ADVFN Morning London Market Report: Thursday 15 October 2020

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London open: Stocks fall amid tightening Covid-19 restrictions


London stocks fell in early trade on Thursday amid tightening coronavirus restrictions across Europe and as hopes of further US stimulus faded.

At 0835 BST, the FTSE 100 was down 1.6% at 5,841.82.

Spreadex analyst Connor Campbell said: “A series of tougher Covid-19 restrictions across Europe sent the markets spiralling on Thursday, one of investors’ regular reminders that, however much they try and deny it, the pandemic is still very much a thing.

“The headline announcement was the imposition of a 9pm to 6am curfew in Paris, and 8 other French cities, that will be in place for at least six weeks. In Germany – which just saw its own record daily case increase – the new restrictions were less severe, but still include limits on the number of people at private gatherings, and curfews on bars and restaurants in the worst hit areas.

“And the tightening continued, with bar and restaurant closures in the north-eastern region of Catalonia in Spain, new mask restrictions in the Netherlands, and the shuttering of non-essential retailers, gyms and leisure centres in Ireland.

“It was a sharp and loud wake-up call, the kind the market often seems to sleep through, but one that was hard to ignore this Thursday.”

Meanwhile, press reports suggested that London was on the brink of tier 2 restrictions, which would mean that the mixing of households indoors and at pubs and restaurants would be banned.

Away from the pandemic, market participants were growing increasingly doubtful over the prospect of further US stimulus after Treasury Secretary Steven Mnuchin said a pre-election package was unlikely.

In equity markets, stocks related to the travel, hospitality and leisure sectors all took a hit as investors fretted about the impact of further restrictions. Premier Inn owner WhitbreadInterContinental Hotels, cruise operator Carnival and WH Smith were all under the cosh.

Outside the FTSE 350, pub and hotel chain Marston’s was trading lower after saying it will cut more than 2,000 jobs due to the impact of the pandemic and ensuing restrictions.

Packaging group Mondi was on the back foot after it reported a drop in third-quarter profit as lower average selling prices and negative currency effects more than offset lower costs.

Airlines were under the cosh after Ryanair said it was cutting planned winter capacity by a third due to the latest round of travel restrictions across Europe. RyanaireasyJet, British Airways parent IAG and Wizz Air were all in the red.

Domino’s Pizza was weaker even as it said it expects full-year profit to be in line with market consensus despite the uncertain backdrop and reported a rise in third-quarter sales and an “exceptional” digital performance.

On the upside, online electricals retailer AO World rallied after saying it expects half-year revenue to rise by more than half driven by strong performances in the UK and Germany.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Whitbread Plc -5.39% -121.00 2,124.00
2 Easyjet Plc -4.99% -24.80 472.00
3 International Consolidated Airlines Group S.a. -4.17% -4.10 94.16
4 Micro Focus International Plc -4.12% -10.60 246.50
5 Royal Dutch Shell Plc -3.77% -37.30 952.60
6 Royal Dutch Shell Plc -3.60% -34.60 926.10
7 Carnival Plc -3.54% -32.80 894.20
8 Compass Group Plc -3.37% -40.00 1,147.50
9 Burberry Group Plc -3.28% -51.00 1,503.50
10 Tui Ag -3.26% -9.10 269.90


Europe open: Shares lower on Covid worries, fading US stimulus hopes

European stocks were firmly in the red in early Thursday trade as investors fretted over tightening coronavirus restrictions across Europe, the dwindling hopes of another US stimulus deal and a crunch Brexit summit in Brussels.

The pan-European Stoxx 600 index was down 1.8%, with Germany’s Dax down 2.43% and the UK FTSE 100 off 2.1%, while France’s CAC 40 fell 1.9%.

“With the prospect of an imminent US stimulus plan diminishing by the day, rising infection rates prompting tighter restrictions across Europe, and little prospect of a vaccine before the middle of next year, is it any wonder that investors are starting to get a little twitchy,” said CMC Markets chief analyst Michael Hewson.

“On the Brexit front there does appear to be some grounds for optimism in that the UK government looks like it won’t stick to its own self-imposed October 15 deadline for a deal with the EU over trade, though this was never likely.”

“As with all things with the EU, talks are likely to go right up to the deadline of the end of this year, as each side waits for the other to blink. The fat lady hasn’t even begun to clear her throat yet.”

France’s shock announcement of a 9pm – 6am curfew in Paris, and eight other French cities for six weeks drove shares lower. There were also suggestions that London could face tighter restrictions under the government’s much-criticised three tier system.

In the US the gap between Democrats and the Republicans on the shape of any relief package did not look like narrowing any time soon with the presidential election two weeks away, and hopes were dashed further when Treasury Secretary Steven Mnuchin said a pre-poll package was unlikely.

In corporate news travel, hospitality and leisure stocks were bashed in response to tightening Covid-19 restrictions.

Premier Inn owner Whitbread, hotel chains InterContinental and Accor, cruise operator Carnival and WH Smith were all lower.

