No Freedom Day lift for FTSE | Henry Boot bullish
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4.45pm: Market bloodbath
Freedom Day turned into a bloodbath on the markets today, with the FTSE 100 plunging 163.1 points (2.34%) to 6,844.39 amid growing Covid cases and the ‘pingdemic’ leaving many companies short of staff and even having to close.
Danni Hewson, AJ Bell financial analyst, said: “Watch out for the next step, it’s a doozy! Let’s be honest, today’s rout on London’s market was well forecast. All last week investors flipped and flopped their way through the maze of contradictory data and declarations but whatever the narrative case numbers don’t lie, and the numbers aren’t good.
“The FTSE 100 has plummeted way below that psychological 7,000 figure with very few of its components manging to stay out of the red zone today.
“The FTSE 250 was similarly afflicted as businesses, pretty much across the board, dealt with the minefield that “Freedom Day” looks sure to bring. Pinging phones penalise businesses big and small as the number of people being told isolate rockets up and it appears no change to the sensitivity of the app is on the cards. It’s hard to see that number not hurtling higher as some people ditch distancing along with the mask.
“The beleaguered hospitality sector might finally be able to operate at full capacity and nightclubs may have finally been allowed to strut their stuff but confidence in the sector is still shaky. Latest figures from the Office for National Statistics suggest that only one out of every seven pubs and bars were confident they’d get through the next three months.
“And it’s not just in the UK that confidence is shaky. Concerns about how robust recovery really is has sent the oil price under $70 a barrel and in marked contrast to the $100 that was being discussed as a real possibility for this summer.
“The OPEC+ spat resolution will have played a part but Delta is destructive and US markets aren’t immune either. Investors appear to be flocking to the safe haven of government bonds with yields plummeting to levels last seen back in February and Wall Street has followed the trajectory of European markets.
“Today is going to hurt and many investors will be crossing their fingers and hoping tomorrow brings another U-turn in fortune.”
Energy, mining and financial stocks were among the biggest decliners, while no single FTSE 100 stock posted gains in early trading.
British Airways-owner IAG and InterContinental Hotels fell more than 4% to the bottom of the FTSE 100.
Parsley Box, the Chris van der Kuyl chaired ready meals company, took a beating as investors grew concerned that potential customers would disappear as normal behaviour resumed. The shares closed down 26.5p (15.73%) at 142p.
Russ Mould, investment director at AJ Bell, said: “Many of the stocks leading the UK stock market downwards are related to travel and leisure, suggesting that investors are extremely worried that we’ve lifted restrictions too soon and that another lockdown could be a month or two round the corner.
“Covid is spreading fast again and the airlines, restaurants and leisure companies may not get the strong summer trading they’ve long hoped for. The fact Cineworld is down 8%, Carnival falling 7% and Restaurant Group 4% implies that investors think the reopening trade is now a dud.
“One has to wonder if the food sector is jinxed. First, we had Deliveroo’s shares struggle when it joined the stock market earlier this year, now we’ve got another new market entrant failing to live up to the hype.
“Parsley Box’s proposition may have appealed to people stuck indoors during lockdown, but now it is finding new customer recruitment harder as Covid restrictions are eased.
“That’s led to analysts slashing their earnings forecasts and the shares trading 25% below the price at which they joined the market in March.
“If people are able and confident enough to get out and about, why use someone like Parsley Box when mainstream supermarkets offer plenty of choice at arguably cheaper prices?”
7am: Scotch Malt Whisky Society on the rise
Artisanal Spirits Company, owner of the Scotch Malt Whisky Society, said it had invested £1m in spirit stock post admission to AIM and is continuing to build on the vast and unique range of outstanding single cask Scotch malt whiskies
Total sales for the half year to the end of June grew 20% to £7.9m (H120: £6.6m), slightly ahead of management expectations at the time of IPO.
7am: Henry Boot upgrades forecast
Henry Boot said that performance for the full year is now anticipated to be ahead of the board’s expectations.
