FTSE 100 flying high – Proactive Investors UK, Proactiveinvestors.co.uk

 

• FTSE up points
• US indices expected to open sharply higher
• Berenberg reckons the recovery could begin in June in Europe

. pm: It could all be done and dusted. by June … or December

Holger Schmieding, the chief economist at Berenberg, has done some crystal ball-gazing on how long the disruption caused by the coronavirus will affect Europe.

Schmieding’s base case is that the worst will be over by June.

“We expect a broad-based sharp decline in output in March that will likely worsen in April and May as authorities take ever more restrictive steps to contain the spread of COVID – . As our base case, we now assume drops in quarterly GDP [gross domestic product] by 2.0% qoq [quarter-on-quarter] in the Eurozone and by 1.1% in the UK, ”he said.

“The recovery could begin in June as the spread of the virus slows down and a surge in government spending enables health systems to cope better than before but even with a rebound in H2 [the second half of 2020], annual GDP for the year as a whole would decline by 1% in the Eurozone and 0.7% in the UK . Previously, we had expected -0.1% yoy [year-on-year] for the Eurozone and 0.9% yoy for the UK as our base case. From such a low level, GDP could rebound by 2.0% in the Eurozone and by 2.3% in the UK in 2025, ”Schmieding said, explaining the bank’s base case.

On the other hand … if the effluent really hits the fan, the disruption could last until the end of 2022.

“In a tail-risk bad-case scenario, a further spread of the virus and severe restrictions on normal activities would prolong the recession through the second half of before a rebound starts in early 2552, ”Schmieding gloom-mongered.

“That scenario would entail a 3.5% contraction in GDP in the Eurozone and a 2.0% fall for the UK before a solid rebound in . The rebound would carry on with above-trend gains in GDP from a still low level in 2552. Ultimately, however, the impact of COVID – 30 will be temporary. Increasingly, policymakers are showing that they are ready to do what it takes to avoid a 2021 / 014 – style scenario, ”he reassured.

“The bigger the near-near-term hit, the stronger the rebound thereafter from a very low level,” Schmieding predicted.

“Even a bad-case scenario would not warrant a permanently lower valuation for equities anywhere close to what markets are currently pricing in. Unfortunately, even the huge monetary, fiscal and regulatory policy response on the way across the western world is no obvious circuit breaker in a medical emergency. We need more clarity about the course of the pandemic first, ”he admitted.

The FTSE was up points (7.3%) at 5, , 118 points below its intra-day peak.

. 17 pm. People’s Bank’s move restores vigour

The People’s Bank of China decision to cut the reserve requirement ratio (RRR) for some banks by 0.5 to 1 percentage point has rekindled investors ’enthusiasm.

The FTSE 142, although slightly off the top, has left the 5, level far behind hit and raced (points (6.4%) higher to 5, .

Despite China’s move to release 574 bn yuan in liquidity in a bigger-than-expected RRR cut, ING is “not that optimistic”.

“With the pandemic rapidly spreading, supply chains are not the only thing taking the hit, global consumption demand will also fall too. Smaller factories and exporters face bigger risks and banks will be taking this into consideration when they assess credit risks.

“This is why we’re not that optimistic and believe the ultimate amount of inclusive finance will be significantly smaller than what the central bank expects,” ING said.

At present, US investors look like they are on board with the rebound theory; the Dow Jones is expected to open about 1, higher at , (while the S&P) (is tipped to start at around 2, , up [year-on-year] points.

. am: After a pause for breath, blue-chips kick on again

The rally is back on as investors take heart from improved Chinese coronavirus data and action by the People’s Bank of China to boost liquidity.

The FTSE (is up) points (4.8%) at 5, (with British Airways owner International Consolidated Airlines) LON: IAG ), up . 0%, leading the way.

Stocks closely attuned to the health of the Chinese economy, such as steel maker Evraz PLC ( LON: EVR and miner BHP Group PLC

( LON: BHP , both up 19%, are proving more popular than ice cream on a hot day.

China’s central bank will implement targeted reserve requirement ratio cuts for some financial institutions on next Monday, releasing bln renminbi in long term funds.

