• FTSE 100 index sheds 26 points
  • GDP falls by 2.6% in November
  • Total trade deficit widens by £0.6bn to £1.5bn in November

9.55am: Trade deficit widens

The total trade deficit for November 2020, excluding non-monetary gold and other precious metals, widened by £0.6bn to £1.5bn.

The Office for National Statistics (ONS) reported imports increased by £2.4bn (4.9%) and exports increased by £1.9bn (3.9%).

The increase in the total trade deficit was driven by an increase in the trade in goods deficit. The underlying trade in goods deficit widened £0.6bn to £12.5bn in November 2020.

Goods imports increased £2.6bn while goods exports increased £1.9bn.

November saw rising imports in machinery and transport equipment, particularly electrical machinery, which includes equipment for distributing electricity and household equipment, the ONS said.

The ONS also reported that production output fell by 0.1% between October and November.

Falls of 3.4% in mining and quarrying, 2.3% in electricity and gas and 0.4% in water and waste were offset by a rise in manufacturing of 0.7%, where the increase was led by manufacturing of transport equipment.

The FTSE 100 was up 26 points (0.4%) at 6,776.

9.15am: GDP falls but not as much as feared

UK gross domestic product (GDP) fell by 2.6% in November, ending a run of six consecutive monthly increases.

The Office for National Statistics (ONS) said November GDP fell back to 8.5% below the levels seen in February – the month before the coronavirus epidemic hit the UK – compared to 6.1% below February’s levels in November.

The services sector acted as the main drag on growth in November, falling by 3.4% as restrictions on activity were reintroduced in some parts of the UK in response to the coronavirus (COVID-19) pandemic. The services sector is now 9.9% below the level of February 2020, the ONS said.

The production sector also fell marginally by 0.1% in November 2020, remaining 4.7% below the February 2020 level. Elsewhere the construction sector saw positive growth of 1.9% in November 2020, recovering to 0.6% above the February 2020 level, it added.

“It’s no surprise that six consecutive months of economic growth came to an end in November, given the impact of that month’s English lockdown and other major restrictions on activity,” said Howard Archer, the chief economic advisor to the EY ITEM Club.

“It is notable that the UK economy had showed signs of losing momentum even before November as increased restrictions on activity amid rising COVID-19 cases affected October’s economic performance. Meanwhile, uncertainties over the future UK-EU relationship after 31 December were also likely to have affected the economy. Positively, near-term unemployment concerns had been eased by the extension of the furlough scheme through to March and, subsequently, April,” he added.

According to Robert Alster, the chief investment officer at Close Brothers Asset Management, the general consensus is that the UK economy is going to get worse before it gets better.

“The lockdown at the end of 2020 almost feels like old news as we undergo our third round of shutdown,” Alster said.

“A double dip recession is increasingly on the cards for Britain. Virus cases continue to climb, leaving policy-makers grappling with establishing an effective health policy whilst providing enough financial support for both individuals and businesses. With no set end-date for the current restrictions, investors will be hoping that the rapid vaccine roll out programme across the nation will get the UK economy up and running again, meaning there is light at the end of the tunnel,” he added.

The market had been expecting a 4.6% fall in GDP in November so the outcome was nowhere near as bad as feared; nevertheless, the FTSE 100 remained in the red, down 37 points (0.5%) at 6,765.

8.45am: That sinking feeling

The FTSE 100 opened in the red on Friday, capping what is likely to be a down week for the benchmark index.

The index of UK blue-chips dropped 30 points at the open to 6,762.34.

The US appeared to be the main driver for sentiment. The ability of the new Biden administration to push through bumper stimulus measures is starting to be doubted by the markets, while the economic portents for the US seem fairly ominous.

“A disappointing jobless claims number, higher than expected at 965,000, with leisure and hospitality still under severe pressure, underlined the requirement for further support,” said Richard Hunter, head of markets at Interactive Investor.

