FTSE 100 rocks on despite UK services and manufacturing activity sliding in October

• FTSE 100 index gains 68 points
• Composite PMI for October falls to a four-month low
• Manufacturing PMI slides to three-month low
• Services PMI falls to four-month low

9.45am: UK services and manufacturing PMIs come off the boil

The IHS Markit / CIPS Flash UK Composite Purchasing Managers’ Index (PMI) for October fell to a four-month low of 52.9 in October.

The index, which is calculated by subtracting the percentage of respondents experiencing a contraction in activity from the percentage of those reporting expansion, fell from September’s level of 56.5.

The services business activity index for October also hit a four-month low, sliding to 52.3 in October from 56.1 in September.

The manufacturing output index eased to 56.4 (a four-month low) from September’s 59.0.

The manufacturing PMI retreated to a three-month low of 53.3 from 54.1 in September.

“The pace of UK economic growth slowed in October to the weakest since the recovery from the national COVID-19 lockdown began. Not surprisingly the weakening is most pronounced in the hospitality and transport sectors, as firms reported falling demand due to renewed lockdown measures and customers being deterred by worries over rising case numbers,” said Chris Williamson, the chief business economist at IHS Markit, which conducts the survey.

“The slowdown would have been even more pronounced had it not been for exports rising as overseas customers sought to secure orders before potential supply disruptions as Brexit draws closer.

“The slower growth of output, the renewed fall in demand and further deterioration in the labour market suggest the economy started the fourth quarter on a weakened footing. While Brexit preparations may cause a short-term boost to some parts of the economy ahead of 31st December, rising COVID-19 cases and the imposition of local lockdown measures bode ill for the near-term economic outlook. While the fourth quarter still looks likely to see the economy expand, the rate of growth looks to have slowed sharply and the risk of a renewed downturn has risen,” Williamson said.

Duncan Brock, the group director at the Chartered Institute of Procurement and Supply (CIPS), said fears over inherent weaknesses in the UK economy materialised this month.

“Where some businesses were largely unaffected or were able to recoup losses quickly following the worst of the pandemic, consumer-facing businesses were the worst hit and some are now concerned about the prospect of total ruin. Either unable to fully open or tempt customers through the doors, hospitality firms saw their hands tied by further lockdown restrictions, safety measures for staff and customers, and the public more reluctant to leave their homes,” Brock said.

“Manufacturing companies had a better month as production remained steady, but at its slowest pace since July when the recovery first started to pick up speed. Sharper falls in job numbers as a result of redundancies and reduced customer demand along with higher prices for raw materials means the sector is still under pressure.

“Optimism fell to levels last seen in May, and unpredictability remains the only predictable conclusion for the remainder of the year,” he added.

UK October Prelim Manufacturing PMI Report – Markithttps://t.co/3aulJu80K6 pic.twitter.com/7K874BJjMn

— LiveSquawk (@LiveSquawk) October 23, 2020

The FTSE 100 was up 68 points (1.2%) at 5,854.

8.50am: Mood improves for Footsie

After a generally dour trading week, the FTSE 100 seems to be looking to finish on a more positive note on Friday.

The index of UK blue-chip shares opened 36 points higher at 5,821.42.

Better than expected monthly retail sales figures lifted the mood a tad – that, the performance of the UK’s banking sector and a bit of bargain hunting after a near-23% slide in the blue-chip index from its early-year high.

Still, bubbling away in the background is the issue of further, economically-punitive coronavirus (COVID-19) lockdowns, with a number of England’s major cities under (or soon to be subject to) tough restrictions. Wales, meanwhile, is now enacting its firebreak policy to prevent the coronavirus spread, while Scotland took early action.

On the market, Barclays (LON:BARC) rose 3.6% early on after posting better than expected quarterly figures. It did so by setting aside fewer provisions for COVID-19-related debt defaults.

Not far behind were HSBC (LON:HSBA), Lloyds (LON:LLOY) and NatWest, which posted gains of around 3% and all report next week.

“Having seen US banks cut back their loan loss provisions in the third quarter we’ve seen Barclays do the same thing this morning,” said Michael Hewson of CMC Markets.

