markit.
“It seems likely that construction activity will rebound in the near-term, as adaptations to social distancing measures become more widespread and the staggered return to work takes effect; however, latest PMI data pointed to another steep reduction in new orders received by UK construction companies, with the pace of decline exceeding the equivalent measures seen in the manufacturing and service sectors,” he added.
Duncan Brock, the group director at the Chartered Institute of Procurement & Supply, said building work continued to be grounded by the pandemic and lockdown measures in May.
“Spending was slashed as clients continued to stonewall building firms and put new projects on hold. With furloughed staff across the supply chain, companies saw their capacity leak away and the construction sector now faces the most challenging environment for generations. Building materials were in constrained supply as vendors gradually reopened in May, while items such as personal safety equipment were difficult to source.
“As the sector staggers back to work, and builders put their heads above the parapet, they face a number of obstacles. New safer working practices will ensure operations can continue but client confidence to place new orders is harder to predict. As the furlough scheme is unravelled towards the end of the summer, the floodgates preventing redundancies may also fly open and job losses will follow without a strong pipeline of work waiting in the wings. It will take a long time for the sector to build strength from the ruins of COVID-19,” he predicted.
Purchasing managers report #UK #construction activity contracted markedly in May but at much reduced rate from April record drop as some sites resumed activity. #PMI up to 29.9 from just 8.2 in April. Activity off lows in all sectors: housebuilding, commercial & civil engineering
— Howard Archer (@HowardArcherUK) June 4, 2020
9.45am: Construction sector remains down in the dumps
The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) recovered to 28.9 in May from 8.2 in April.
That being said, the index was still the second-lowest reading since February 2009, when the credit crunch was at its crunchiest.
A PMI reading below 50 indicates a contraction in activity.
Around 64% of the survey panel reported a drop in construction activity during May, while only 21% signalled an expansion, said IHS Markit, which compiles the survey.
“Where growth was reported, this was mostly attributed to a limited return to work on-site following shutdowns in April,” it added.
The FTSE 100 was down 9 points (0.2%) at 6,373.
8.35am: Mild profit-taking
The FTSE 100 index endured a minor case of the collywobbles in early trade on Thursday ahead of a meeting of the European Central Bank and US weekly jobs data later.
The index of UK blue-chips opened 30 points lower at 6,352.75.
After a triple-digit gain on Wednesday, it was perhaps to be expected that traders would look to book a little profit.
Following better than expected ADP employment numbers in the US, the Dow Jones Industrials Average closed more than 500 points to the good and is now at levels last seen in early March.
James Hughes, chief market analysts at Scope Markets commented: “Thursday will see a continuation of the jobs theme in the US as we get the all-important weekly jobless claims. Expectations are for a further 1.8mln Americans to have sought unemployment benefit this week. Although bad this figure is way off the drastic readings at the height of the pandemic.
“The better than expected data only shows that the picture may finally be hitting its peak, and doesn’t give any indication of how the US government plans to get the over 40mln people in the US back into employment.”
The profit-taking theme continued at the individual stocks level, with the recent good run for Rolls Royce (LON:RR.) ending in a 4.8% fall.
AstraZeneca’s (LON:AZN) collaboration with Accent Therapeutics was greeted with a 2% rise in the share price. Given drug buddy Hikma (LON:HIK) was also up, the move was probably more suggestive of a drift towards defensive equity investments.
Proactive news headlines:
Open Orphan PLC (LON:ORPH) has announced the launch of hVIVO’s COVID Clear Test, its antibody testing service, following the successful completion of the installation, testing and training for the coronavirus (COVID-19) test, The service will be offered to large employer groups and partners including GP networks, nursing care businesses, health clinics and private hospitals. Samples will be tested in the company’s London lab with results returned within 48 hours.
Gfinity PLC (LON:GFIN) said it has signed a five-year deal with Abu Dhabi Motorsport Management (ADMM) to design, develop and deliver an esports racing championship (ERC). The AIM-listed firm said the ERC concept is based on a “unique format not seen in virtual racing before” and will feature professional simulation racing drivers and a roster of teams from digital motorsport. The championship will have two seasons each calendar year, with the first to take place in 2020 and be hosted by Gfinity.
