- FTSE 100 down 38 points
- US indices to claw back Thursday losses
- FirstGroup exits US operations
11.25am: Wall Street to open in the green
FTSE 100 dropped further before lunch and plunged 38 points to 6,898, while US indices are called higher.
The Nasdaq, S&P 500 and Dow Jones are all set to start on the front foot, recouping heavy losses on Thursday after reports that the Biden administration is set to propose a 40% capital gains tax for the wealthy.
“The prospect of a doubling to CGT prompted speculation that many wealthy Americans could sell out of their stock holdings before the rise comes into play,” said Sophie Griffiths, analyst at OANDA.
“Follow-through selling is evident in Europe. However, the fact that US futures are once again on the rise suggests that yesterday’s knee-jerk reaction on Wall Street was overdone.”
According to Joshua Mahony, chief market analyst at IG, traders are gradually seeing the “uncomfortable truth” that the financial stimulus has to be paid one way or another.
“Quite whether Biden manages to garner enough support to pass this bill remains to be seen, with the president likely to require almost unanimous support from the Democrats given the expected widespread rejection from the GOP,” he commented.
10.15am: FirstGroup jumps on deal to offload US businesses for £3.3bn
FTSE 100 remained underwater in late morning and shed 22 points to 6,916.
“Friday’s market open was the latest reminder that the FTSE 100 is in no way a proxy for the UK economy. In fact, in the short-term good news for the UK can be bad news for the index as a rise in the pound against other currencies hits the relative value of its constituents’ overseas earnings,” noted AJ Bell investment director Russ Mould.
“The rollout of vaccines has been impressive in the UK, but the situation globally is decidedly patchy, causing understandable nervousness in the markets. Also, the Biden administration’s latest tax proposals – which look set to include big hikes in capital gains tax – saw US stocks take a tumble overnight.”
The Aberdeen-based company said debt will reduce from £1.4bn at the end of March 2021 to around £100mln and it will concentrate solely on its UK rail and bus businesses.
9.20am: UK government borrowing estimated to be £303.1bn for full year
FTSE 100 held onto its losses in mid-morning, sliding 15 points to 6,922.
UK government borrowing for the financial year to March 2021 is estimated to be £303.1bn, according to the latest data from the Office for National Statistics (ONS).
It equates to 14.5% of GDP and it would be the highest figure since WW2.
“The ONS’ figures still do not include an estimate of future write-offs on virus-related loans, which will accrue to when the funds were first dispensed in this fiscal year. The Office for Budget Responsibility (OBR) judges that the eventual cost to the Exchequer will be £27.2bn,” said Samuel Tombs. chief UK economist at Pantheon Macroeconomics.
“Public borrowing probably will undershoot the OBR’s forecast again in 2021/22, given that it was based on a forecast that GDP would rise by only 4.0% this year; we look for a 6.6% increase. But the March Budget projections also assumed only a 3% long-term hit to potential supply from the recent recession, much less than after prior downturns. This looks too sanguine, given the sharp fall in capex and immigration to date.”
8.20am: FTSE 100 opens lower
FTSE 100 opened lower despite a flurry of data showed improved consumer sentiment in the UK.
London’s leading index dropped 19 points to 6,918 at the opening bell.
Despite the non-essential retail stores were closed across the UK, monthly retail sales jumped 5.4% in March after the 2.2% surge in February.
Although not yet as high as the summer 2020 peak when most restrictions were temporarily eased, March retail sales excluding autos were 3.4% higher than their pre-pandemic January level.
Department stores were up 7.2% month-on-month, with textile, clothing and footwear up 17.5% and household good stores up 3.7%.
The latest GfK consumer confidence survey showed a broad-based improvement in underlying sentiment, with households’ current financial situation remaining at a survey high of 31.
Headline consumer confidence only edged up by one point in April to -15.
“Led by a rapid recovery in domestic demand, the UK is building serious recovery momentum heading into the summer. Household confidence continued to rise in April, underpinned by rapid vaccine progress and easing virus restrictions, while monthly retail sales surged above their pre-pandemic level in March,” said Kallum Pickering, senior economist and director at Berenberg.
“Huge excess savings, record household net wealth and stable employment income set the stage for a robust recovery in household spending.”
6.30am: FTSE 100 set for a soft start
Stocks in London are expected to open modestly lower ahead of retail sales data and a blast of purchasing managers’ indices (PMI) releases.
Spread betting quotes indicate the FTSE 100 will open 27 points lower at 6,911.
