ADVFN Morning London Market Report: Friday 16 October 2020

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London open: Stocks rise after Thursday’s selloff; Brexit talks eyed

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London stocks rose in early trade on Friday following heavy losses in the previous session on concerns about tightening Covid-19 restrictions.

At 0835 BST, the FTSE 100 was up 1% at 5,888.50, having fallen sharply a day earlier as countries across Europe implemented further restrictions and London was moved to Tier 2.

Meanwhile, sterling was up 0.1% against the dollar at 1.2917 as the second day of the European Union summit kicks off, with Prime Minister Boris Johnson due to make a statement on negotiations later in the day.

Danske Bank said: “The EU’s chief negotiator Michel Barnier was more ‘bullish’ saying that the EU is ready to negotiate until the last possible day, wants to give the negotiations every chance to be successful and is ready to speed up negotiations in the next few days.

“We do not know how the UK is responding yet but the UK’s chief negotiator said he was ‘disappointed’ about the EU council statement and the Financial Times reports that PM Boris Johnson will give the EU an ultimatum over the coming days and will decide today whether to stay and negotiate or not. We think this should just be considered as a play to the gallery and continue to think a deal is more likely than not. That said, negotiations are likely to extend into November, in our view.”

In equity markets, luxury brand Burberry was the top performer on the FTSE 100 following well-received third-quarter results from peer LVMH Moet Hennessy Louis Vuitton.

Just Eat followed close behind after an upgrade to ‘buy’ at HSBC, while Premier Inn owner Whitbread was boosted by an upgrade to ‘buy’ at BerenbergDixons Carphone was lifted by an upgrade to ‘sector perform’ at RBC.

Hedge fund Man Group gained after it reported a 4% rise in third-quarter funds under management partly thanks to “robust” net inflows, although it also struck a note of caution about the outlook.

Outsourcer Serco surged after upgrading its 2020 guidance thanks to strong revenue growth in the third quarter and good cost control.

On the downside, pub chain Wetherspoons slumped after it swung to an annual loss as it felt the full impact of the coronavirus lockdown and said the government’s latest set of curbs had led to a 15% fall in like-for-like sales in the first 11 weeks of the current fiscal year.

The company reported a pre-tax loss of £34m compared with £102m profit a year ago. Revenue fell by a third to £1.26bn and the final dividend was scrapped.

Jupiter Fund Management was also in the red as it said assets under management jumped 42% in the third quarter to £55.7bn, with the increase entirely due to the consolidation of assets from recently acquired Merian.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc +7.38% +14.40 209.50
2 Burberry Group Plc +3.26% +48.50 1,536.00
3 Experian Plc +2.96% +88.00 3,058.00
4 Whitbread Plc +2.66% +58.00 2,236.00
5 Melrose Industries Plc +2.63% +3.30 128.80
6 Ocado Group Plc +2.41% +58.00 2,461.00
7 Intertek Group Plc +2.35% +142.00 6,176.00
8 Glaxosmithkline Plc +2.34% +32.20 1,408.40
9 Admiral Group Plc +2.32% +63.00 2,775.00
10 Smiths Group Plc +2.31% +31.50 1,393.50

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. -2.05% -1.96 93.80
2 Bt Group Plc -1.22% -1.25 100.95
3 Easyjet Plc -1.04% -5.00 475.50
4 Land Securities Group Plc -0.83% -4.50 536.00
5 Micro Focus International Plc -0.80% -2.00 248.10
6 Lloyds Banking Group Plc -0.75% -0.20 26.39
7 Carnival Plc -0.66% -6.00 899.20
8 Taylor Wimpey Plc -0.59% -0.70 117.85
9 Tui Ag -0.40% -1.10 270.80
10 Vodafone Group Plc -0.26% -0.28 108.62

 

Europe open: Luxury goods stocks get a lift from LVMH results

European stocks rebounded on Friday morning after a mauling on Thursday, driven by upbeat corporate earnings in the luxury sector.

The pan-European Stoxx 600 index was up 0.67% with all major bourses higher. US futures were creeping into positive territory.

Investors were still keeping close watch on the rising number of coronavirus cases across the continent and Britain’s response to an EU ultimatum on a post-Brexit trade deal. Also due out later in the day are US retail sales, industrial production and a consumer sentiment survey.

UK Prime Minister Boris Johnson was due to make a statement on Friday on whether the Britain would continue Brexit talks with the EU as a summit of the bloc’s 27 leaders was due to conclude later.

In corporate news, shares in high-end retailers were on the march, led by LVMH Moet Hennessey, up 7% as the luxury goods outfit reported strong growth at its Louis Vuitton and Dior brands.

Hermes InternationalBurberry and Christian Dior all rose on the news.