Trading across the group’s operations has been strong, but notably HBD continues to see growth in occupier and investment demand within the industrial and logistics market, leading to positive capital returns.
Strategic acquisitions in both the industrial and logistics market and urban residential market through H1 continue to support a significant development pipeline.
The group’s financial position is returning to net debt of c.£13m.
Henry Boot Construction continues to trade ahead of expectations on an already full orderbook for 2021. .
Interim results will be published on 13 September.
7am: Parsley Box focused on shift in behaviour
Parsley Box Group, the Scottish direct-to-consumer provider of ready meals focused on the Baby Boomer-plus demographic, expects demand to slow as Covid-19 restrictions ease.
“Shopping behaviours are beginning to normalise and this has had some impact on sales growth,” it said in an update ahead of interim results on 7 September.
7am: Revolution Beauty shares begin trading
Revolution Beauty Group, which promises to bring cruelty-free cosmetics to a wider audience at an affordable price, will be valued at £495 million as its shares are admitted to AIM today.
A placing of shares priced at 160 pence per share raised gross proceeds of £110.7m for the company and £189.3m for selling shareholders.
The UK’s businesses recorded a fourth straight monthly increase in output during June, with looser pandemic restrictions leading to a surge in customer demand, according to NatWest’s UK Small Business Recovery PMI.
On average in the second quarter of 2021, the rate of business activity expansion was the fastest since the index began more than 23 years ago.
Nick Stamenkovic, NatWest economist, commented: “As ‘Freedom day’ arrives and Scotland moves to Level-0 the re-opening of the UK economy has unleashed pent-up consumer demand, prompting a fourth consecutive monthly increase in UK small firms business confidence in June.
“All in all, the UK economy is enjoying strong growth at this juncture, but sharply higher delta Covid cases and the winding down of UK government support schemes pose downside risks near-term. Still, UK growth should return to pre-Covid levels by early 2022, if not earlier, aided by continued accommodating monetary and fiscal policy.”
Hospitality – cause for optimism
Britain’s managed pub, restaurant and bar groups saw sales drop just 1% in June from the same month in 2019, the new edition of the Coffer CGA Business Tracker reveals.
The Tracker, produced by CGA in partnership with The Coffer Group and RSM, shows sales were nearly level on both a total and like-for-like basis.
Consumer demand was particularly strong in restaurants, where total sales were up by 3% in June. Pubs recorded a 2% drop, with mixed weather and restrictions dampening any benefit from the Euro 2020 football tournament. Sales were down by 11% in bars, where social distancing and early closing requirements continue to impact footfall.
June’s performance is a significant improvement on May, when total sales were down by 26% on May 2019. The Tracker indicates a particularly good month for regions beyond London: sales outside the M25 were up 4% in June, but down by 11% inside the M25.
Traders are unlikely to take a shine to Freedom Day in England as worries over the spread of Covid weighs on sentiment.
The FTSE looks set to open below the 7,000-mark for the first time since mid-April following after-hours falls on Wall Street on Friday.
Inflation is back on the agenda following a warning of rising prices from Janet Yellen, the former Fed chair and current Treasury Secretary. Her comments prompted a sell off, with tech and banking stocks hit hardest.
The Covid delta variant is also spreading in Malaysia, Japan, Indonesia and Thailand, causing investors to sell equities.
Singapore reported its highest daily new COVID-19 cases since August 2020 on Sunday. Indonesia posted highest daily new infections numbers in the world last week. Thailand suspended domestic flights to and from its capital Bangkok and Australia extended lockdown of the state of Victoria beyond Tuesday.
Hong Kong’s Hang Seng index dropped 1.6%, South Korea’s KOSPI declined 1% and Japan’s Nikkei 225 fell 1.5%.
Crude oil prices dipped a little after OPEC+ agreed a deal to restrict production to 400,000 barrels a day from August.
Brent crude and WTI crude oil prices were down 1.4% each to $72.56 per barrel and $70.83 per barrel, respectively.