FTSE 100 edges higher as macroeconomic data provides a modest lift

  • FTSE 100 index gains 12 points
  • Retail sales volumes unexpectedly rise
  • Government borrowing deficit not as terrible as feared (but still terrible)

9.15am: Equities edge higher as retail sales and government borrowing numbers spring surprises

UK retail sales figures have provided a bit of much needed early cheer while even the government’s borrowing figures were not as horrific as feared.

The FTSE 100 was up 12 points (0.2%) at 6,347.

Retail sales volumes, including petrol, rose by 1.2% month-on-month in October, defying expectations of a 0.3% fall.

Volumes were 5.8% higher than in October of last year, compared to a consensus forecast of 4.1%.

“Retail sales climbed to a new record high in October, as households continued to reallocate funds usually reserved for spending on services. The increase was driven by a 6.4% month-to-month rise in non-store sales, as households hunkered down again in the face of the developing second wave of Covid-19,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.

“Looking ahead, the second ‘lockdown’ has prompted us to pencil-in a 10% month-to-month decline in retail sales volumes in November, which would leave them 4% below their pre-Covid level. This compares very favourably to the shortfalls of 23% in April and 13% in May, when all non-essential stores had to close,” Tombs added,

Public finances recorded a smaller-than-expected, reduced deficit in October. Public sector net borrowing excluding banks – PSNBex in the jargon – rose to £22.3bn from £11.6bn the year before, although the deficit was narrower than September’s £28.6bn.

“The public finances, measured in terms of Public Sector Net Borrowing excluding banks (PSNBex), saw a seventh successive, large shortfall in October as the Government’s measures to support businesses and jobs affected by COVID-19 fed through both in terms of reduced receipts and substantially increased public spending,” said Howard Archer, the chief economic advisor to the EY ITEM Club.

“October’s shortfall was less-than-expected; the consensus forecast had been for a deficit around £36bn. It was also well down from the record, peak levels seen in May (£43.7 billion) and April (£47.3 billion). This is a consequence of more people coming off the furlough scheme and returning to work, and the economy growing again, although growth may well have slowed further in October after losing momentum in August and September,” Archer observed.

8.40am: Small rally ahead of weekend

The FTSE 100 made a muted start to proceedings on Friday with UK traders largely ignoring the day’s two main data points – ballooning public debt and recovering retail sales.

The UK index of blue-chips rose 10 points to 6,344.18.

Investors will no doubt expect retail sales to have dipped markedly over the last fortnight under the new coronavirus (COVID-19) lockdown, while public debt is expected to grow at a faster pace in November thanks to the re-emergence of employer and employer support schemes.

A new era of austerity looks to have arrived with details of a new public sector pay clampdown being widely reported.

Meanwhile, Brexit negotiations have been temporarily suspended after one of the delegates came down with COVID-19.

As Richard Hunter, head of markets at Interactive Investor, pointed out: “The lack of a deal would, of course, exacerbate the UK’s travails, and was further highlighted by the release of government figures reporting significantly higher levels of borrowing accompanied by lower tax receipts, putting further pressure on a deficit which will ultimately need to be dealt with.”

On the market, blue-chip firm Sage tumbled () 10.4% after it reported a decline in profit margins and said the trend would continue into the new trading year as invested heavily in the migration of its accounting software to the cloud.

Citi got behind speciality chemicals group Croda () after its £734mln purchase of a Spanish fragrance maker. The American bank raised its recommendation to ‘buy’ from ‘neutral’ on the shares, which rose 1.7%.

Defence contractor () led the risers with a 3.5% gain as analysts worked through the latest boost to military spending in the UK.

7.55am: Christmas starts early for retailers

In October 2020, UK retail sales volumes increased by 1.2% from September, the Office for National Statistics (ONS) said on Friday. It was the sixth consecutive month of growth for the sector.

Growth in the volume of sales for non-store retailing clocked in at 6.4%, while growth rates of 3.2% for household goods stores and 3.1% for the hard-pressed department store sector all contributed to the overall monthly increase in retail sales, the ONS said.

The year-on-year growth rate in the volume of retail sales saw a strong increase of 5.8%, with feedback from a range of businesses suggesting that consumers had started Christmas shopping earlier this year, further helped by early discounting from a range of stores.

Total retail sales values (excluding fuel) in October were 7.9% higher than they were in February – the month before the lockdown restrictions were imposed in the UK.

Proactive news headlines:

() has told investors it is expected to close its acquisition of the Schlumberger Rustaveli Company Limited (SRCL) entity on November 23, 2020. Additionally, the company noted that amended deals terms will see it also take possession of some 29,000 barrels of crude oil inventory. Block said that this will be a welcome boost to its balance sheet

() (Euronext Growth Brussels:ALIMM) has said that its partner Avion Pharmaceuticals will discuss with US regulators early next month plans for an optimised phase III study of a lupus drug developed by the UK company. At the Type ‘A’ Meeting, to be held on December 4, the firm said Avion will ask for guidance from the US Food & Drug Administration (FDA) on key aspects of the study design, clinical endpoints and the approval process for treatment, called Lupuzor. It will also request the FDA consider conditional approval of the drug, whilst the final-stage trial is taking place.

