ADVFN Morning London Market Report: Tuesday 13 October 2020

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London open: Stocks fall after UK jobs data

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London stocks fell in early trade on Tuesday as investors mulled disappointing UK jobs data, with the pause of a Johnson & Johnson coronavirus vaccine trial also denting sentiment.

At 0850 BST, the FTSE 100 was down 0.6% at 5,965.52.

Spreadex analyst Connor Campbell said: “A pause in the Johnson & Johnson Covid-19 vaccine study sent a chill across the markets on Tuesday, dusting the European indices in red.

“Though a pause in a trial – this time due to ‘an unexplained illness in a study participant’ – isn’t exactly out of the ordinary, it still dealt a blow to the market’s faint, naïve hopes of a vaccine arriving this side of Christmas.”

Meanwhile, figures from the Office for National Statistics showed the unemployment rate rose more than expected August, hitting its highest level in three years as the coronavirus pandemic continues to take its toll. The unemployment rate increased to 4.5% from 4.1% in July, coming in above consensus expectations of 4.3%.

The ONS said estimates for June to August show an estimated 1.52m people were unemployed, up 209,000 on a year earlier and 138,000 higher than the previous quarter.

Redundancies increased in June to August by 113,000 on the year, and a record 114,000 on the quarter, to 227,000. The annual increase was the largest since April to June 2009, with the number of redundancies at its highest level since May to July 2009.

ONS deputy national statistician for Economic Statistics Jonathan Athow said: “Since the start of the pandemic there has been a sharp increase in those out of work and job hunting but more people telling us they are not actively looking for work. There has also been a stark rise in the number of people who have recently been made redundant.”

Laith Khalaf, financial analyst at AJ Bell, said: “Looking forward things look set to get worse before they get better for the UK economy, as furlough expires and greater social restrictions are enforced, albeit not nationwide. The huge cost of the Covid crisis response also needs to be reckoned with.

“The IFS estimates borrowing will hit £350 billion this year, a level never seen in peacetime Britain. The government will probably wait until it can at least see the edge of the woods before it lays out its plans to balance the books, but tax rises looks set to be on Rishi’s menu.”

Chinese trade data was more upbeat, with exports up 9.9% on the year in September and imports 13.2% higher.

In equity markets, stocks with significant exposure to the pandemic and related restrictions were under the cosh. Engine maker Rolls-Royce was the worst performer following strong gains in the previous session, closely followed by British Airways and Iberia parent IAG, Premier Inn owner Whitbread, GKN owner Melrose and InterContinental Hotels.

Cineworld, Upper Crust owner SSP, pub chain Mitchells & Butlers, cruise operator Carnival and travel company TUI also fell sharply.

On the upside, SSE rallied after agreeing to sell its 50% share in its Multifuel energy-from-waste ventures to Australian fund manager First Sentier Investors for £995m in cash as part of its £2bn disposal programme.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Sse Plc +3.96% +52.50 1,378.50
2 Experian Plc +2.42% +73.00 3,087.00
3 Bunzl Plc +1.39% +35.00 2,553.00
4 Morrison (wm) Supermarkets Plc +1.28% +2.20 174.60
5 Anglo American Plc +1.26% +24.40 1,954.40
6 Tesco Plc +1.19% +2.60 221.70
7 Antofagasta Plc +1.17% +12.00 1,037.00
8 Fresnillo Plc +1.16% +15.50 1,347.00
9 Vodafone Group Plc +0.98% +1.10 112.94
10 Halma Plc +0.81% +20.00 2,486.00

 

Top 10 FTSE 100 Fallers

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76.4% of retail CFD accounts lose money.

 

# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc -6.98% -13.60 181.25
2 Hargreaves Lansdown Plc -3.76% -58.00 1,484.00
3 Melrose Industries Plc -3.30% -4.30 126.15
4 International Consolidated Airlines Group S.a. -3.27% -3.33 98.42
5 Smurfit Kappa Group Plc -2.98% -96.00 3,128.00
6 Aviva Plc -2.97% -8.80 287.80
7 Carnival Plc -2.87% -28.40 961.80
8 Lloyds Banking Group Plc -2.87% -0.81 27.27
9 Smith (ds) Plc -2.80% -8.80 305.00
10 Tui Ag -2.64% -7.70 284.50

 

Europe open: Shares lower as J&J Covid-19 vaccine pause sours mood

European shares opened lower on Tuesday on the back of weaker Wall Street futures and news that a Covid-19 vaccine trial in the US had been paused.

The pan-European Stoxx 600 index was down 0.33% with all major European bourses lower. Dow Jones futures were 149 points lower.

Johnson & Johnson announced overnight that it was pausing its Covid-19 vaccine trial after a participant reported an “unexplained illness”.

“Though a pause in a trial … isn’t exactly out of the ordinary, it still dealt a blow to the market’s faint, naive hopes of a vaccine arriving this side of Christmas,” said Spreadex analyst Connor Campbell.

The mood was also dampened by fading hopes of a US stimulus deal, with little appetite from politicians to get a deal done.