Sativa Group PLC (LON:SATI) has received a takeover bid from Canadian-listed cannabinoid (CBD) extraction and agriculture specialist Stillcanna Inc. The offer, which was unveiled after Wednesday’s London close, will see Stillcanna offer 0.33507 new shares for each Sativa share, valuing the Aquis Exchange-listed company’s entire share capital at around £10.66mln. The offer represents a 28.6% discount to Sativa’s middle market closing price of 2.6p per share on April 21, when a deal was first mooted, and the group noted that following the deal its shareholders will own around 65% of the combined entity. In a separate announcement, also after yesterday’s close, Sativa reported its results for the year ended December 31, 2019, which saw its revenues increase more than five-fold to £1.45mln from £0.26mln while its gross margins improved to 52% from 42% due to a decrease in the cost of CBD extract and production efficiencies. Sativa also reported figures for the first quarter of 2020, posting revenues of £0.36mln, 49% higher than the prior-year and gross profit of £0.21mln with a 59% margin, ahead of management expectations.
Oncimmune Holdings PLC (LON:ONC) said it is expecting further strong growth in the top-line in the current fiscal year. In a trading update covering the 12 months to the end of May 2020, the immunodiagnostics specialist noted that its revenue was in line with market expectations. Meanwhile, it said, the next 18 months are expected to create substantial revenues within the EarlyCDT lung cancer test business. while the pipeline of contracts within the ImmunoINSIGHTS services business is building. Oncimmune also noted that its board has been streamlined, as a result of which Geoffrey Hamilton-Fairley, the non-executive vice-chairman and co-founder of the company, plus two other non-executive directors – Julian Hirst and Carsten Schroeder – have stepped down from the board with immediate effect.
Tiziana Life Sciences PLC (LON:TILS) (NASDAQ:TLSA) said the chairman of its scientific advisory board has received a research grant from the National Institutes of Health in the US to investigate the company’s nasal anti-CD3 drug, Foralumab, for the treatment of Alzheimer’s disease. The NIH award provides third-party validation of the work of Dr Howard Weiner in an area of great unmet medical need. He believes the nasal administration of Foralumab is a “potentially revolutionary approach” to treat patients with Alzheimer’s.
Oracle Power PLC (LON:ORCP) has said it continues to receive support for the development of its Thar project in Pakistan. As announced in March, Oracle has submitted an application to the Private Power and Infrastructure Board for a letter of intent (LOI) on behalf of the consortium developing the project. The issuance of the LOI will be a major step in the development of Thar Block VI and would confirm the Government of Pakistan’s commitment to purchase power from Thar Block VI. Oracle has now paid the US$50,000 evaluation fee that became due under the terms of the LOI and has received a payment of US$7,491 from Sheikh Ahmed Dalmook Al Maktoum’s private office in respect of the office’s share of the evaluation fee.
Personal Group PLC (LON:PGH) chairman, Mark Winlow will tell shareholders at Thursday’s annual general meeting that, given the current coronavirus (COVID-19) pandemic environment, the leading provider of employee services has made an encouraging start to the year. In the AGM statement, Winlow said: “We continue to engage with clients, existing and new and I am pleased to announce that we are negotiating significant potential new Let’s Connect and Insurance clients which are on-going despite the challenges of COVID-19.” In a separate statement, Personal Group on also announced that its CFO Mike Dugdale has confirmed his intention to retire on September 30, 2020. The company said Sarah Mace, the group financial controller and company secretary, will be appointed as Interim CFO on September 30, Dugdale’s departure date allowing an orderly handover and transition time.
Impax Asset Management Group PLC (LON:IPX) has increased its interim dividend saying it is good financial health while inflows and the performance of its funds saw a rebound in April. Inflows into its funds were a record £1.8bn in the half-year to March 31, 2020, Impax said, but assets under management were affected by coronavirus volatility and dropped by 4% to £14.4bn. In April, net inflows were almost £300mln, it added, and at the end of the month assets under management had rebounded to £15.8bn.