“Further colour will be given to the state of the economy over the next few weeks after the fourth-quarter reporting season kicks off today with updates from the likes of Citigroup and JP Morgan.”

It was a quiet finish to the week for corporate news. The coughing and spluttering software group AVEVA (LON:AVV) finally showed some form as its shares jumped 5% after it reported a strong end to the trading year.

Dropping to the FTSE 250, contractor Babcock International (LON:BAB) dropped a bomb on the market by saying profits so far this financial year were down over a third with the civil aviation arm of the business hit hard by the coronavirus pandemic.

Drug group Indivior (LON:INDV) rose 10% after it hiked revenue guidance, citing the relative resilience of its off-patent former blockbuster.

Proactive news headlines:

Oracle Power PLC (LON:ORCP) said its consortium partner, China National Coal Development Company (CNCDC) has commenced preliminary feasibility work relating to the potential gasification of coal at Oracle’s Thar Block VI project in Pakistan. The natural resources and power project developer said CNCDC will guide the feasibility study workstreams for the project, which includes market analyses, type of product and scale, process technology evaluation, public engineering of auxiliary facilities required, investment estimation and financial evaluations.

Alpha Growth PLC (LON:ALGW) (OTCQB: ALPGF), the financial services specialist in the growing Senior Life Settlement (SLS) asset class, has announced year-end results for its BlackOak Alpha Growth Fund. On a net basis, the fund produced a 2020 calendar year return of 10.63% and a 13.71% total return since inception in September 2019. Alpha Growth said it continues to actively market to registered investment advisors in the US and to look at supplementing the direct outreach with virtual events in the US that showcase the fund.

Frontier IP Group PLC (LON:FIPP) said it has appointed Darren Winter, a former senior sales director with more than 30 years’ City experience, as its director of corporate relationships. The intellectual property commercialisation specialist said Winter, whose previous experience includes sales director roles at HSBC and as head of capital markets, sales for Collins Stewart Wealth Management, has been appointed to support the firm’s portfolio companies with their fundraising requirements.

ReNeuron PLC (LON:RENE) said it has completed dosing of the first group of three people in its phase IIa extension study of its human retinal progenitor cell therapy for degenerative eye disease. This part of the trial will assess the responses of nine sufferers of retinitis pigmentosa – but at higher doses than the first ten subjects already treated. Data will be presented later this year. ReNeuron said there would be a review of the short-term safety data from this first cohort before the next group is dosed.

Alien Metals Ltd (LON:UFO) said it has kicked off an airborne magnetic survey over the Elizabeth Hill Project in Western Australia. The explorer highlighted that the survey will help tie together all the existing prospects and historical data, to assist in the prioritisation of the target inventory. It noted that the project area now spans the original Mining Licence M47/342, hosting the Elizabeth Hill Silver Mine and associated prospects, as well as exploration permit ELA47/4422 – alternatively known as Munni Munni North project – which has been conditionally acquired by the company.

Kodal Minerals PLC (LON:KOD) said good progress is being made on the funding agreement that will finance the exploration programme at the Fatou Gold Project. Due diligence is nearing completion and documentation is in progress but due to delays over the Christmas period, an extension of two weeks has been granted to the investors for completion of the final contract. A review of the project is continuing and a drilling programme is being finalised with initial diamond drilling and reverse circulation (RC) drilling planned for the Fatou Main and Fininko prospects.

W Resources PLC (LON:WRES) has updated investors on a grant from the Junta de Extremadura government in Spain as well as an extension to its loan facility with Banco Santander. The AIM-listed tungsten, tin and gold miner said following a number of meetings toward the end of December between its senior management and representatives of the Extremadura government, it has been assured that the approved €5.3mln (£4.7mln) grant is being processed for payment, although actual payment is not expected to be made until later in the first half of 2021. Meanwhile, the firm said it has finalised a six-month extension to the €5mln (£4.4mln) loan facility with Santander, saying that as the initial term of the loan was the earlier of February 18, 2021, or the receipt of the proceeds of the grant funds, it was prudent to seek the extension.