() chief executive David Budd hailed as ‘excellent’  the results from an Indian study that showed the group’s hepatitis-C (HCV) testing kit was able to determine who did and didn’t have the disease with 100% accuracy. Overall, the data demonstrated that the rapid point-of-care device was suitable for use in a country where infections estimated at between six and 12 million, the company added. “These excellent clinical results for our HCV assay further validate the applicability of the test for a decentralised setting,” explained Budd. “India is a key target market for our assay and we are excited about the commercial prospects in the region.”

Group PLC () has hailed a record number of new corporate clients in its second quarter as well as “encouraging” trading into the second half of its current year. In its results for the six months to September 30, 2020, the provider of foreign exchange services said it had recruited 126 new corporate clients in the second quarter, while the number of corporate clients trading during the period was up 15% year-on-year at 212. also highlighted “encouraging levels of client activity” in September, which it said pointed to an unwinding of pent-up demand. Revenues generated during the month were up 57% of the figure from August.

() said its subsidiary Mercator Gold Australia (MGA) has taken delivery of a new drill rig and is preparing to start a programme on the HR3 prospect, in the Bailieston project area. The company noted that all necessary permissions are in place for drilling at the HR3 prospect. HR3 comprises at least four closely-spaced lines of reef, including the Byron, Dan Genders, Scoulars and Maori Reefs, ECR noted.

US Oil & Gas PLC (LON:USOP) told investors that the Bureau of Land Management has approved the necessary Permit to Drill for the proposed Eblana-9 well, at the Hot Creek Valley project in Nevada. Groundwork to prepare the well site for drilling will kick off immediately and it is slated to take three days to complete, the group added. Meanwhile, the company said it expects to sign contracts with the rig supplier and other services without delay.

PLC () said work to enlarge the Alamo Gold Project in Arizona, USA, is set to start next month. The AIM-listed metals exploration and development company has the right to earn-in up to a 75% interest in the project. Power Metal said that following completion of the reconnaissance programme, an additional nine claim blocks have been staked to enlarge the project by 23.5% to a total 946 acres.

() (ASX:BSE) said its Kwale operations in Kenya exceeded expectations in the first full year of mining in the South Dune. In a statement released on the day of the company’s annual general meeting, chairman Keith Spence noted that the Kwale operations remained at full-pelt and met shipping schedules throughout the fiscal year despite the problems posed by the coronavirus pandemic. In a separate statement, Base Resources said that all resolutions set out in the Notice of Annual General Meeting and put to shareholders at Friday’s meeting were carried.

(), the fully integrated specialty pharmaceutical company specialising in allergy vaccines, announced that Peter Jensen, the group’s non-executive chairman, has purchased 100,000 ordinary shares of 0.1p each in the capital of the company at a price of 14p per ordinary share. Following the transaction, the group said the total beneficial interest of Jensen is 270,000 ordinary shares, representing 0.04% of the issued share capital of the company to which voting rights are attached.

Salt Lake Potash Limited () () advised that at the annual general meeting of the company held on Friday, November 20, 2020, at 11.00am (WST) all resolutions were voted on and carried by way of a poll.

() announced that it is convening a general meeting (GM) of the company’s shareholders at 11.30am on Wednesday, December 16, 2020, at the company’s offices at 1 Bracknell Beeches, Old Bracknell Lane, Bracknell RG 12 7BW. The purpose of the GM is to seek Shareholders’ approval for the creation of a new class of growth shares and to make other minor amendments to the Company’s Articles of Association to update them generally. The new proposal offers the Executive Directors and other members of the leadership team the potential of reward should they achieve more demanding performance hurdles than those attached to their current share options but also introduces peril (the risk of loss) for non-performance. Due to the current coronavirus (COVID-19) measures implemented by the Government in the United Kingdom shareholders will not be permitted to attend the GM. If shareholders have any questions or comments relating to the business of the meeting that they would like to put to the board then they are requested to submit those questions in writing via email to [email protected] no later than 11.30am on December 14, 2020. The board will publish a summary of any questions received which are of common interest, together with a written response on the company’s website as soon as practicable after the conclusion of the meeting.

(AIM: FIPP), a specialist in commercialising intellectual property said its annual general meeting (AGM) will be held at 93 George Street, Edinburgh, EH2 SE3 at 11.00am on December 17, 2020. In light of social distancing measures as a response to the coronavirus (COVID-19) pandemic, this year’s AGM will be run as a closed meeting and shareholders will not be permitted to attend the AGM. As shareholders will not be able to attend in person, questions in relation to any of the resolutions to be proposed at the AGM, the Annual Financial Statements or the business of the company, should be submitted to [email protected] by 12.00pm on December 15, 2020 (including ‘AGM 2020’ in the subject heading). Questions will be grouped into themes and addressed on the company’s website as soon as practicable following the AGM.