Strategic Minerals PLC (LON:SML) said it has raised £1.1mln through a placing and subscription of around 244.4mln new shares to help pay the remaining balance of £990,000 for the acquisition of New Age Exploration’s interest in Cornwall Resources, holder of the Redmoor Tin/Tungsten project. The AIM-listed company said the shares had been issued at a price of 0.45p each, a 28.6% discount to its closing price on Wednesday, adding that it is also allowing existing shareholders to subscribe for up to 22.2mln new shares at the same price through a broker option. “The company continues to limit equity raisings to only fund projects it believes will value add over time. Today’s raise not only achieves this, through securing the balance of the Redmoor acquisition, but the board considers that it will also remove a perceived market overhang associated with the need to fund this liability”, Strategic Minerals chairman Alan Broome said in a statement.
Curzon Energy PLC (LON:CZN) has raised £166,066 by placing shares at a penny a pop. The placing shares came with warrants attached that can be exercised at 1.5p a share. In all, 16.6mln shares were issued along with 17.6mln warrants. The funds raised will be used to advance and complete negotiations with the Sun Seven Stars Investment Group (SSSIG) on a transaction involving the London Critical Metals Market (LCMM).
Keywords Studios PLC (LON:KWS), the international technical services provider to the global video games industry, has announced that Andrew Day, its chief executive officer, yesterday exercised 150,095 options over ordinary shares dating from the time of the company’s IPO in 2013. Of these 150,095 options, 86,593 were awards granted on 8 July 2013 under the terms of the company’s long term incentive plan and were due to expire on July 8, 2020, and 63,502 were awards granted on July 12, 2013, under the terms of the company’s EMI stock option plan and were due to expire on July 12, 2020. It said that Day has sold the shares issued to him under these LTIP and SOP option exercises at 1,770p per ordinary share, in part to cover personal income tax and other liabilities arising from the exercise of the options. As a result, Day’s interest in the company’s share capital remains unchanged at 3,296,573 ordinary shares, equivalent to 4.5% of the company’s issued share capital. Following this exercise of options, the group added, Day has 297,000 unexercised options over the company’s ordinary shares.
Synairgen PLC (LON: SNG), the respiratory drug discovery and development company, has said that, in line with the UK government’s latest guidelines on coronavirus (COVID-19), it will host its AGM as a closed meeting at The Blueprint Design Company Limited, Martins Barn, Birdham Road, Chichester, West Sussex PO20 7BX at 9.00am on June 29, 2020. Any shareholders attempting to attend the AGM will be refused entry and will be convened with the minimum necessary quorum of two shareholders, with the outcome of the resolutions determined by shareholder vote based on the proxy votes received. Shareholders are therefore strongly encouraged to vote by proxy on the resolutions contained in the AGM notice which should either be completed electronically – using either Link Asset Services’ Signal Shares share portal service at www.signalshares.com, or by completing a CREST Proxy Instruction – or be posted to: Link Asset Services, PXS 1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF and must be received by 9.00am on June 25, 2020, to be valid. The results of the AGM will be announced to the London Stock Exchange and placed on the company’s website, in the usual way, as soon as practicable after the conclusion of the AGM.
6.30am: Mild retreat after leaps
The FTSE 100 index is expected to pause at the open on Thursday, easing back after posting strong gains so far this week though Wall Street and Asian markets continued to advance overnight as traders gear up for another European Central Bank council meeting and the latest coronavirus blighted US jobs data.
Spread betting firm IG expects the blue-chip index to open around 6 points lower at 6,376, having jumped 162 points on Wednesday to hit 6,382.
Overnight in New York, the Dow Jones Industrials Average ended 527 points, or 2.1% higher at 26,269, while the broader S&P 500 index gained 1.4%, and the tech-laden Nasdaq Composite added 0.8%.
In Asia today, with Hong Kong’s Hang Seng index losing 0.5%, while Tokyo’s Nikkei 225 index shed 0.6%.
Oil retreated after briefly jumping above $40 a barrel, the highest since March, as doubts emerged about the timing and scale of a potential extension to the pact between the Organization of the Petroleum Exporting Countries and its allies to cut crude supplies.
On currency markets, sterling slipped back against the US dollar with investors awaiting the latest US weekly jobless numbers due this afternoon and, perhaps more importantly, Friday’s May job loss total to see the ongoing impact of the coronavirus (COVID-129) pandemic.