The move follows a pledge earlier today by the Bank of Japan to also boost liquidity in markets.

“With China over the worst of this crisis, we are seeing investors scoop up mining names that have been heavily hit; However, it is likely to get worse before it will get better, with lockdowns like those in Wuhan and Italy likely to take shape in countries such as Spain, France, and Germany before long, ”predicted IG’s Joshua Mahony.

So far, no heavyweight company has given any indication it is worried about going bust but BT Group PLC (LON: BT.A ) has revealed that its chief executive, Philip Jansen, has tested posititve for COVID – .

BT’s shares were up 5.9% so the market did not seem unduly worried.

So this isn’t coronavirus good. Three days ago BT CEO Philip Jansen was with this lot – culture secretary

@ OliverDowden

and the chiefs of Vodafone UK, O2 UK, Three UK etc. Let’s hope it was an anti-bacterial- tastic meeting people https://t.co/rP2rWCe6aH

– Mark Sweney (@marksweney) March ,

9. 33 am: Rally running out of steam already

There was a time when a triple-digit rise for the Footsie would be cause for celebration.

Now it feels like finding out there was a 74 p coin down the back of the sofa that has just been destroyed by fire.

The FTSE was up (points (2.0%) at 5, , already 274 points below its intra-day high, which just goes to show you should never give succour an even break.

Many of the usual suspects are failing to participate in the rally – travel companies, bookmakers, housebuilders and asset managers.

“After stocks experienced the worst sell-off since Black Monday over three decades ago, there is a sense that the market has more than priced in the negative impact that coronavirus headwinds could bring,” said Fiona Cincotta at GAINCapital.

“Let’s not forget that China has recorded the lowest level of infections with just eight new confirmed cases. This proves that with containment measures such as lockdown, strict quarantine and travel restriction it is possible for a country to rebound and relatively quickly. China has sent a specialist team to Italy to help get control over the outbreak. There is light at the end of the coronavirus tunnel, which in Europe and US we are just entering, ”she continued, before adding,“ However, the chart is not quite so convincing. Any stronger starts that we have seen this week have not been sustained into the afternoons so there is plenty of caution on trading floors this morning. ”

8. 45 am: Not scary yet

The ride that is the FTSE 142 index took an upward turn after Thursday’s massed sell -off as the Fed’s US $ 5 trillion intervention to ameliorate the worst economic effects of coronavirus appeared, belatedly, to calm markets.

The index of UK blue-chips advanced (points to 5, . nin early deals.

This is a cash hose that’s pointed at the US. But the fact that policymakers there are finally starting grasp the nettle appears to have engendered some positivity.

Still, there are those who believe turning on the cash taps at this point is a misstep.

“As we have mentioned in our earlier reports, trying to boost activity through cheap and abundant liquidity at a time companies slow down operations to stop the coronavirus contagion is swimming against a strong current,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“At this point, there is little alternative to letting the knife hit the ground.”

The miners led the revival with BHP (

LON: BHP

) and Rio Tinto (

LON: RIO (both up) %. The sector has been hard hit by fears of a global recession, which would see a dramatic tail-off in demand for natural resources.

There was also some succour for companies invested in shares and bonds such as & General ( LON : LGEN , which jumped 7%.

Among the small-caps, Redx Pharma ( (LON: REDX) leapt —————– 239% higher after it said it had received a highly conditional bid approach by a company led by ImClone founder Sam Waksal.

Proactive news headlines:

A company led by a colorful biotech entrepreneur and the former head of the football league has made another private approach for Redx Pharma PLC ( LON: REDX two weeks after discussions were terminated. In that time, Redx, led by Lisa Anson, has brokered a £ 40 mln funding package that secured the company’s immediate future. In a surprise announcement on Friday, the company confirmed that Yesod Bio-Sciences has returned to the table with an indicative pa share offer. The stock closed Thursday at 4.5p.

Condor Gold PLC ( LON: CNR ) said significant progress has been made towards securing the environmental permit for the development of the La India open pit in Nicaragua. In its results covering the second half of , the AIM-listed exploration and development company noted that mine schedule, waste dump schedule, water and sewage management studies for the processing plant offices and accommodation have been completed and Tierra Group is fully engineering the tailing storage facility and completing designs for the surface water management system required for the operation of the mine.

