ADVFN Morning London Market Report: Friday 24 July 2020

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London open: Stocks slump as Sino-US tensions escalate


London stocks fell sharply in early trade on Friday amid escalating tensions between the US and China, although there was some encouraging news in the form of UK retail sales data.

At 0855 BST, the FTSE 100 was down 1.8% at 6,101.33.

Spreadex analyst Connor Campbell said: “Though it has felt like a weirdly aimless week, it seems the markets have settled on a direction – and it’s not up.

“In a fairly predictable, if no less troublesome, move, Beijing ordered the closure of the US consulate in Chengdu, as retaliation for the Trump administration shuttering the Chinese consulate in Houston.

“The fear is that this might only be the start of a re-escalation in tensions between the two superpowers, especially as Trump seeks to distract from his disastrous domestic policies in the run-up to November’s Presidential election.

“China has said that it ‘does not want to see’ the current situation, and that the ‘responsibility rests entirely with the United States’ regarding what happens next. Which, given the leadership stateside, has provided no comfort to investors at all.”

On home turf, the latest figures from the Office for National Statistics showed that retail sales continued to recover in June as non-essential shops reopened amid the lifting of coronavirus restrictions.

Retail sales rose 13.9% on the month following a revised 12.3% increase in May, beating expectations of an 8% jump. On the year, retail sales were down 1.6% in June, which was a big improvement on the 12.9% decline seen in May and better than expectations of a 6.4% fall.

Jonathan Athow, ONS deputy national statistician for economic statistics, said: “Retail continued to recover from the sharp falls seen in April, with overall sales now almost back to pre-pandemic levels. But there are some dramatic differences in sales across the retail industry.

“Food sales continue above their pre-pandemic levels due to the closure of cafes, restaurants and pubs. Online sales have risen to record levels, and now count for £3 in every £10 spent. On the other hand, clothing sales remain depressed and across the high street sales in non-food stores are down by around one-third on pre-pandemic levels.

“The latest three months as a whole still saw the weakest quarterly growth on record.”

Still to come on the macroeconomic front, Markit’s services and manufacturing PMIs for July are due at 0930 BST.

In equity marketsVodafone fell after it said first-quarter organic service revenue declined 1.3%, with total revenue down 1.4% to £10.5bn. The company also announced that it plans to list its towers infrastructure business in Frankfurt early next year.

Education publisher Pearson lost ground after saying it swung to a first-half loss due to the impact of the coronavirus, but that it expects to deliver adjusted operating profit broadly consistent with expectations.

Cineworld was under the cosh after Disney said it was delaying the release of Mulan and Spiderman indefinitely and pushing back the release of the Star Wars and Avatar films by a year.

On the upside, plumbing and heating supplies group Ferguson rallied after it said trading had improved steadily since the height of lockdowns in April.

Centrica surged to the top of the FTSE 250 as the British Gas owner said it was selling its US energy business to NRG Energy $3.6bn (£2.87bn) as part of a plan to turn the company around. It also reported a half-year loss of £135m due to the pandemic as it took a one-off charge of £1bn.

Engineer IMI was a high riser after it posted a jump in interim profit, thanks in part to a temporary surge in demand for ventilator parts due to Covid-19, and said it was reinstating its full-year dividend.


Top 10 FTSE 100 Risers

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76.4% of retail CFD accounts lose money.


# Name Change Pct Change Cur Price
1 Centrica Plc +17.91% +7.23 47.60
2 Ferguson Plc +2.04% +140.00 7,014.00
3 Whitbread Plc +1.41% +32.00 2,297.00
4 Tesco Plc +0.88% +1.90 217.90
5 Johnson Matthey Plc +0.49% +11.00 2,269.00
6 3i Group Plc +0.46% +4.00 871.00
7 Intercontinental Hotels Group Plc +0.40% +15.00 3,801.00
8 United Utilities Group Plc +0.39% +3.40 875.60
9 Royal Dutch Shell Plc +0.18% +2.20 1,253.80
10 Royal Dutch Shell Plc +0.12% +1.40 1,200.60


Top 10 FTSE 100 Fallers

Sponsored by
76.4% of retail CFD accounts lose money.


