FTSE 100 drifts lower as macro data paints a gloomy picture

FTSE 100 index drops 36 points
UK retail sales bounce back less than expected in December
The UK’s budget deficit in December was the third-largest on record

London looks set for a drab end to the week with grisly UK economic data and developments in China sapping confidence.

The FTSE 100 was down 36 points (0.6%) at 6,678.

“Things have unravelled quickly, likely a symptom of heavy bullish bets and weaker hands heading for the exits,” suggested Stephen Innes, the chief global market strategist at Axi.

“More lockdowns in China and the economic implications this will have in terms of mobility knock-on effects ahead of Chinese New Year and increasing push back from Republicans around US President Biden’s stimulus plans, have led to profit-taking across the value/re-opening trade.

“With China back in emergency COVID mode, it has rocked the boat pretty violently today,” he added.

As for today’s UK retail sales figures, volumes rose 0.3% month-on-month in December but this “was a much smaller rebound than had been hoped for after retail sales had fallen 4.1% in November,” according to Howard Archer, the chief economic advisor to the EY ITEM Club.

The consensus had been for a 1.2% rise in December.

“Retail sales volumes fell 0.4% q/q [quarter-on-quarter] over the fourth quarter, which ties in with the EY ITEM Club’s view that the economy likely stagnated,” Archer said.

The UK’s budget deficit (public sector net borrowing excluding banks or PSNBex) rose to GBP34.1bn in December, the third largest monthly budget deficit on record and the highest since May. This was up from GBP26.1bn in November and nearly six times the December 2019 shortfall of GBP5.9 bn.

“The public finances saw a ninth successive large shortfall in December as the Government’s measures to support businesses and jobs affected by COVID-19 resulted in reduced receipts and substantially increased public spending. Significantly, with the continuation of the furlough scheme, the ONS reported December saw GBP4.7bn spent on the Coronavirus Job Retention Scheme (CJRS) and GBP5.3bn on the Self Employment Income Support Scheme,”Archer reported.

“The EY ITEM Club expects the budget deficit (PSNBex) to come in around GBP420bn in 2020/21 – 19.9% of GDP,” Archer revealed.

If there is not much good news on the economic front, mid-cap Computacenter PLC (LON:CCC) has provided some cheer in the corporate arena with its pre-close trading statement.

The shares rose 3.4% to 2,538p after the information technology firm increased its full-year profit guidance.

#CCC Solid update from Computacenter with adjusted PBT raised yet again to >GBP195m. Real quality with technology clients more than offsetting falls in manufacturing and industrial. Like this bit: “we are as confident as we can be at this stage that 2021 will be a year of progress”
— Damian Cannon (@ThreeHalfPenny) January 22, 2021

8.25am: Weak end to the week

The FTSE 100 made a lacklustre start to the final day of the trading week – taking its cue from Wall Street and Asia’s main bourses.

The index of UK blue-chips opened 19 points lower at 6,696.22.

“Markets have stumbled at the end of a generally directionless week,” said Richard Hunter, head of markets at Interactive Investor.

“The wave of optimism which had gripped the US markets the previous day, as the inauguration of the new president passed without incident, and as investors took hope from some positive political noises around the stimulus package, subsided.”

If the international stock action was dull, then there wasn’t much cheer closer to home.

It is unlikely traders will warm to the last UK retail sales data, which showed volumes fell 1.9% in 2020, the biggest annual decline on record.

Clothing was hardest hit by the coronavirus lockdown with business down by a quarter.

December’s performance provided a small crumb of comfort – but only that – with sales ahead 0.3% year on year.

Turning to the movers, coronavirus-impacted stocks were on the decline, led by tour operator TUI (LON:TUI), off 5.8%, picture hall owner Cineworld (LON:CINE), down 3.3%, and IAG (LON:IAG), the British Airways and Iberia airlines holding company, shares in which fell 3%.

BP (LON:BP) and Shell (LON:RDSA) were dragged 2.2% and 2% lower by the declining price of crude.