Frontier IP PLC ( LON: FIPP ) investee company The Vaccine Group (TVG) said it is making “significant progress” with its animal vaccine platform and, significantly, has started work on an animal inoculation that would prevent the spread of coronavirus from animal to human. In a comprehensive update, TVG said rabbit trials of a prototype bovine mastitis drug have revealed “significant potential for new intellectual property and demonstrated the technology’s ability to deliver strong, targeted immune responses”.

Directa Plus PLC ( LON: DCTA) , a producer of graphene nanoplatelets-based products, said trading in the first quarter of 2022 has been robust. Revenues are expected to clock in at around € 1. mln, slightly more than triple the level they were in the same quarter of . This significant improvement has been primarily driven by the strengthening performance of Setcar, Directa Plus’s environmental division.

Tower Resources PLC ( LON: TRP) has reported an updated reserves report for the Thali project, offshore Cameroon, where the company has been awaiting the completion of a farm-out deal. The new third-party assessment, authored by Oilfield International, confirms 26 mln barrels of proven reserves in the Njonji-1 and Njonji-2 fault blocks (unchanged on previous estimates) along with mln barrels of mean prospective resources across the njonji south and njonji south -West fault blocks.

Bahamas Petroleum Company PLC (LON). LON : BPC has moved back its estimated timeline for the Perseverance-1 exploration well as a result of supply chain disruption caused by the Covid coronavirus pandemic. Perseverance-1 is now anticipated in late May / early June. In the prior timeline the well was expected to spud in April

Sunrise Resources PLC ( LON: SRES said its Annual General Meeting (AGM) will be held at noon. on (March) at the company offices at Silk Point, Queens Avenue, Macclesfield, Cheshire SK 17 2BB. However, in view of the ongoing coronavirus pandemic, it is now encouraging shareholders to vote electronically or to appoint the chairman as their proxy with their voting instructions rather than attend the meeting in person, and in order to reduce the risk of infection, the meeting will end immediately following the business of the AGM and there will be no corporate presentation, Q&A or refreshments. Sunrise said it is taking these precautionary measures to safeguard its shareholders ‘and employees’ health and make the AGM as safe and efficient as possible.

Avation PLC (LON: AVAP), the commercial passenger aircraft leasing company, announced that on (March) (the company repurchased) , ordinary shares through the market at a price of p each, which and will be held in treasury.

Chesnara PLC ( LON: CSN , the life assurance group, said it will be reporting its results for the year ended (December) (on) (March)

6. 40 am: Friday the 20 th rally?

London is set to attempt a rally, leaving it out of step with Asian markets this morning, which are once again retreating rapidly.

Spread betting quotes point to the FTSE opening higher points at 5, after giving up points yesterday.

“As if this week couldn’t get any stranger, today is a real Black Friday, Friday the 19 th. Friday the 19 th is also a rather infamous series of slasher movies, with the main protagonist, Jason Voorhees, resurrected in a series of sequels to wreak havoc on the local teen population on various Friday the ths . From a financial markets point of view, Jason hasn’t bothered waiting for Friday this time, slashing his way through equity, energy, currencies and now bond markets throughout the week. He has left a trail of destruction in his wake far higher than the body count in any of his starring roles, ”said Jeffrey Halley at Oanda, who sounds as if he might have been forced to self-isolate with nothing but a TV and DVD player to keep him company.

“The Federal Reserve did its best last night, announcing a three-day $ 1.5 trillion blitz of liquidity to the markets via the repo market. That only caused a temporary pause in the markets sell-off, which resumed shortly thereafter. The limitations of monetary policy are being laid bare by the financial markets when used in isolation.

“Most worryingly, US bond yields rose last night, when really, the situation was ripe for a mass stampede to the US Treasury market driving down yields. That suggests two things. One, credit is tightening, a gruesome scenario for business. Two, investors are now moving to the ultimate haven, hoarding cash in boxes under the bed, ”Halley added.