“These loan loss provisions were one of the most notable characteristics of the numbers that we saw in the second quarter, particularly in the context of the impact the economic slowdown the coronavirus pandemic had on bank profit margins, as well as the rise in non-performing loans.”

Among the small-caps, Sensyne Health (LON:SENS), founded and run by former science minister Lord Drayson, was up 9% after the group signed its fourth artificial intelligence deal with a big pharma company.

Braveheart Investments (LON:BRH) was up 11% after its investee company said its coated masks that are primed to kill COVID-19 will be on sale by the end of December.

Braveheart is selling its plus-50% stake in the company developing the coating and masks, which is called Pharm2Farm.

Buyer Remote Monitored Systems (LON:RMS), in which Braveheart will soon have a 37% stake, was up 23% on the back of the Pharm2Farm mask sale news.

7.30am: Shoppers returning

UK retail sales volumes rose by 1.5% in September from August’s level, the Office for National Statistics (ONS) said on Friday.

It was the fifth consecutive month of retail sales growth, with sales volumes 5.5% above February’s pre-pandemic level.

The proportion of online sales was at 27.5%, compared with 20.1% reported in February, despite small monthly declines across most of the retail sector.

Meanwhile, market research group GfK revealed UK consumer sentiment took a knock in October.

The index fell to -31 in October from -25 in September; economists had predicted a reading of -27.

Sharp drop in #UK #consumer confidence in October worrying for spending prospects in fourth quarter after the consumer clearly played leading role in #economy‘s third quarter bounce back. #UK consumer sentiment falls by most since start of pandemic – GfK https://t.co/Qyh2Fj5Bvy

— Howard Archer (@HowardArcherUK) October 23, 2020

Following the release of the retail sales figures, consumer sentiment index and trading updates from FTSE 100 constituents Barclays PLC (LON:BARC), London Stock Exchange Group PLC (LON:LSE) and InterContinental Holdings Group PLC (LON:IHG), the Footsie was expected to open little changed.

Proactive news headlines:

Sensyne Health PLC (LON:SENS) has agreed a research collaboration with Bristol Myers Squibb that will see it deploy its artificial intelligence and machine learning technology to help better understand certain rare blood diseases. Work will focus on Myeloproliferative Neoplasms to assess the progression of these blood cancers that are characterised by the over-production of white or red cells, or platelets. No financial terms were disclosed. This is Sensyne’s fourth partnership with a major pharma company following deals with Bayer, Roche and Alexion.

Braveheart Investment Group PLC (LON:BRH) has said a new antiviral face mask that can kill coronavirus (COVID-19) will go on sale by the end of the year. This follows a flurry of activity at Braveheart investee company Pharm2Farm (P2F), which has developed a textile coating incorporating nanoparticles with long-lasting virucidal properties. It now has testing results from two independent labs that show the mask textile has a ‘kill rate’ of over 90% for up to seven hours, meeting the requirements for ISO 18184 certification. Meanwhile, Braveheart’s sale of its 51.72% stake in P2F to Remote Monitored Systems PLC (LON:RMS) is expected to complete on November 5. As a result, Braveheart will own 37.12% of RMS.

Aminex PLC (LON:AEX) has announced the completion of its farm-out deal with ARA Petroleum Tanzania Limited (APT). “We are delighted to finally complete the farm-out and hand over operatorship of the Ruvuma PSA to APT,” said Robert Ambrose, Aminex chief executive in a statement. The company now retains a 25% interest in the Ruvuma asset – which includes the Ntorya gas project and exploration areas – and APT will fund a forward programme including the drilling of the Chikumbi-1 well and a new seismic programme over at least 200 square kilometres.

Avation PLC (LON:AVAP), the civil aircraft lessor, said it stayed in profit in its latest financial year in spite of the problems facing airlines due to coronavirus restrictions. Profits dropped 43% to US$14.3mln in the year to end June 2020, which was largely the result of US$35.5mln of impairment losses offset partially by an unrealised gain of US$27.1mln for purchase rights with plane manufacturer ATR. Revenue increased by 14% to US$135.3mln during the year, which was a new record said the company, and before the one-offs profits rose 28% to US$19.8mln.

