ADVFN Morning London Market Report: Thursday 30 July 2020

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London open: Stocks fall amid earnings deluge

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London stocks fell in early trade on Thursday as investors waded through a deluge of corporate news and mulled the latest policy announcement from the US Federal Reserve.

At 0900 BST, the FTSE 100 was down 0.7% at 6,091.66.

Overnight, the Federal Reserve left interest rates unchanged, as expected, and signalled that policy would be kept loose well into next year.

Oanda analyst Jeffrey Halley said: “The Federal Reserve did what it needed to, held rates steady and reiterated that any wobbles in growth and bond yields would be met with a wall of Fed money. Importantly, they also reassured markets that they would alleviate any shortages of off-shore US Dollars if necessary.”

On home shores, meanwhile, market participants were sinking their teeth into a raft of corporate results.

Lloyds Bank was under the cosh after saying it increased its provision for bad debts by £2.4bn in the second quarter as it braced for a “significant deterioration” in the economic outlook amid the coronavirus pandemic and swung to a heavy first-half loss. That took impairment charges to £3.8bn in the first half, up from £579m in 2019, with the bank forecasting a full-year figure of between £4.5bn and £5.5bn.

Anglo American was also in the red after it cut its interim dividend and posted a 39% drop in underlying first-half earnings due to the pandemic.

Technology-led services and payments specialist Equiniti was weaker after it reported a decline in first-half earnings and revenue as its business took a hit from the Covid-19 crisis.

Car dealership Inchcape was under pressure after saying it would be cutting jobs globally as it swung to a first-half loss due to Covid shutdowns.

On the upside, BAE Systems was the standout gainer on the FTSE 100 after the arms maker said full-year profits would be lower due to the pandemic, but that it expected a good second half as it reinstated dividend payments.

Pharmaceuticals giant AstraZeneca was on the rise after its first-half numbers beat analysts’ expectations.

Pest control and hygiene services company Rentokil gained even as it said first-half adjusted pre-tax profit fell 11% as the temporary closure of some businesses due to lockdowns took its toll.

Private equity and venture capital firm 3i Group was trading up as it said net asset value grew in the year ended 30 June despite “significant economic and social disruption” caused by Covid-19.

Hastings rallied after it confirmed late on Wednesday that it had been approached by a consortium led by Finnish insurer Sampo and its biggest shareholder, Rand Merchant Investment Holdings, about a possible cash offer.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Bae Systems Plc +5.26% +25.10 502.00
2 Rentokil Initial Plc +3.61% +19.80 568.20
3 Astrazeneca Plc +3.17% +273.00 8,888.00
4 Hikma Pharmaceuticals Plc +1.08% +23.00 2,151.00
5 3i Group Plc +0.66% +5.80 890.00
6 Whitbread Plc +0.31% +7.00 2,280.00
7 Fresnillo Plc +0.04% +0.50 1,261.50
8 Glaxosmithkline Plc +0.01% +0.20 1,554.00
9 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 Lloyds Banking Group Plc -8.07% -2.29 26.08
2 Evraz Plc -4.74% -14.20 285.60
3 Legal & General Group Plc -4.67% -10.50 214.40
4 Tui Ag -4.64% -15.00 308.60
5 Prudential Plc -4.41% -51.50 1,116.50
6 Melrose Industries Plc -4.25% -4.00 90.04
7 Bt Group Plc -3.89% -4.35 107.55
8 Aviva Plc -3.88% -10.80 267.20
9 Rolls-royce Holdings Plc -3.83% -9.70 243.40
10 Easyjet Plc -3.66% -19.80 521.00

 

US close: Stocks finish higher as Fed stands pat on rates

US stocks closed slightly higher on Wednesday as market participants digested the latest from the Federal Reserve, as it stood pat on interest rates late in the day.

The Dow Jones Industrial Average ended the session up 0.61% at 26,539.57, the S&P 500 added 1.24% to 3,258.44, and the Nasdaq Composite was 1.35% firmer at 10,542.94.

At the open, the Dow was 38.84 points higher, cutting into some of the losses recorded in the previous session amid stimulus headlines and another slab of corporate earnings.

The Federal Reserve kept its interest rate target on hold at between 0% and 0.25%, as expected, but it did acknowledge the recovery in the US in its rhetoric.

In its statement, it replaced “the virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses” with “economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.”

Rabobank senior US strategist Philip Marey noted that during his press conference, Fed chair Jerome Powell stressed the crucial role of the virus, and the measures taken against it.