Proactive news headlines:

Evgen Pharma PLC (LON:EVG) said its lead compound has been shown to inhibit a protein associated with a number of different cancers. Research carried out by Professor Philip Eaton, of Queen Mary University of London, showed SFX-01 was able to decrease the activity of SHP2. This is a non-receptor protein tyrosine phosphatase that is associated with breast cancer, leukaemia, lung cancer, liver cancer, gastric cancer, laryngeal cancer and oral cancer.

Learning Technologies Group PLC (LON:LTG) said its full-year revenues and earnings are expected to be ahead of consensus despite disruption in the wider market during the coronavirus (COVID-19) pandemic. In a trading update for the year to December 31, 2020, the digital learning and talent management specialist said it expects revenues to be no less than GBP131mln, up from GBP130.1mln in the prior year, while recurring revenues increased to 80%growth from 74% driven by what the firm said was the ongoing performance of its software & platforms division and the expansion of its business in open-source learning management systems.

Union Jack Oil PLC (LON:UJO) has updated on the planning and permitting process for the West Newton project in Yorkshire. Project operator Rathlin Energy is advancing the process with the East Riding of Yorkshire Council. The West Newton partner seeks approval for the development of the field – by testing, appraisal and production from the two existing wells along with the drilling, testing, appraisal and production from up to six new wells over a 25-year lifespan. “The East Riding of Yorkshire Council`s screening opinion considers that the proposed development would not comprise EIA (Environmental Impact Assessment) development,” Union Jack noted in a statement.

Directa Plus PLC (LON:DCTA) said it has had its hydrocarbon sludge processing contract with OMV Petrom extended and increased. The contract, which was initially awarded in July 2019, was for the provision of decontamination and oil recovery services using the company’s proprietary Grafysorber technology. The AIM-listed producer and supplier of graphene nanoplatelets based products for use in consumer and industrial markets said the value of the contract has now increased to EUR410,000 from EUR150,000 (of which, EUR75,000 was delivered and invoiced in 2020) originally. The balance of the contract is expected to be fulfilled by June 2021.

Falcon Oil & Gas Ltd (LON:FOG) (CVE:FO) has highlighted what it describes as very encouraging initial gas composition data from the Kyalla 117 well, at the Beetaloo project in Australia’s Northern Territory. Gas samples taken during a 17-hour unassisted flow period confirm a 17-hour unassisted flow period, the company said. The data meets expectations, it added, and also supports the view that Kyalla gas stream will have elevated LPG and condensate yields.

Vast Resources PLC (LON:VAST) said it has appointed a new general manager at its Baita Plai Polymetallic Mine in Romania. Marcus Brewster, a senior mining professional with 24 years of open pit and underground experience, will clock in for the first time on March 1, 2021. Brewster previously held senior operational management positions at international mining companies such as Hummingbird Resources, Endeavour Mining, Nordgold & Gold Field. His role will include leading the development of Baita Plai to its full potential while maintaining the highest standard of safety and environmental compliance, Vast Resources said.

Advanced Oncotherapy PLC (LON:AVO) said it has raised GBP5.9mln via a share placing at 40p a pop. The buyers of the new stock, which was priced at just a 2% discount to the group’s average closing price over the past 30 days, were clients of SI Capital, an independent stockbroker. The latest cash injection will be used to help progress the assembly of the company’s LIGHT proton beam therapy system.

Anglesey Mining PLC (LON:AYM) has said it is to raise GBP660,000 by placing 10mln shares at 6.6p a share. The newly issued shares represent roughly 4.7% of the company’s current issued share capital. The money raised will be used for general corporate purposes and particularly to continue the development of the group’s Parys Mountain property as outlined in the recent positive preliminary economic assessment for that project, Anglesey Mining said.

Live Company Group PLC (LON:LVCG) has announced the appointment of Monecor (London) Limited Capital as the company’s sole corporate broker with immediate effect.