Powerhouse Energy Group PLC (LON:PHE) has told investors that Dr Cameron Davies will retire as a director of the company on March 31, 2021. The company intends to appoint Mark Berry as a non-executive director. He is a partner in law firm Norton Rose Fulbright which has particular expertise in the energy industry, Powerhouse noted.

Shanta Gold Limited (LON:SHG) announced after the market close on Thursday that it is proposing to raise roughly £31mln by way of a placing and a direct subscription of shares priced at 16.5p each. All of the directors of the East Africa-focused gold producer, developer and explorer, have indicated an intention to participate in the subscription, up to an aggregate amount of about £270,000. The funds raised will pay for infill drilling, expansion drilling, technical studies and working capital over the next 36 months at the company’s West Kenya Project.

Pan African Resources plc (LON:PAF) has said its American depositary receipts (ADRs) are to be traded on the OTCQX Best Market, starting Friday, October 23, 2020. The OTCQX market is the highest tier of the over-the-counter (OTC) market operated by OTC Markets Group. The ADRs were previously traded on the Pink OTC market.

Power Metal Resources PLC (LON:POW) the AIM-listed metals exploration and development company said it has received notices to exercise warrants over 7,136,000 new ordinary shares of 0.1 pence each in the company. The warrant shares are being issued under the exercise for 4,636,000 warrants at an exercise price of 1.0p each and 2,500,000 warrants at an exercise price of 0.7p each. Subscription monies of £63,860 have been received by Power Metal in respect of these exercises.

Tiziana Life Sciences PLC (NASDAQ:TLSA) (LON:TILS), a biotechnology company focused on innovative therapeutics for oncology, inflammation and infectious diseases, said it has allotted and issued 285,714 ordinary shares of 3p each credited as fully paid at a price of 35p per share in respect of the exercise of 285,714 warrants held by a warrant holder.

Stobart Group PLC (LON:STOB), the aviation and energy infrastructure group, has said it will announce its interim results for the six months ended 31 August 2020 on Wednesday, November 4, 2020. The group will hold an investor presentation at 9.30am UK time on the same day hosted by Warwick Brady, its chief executive officer and Lewis Girdwood, its chief financial officer. The presentation will be hosted through the digital platform Investor Meet Company. Investors can access the webcast by visiting: https://www.investormeetcompany.com/stobart-group-ld/register-investor

6.50am: Small advance predicted

Helped by a soft sterling exchange rate, the FTSE 100 is set to open proceedings modestly firmer on Friday.

Spread betting quotes point to London’s index of leading shares rising 18 points to 5,804 as the dollar rose following last night’s US presidential debate and ahead of the release of a slew of purchasing managers’ indices (PMis) today plus UK retail sales.

The market received an additional boost to sentiment with the news that the US Food and Drug Administration (FDA) has approved Veklury, the coronavirus (COVID-19) treatment from Gilead Sciences that was formerly known as Remdesivir.

“European stocks look set for cautiously higher open with the idea that the presidential debate won’t have diminished chances of a new US stimulus bill. The approval of Remdesivir by the FDA [Food and Drug Administration] as the first drug to treat COVID-19 is a big positive for markets beset by second wave concerns,” said LCG’s Jasper Lawler.

US markets put in a good shift yesterday with the Dow Jones Industrial Average rising 153 points to close at 28,364 and the S&P 500 climbing 18 points to 3,453.

Asian markets picked up the baton this morning, with Japan’s Nikkei 225 up 81 points at 23,555 and Hong Kong’s Hang Seng up 153 points at 24,939.

On the macroeconomic agenda today in the UK we have the retail sales figures for September and the “flash” PMIs.

“The latest retail sales numbers for September, which could well be a last hurrah ahead of what could well be a bleak autumn for the UK economy,” suggested CMC’s Michael Hewson.

“The big question as Q3 draws to a close is whether today’s September numbers can round off another month of gains as summer draws to a close. The prevailing thinking, if judged purely on the basis of recent PMI data would be in the positive; however, life is rarely that simple. Other retail sales surveys do offer some encouragement.