# Name Change Pct Change Cur Price
1 Vodafone Group Plc -4.83% -6.22 122.58
2 Pearson Plc -4.22% -23.20 526.80
3 Ocado Group Plc -3.85% -84.00 2,095.00
4 Micro Focus International Plc -3.72% -11.60 300.00
5 Scottish Mortgage Investment Trust Plc -3.72% -34.00 879.50
6 Prudential Plc -2.99% -36.00 1,167.00
7 Easyjet Plc -2.96% -18.20 596.60
8 Smiths Group Plc -2.74% -40.50 1,435.50
9 Tui Ag -2.67% -9.40 342.50
10 Smith & Nephew Plc -2.60% -43.50 1,630.50


US close: Stocks slide following jobless data

Wall Street stocks closed lower on Thursday following the release of this week’s jobless claims data and some key corporate earnings.

At the close, the Dow Jones Industrial Average was down 1.31% at 26,652.33, while the S&P 500 was 1.23% lower at 3,235.66 and the Nasdaq Composite saw out the session 2.29% weaker at 10,461.42.

The Dow closed 353.51 points lower on Thursday, reversing gains recorded in the previous session despite US-Sino tensions coming back into focus as news of a coronavirus vaccine deal between the White House and pharma groups Pfizer and BioNTech lifted sentiment.

Thursday’s main focus was the Labor Department’s jobless claims data, which saw initial jobless claims in the US rise modestly and somewhat unexpectedly during the previous week, marking the first increase since March.

Initial claims for the week ending on 18 July rose by 109,000 to reach 1.416m, a far cry from the dip to 1.28m economists had forecast as the reimposition of lockdown measures led to renewed increases.

However, the four-week moving average of initial claims, which aims to smooth out the variations in the data from one week to the next, retreated by 16,500 to 1,360,250. Secondary unemployment claims also retreated by 1.10m to 16.19m over the week ending 11 July.

Focus was also on some key corporate earnings from Tesla and Microsoft overnight as Tesla smashed analyst expectations with a fourth consecutive profitable quarter, while Microsoft shares were lower despite posting largely positive results.

American Airlines posted a second consecutive quarterly loss as Covid-19 continued to hammer demand, Southwest Airlines also cited similar reasons for its $915m quarterly loss.

Word that Republican lawmakers were mulling over the concept of extending a watered-down version of current unemployment benefits through to the end of 2020 initially led to some optimism on the Street.

On Thursday, Treasury Secretary Steven Mnuchin said an extension in unemployment benefits would be based on “approximately 70% wage replacement”.

Also on the macro front, the Kansas City Fed manufacturing activity index for July came in at 3.0 versus estimates for a reading of 5.0. However, the index was up from last month’s reading of 1.0.


Friday newspaper round-up: Sports Direct, consumer sentiment, supermarkets

Warehouse workers at Sports Direct, the retail chain controlled by the billionaire Mike Ashley, appear to be receiving pay below the national minimum wage, according to expert analysis of a new Guardian undercover investigation. The concerns have emerged almost five years after the Guardian first exposed how the retailer was breaching minimum wage law, which resulted in workers receiving about £1m in back pay and Ashley being hauled in front of a parliamentary select committee. – Guardian

Fears of rising redundancies and concerns about the health risks of high street shopping have hit consumer confidence, according to a closely watched survey that flatlined last month. The GfK barometer for July showed confidence petering out, despite rising in May and June. It came as a senior Bank of England policymaker warned Britain’s recovery from the Covid-19 pandemic would be hampered while concerns about catching the virus and fears of redundancy limited spending. – Guardian

Major supermarkets and coffee chains say they will not enforce new rules which say customers should wear face coverings from Friday. Sainsburys, Asda, Co-op and Costa Coffee are among retailers saying they have no intention of policing the laws, which carry a penalty of a £100 fine. It comes after the Police Federation of England and Wales, which represents rank-and-file officers, said it was “unrealistic and unfair” to expect them to patrol the aisles looking for people breaking the coronavirus regulations. – Telegraph

A new tax on the gain in property values when sold should be introduced to ensure the costs of the coronavirus crisis do not fall unfairly on young people, according to a non-partisan think tank. A report by the Social Market Foundation has said the Treasury should raise £421 billion over the next 25 years by imposing a property capital gains tax on all homes sold in Britain. It suggests that the tax could be set at 10 per cent of the increase in the value of the property. – The Times



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