Oriole Resources PLC (LON:ORR) , the AIM-quoted exploration company focused on West Africa said that following an exercise of warrants and options over ordinary shares in the company it has issued 18,349,792 new ordinary shares of 0.1p each; The exercise prices of the warrants and options were: 264,126 warrants at 0.60p each; 17,419,000 warrants at 0.68p each; and 666,666 options at 0.37p each. Following the issuance, a total of 296,965,977 warrants and 82,526,246 options over ordinary shares (representing approximately 25.5% of the company’s enlarged issued share capital) remain outstanding.

Landore Resources Limited (LON:LND) said it has received a notice to exercise warrants over a total of 296,296 ordinary shares, for which funds of GBP59,259.20 have been received by the company.

Shield Therapeutics PLC (LON:STX), a commercial-stage, pharmaceutical company with a focus on addressing iron deficiency with its lead product Feraccru/Accrufer (ferric maltol), has said Hans Peter Hasler, its non-executive chairman acquired 100,000 ordinary shares in the company on January 20, 2021, for consideration of GBP0.59 each. Following the transaction, Hasler holds 100,000 shares.

Great Western Mining Corporation PLC has announced that an extraordinary general meeting of the company will be held at Haresmead House, Foulkesmill, Wexford, Ireland, on February 17, 2021, at 11.00am. The group said the business of the EGM will be to consider and, if thought fit, approve certain resolutions relating to the replacement of CREST with a system operated by Euroclear Bank SA/NV for the electronic settlement of trading in the Company’s ordinary shares. Approval of the resolutions is necessary to ensure the company’s shares can continue to be settled electronically when they are traded on Euronext Growth Dublin and the AIM market of the London Stock Exchange and remain eligible for continued admission to trading on those exchanges.

Edison Research has issued an update on Baker Steel Resources Trust PLC (LON:BSRT). Its analysts said: “In 2020 BSRT’s shares traded at an average discount to NAV of c 20%, compared to its five-year average of c 25%. The discount has significantly narrowed by the year-end and turned into a slight premium (1.5%) on 30 December 2020 close, which may suggest investors already anticipated a significant NAV uplift. As such, the immediate share price response to the end-2020 NAV announcement on 14 January 2021 was only a c 10% increase compared to the 27.5% NAV uplift versus end-November, resulting in a double-digit discount to NAV (currently c 14.1%). To view the full report use the following link: https://www.edisongroup.com/publication/annual-review-results-in-a-strong-nav-uplift/28677

6.50am: Dull end to the week predicted

On Thursday, even the US got the “stuck in a rut” blues and more of the same can be expected today in London.

Spread betting quotes suggest the FTSE 100 might eke out a 2 point rise to open at 6,715 after a mixed showing Thursday by US indices.

The Dow Jones Industrials Average drifted 12 points lower to 31,176 while the S&P 500 index edged 1 point higher to 3,853. Only the Nasdaq Composite showed any vigour, advancing 74 points to 13,531.

“A few swirling doubts have crept into Asian markets, with equities across the region indicating that regional investors prefer caution as the week closes. Hong Kong has announced a complete lockdown of part of Kowloon this morning in its COVID-19 battle,” reported Jeffrey Halley at OANDA.

In Hong Kong on Friday, the Hang Seng index was 392 points weaker at 29,535. Elsewhere in Asia, Japan’s Nikkei 225 was 82 points lower at 28,675.

Looking ahead to Friday’s agenda in the UK, the latest retail sales and public finances numbers for December will be released plus there will be flash manufacturing and services Purchasing Managers Indices (PMI) readings, where the consensus forecasts are 53.6 and 45 respectively.

“Since the April lockdown last year UK retail sales growth saw six consecutive months of gains; however, these came to a shuddering halt in the November numbers due to the lockdown restrictions that were put in place from the 5th November,” said CMC’s Michael Hewson.

“The biggest drag to retail sales is likely to be from closing bars and restaurants which have seen big declines in spending there, though as recent retail numbers have shown the boom in online and digital sales could help to compensate, “he added.

Economists are expecting UK retail sales to rise by 1.3%.