“The recent British Retail Consortium sales numbers for September showed a 6.1% rise, well above the 4.7% rise in August, driven largely by increased spending in pubs, as well as higher DIY spending and a back to school boost,” Hewson said, before noting “this could be as good as it gets for a while, as we head towards the potential for a train wreck in Q4, as new lockdown restrictions start to bite”.

“Expectations are for a rise of 0.4% [down from 0.6% in August], though it wouldn’t be a surprise to see that come in slightly higher,” he suggested.

As for the PMIs, the manufacturing number is expected to ease to 53.2 from September’s 54.1, which is still above the 50-point level that separates contraction from expansion, while economists have pencilled in a number of 53.4 for services, down from 56.1 in September.

Unusually for a Friday, the company results schedule is quite busy, with Barclays, London Stock Exchange Group and Intercontinental Hotels all releasing trading updates for the summer quarter.

READ Busy Friday ahead with Barclays, London Stock Exchange Group, Intercontinental Hotels on the schedule

Around the markets:

• Sterling: US$1.3061, down 0.23 cents
• 10-year gilt: 0.286%, up 4.3 basis points
• Gold: US$1,908.10 an ounce, up US$3.50
• Brent crude: US$42.39 a barrel, down 7 cents
• Bitcoin: US$12,953, down US$175

6.45am: Early Markets – Asia/Australia

Shares in the Asia-Pacific region were mixed on Friday as investors continued to monitor the COVID-19 pandemic, US stimulus talks and the final Trump-Biden election debate.

China’s Shanghai composite was 0.05% lower while Hong Kong’s Hang Seng index gained 0.44%.

In Japan, the Nikkei 225 rose 0.40% while South Korea’s Kospi was 0.40% higher.

Meanwhile, shares in Australia dipped below the flatline, with the S&P/ASX 200 down 0.11%.

READ OUR ASX REPORT HERE

Proactive Australia news:

Mali Lithium Ltd (ASX:MLL), which is soon to be renamed FireFinch, has received a response described as overwhelmingly positive to a $6 million share purchase plan (SPP), which closed heavily oversubscribed and raised around $9.835 million before costs.

Macarthur Minerals Ltd (ASX:MIO) (CVE:MMS) (OTCMKTS:MMSDF) has closed a well-supported private placement with subscriptions from institutional and sophisticated investors totalling 11,362,618 new shares for funds of almost A$6.25 million.

Kazia Therapeutics Limited (ASX:KZA) (NASDAQ:KZIA) (FRA:NV9M) has successfully completed the A$8.8 million retail component of its A$25.2 million entitlement offer of shares at 80 cents per new share.

Orion Minerals Ltd (ASX:ORN) (JSE:ORN) has started a new phase of high-impact exploration drilling targeting near-mine and regional VMS copper-zinc and nickel-copper targets at Prieska Copper-Zinc Project in South Africa’s Northern Cape.

Aspire Mining Ltd (ASX:AKM) remains committed to turning the Ovoot Coking Project in Mongolia into a first world development that will provide high-quality jobs and community benefits to ensure efficiency and mitigate environmental impacts.

TNT Mines Ltd (ASX:TIN) hit a new record high after signing a binding share sale agreement to acquire Warriedar Mining Pty Ltd, which owns the Eureka and Warriedar gold projects in Western Australia, both with a history of gold production.

VRX Silica Ltd (ASX:VRX) has received notice from the Yamatji Aboriginal Corporation (YMAC) that conclusive registration of the Yamatji Nation Indigenous Land Use Agreement (ILUA) is expected today, in accordance with the terms of the ILUA.

Australian Potash Ltd (ASX:APC) has welcomed the start of a detailed assessment and due diligence on the Lake Wells Sulphate of Potash Project (LSOP) by the Australian Federal Government’s export credit agency Export Finance Australia (EFA).

Fenix Resources Ltd (ASX:FEX) is making progress on its planned development of the Iron Ridge Iron Ore Project in Western Australia’s Mid-West, with production on track to start later this year.