ADVFN Morning London Market Report: Wednesday 29 July 2020

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London open: Stocks steady ahead of Fed announcement; Next surges

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London stocks were little changed in early trade on Wednesday amid lingering concerns about a second wave of Covid-19 and as investors eyed the latest policy announcement from the US Federal Reserve.

At 0840 BST, the FTSE 100 was steady at 6,131.75.

CMC Markets analyst Michael Hewson said global stock markets appear to be getting a little “wobbly” as the latest earnings numbers paint a picture of a global economy that could start to face a challenging time in the weeks and months ahead.

“For all the optimism about a new US stimulus programme, the rising hopes of a vaccine, and the likelihood of central banks keeping monetary policy extraordinarily loose, the resurgence of coronavirus cases that are starting to get reported across the world is prompting the realisation that hopes of a v-shaped recovery is starting to look like pie in the sky,” he said.

“A resurgence of Covid-19 cases in Xinjiang in China, Hong Kong, and Australia, as well as spikes in Spain and Belgium, along with other localised outbreaks across Europe has prompted concerns about a second wave, and thus jeopardising further lockdown relaxation measures as we head into August.”

Investors will be watching out for the latest Federal Reserve policy announcement later in the day.

Danske Bank said: “We do not expect any major policy changes at this meeting, although we know the Fed is working hard on strengthening its forward guidance. Based on the minutes from the last meeting, we expect the Fed to give outcome-based forward guidance, tying the Fed Funds rate to the inflation rate at the September meeting, although Fed chair Powell hinted more discussions are needed.

“For the same reason, we do not expect big changes at this meeting. We expect the Fed to continue to express concerns about the economic recovery not least with the indication that the recovery has halted the past month or so amid Covid-19 outbreaks in Texas, California and Florida.”

In equity marketsNext was sitting pretty at the top of the FTSE 100 as it reported a 28% decline in full-price second-quarter, beating its own expectations and performing ahead of the best-case scenario given in its April trading statement.

Corrugated packaging company Smurfit Kappa rallied as it reinstated its final dividend despite posting a drop in first-half profit and revenue as the coronavirus pandemic dented demand. Peers Mondi and DS Smith also gained.

Rathbone BrothersWizz Air and Aston Martin were all trading higher after results.

On the downside, Taylor Wimpey fell as the housebuilder said it swung to a loss in the first half due to disruptions caused by the coronavirus outbreak.

Smith & Nephew, a maker of hip and knee replacement products, was weaker after saying it swung to a first-half loss as elective surgeries were cancelled or put off due to the pandemic.

Barclays was on the back foot after saying it took a £3.7bn hit in coronavirus-related charges as interim profits more than halved and it warned of headwinds continuing into 2021. Pre-tax profits fell to £1.2bn from £3bn a year earlier, with net operating income down 20% to £7.8bn.

Network International slid after raising around £205m in a discounted placing to buy African online commerce platform DPO Group.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Next Plc +6.65% +350.00 5,612.00
2 Smurfit Kappa Group Plc +5.64% +140.00 2,622.00
3 Burberry Group Plc +2.62% +33.00 1,293.00
4 Itv Plc +2.42% +1.44 60.98
5 Reckitt Benckiser Group Plc +2.13% +166.00 7,966.00
6 St. James’s Place Plc +2.05% +19.60 973.40
7 Unilever Plc +1.83% +86.00 4,775.00
8 Intertek Group Plc +1.64% +92.00 5,690.00
9 Fresnillo Plc +1.63% +20.50 1,278.00
10 Mondi Plc +1.40% +20.00 1,447.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Taylor Wimpey Plc -6.69% -8.90 124.05
2 Smith & Nephew Plc -4.11% -67.00 1,563.00
3 Barclays Plc -3.86% -4.32 107.54
4 Barratt Developments Plc -3.29% -17.80 523.20
5 International Consolidated Airlines Group S.a. -2.95% -5.60 184.30
6 Carnival Plc -2.38% -21.20 868.20
7 Micro Focus International Plc -2.32% -6.70 281.60
8 Persimmon Plc -2.09% -53.00 2,483.00
9 Melrose Industries Plc -2.05% -2.00 95.38
10 Easyjet Plc -1.98% -10.80 535.00

 

US close: Stocks slide following corporate earnings

Wall Street stocks closed lower on Tuesday amid stimulus headlines and another slab of corporate earnings.