Meanwhile, the European Central Bank is expected to ramp up stimulative bond purchases when it meets on Thursday.
Michael Hewson, chief market analyst at CMC Markets UK commented: “While a lot of the recent rebound in stock markets is down to optimism that the worst in terms of economic damage may be in the rear-view mirror, even if the visibility on the data is not, there have also been some data surprises which have encouraged this view.”
He added: “Last night the German coalition government managed to agree on a €130bn fiscal stimulus program for the German economy, which combined with an expectation today that the European Central Bank will signal its intention to add to its current €750bn PEPP program when they meet later today.
“The general consensus is that while interest rates will be left on hold, the ECB will increase the current program by another €500-€750bn, as well as extending the horizon of the current program beyond October, with the latest macro-economic projections likely to make for grim reading.
“Coming as it does in the aftermath of the EU’s proposed €750bn recovery plan, it’s probably not too surprising that equity markets are getting a little ahead of themselves.”
Pennon results to flow
On the corporate front, Thursday will bring full-year figures from FTSE 250-listed water firm Pennon Group PLC (LON:PNN), with many investors hoping for more clarity on what the utility plans to pay out to shareholders over the next five years.
Over the previous five years, the policy has been to increase the dividend by at least 4% above inflation annually, however with water companies about to face a more difficult future following a tough review from regulator Ofwat in February, covering the period from 2020 to 2025, the firm could decide to make its payout less generous alongside peers Severn Trent and United Utilities, who have both said they will only increase the dividend in line with inflation each year.
However, investors may care less about this than normal as, due to firms cutting and suspending dividends across the board amid the coronavirus pandemic, the utility sector has become even more of a haven than usual.
While these firms are perhaps shielded from the fallout to some extent, they could see their business come under pressure if more customers find themselves unable to pay their bills.
However, Pennon’s balance sheet may be in a better position than most having recently pocketed £4.2bn from the sale of its waste recycling business Viridor.
Significant events expected on Thursday:
Economic data: UK construction PMI, US weekly jobless claims
Around the markets:
- Sterling: US$1.2540, down 0.1%
- Gold: US$1,701 an ounce, up 0.1%
- Brent crude: US$39.17 a barrel, down 0.1%
- HSBC and Standard Chartered have backed China’s controversial imposition of a national security law on Hong Kong in a move likely to infuriate ministers in London – – The Times
- Marks and Spencer has cut share awards for its two top executives this year because of a sharp fall in the value of the company’s stock – Financial Times
- British Airways could lose its prized landing slots at Heathrow airport as it is using taxpayers’ cash to pay staff on furlough, a minister has suggested – The Daily Telegraph
- The Restaurant Group is to permanently close up to 120 restaurants with almost 3,000 jobs losses expected – The Guardian
- French insurer Axa is planning to pay a dividend to shareholders, defying the recommendations of regulators – Financial Times
- Digger maker JCB has won approval for a £600mln taxpayer-backed loan as it struggles with a plunge in construction work worldwide – The Daily Telegraph
- Nissan has said its Sunderland manufacturing plant is still under threat if the UK leaves the EU without a trade deal The Guardian
- Investors trapped in the Woodford Equity Income fund could see some money sooner than they thought as the sale of its biotech portfolio is reportedly on the brink of closing – Daily Mail
- James Benamor said his company, Richmond Group, would sell its shares over a three-month period if the other shareholders do not back his bid to oust the current board – The Daily Telegraph
- The Bank of England Governor Andrew Bailey has warned the City to brace for Brexit trade talks to fail amid rising concern among businesses about the deadlock in negotiations – Daily Mail
- The European Central Bank is expected to announce a further €500bn of quantitative easing after warning that gross domestic product will shrink by up to 20% in the second quarter The Times
- Car dealers have reported relatively strong sales since the government allowed showrooms to reopen in England on Monday morning, more than two months after they were forced to shut in the coronavirus lockdown – The Guardian
- The coronavirus outbreak could trigger a $25 trillion collapse in the fossil fuel industry, a study by financial thinktank Carbon Tracker – The Guardian
- The US government has banned Chinese passenger airlines from flying to the US amid growing tensions between the two countries – The Daily Telegraph