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FTSE 100 index set to pause after week’s advances with ECB meeting, US jobs data eyed

  • FTSE 100 seen off 6 points
  • ECB meeting later today
  • US weekly jobless eyed

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:

Finals: Pennon Group PLC (LON:PNN), Intermediate Capital Group PLC (LON:ICP), Allied Minds PLC (LON:ALM), Renewi PLC (LON:RWI)

Interims: Euromoney Institutional Investor PLC (LON:ERM)

Trading updates: IG Group Holdings PLC (LON:IGG), Oncimmune Holdings PLC (LON:ONC)

AGMs: Arix Bioscience PLC (LON:ARIX), CentralNic Group PLC (LON:CNIC)

FTSE 100 ex-dividends to knock 0.11 points off the index: Scottish Mortgage Investment Trust PLC (LON:SMT)

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%

City Headlines:

  • 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

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