At the close, the Dow Jones Industrial Average was down 0.77% at 26,379.28, while the S&P 500 was 0.65% softer at 3,218.44 and the Nasdaq Composite saw out the session 1.27% weaker at 10,402.09.

The Dow closed 205.49 points lower on Tuesday, reversing gains recorded in the previous session as market participants prepared for a week full of major corporate earnings.

The Republican Party’s coronavirus relief plan was in focus at the open on Tuesday after Senate Majority Leader Mitch McConnell unveiled the bill overnight.

The new legislation will offer relief for unemployed Americans and include another direct payment to individuals of as much as $1,200, as well as more Paycheck Protection Program, small business loan funds and other provisions.

McConnell said the bill would set federal unemployment insurance at 70% of a worker’s previous wages, replacing the $600 per week which was set to stop being paid this week.

Also in focus, the Federal Reserve will start its two-day policy meeting, followed by the announcement of its interest rate decision on Wednesday.

The FOMC maintained its target range for the federal funds rate at 0-0.25% at its last meeting in June as the Covid-19 pandemic continued to wreak havoc on the US economy.

Some economists believed that rate-setters might strengthen their so-called ‘forward guidance’.

In corporate news, 3M posted quarterly profit figures that fell short of estimates on the Street ahead of the bell, while McDonald’s shares slid after the fast-food giant posted a quarterly profit that fell short of analyst expectations.

Pfizer posted better-than-expected second-quarter earnings and raised its full-year guidance, while Raytheon topped estimates for both profits and sales on the back of a strong showing by its defence unit.

On the macro front, home prices continued to increase in May, albeit at a moderately decelerated pace than a month earlier, according to the S&P CoreLogic Case-Shiller National Home Price Index. Nationally, prices rose 4.5% annually in May, a slight drop from the 4.6% gain recorded in April. Home values increased in all 19 of the cities surveyed, however, gains accelerated in just three.

Elsewhere, US consumer confidence slipped in July, according to the Conference Board, amid increased Covid-19 cases across the nation. Consumer confidence dropped to a reading of 92.6 in July from an upwardly revised print of 98.3 in June – weaker than the 94.5 expected by analysts.

Lastly, manufacturing in the Fifth District showed signs of recovery in July, according to the Richmond Federal Reserve. The composite index rose from 0 in June to 10 in July – its first positive reading since March.

 

Wednesday newspaper round-up: Ofgem, bank dividends, HSBC

The government should prepare to step in with targeted emergency support to help people and businesses that would be hardest hit by a second surge in coronavirus infections, a group of MPs has warned. Sounding the alarm over the uneven impact of the Covid-19 crisis, the commons business committee said there were major gaps in the financial support package rolled out by the government – especially for women and freelance and agency workers. – Guardian

The energy regulator has vowed to crack down on “unscrupulous” brokers that have overcharged charities, community sports clubs, and care homes for their energy by hiding their inflated commission charges. Ofgem set out the plans to help prevent more than a million microbusinesses from being ripped-off by unregulated energy brokers after finding that some were paying thousands of pounds more than they needed to. – Guardian

Bank dividend payments could be restarted within months in a boost to millions of small investors battered by the coronavirus meltdown. Lenders were forced to halt shareholder pay-outs following heavy pressure from the Bank of England after the pandemic struck – but Threadneedle Street has said it will consider plans to dole out cash from January onwards as an economic recovery begins. – Telegraph

Chinese state-backed media have put further pressure on HSBC over allegations that the bank had a hand in the arrest of a senior Huawei executive. Meng Wanzhou, the finance chief of the telecoms company, was arrested in Canada in December 2018 and is fighting extradition to the United States. She is accused of bank fraud for misleading HSBC about Huawei’s relationship with a business operating in Iran, a country subject to American sanctions. – The Times

The funding gap in the universities’ pensions scheme has ballooned to £20 billion, raising the prospect of fresh strikes by academics over potential increased member contributions. The scheme’s deficit rose from £5.7 billion to £12.9 billion in the 12 months to March 31, according to its latest accounts. It then rose to £20 billion at the end of June, the Universities Superannuation Scheme warned. – The Times

 

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