“When asked when the Fed is going to raise rates he said that the FOMC is not even thinking about thinking about thinking about raising rates,” Marey said.

“Sounding like a vinyl record being stuck – or was this DJ Fed scratching – he was very dovish.”

Marey said that on calendar-based versus outcome-based forward guidance, Powell remained vague and said that they had not yet made any decisions.

“For now, it looks like we are going to have to count the number of ‘thinking about’s.

“Powell had very little to say about the outcome of the monetary policy review and even less about yield curve control.”

The tête-à-tête between Republican and Democratic lawmakers over a proposed $1trn stimulus package was also in focus again on Wednesday.

On the macro front, after three weeks of increases, mortgage applications fell 0.8% last week, according to the Mortgage Bankers Association.

Despite mortgage rates continuing to sit near record lows, the MBA’s unadjusted purchase index also fell 1% last week – but was up 21% compared to last year, marking 10 straight weeks of year-on-year increases for purchase activity.

Elsewhere, America’s shortfall in trade on goods with the rest of the world fell more quickly than expected last month as export growth picked up.

According to the Department of Commerce, in seasonally adjusted terms, the US’ trade deficit fell at a month-on-month pace of 6.1% to reach $70.6bn, against consensus forecasts for a deficit of $74.2bn.

Exports jumped at a month-on-month pace of 13.8% to reach $102.6bn, while imports were 4.8% higher to $173.2bn.

Lastly, contracts to buy previously owned US homes increased more than expected in June – another indication that the housing market was weathering the Covid-19 pandemic better than the rest of the economy.

The National Association of Realtors’ pending home sales index rose 16.6% to 116.1 last month. Economists anticipated a 15% increase.

In the corporate space, Starbucks was up 3.72% after it posted a third-quarter loss overnight but raised its fourth-quarter forecast, while AMD stock surged 12.54% after posting a better-than-expected quarterly performance and issuing upbeat full-year guidance.

Amazon was up 1.11%, Apple added 1.92%, Facebook rose 1.38% and Google owner Alphabet gained 1.45%, as the companies’ chief executive officers testified before the House Antitrust Subcommittee following a year-long probe into alleged anti-competitive practices.

General Motors was down 1.75% after it swung to a quarterly loss as the coronavirus shuttered factories and devastated sales, while General Electric was off 4.35% after it posted slightly better-than-expected second-quarter numbers.

Boeing was down 2.92% after it posted a net loss of $2.4bn and said it would slow aircraft production amid Covid-19-weakened demand.

 

Thursday newspaper round-up: Covid-19 rescue loan scheme, UK car production, Monsoon

The government is expanding its Covid-19 rescue loan scheme to cover small businesses on the edge of collapse, a move that Labour warned would come too late for many troubled firms. With less than a week before the furlough scheme covering 9 million employees is cut back, plunging more employers into debt, the Treasury said it would use a change in EU state aid rules to allow firms previously locked out of the coronavirus business interruption loan scheme (CBILS) to access government funds. – Guardian

British negotiators in the trade and security talks with the EU have only started to engage with the most contentious issues “in the last week or two” after pressure from business groups, the European commissioner for trade has said. In an interview with the Guardian, Phil Hogan, who oversees the EU’s negotiations, said there had been “a change of attitude” by Downing Street in July as they realised time was running out but that the talks were “not as advanced as we would like”. – Guardian

Car production in the UK plunged to a near 70-year low in the first half of 2020, with just 381,357 vehicles rolling off lines at car plants. Factory stoppages and lower demand caused by dealers being forced to shut because of the Covid-19 lockdown, combined with weakening consumer confidence, drove the 48pc decline on the previous year, according to data from the Society of Motor Manufacturers and Traders (SMMT). – Telegraph

Unsecured creditors of Monsoon Accessorize are owed more than £132 million after its founder bought it back out of administration in a pre-pack rescue deal. The administrator’s proposals, filed at Companies House, show that creditors include landlords, suppliers and local authorities. FRP was appointed administrator to the fashion chain in June after stores were closed because of the pandemic. – The Times

The economy is on track to grow by 5 per cent in July as growth picks up from its lockdown lows, according to analysis of real-time data by Jefferies bank. The investment bank’s composite index of several up-to-date activity indicators, from energy use to traffic congestion to online searches, edged up to 58 per cent of pre-coronavirus levels in the past week, from 57 per cent the week before. – The Times

 

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