“Investors are also not too hopeful for another stimulus aid package from the US this week as it is pretty clear that House members are in no mood to have any sort of resolution,” said Avatrade chief analyst Naeem Aslam.

“In addition to this, Senate Republicans have also failed to warm up to the President’s stimulus proposal. Traders know that this is a bumpy road, but there were hopes that perhaps we may finally see politicians coming to their senses and finally forming a deal. ”

US third quarter earnings from banks were set to be the focus on Tuesday with JP Morgan, Citigroup, and BlackRock are expected to report.

Investors were also eyeing Brexit developments with Thursdayâ’s self-imposed UK deadline for a trade deal with the European Union.

On the economic front, official UK data showed the unemployment rate rose to a higher-than-expected 4.5% in the three months to August 31.

In company news, Airbus fell 3.5% as JPMorgan cuts its rating on the planemaker’s stock to “underweight” from “neutral”.

Shares in German pharma firm MorphoSYS topped the losers board, down 8.5% as the company announced a €325m bond offering.

Stocks exposed to the coronavirus pandemic and related restrictions felt the impact, with engine maker Rolls-Royce one of the worst performers following strong gains over the past week, closely followed by British Airways and Iberia parent IAG, Premier Inn owner Whitbread, GKN owner Melrose and InterContinental Hotels.

Cineworld, Upper Crust owner SSP, pub chain Mitchells & Butlers, cruise operator Carnival and travel company TUI also fell sharply.

 

US close: Stocks close higher as stimulus talks remain in focus

US stocks closed higher on Monday as stimulus talks remained in focus for yet another session.

At the close, the Dow Jones Industrial Average was up 0.88% at 28,837.52, while the S&P 500 was 1.64% firmer at 3,534.22 and the Nasdaq Composite saw out the session 2.56% stronger at 11,876.26.

The Dow Jones closed 250.62 points higher on Monday, extending gains recorded on Friday as talks on Capitol Hill consumed the majority of market participants’ attention.

As far as Monday was concerned, those same stimulus talks in Congress remained in focus for yet another week.

With roughly three weeks until the US election, Democratic candidate Joe Biden’s widening lead in the polls may very well indicate that a substantial fiscal package could be on the horizon if his party can take Congress.

With that said, the most investors can really seem to count on at present appears to be a slim, targeted package aimed at addressing certain areas where waiting for stimulus was out of the question, such as the aviation sector.

Both House Speaker Nancy Pelosi and Senate Republicans have pushed back on a $1.8trn offer from the White House, above the $1.6trn offered previously and well beyond the $1trn cap Republicans were aiming for, with Pelosi highlighting what she branded as insufficient offers on healthcare issues.

“The news is filled with the numbers in terms of dollars. The heart of the matter is: can we allow the virus to rage on and ignore science as the Administration proposes, or will they accept the scientific strategic plan in the Heroes Act to crush the virus,” Pelosi said.

Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows also called for a separate vote on the Paycheck Protection Program in a letter to Congress on Sunday.

No major data points were released on Monday.

While things were also quiet on corporate front on the first day of the new week, third-quarter earnings season will kick off later in the week – with multiple major banks and airlines set to publish results, including JPMorgan Chase and Delta Air Lines on Tuesday.

 

Tuesday newspaper round-up: Amazon Prime, OECD, taxes

Campaign groups and small business representatives have called on consumers to shun this week’s Amazon Prime extravaganza and support small retailers instead. On Tuesday and Wednesday the tech giant will host its annual Prime Day event, with thousands of tempting bargains – many at up to half price. However, campaigners are calling on consumers to consider the plight of local businesses that were already struggling to compete with Amazon ahead of lockdown. – Guardian

Economies struggling with the costs of Covid-19 could face a double blow from escalating trade wars unless international talks to rewrite cross-border tax rules are successful, the OECD has warned. The Paris-based organisation, which has been steering the talks, said governments would come under further financial pressure from retaliatory tariffs should governments fail to agree a global tax framework by an extended deadline of mid 2021. – Guardian

Taxes may have to rise more than £40bn a year to stop Government borrowing spiralling out of control, the Institute for Fiscal Studies has warned. The think-tank said the deficit this year was set to reach levels not seen outside the two world wars due to Covid-19. In its annual Green Budget, the IFS said over the medium term, taxes would almost certainly have to rise, noting that the Government had increased spending on day-to-day public services by £70bn in response to the pandemic. – Telegraph

The big day may still be more than 10 weeks away but Britons have already started their Christmas shopping with gusto, according to the British Retail Consortium (BRC). Its latest survey for the five weeks to Oct 3 recorded a 5.6pc jump in total sales compared to last year – the best since December 2009. – Telegraph

An investment vehicle belonging to a care homes tycoon paid £27 million in annual dividends, despite a crisis in the industry. The latest accounts for Court Cavendish, which is controlled by Chai Patel through a 90 per cent stake, shows that dividends have increased to £43 million over its past three financial years. – The Times

 

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