Clipper Logistics PLC (LON:CLG) said a company ultimately controlled by its executive chairman Steve Parkin has sold 11mln shares in the firm at 565p each. The sale was undertaken by Parker, who founded Clipper, as part of an estate planning exercise and to improve the number of Clipper shares available in the market, i.e. improve liquidity. The share sale raised roughly £62.2mln for Carlton Court Investments and reduced the company’s stake in Clipper to about 13.9%. The 14.13mln shares held by Carlton Court are subject to a 180-day lockdown restriction.

Shield Therapeutics PLC (LON:STX) chief executive Tim Watts hailed 2020 as a “positive year” for the company – a period in which European sales volumes of its breakthrough iron deficiency drug Feraccru grew by 70% year-on-year. He added that discussions with potential US out-licensing partners continued, but added that preparations were also being made for a “Shield-led” launch of the product, which is called Accrufer in the States. “In the US, our knowledge of the iron deficiency market and the great opportunity for Accrufer has developed massively during the year such that we are now evaluating a Shield-led launch in the US as an alternative to out-licensing the product,” said Watts in a statement.

Mineral and Financial Investments Limited (LON:MAFL) said its net asset value (NAV) per share at the end of September 2020, was 15.77p, up 4.1% year-on-year. The company, which as its name implies invests in natural resource companies, said its financial performance was hampered by sterling’s appreciation against the US and Canadian currencies; had those foreign exchange rates remained unchanged, NAV per share would have been 16.33p, up 7.9% on a year earlier. The investment company’s “tactical portfolio” (excluding its cash holdings) increased in value by 17.1% in the year to the end of September.

InnovaDerma PLC (LON:IDP), a UK developer of beauty, personal care and life sciences products has announced that further to the announcement on January 11, 2021, it has entered into a loan agreement to provide the company with a working capital loan facility of £500,000 with M.Ward, a non-executive director of the company and substantial shareholder. Under the Loan Agreement, the loan attracts interest at 5% above LIBOR and is repayable on July 13, 2021. The group said Ward can require the loan to be repaid early in the event that the company raises in excess of £2mln through debt or equity issuance. In the event that the loan is repaid early, Ward intends to invest the principle in any associated equity issue. The company has given, as security, a debenture over all the assets of InnovaDerma PLC and provided the normal representations and warranties for this type of agreement. Given Ward’s position as a director of the company and substantial shareholder, the group’s independent directors, comprising Ross Andrews, Blake Hughes and Simon Pyper have stated that they consider the terms of the loan agreement fair and reasonable insofar as the company’s shareholders are concerned.

Mosman Oil and Gas Limited (LON:MSMN) the oil exploration, development, and production company, announced that its latest investor presentation is now available on the company’s website. Investors can view the presentation at: www.mosmanoilandgas.com 

6.50am: Subdued end to the week

The FTSE 100 is set to join Asian markets in retreat on Friday with traders expecting a 28 point fall in London to 6,774.

Details of US president-elect Joe Biden’s stimulus package are now out and the response from global markets has been negative.

It is not so much the US$1.9tn fiscal support package that markets are cool on; it’s more the chances of Biden getting the measures passed into law.

“Amid further evidence that the economy is stuttering in response to the intensifying health crises, Joe Biden has unveiled a proposed package of measures amounting to $1.9tn. This follows on from the $900bn agreed in December and the $3tn CARES Act. Once again there are no tax increases to fund any portion of it, meaning it will result in another step up in government borrowing,” said James Knightley, the chief international economist at ING.

“The aim is to get this passed before the end of March when several of the special unemployment benefits are ending; however, it may not be straightforward. Joe Biden campaigned as a bipartisan dealmaker and he is going to need all those skills to reach out to enough Republican moderates to get it passed in its current form,” Knightley warned, adding that “the tax hikes are coming”.