6.50am: End of week revival

The FTSE 100 index looked set to rally on Friday, taking its lead from Wall Street which staged a modest rally yesterday.

Spread betting quotes point to the UK blue-chip index opening around 15 points higher at 6,349, as investors wait to see whether reports that a Brexit trade deal will be sealed next week turn out to be true.

Overnight, the Dow Jones Industrials Average, which got off to a wobbly start on Thursday, closed 45 points to the good at 29,483 while the S&P 500 advanced 14 points to 3,582.

China left its one and five-year loan prime rate benchmarks unchanged this morning at 3.85% and 4.65% respectively.

“The decision should be of no surprise with China’s economy firing on all cylinders,” said OANDA’s Jeffrey Halley.

“Even a Covid-19 slowdown from the US and Europe impacting exports would only be a mere flesh wound at this stage, especially with vaccines now on the horizon. If China wants to raise money, they can issue bonds in Europe and have Europeans pay them for the privilege,” he added.

Hong Kong’s Hang Seng index was on the up as a result today, rising 88 points to 26,445 but elsewhere in Asia, Japan’s Nikkei 225 was down 133 points at 25,501 as investors continue to wonder whether the lid is coming off the coronavirus pressure cooker in the Land of the Rising Sun.

Closer to home, the UK retail sales numbers should be interesting, with observers keen to see whether the recovery has been maintained.

“Since the lockdown, in April we’ve seen five consecutive months of decent gains; however, this could well be as good as it gets for retail spending as we head into year-end given recent steps by the government in re-imposing lockdown restrictions throughout certain parts of the country,” observed CMC’s Michael Hewson.

“In September retail sales saw an increase of 1.5%; however, recent third-party studies have been somewhat mixed, with some suggesting a sharp slowdown in the October numbers, while others like the latest British Retail Consortium sales survey, showed a pre-lockdown surge which pushed the numbers higher ahead of the November lockdown.

“On the downside, pub and restaurant sales saw a decline of 33% as tighter lockdown restrictions hit demand. Whatever the number for October and expectations are for a -0.3% decline, it is likely to be a last hurrah, before we see an even sharper slide in the November numbers, a month from now,” Hewson said.

As for company results, () is set to report final results on Friday, having last updated the market in July when it reported “more challenging trading conditions” due to coronavirus but added that this had eased off as the third quarter progressed.

The market is presently estimating 7.5% growth in recurring revenues for the year, with total group sales growth of 2.9% to £1.88bn and SSRS down 24% for the quarter and the year.

Analysts at UBS said that with extended government support programmes to SMEs, they believe guidance for a “low-to-mid single-digit” or perhaps 3%-5% recurring revenue growth may be given, “although are more cautious in our own model (+1.0%)”.

“We think the key question is what margin Sage expects,” the analysts added, with the current market forecast at 22.0%.

Around the markets:

  • Sterling: US$1.3278, up 0.14 cents
  • 10-year gilt: 0.326%, down 1.25 basis points
  • Gold: US$1,868.10 an ounce, up US$6.60
  • Brent crude: US$44.17 a barrel, down 3 cents
  • Bitcoin: US$18,178, up US$240

6.45am: Early Markets – Asia/Australia

Asia-Pacific markets traded mixed on Friday as coronavirus (COVID-19) cases around the world continue to rise helping push global debt levels to a new high.

Australia’s benchmark ASX 200 made early gains but reversed its course by evening to close 0.12% down at 6539.

In Japan, the Nikkei 225 fell 0.42% while South Korea’s Kospi index gained 0.25%.

Chinese stocks improved today, with the Shanghai composite up 0.38% and in Hong Kong, the Hang Seng index gained 0.25%.

READ OUR ASX REPORT HERE

Proactive Australia news:

Proactive will host a Gold Webinar next Tuesday, November 24, as strong prices and market fundamentals continue to focus global attention on the precious metal.

Three Australian resource companies – (), () (FRA:YAK) and () – will be in the spotlight.

() has received firm commitments to raise up to A$6 million to fund a multi-well drilling program, further material lease acquisitions and provide working capital.

() has raised $3.12 million in an oversubscribed placement to accelerate exploration programs at the Cox’s Find and Mon Ami gold projects in Western Australia.

Limited () has received firm commitments from institutional and sophisticated investors totalling $6 million via a placement at 13 cents per share.

() remains confident that the Lake Way Project in the Western Australian Goldfields is on-track for first sulphate of potash (SOP) production in quarter one of 2021.

() non-executive chairman John Clarke told the company’s annual general meeting that despite a global pandemic the company has delivered significant progress for its world-class Manono Lithium and Tin Project.

() shares are higher on news of positive long-term clinical data for nerve repair with CelGro® resulting in predictable and consistent restoration of upper limb function.

() has received binding commitments for a capital raising via a share placement to institutional, professional and sophisticated investors to raise $7 million before costs.

() (FRA:F1S) has registered the presence of kaolinite and halloysite minerals after completing an aircore drilling program at the Gibraltar project adjacent to () Mt Hope Kaolin-Halloysite Project on South Australia’s Eyre Peninsula.



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