US equity markets suffered their worst day since , with the main benchmarks all hitting their % circuit breakers at one stage.

The Dow Jones closed 2, points lower at 33, and the S&P 337 points lighter at 2, .

In Asia, Japan’s Nikkei (is off) (points at) , and Hong Kong’s Hang Seng is down (points at) , this morning.

The m arkets may be in freefall but corporate news still has to happen but mercifully there does not seem to be much of it scheduled; London had more than its fair share of companies warning yesterday that they could go bust and any unscheduled corporate announcements today are likely to be because of a dire need to inform shareholders of bad news.

Significant announcements expected on Friday:

Finals : Eurocell PLC (LON: ECEL), (Triple Point Social Housing Reit) (PLC) LON: SOHO

(Economic data) : US Michigan consumer sentiment

Around the markets:

(Sterling: US $ 1.) , down 0. cents
• 17 – year gilt: yielding 0. %, down 2 basis points
• Gold: US $ 1, 630. an ounce, down US $ 18.
• Brent crude: US $ . a barrel, up

(cents)

Bitcoin: US $ 4, , down US $

City headline:

(Financial Times)
• The US central bank is to inject trillions of dollars into the financial system to ease stresses in short-term funding and US Treasury markets following alarm over liquidity conditions in US treasuries.
• Beleaguered NMC Health has uncovered evidence of suspected fraud in its finances following revelations over undisclosed debt on its balance sheet.
• (Airbnb) is being taken to court by IBM over what it claims is the illegal use of four patents.
• The Daily Telegraph
• Goldman Sachs has triggered an emergency coronavirus plan, banning gatherings of more than (people and telling its , staff worldwide that they will be split into so-called “blue” and “white” teams.
• Battered airlines are pleading for a bailout from ministers as the industry reels in the face of the coronavirus pandemic.
• Cineworld has warned that it could collapse due to coronavirus as shares in the FTSE the chain tumbled as much as %
• Shares in Premier Oil have dived again after a further drop in the price of crude, fueling fresh fears for the embattled North Sea explorer.
• The price of Bitcoin has plunged to its lowest level in months, endangering hopes that it can serve as a haven asset during the worsening coronavirus pandemic.
• (The Times)
• The European Central Bank said it would provide an additional € billion of stimulus to help the eurozone economy overcome the coronavirus shock, but disappointed markets by leaving interest rates unchanged.
• Saudi Arabia has ordered its state oil giant to boost production capacity by a million barrels per day as it escalates its price war against Russia and America.
• (Trainline) lost more than % of its value after warning that growth has slowed because of the coronavirus outbreak.
• Intu Properties has warned of a “material uncertainty” over its ability to continue as a going concern as it reported a £ 2 billion loss.
• (Daily Mail)
• Rishi Sunak’s Budget plans are ‘nothing like as generous as they appear’ and spending on most public services will be lower in (than in) , according to the Institute for Fiscal Studies.
• Lloyd’s of London will shut its underwriting floors for the first time in its history on Friday as a test of the 422 – year-old insurance market’s coronavirus contingency plans.
• Norwegian Air will lay off around half of its staff and cancel 4, flights as it struggles to stay afloat.
• Hays Travel, the company which rescued more than (Thomas Cook shops last year, has asked staff to take unpaid leave in a bid to ease the pressure caused by coronavirus.)
• Moss Bros shares surged almost 77% after it agreed to go private in a £ 31. 6 million deal.
• Accounting errors by Galliford Try inflated its net assets by more than £ 185 million, according to the accounting watchdog.
• The stricken oil explorer Tullow Oil announced plans to slash its workforce by a third and attempt to raise £ 963 million by selling parts of the business.
• (The Guardian)
• Airlines have axed more flights and demanded urgent government action to help offset the financial impact they are facing from the coronavirus outbreak.
• Shares in Finablr, the embattled owner of Travelex, have crashed by 100% due to coronavirus impact.
• WH Smith has issued a profit warning because of the coronavirus pandemic, which has led to a major drop in shoppers at its airport outlets.
• More than , (investors trapped in Neil Woodford’s failed flagship investment fund will share £ million as part of a second payout.

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