US markets headed lower yesterday prior to Biden’s announcement, with the Dow Jones Industrials Average closing down 69 points at 30,992 and the S&P 500 off 14 points at 3,796.

In Asian markets on Friday morning, Japan’s Nikkei 225 was 137 points softer at 28,562 and Hong Kong’s Hang Seng was 75 points lower at 28,422.

Today will see the start of fourth-quarter earnings announcements coming through in the US but aside perhaps from a few more retailers reporting Christmas trading numbers, there is nothing similar slated for UK equities.

On the macroeconomic front, we can look forward to UK gross domestic product (GDP), trade balance and industrial production data.

The market is expecting a 4.6% fall in GDP for November, although Pantheon Macroeconomics is forecasting a 3.5% decline, as the second lockdown was much less restrictive than the first.

“Our forecast implies that GDP would be 11.3% below its January 2020 peak, much better than the 25.6% shortfall seen in April. Output in the manufacturing and construction sectors likely continued to recover in November, as these sectors were encouraged to stay open.

“In addition, more restaurants, cafes and non-essential retailers continued to trade than in the first lockdown, by providing takeaway and click-and-collect services. Meanwhile, transport flows held up better than in the first lockdown, and schools remained open. We doubt, however, that GDP fully rebounded in December, and expect it to fall to a significantly lower level in January, not least because schools now are shut,” Pantheon said.

The UK trade deficit for November is expected to narrow to around £1.6bn from £1.7bn in October.

Around the markets:

  • Sterling: US$1.3671, down 0.17 cents
  • 10-year gilt: 0.294%, down 1.55 basis points
  • Gold: US$1,848.50 an ounce, down US$3.00
  • Oil: US$55.84 a barrel, down 58 cents
  • Bitcoin: US$37,990, down US$874

6.45am: Early Markets – Asia / Australia

Asian markets were mixed on Friday as the Trump administration on Thursday added Chinese smartphone maker Xiaomi to a blacklist of alleged Chinese military companies.

Chinese stocks were marginally higher with the Shanghai composite rising 0.12% while Hong Kong’s Hang Seng index dipped 0.09%.

In Japan, the Nikkei 225 fell 0.62% and South Korea’s Kospi dropped 1.86%.

Shares in Australia closed flat, with the S&P/ASX 200 rising a meagre 0.1 points.

READ OUR ASX REPORT HERE

Proactive Australia news:

Peninsula Energy Ltd (ASX:PEN) (OTCMKTS:PENMF) has commenced trading on the US OTC (over-the-counter) Pink Market under the code PKC:PENMF and will apply to upgrade its market tier to the OTCQB venture market after increased North American based investor interest in the company and its 100%-owned Lance Project in Wyoming USA.

Pan Asia Metals Ltd (ASX:PAM) has completed drilling priority one holes at Than Pho West (TPW) prospect of Khao Soon Tungsten Project (KSTP) in southern Thailand and has mobilised the rig to Reung Kiet Lithium Project (RKLP) to the west.

WA Kaolin Ltd (ASX:WAK) has begun stage one building work at its wholly-owned Wickepin Kaolin Project, 220 kilometres southeast of Perth, Western Australia.with the purchase of shares in an on-market transaction.

Kin Mining NL’s (ASX:KIN) new assay results from recent reverse circulation (RC) drilling at Bruno-Lewis deposit, one of the cornerstone deposits at its 100%-owned Cardinia Gold Project (CGP) in Western Australia, have confirmed the quality of the deposit.

Blackstone Minerals Ltd (ASX:BSX) will spin-out a number of non-core Western Australian gold assets into a new initial public offering (IPO), Codrus Minerals Ltd.

Euro Manganese Inc (ASX:EMN) (CVE:EMN) (OTCMKTS:EROMF) can move forward to the next stages of the permitting process for its Chvaletice Manganese Project after concluding the six-month screening of its preliminary Environmental Impact Assessment (EIA) by the Czech Ministry of the Environment.

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