Ryanair shares fell as the budget carrier said it was cutting planned winter capacity by a third due to the latest round of travel restrictions across Europe. EasyJet, British Airways parent IAG, Deutsche Lufthansa, and Wizz Air also fell.

Domino’s Pizza was weaker even as it said it expects full-year profit to be in line with market consensus despite the uncertain backdrop and reported a rise in third-quarter sales and an “exceptional” digital performance.

On the upside, online electricals retailer AO World rallied after saying it expects half-year revenue to rise by more than half driven by strong performances in the UK and Germany.


US close: Stocks finish lower as investors sift through earnings

Wall Street stocks finished in negative territory on Wednesday, amid a flurry of corporate earnings.

At the close, the Dow Jones Industrial Average was down 0.58% at 28,514.00, the S&P 500 was off 0.66% at 3,488.67, and the Nasdaq Composite was 0.8% weaker at 11,768.73.

The Dow closed 165.81 points lower on Wednesday, after losses in the previous session, as market participants digested some key corporate earnings and news of a pause in multiple Covid-19 vaccine studies.

Stimulus talks were still drawing attention on Thursday, as was election polling, which currently has Joe Biden ahead by 17 points on a national basis.

On the macro front, mortgage applications fell 0.7% in the week ended 9 October, after increasing 4.6% in the previous week, according to the Mortgage Bankers Association.

Applications to refinance a home loan dropped 0.3% and homebuyer mortgage applications declined 1.6% despite the average fixed 30-year mortgage rate falling one basis point to a fresh record low of 3.00%.

Elsewhere, producer prices in the States increased more than expected last month, boosted by higher prices for food.

According to the Department of Labor, so-called final demand prices rose at a month-on-month clip of 0.4%, leading to an acceleration in the year-on-year rate of price gains from -0.2% to 0.4%, against consensus forecasts for 0.2%.

Similarly, the annual rate of increases in core final demand prices, which exclude food, energy and trade, picked-up from 0.3% to 0.7%, while prices for final demand goods and services were both up by 0.4% on the month.

In remarks prepared for a conference at the International Institute of Finance, the Federal Reserve vice-president Richard Clarida said the flow of economic data since May had been “surprisingly strong”.

However, Clarida added that further assistance for the economy, both from the Fed itself and from Congress, would be needed.

In equity news, quarterly earnings remained firmly in focus, with Bank of America being the first cab off the rank and posting an earnings beat despite lagging on revenues, while Wells Fargo posted some disappointing third-quarter earnings as low rates hurt the bank’s net interest income throughout the period.

Bank of America was down 5.33%, while Wells Fargo was 6.02% lower.

Goldman Sachs was up 0.21% after it blew past analysts’ estimates for earnings in its third quarter, thanks to a strong showing from its Global Markets and Investment Banking arms, while UnitedHealth lost 2.89% even after it raised its full-year 2020 profit forecasts after topping third-quarter earnings estimates.

Also in focus, news that Eli Lilly had paused a trial of its Covid-19 antibody due to a “potential safety concern” weighed on sentiment, and came after Johnson & Johnson opted to halt its own vaccine trial following an “adverse event”.

Eli Lilly was 1.13% weaker by the closing bell.


Thursday newspaper round-up: Cashback, Ocado, EG Group

Shops will offer cashback without consumers needing to make a purchase, under Treasury proposals to protect people’s access to cash. In 2019 consumers received £3.8bn in cash when paying for items at a till, making it the second most popular way of withdrawing money behind ATMs. – Guardian

Management consultants are being paid as much as £6,250 a day to work on the British government’s struggling coronavirus testing system, sources have confirmed. Senior executives from Boston Consulting Group (BCG) are being paid fees equivalent to £1.5m a year to help speed up and reorganise the £12bn network that Boris Johnson said in May would be “world-beating”. – Guardian

Ocado has lost the right to open a new depot in north London after the local council ruled that a planning application was misleading. The news emerged after Labour councillors in the area welcomed the move by the authorities in Islington. The decision could be a major setback for Ocado’s ambitions to have depots closer to shoppers to cut delivery times. Other supermarkets, such as Tesco, have also begun building urban warehouses to dispatch online orders from. – Telegraph

Policymakers in Britain must do more to help people to find jobs in order to boost productivity and limit the long-term economic fallout from Covid-19, according to a report by the Organisation for Economic Development and Co-operation. In its latest forecasts for the UK economy, the body said that government interventions to protect jobs and incomes would lead to unemployment averaging 5.3 per cent this year. – The Times

Deloitte has resigned as auditor of EG Group, the British petrol stations company whose billionaire owners have agreed a £6.8 billion takeover of Asda, amid concerns about its governance and internal controls. EG Group, which owns nearly 6,000 petrol stations and reported more than €20billion of revenue last year, told its bondholders in a private notice this week that KPMG had been appointed as its auditor after Deloitte resigned with “immediate effect”, according to the Financial Times. The firm had been auditing EG Group’s accounts for four years. – The Times


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