“In November the government borrowed GBP30.8bn, bringing the total amount borrowed for this fiscal year to GBP245bn, with the very real prospect that the total sum could well rise to well over GBP300bn by year-end,” Hewson reported.

Borrowing is expected to have risen by another GBP31.4bn in November.

As for corporate announcements, trading updates from IT group Computacenter PLC (LON:CCC), retailer TheWorks.co.uk PLC (LON:WRKS) and a few others will give investors something chew over on Friday.

Around the markets:

Sterling: US$1.3700, down 0.31 cents
10-year gilt: 0.333%, up 3.05 basis points
Gold: US$1,861.40 an ounce, down US$4.50
Oil: US$55.43 a barrel, down 67 cents
Bitcoin: US$31,657, up US$382

6.45am: Early Markets – Asia / Australia

Shares in the Asia-Pacific region were lower on Friday following a mixed session overnight for major US indices.

Hong Kong’s Hang Seng index led losses among the Asian markets as it fell 1.38% while China’s Shanghai Composite dropped 0.36%.

In Japan, the Nikkei 225 declined 0.44% and South Korea’s Kospi slipped 0.64%.

Over in Australia, the S&P/ASX 200 closed 0.34% lower.

READ OUR ASX REPORT HERE

Proactive Australia news:

Nelson Resources Ltd (ASX:NES) has accepted binding commitments for a placement of 28,700,535 new shares at an issue price of 7.5 cents per share to raise $2.15 million for advancing its exploration projects.

engage:BDR Ltd (ASX:EN1) has ended 2020 strongly, completing a heavily oversubscribed shareholder purchase plan (SPP) in conjunction with a placement, which raised $3,243,275, allowing the company to retire outstanding payments owed to service & inventory providers that accrued during the COVID-19 pandemic.

Jindalee Resources Limited (ASX:JRL) has completed an exploration target range (ETR) at its Lyon River magnesite deposit as part of its 100& owned greater Prospect Ridge Project.

Technology Metals Australia Ltd (ASX:TMT) (FRA:TN6) has resumed drilling at the Yarrabubba Iron Vanadium Project in Western Australia, with a second drill rig starting on January 11.

Blackstone Minerals Ltd (ASX:BSX) (OTCMKTS:BLSTF) (FRA:B9S) has signed a non-binding letter of interest with Trafigura Pte Ltd for the potential supply of nickel and cobalt products for the production of downstream products for the lithium-ion battery industry at the Ta Khoa Nickel Project in Vietnam.

Lithium Australia NL (ASX:LIT) (OTCMKTS:LMMFF) (FRA:3MW) has raised another $484,132.84 after its shareholders fully paid the balance on a further 9,702,061 LITCF partly paid ordinary shares in the company, the latest in a series of similar transactions since mid-December 2020.

Predictive Discovery Ltd (ASX:PDI) is accelerating drilling at its Bankan Gold Project in Guinea, with the 25,000-metres Bankan-2 drilling program operating at full capacity as it targets a maiden JORC resource in mid-2021.

Firefinch Ltd’s (ASX:FFX) (FRA:N9F) infill and extensional drilling at the N’Tiola Deposit within the Morila Gold Project has intersected broad zones of economic mineralisation.

Sipa Resources Ltd (ASX:SRI) remained focused on its portfolio of Western Australian assets throughout the December 2020 quarter, in-line with its strategy to concentrate on large-scale ground holdings in underexplored areas.

MGC Pharmaceuticals Ltd (ASX:MXC) (OTCMKTS:MGCLF) (FRA:H5O) enjoyed a productive December quarter and is progressing towards its target of achieving monthly cash flow breakeven by the end of 1H 2021 from around 5,000 units sold per month.

Azure Minerals Limited (ASX:AZS) has observed nickel and copper sulphide mineralisation in each of the first three diamond core holes drilled at the VC-23 target on the Andover Nickel-Copper Project, which is 60% owned by the company.

Miramar Resources Ltd (ASX:M2R) has chalked out plans for a busy first quarter that has set the stage for growth, building over the progress made since its listing on the ASX in October.