The wheels came off the equity bandwagon yesterday in the US after it was reported that the Biden administration is looking to increase the rate of capital gains tax to 39.6% for those Americans earning US$1mln or more per year.
“While one could argue that the prospect of higher taxes is never welcome, and a doubling of a key tax rate even more so, the likelihood of anything of this nature passing through an evenly split Congress, lies somewhere between slim and none, however in these highly uncertainty times it doesn’t take much to spook a little bit of profit-taking, in what has already been a very choppy week. The reality is taxes may rise but certainly not by as much being touted,” suggested CMC’s Michael Hewson.
The Dow Jones industrial average tumbled 321 points to 33,816 while the S&P 500 shed 38 points at 4,135.
In Asia this morning, markets are mixed. Japan’s Nikkei 225 is on-trend, sporting red with a 226 point fall at 28,962 but in Hong Kong, the Hang Seng is on the rise, up 259 points at 29,014.
In the UK, retail sales data for March will make for interesting reading as the year-ago data starts to include data from lockdown periods.
Market expectations are for retail sales (including petrol) in March to show a 1.5% increase month-on-month after rising 2.1% in February.
Year-on-year, that would equate to a 3.5% increase compared to February 3.7% decline.
With petrol excluded from the equation, the monthly rise is tipped to be 2.0%, compared to February’s 2.4% hike, while the year-on-year gain is expected to be 4.5%, compared to a 1.1% decline in February.
As for the flash PMIs, these are expected to report an acceleration in growth this month, according to Daiwa Capital Markets, with the composite PMI likely to rise about 2pts from March’s six-month high of 56.5, “thanks not least to improvement in the services sector.”
The consensus forecast is for a reading of 58.0.
Numbers on UK public finances are also scheduled for release.
“We look for a ‘PSNB. ex.’ figure of £18.5bn in March. Bar revisions, this would imply a full-year deficit of £297bn, well below the OBR’s £327bn forecast,” said Samuel Tombs at Pantheon Macroeconomic.
The consensus forecast is for £21.3bn.
Around the markets
Sterling: US$1.3862, up 0.23 cents
10-year gilt: 0.741%, – 0.33 basis points
Gold: US$1,785.30 an ounce, up US$3.30
Brent crude: US$65.82 a barrel, up 42 cents
Bitcoin: US$49,024 a barrel, down US$2,819
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mixed on Friday as investors reacted to news that US President Biden could almost double the capital gains tax rate for wealthier Americans.
The Hang Seng index in Hong Kong rose 0.71% while the Shanghai Composite in China slipped 0.08%.
In Japan, the Nikkei 225 fell 0.84% but South Korea’s Kospi gained 0.23%.
Shares in Australia declined, with the S&P/ASX 200 trading 0.13% lower.
Proactive Australia news:
Great Boulder Resources Ltd (ASX:GBR) is trading higher after securing a major land position in the Earaheedy Basin, east of Wiluna in Western Australia, near the recent zinc-lead discovery made by Rumble Resources Ltd (ASX:RTR).
Boadicea Resources Ltd (ASX:BOA) is confident its growth trajectory is exponential as it sits on a potential $50 million-plus payday from mining partner IGO Ltd (ASX:IGO), amid several other projects in the premier mining regions of northern Western Australia and northern Queensland.
Brookside Energy Ltd (ASX:BRK) (OTCMKTS:RDFEF) is making strong progress on the high-impact Jewell 13-12-1S-3W Well in the SWISH area of interest within the Anadarko Basin of the US with the completion of pre-mobilisation inspection, testing and maintenance works on the contracted rig.
Elementos Ltd (ASX:ELT) (OTCMKTS:ELTLF) (FRA:9EM) is taking big steps to capitalise on strong tin market fundamentals, including high prices, through exploration, development and production of high-grade tin projects in stable jurisdictions.
King River Resources Ltd (ASX:KRR) is making progress with test-work for a pre-feasibility study (PFS) into the production of high purity alumina (HPA) using its specially developed refining process at a proposed processing operation at Kwinana in Western Australia.
Pharmaxis Ltd (ASX:PXS) (FRA:UUD) has multiple potential value inflection points over the next two years, with two drugs in clinical trials that are due to report meaningful efficacy and safety endpoints in patients by the end of 2022.
Cohiba Minerals Ltd (ASX:CHK) has revealed that its tenement package in the Gawler Craton of South Australia contains strong potential for iron oxide-copper-gold (IOCG) deposits and as a part of its 2021 strategy, plans to aggressively undertake exploration activities.