Monday 8 June 2020 4:53 pm

Markets live: FTSE 100 falters after last week's rally as US stocks inch up

The FTSE 100 faltered today after a strong rally last week, coming down from highs despite more countries moving to ease lockdown measures. 

The blue chip index dropped as much as 0.75 per cent following the open. The FTSE 100 later pared back losses to close down 0.085 per cent lower at 6,478.

Meanwhile, US stocks pushed higher again as investors shrugged off widespread racism protests after a shock US jobs report showing 2.5m new jobs were created last month, defying predictions of 8m more redundancies.

Europe was also subdued, however, after last week’s rally, to join the FTSE 100 lower. Germany’s Dax dropped 0.7 per cent on an Ifo survey suggesting manufacturing faces more production plunges to close down 0.16 per cent. France’s Cac fell 0.3 per cent.

Read more: Astrazeneca approaches Gilead about potential merger

Drugmaker Astrazeneca closed down nearly three per cent following reports yesterday that it had approached US rival Gilead about a possible merger to form one of the world’s largest drug companies. 

The Cambridge-based company, which recently saw its share price hit a record high, contacted Gilead last month in a bid to gauge interest in a possible deal, but did not provide details of any transaction, Bloomberg reported.

“Investors are unlikely to welcome a large M&A deal at a time when both companies are trying to fight coronavirus as it could prove to be a distraction to management,” said AJ Bell investment director Russ Mould.

“The timing seems wrong when both companies have such important work to do,” he added. 

However, analysts were still positive about the FTSE 100, and blamed the UK’s quarantine for holding back airlines and travel stocks

“The surge in travel- and airline-related names comes on the day when the UK implements a quarantine for overseas travel, perhaps the very definition of shutting stable doors after the horse has bolted,” Chris Beauchamp, chief market analyst at IG, said.

“With lockdowns easing across Europe and no sign of a second infection wave, this move has been staunchly opposed by airlines, and it looks like the market expects the restriction to remain in place for only a limited time.

“Also, on the up this morning are oil stocks, after Opec+ extended their production cuts until the end of July. It looks like the oversupply story is being replaced by expectations of higher demand, or least by hopes that demand will not be as weak as previously feared.

“Overall, markets continue to look past all the bad data and concentrate on the good news, hence the strong reaction to Friday’s job numbers. While this leaves indices vulnerable to a pullback, the strength of the bounce of the past month suggests that such weakness will be only temporary.”

Oil prices rise on OPEC+ cuts

The mid-cap FTSE 250 rose as much as 0.91 per cent, while oil and gas stocks jumped after major producers agreed to extend a deal on record output cuts to the end of July.

Over the weekend, OPEC and its allies formally agreed to extend the deal to withdraw almost 10 per cent of global supplies from the market by a third month to the end of July.

Saudi Arabia is not planning to extend its voluntary cuts in oil output into July, the country’s energy minister Prince Abdulaziz bin Salman told reporters on Monday.

Brent Crude and West Texas Intermediate both hit their highest price since early March following the OPEC+ agreement, helping boost energy firms in the FTSE 100.

Oil major Shell rose as much as 3.91 per cent, while BP climbed 2.88 per cent.

Bjarne Schieldrop, chief commodities analyst at Swedish corporate bank SEB, said the oil market “is now totally reliant on full compliance to production targets in OPEC+”.

Read more: BP set to axe 10,000 jobs due to coronavirus

“If the producers in the group do not comply, they risk all producers in the group moving back to full production. This threat is the only real controlling mechanism the group has, and it will have to use it from time to time for the weapon to be real,” he said.

“OPEC+ has become much more nimble and light on its feet. It will cut deep in the short term and create prompt tightness, with the very front-end of the Brent crude curve now starting to move into backwardation, but it gives fewer assurances for the future.”

European stocks pare back gains  

In Europe, shares retreated from a three-month high as investors moved to lock in some profits following last week’s rally. Following the FTSE 100’s lead, the pan-European STOXX 600 shed as much as 0.8 per cent, before closing down 0.25 per cent. Personal and household goods, healthcare and retail sectors leading the decline. 

Germany’s DAX slipped one per cent after data showed that German industrial production recorded its steepest plunge on record in April, as the coronavirus pandemic forced companies in Europe’s largest economy to dramatically scale back production. 

The index had pared back most of the losses to close 0.087 per cent down.

France’s CAC 40 fell as much as 0.79 per cent in morning trading, but made up some ground later and down 0.38 per cent.

US stocks stay in green after shock jobs report

Read more: ‘Mind-blowing’: US economy adds 2.5m jobs as states reopen

The Dow added one per cent shortly after Wall Street opened this afternoon after Friday’s shock US jobs report.

Economists were shocked when the US economy added 2.5m jobs last month, compared to a predicted fall of 8m.

April had seen a record plunge of 20.7m jobs as the coronavirus lockdown saw firms haemorrhage staff.

The Dow trimmed its gains but still stood 0.9 per cent higher by 4.30pm. The S&P 500 rose 0.36 per cent while the Nasdaq edged up 0.15 per cent.

Analysts said US stocks’ broad push higher suggested traders believe the Federal Reserve’s trillions of dollars of stimulus is working, and helping curb the huge levels of unemployment in the US.

“It’s a bullish signal for global stocks,” Edward Moya, senior market analyst at trading platform Oanda, said.

“The world’s largest economy just grabbed the baton back and is leading the stock market rally.”
New York’s initial reopening phase begins today, adding to optimism, as Moya said “Wall Street continues to ride the global reopening trade”.

The S&P 500 has almost recovered all its coronavirus losses despite almost 2m infections and 110,000 deaths in the US.

Widespread racism protests after the death of George Floyd in police custody have also failed to halt the rise of US stocks.

The S&P 500 hovered just above 3,200 points around 3pm, close to its February high of 3,386.

The Nasdaq posted a new intraday record high on Friday, following strong US jobs figures that helped lift hopes of a quicker global economic recovery following weeks of lockdowns aimed at limiting the spread of the coronavirus pandemic.

Read more: Ifo: German industry predicts summer-long production slump

“In the space of four weeks we’ve seen history made as the US economy posted a record number of job losses in one month, only to be followed by a record number of jobs gains in the following month,” said CMC Markets’ Michael Hewson.

‘Despite all of the enthusiasm over last month’s jobs report it doesn’t change the fact that US unemployment is still well above post financial crisis levels, and is likely to remain so for quite some time,” he added.

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