Daimler shares were higher as the German auto maker reported third-quarter earnings above market consensus, and guided for a strong final three months.

Hedge fund Man Group gained after it reported a 4% rise in third-quarter funds under management partly thanks to “robust” net inflows, although it also struck a note of caution about the outlook.

Outsourcer Serco surged after upgrading its 2020 guidance thanks to strong revenue growth in the third quarter and good cost control.

On the downside, pub chain JD Wetherspoon slumped after it swung to an annual loss as it felt the full impact of the coronavirus lockdown and said the government’s latest set of curbs had led to a 15% fall in like-for-like sales in the first 11 weeks of the current fiscal year.

The company reported a pre-tax loss of £34m compared with £102m profit a year ago. Revenue fell by a third to £1.26bn and the final dividend was scrapped.

 

US close: Stocks record third straight session of losses

Wall Street stocks finished weaker on Thursday, making for the third consecutive day of losses in US equities.

At the close, the Dow Jones Industrial Average was down 0.07% at 28,494.20, the S&P 500 lost 0.15% to 3,483.34, and the Nasdaq Composite was off 0.47% at 11,713.87.

The Dow closed 19.8 points lower on Thursday, extending losses recorded in the previous session amid a flurry of corporate earnings.

Market participants left questioning whether a Covid-19 aid deal was still possible during the session, after Treasury Secretary Steven Mnuchin said on Wednesday that reaching a stimulus agreement before the election would be difficult.

However, Mnuchin did state that both he and Donald Trump were committed to getting a stimulus deal done.

Also in focus was the news that several European nations, including the UK, were nearing another round of nationwide lockdowns as part of an effort to curb the spread of Covid-19 ahead of winter.

On the macro front, initial jobless claims rose unexpectedly from last week’s upwardly revised print of 845,000 to 898,000 in the week ended 10 October, according to the Labor Department, well above expectations for a reading of 825,000.

The reading marked the seventh straight week that claims were above 800,000, indicating a potential slowdown in the US labour market recovery.

On the other hand, continuing claims dropped from 11.18m to hit 10.01m.

Elsewhere, the Philadelphia Federal Reserve’s manufacturing index for October surged to 32.3, well ahead of expectations for a reading of 13.5, while the New York Fed’s Empire State Index fell more than expected – dropping from 17 to 10.5, weaker than the 14.5 predicted by economists.

In equities, Morgan Stanley was up 1.36% after reporting quarterly earnings of $1.66 per share, beating the consensus estimate of $1.28.

Walgreens Boots Alliance was 4.82% firmer after it posted an adjusted quarterly profit of $1.02 per share and also announced a 2.2% dividend increase.

Jeweller Tiffany & Co added 2.21% after posting some strong preliminary sales figures earlier in the morning but said it still expects to record a mid-single-digit percentage decline in sales despite now eyeing an increase in operating earnings.

On the downside, United Airlines was off 3.82% after it disclosed a quarterly loss of $8.16 per share, wider than the loss of $7.53 predicted by analysts.

 

Friday newspaper round-up: Tier 2, John Lewis, mortgage defaults

New lockdown restrictions to be imposed across much of England from Saturday could be the “death knell” for many pubs and restaurants, the government has been told, as business groups voiced concerns about a wave of job losses within weeks. London, Essex, York and parts of Derbyshire are among the regions that will be subject to tier 2 curbs, meaning people from multiple households will not be allowed to mix in venues such as pubs, restaurants and bars. – Guardian

The bill for private consultants hired by the government to help combat the coronavirus pandemic has climbed to £175m, as the chair of an influential parliamentary committee revealed that MPs would investigate the multimillion pound use of management consultancies. The government has bought consulting services from almost 90 different companies as it scrambled to fill gaps in the civil service’s pandemic response. – Guardian

Two of Britain’s largest airlines were paid more than £70m of taxpayer cash to fetch PPE from China, according to new data which threatens to reignite the row over tendering at the height of the Covid crisis. The deals with British Airways and Virgin Atlantic were part of a massive drive to replenish stocks of protective kit from sources all over the world. They will have provided vital funding to the airlines at a time when almost no passengers were travelling. – Telegraph

The future of John Lewis and Waitrose will not be exclusively in retail, Dame Sharon White has said as she prepares to unveil a strategy for the group. Dame Sharon, chairwoman of the John Lewis Partnership, said yesterday that while it was premature to sound the death knell of the high street, the employee-owned business needed to find “some balanced sources of profit”. – The Times

High street lenders are steeling themselves for a wave of mortgage and business defaults in the coming months. The Bank of England’s quarterly credit conditions survey found that the volume of delinquent loans in the three months to September changed little from earlier in the year but suggested a reckoning is coming as jobs are lost and companies go bust in the final quarter. – The Times

 

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