ADVFN Morning London Market Report: Tuesday 23 February 2021

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London open: Travel & leisure stocks pace the advance


London equity markets rose in early trade on Tuesday, with travel and leisure stocks pacing the advance, as investors mulled the latest UK jobs data.

At 0840 GMT, the FTSE 100 was up 0.5% at 6,644.62.

Figures released earlier by the Office for National Statistics showed the unemployment rate hit its highest level in five years in December.

The unemployment rate rose to 5.1% in the three months to the end of December from 5.0% in November, in line with economists’ expectations and marking the highest level since early 2016. Meanwhile, 726,000 jobs were lost since before the pandemic in February 2020.

Still, the figures also showed that in January, 83,000 more people were in payrolled employment compared to December 2020, marking the second consecutive monthly increase.

ONS deputy national statistician for economic statistics Jonathan Athow said: “Our survey shows that the unemployment rate has had the biggest annual rise since the financial crisis. However, the proportion of people who are neither working nor looking for work has stabilised after rising sharply at the start of the pandemic, with many people who lost their jobs early on having now started looking for work.”

In equity markets, travel and leisure stocks rallied as budget airline easyJet said there had been a surge in bookings after Prime Minister Boris Johnson outlined the government’s lockdown exit strategy on Monday.

British Airways owner IAGeasyJet, engine maker Rolls-RoyceInterContinental Hotels, Premier Inn owner Whitbread, caterer Compass GroupCineworldRank GroupWH SmithSSPTui and Wetherspoons all gained.

InterContinental Hotels pushed higher despite saying it swung to a full-year loss and scrapping its final dividend after what it called the most challenging year in its history.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The roadmap to reopening has accelerated the recovery in travel and hospitality stocks with fresh rises since the market open.

“The palpable sigh of relief that there are dates to target for struggling pub and restaurant chains, has translated into a share price rally for the sectors.

“Although international travel won’t begin until at least 17th May, news that the government’s global taskforce will reconvene in April to recommend how holidays can resume has been a boost for the industry which has been anxious for a sense of direction.”

Elsewhere, HSBC fell as it reported a 34% slump in annual profits, but resumed dividend payments as it said it would refocus operations on China.

Online supermarket Ocado, which has benefited from lockdowns and restrictions, also lost ground.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Easyjet Plc +8.34% +74.40 966.60
2 Rolls-royce Holdings Plc +7.35% +7.75 113.20
3 Tui Ag +6.70% +26.00 413.90
4 International Consolidated Airlines Group S.a. +5.67% +10.10 188.20
5 Melrose Industries Plc +4.72% +8.00 177.45
6 Compass Group Plc +4.61% +68.50 1,554.50
7 Informa Plc +3.91% +21.00 557.60
8 Intercontinental Hotels Group Plc +3.88% +206.00 5,518.00
9 Itv Plc +3.74% +4.15 115.10
10 Whitbread Plc +3.71% +131.00 3,665.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Ocado Group Plc -4.21% -101.00 2,300.00
2 Scottish Mortgage Investment Trust Plc -2.68% -34.00 1,233.00
3 Experian Plc -1.90% -46.00 2,373.00
4 Halma Plc -1.70% -41.00 2,377.00
5 Rentokil Initial Plc -1.67% -8.10 475.90
6 Smith & Nephew Plc -1.66% -23.50 1,391.50
7 Kingfisher Plc -1.56% -4.20 264.90
8 Intertek Group Plc -1.33% -74.00 5,474.00
9 Fresnillo Plc -1.33% -13.20 976.60
10 United Utilities Group Plc -1.25% -11.20 882.00


Europe open: Travel, leisure stocks in favour on UK Covid exit plan

European shares were broadly higher on Tuesday, led by travel and leisure stocks as the UK published its roadmap out of Covid-19 restrictions although German stocks weighed on the continent’s benchmark index.

The pan-European Stoxx 600 index was down 0.3%, with Germany’s DAX 0.44% lower. The UK’s FTSE climbed 0.26% on hopes of a post-Covid economic recovery but was tempered by a rise in unemployment.

Britain’s unemployment rate hit 5.1% for the first time since 2016, although this was offset by a rise in the average earnings index for the three months to December to 4.7% from 3.7%.

“Most importantly, January’s claimant count change reading saw a 20,000 reduction in the number of people claiming unemployment-related benefits, instead of the near 14,000 addition forecast. Even better, the number from December was revised from +7,000 to -20,400,” said Spreadex analyst Connor Campbell.

“So while the unemployment rate might be stealing headlines, the rest of the report was good enough to, at the very least, keep the UK markets from posting any major losses.”

Travel and leisure stocks were the main gainers after Monday’s announcement from the UK government on a gradual easing of restrictions starting in March, with overseas holidays looking a prospect later in the year.

The news prompted a surge in holiday bookings, with easyJet reporting a jump in summer ticket sales, particularly in August, sending the company’s shares 11% higher at the opening before settling to a healthy 7.85% rise.

Airline group IAGTUI Travel as well as Premier Inn owner Whitbread and travel outlet food operator SSP were also higher, while aircraft engine maker Rolls-Royce, which is paid by the number of hours its engines fly, also gained.

Intercontinental Hotels Group rose by more than 3%, despite posting a sharp decline in full year revenues. Aeroports de Paris and Frankfurt Airport operator Fraport were also higher.

BP and Royal Dutch Shell gained as crude oil prices hit 13 month highs.

On the downside, shares in German commercial cooking appliance maker Rational AG slumped 11.2% as it reported a cautious start to the year, saying the unpredictability of easing or tightening restrictions “is additionally unsettling many customers” with hotel and restaurant customer groups are especially hard hit.


US close: Mixed session on the Street, Treasury yields remain in focus

Wall Street stocks closed mostly lower on Monday ahead of Senate testimony from Federal Reserve chairman Jerome Powell tomorrow.

At the close, the Dow Jones Industrial Average was up 0.09% at 31,521.69, while the S&P 500 was 0.77% softer at 3,876.50 and the Nasdaq Composite saw out the session 2.46% weaker at 13,533.05.

The Dow closed 27.37 points higher on Monday after eking out a gain of less than one point in the previous session.

Market participants were paying strict attention to the 10-year Treasury yield, which jumped 14 basis points last week to 1.34%, edging towards its highest level since February 2020. The 10-year yield was up another three basis points at the end of trading on Monday at 1.35%.

Traders were also focussed on Powell, who will deliver his semi-annual testimony on the state of the US economy before the Senate Banking Committee on Tuesday, with comments on rates and inflation potentially determining the market’s direction for the rest of the week.

As far as the Covid-19 pandemic was concerned, the White House expects to ship out millions of delayed coronavirus vaccine doses during the week after winter storms disrupted logistics networks.

On the macro front, the Chicago Fed‘s national activity index improved slightly in January, rising to 0.66 last month from 0.41 in December to come in better than the market expectations for an increase of 0.4%.

Elsewhere, last month’s leading index from the Conference Board increased 0.5% to 110.3, suggesting economic growth should improve gradually over the first half of 2021.

Lastly, the Dallas Fed‘s February manufacturing index surged 15 points to 19.9, indicating a sharp acceleration in output growth.

In the corporate space, Dish Network posted fourth-quarter results that included revenues that were ahead of expectations, while Royal Caribbean said it had lost over $5.8bn in 2020 as a result of the pandemic.

Shares in Tesla and Apple were both sharply lower in early trade, while airline stocks took off after a series of upgrades by analysts at Deutsche Bank.


Tuesday newspaper round-up: Uber, IG Group, capital gains

Business leaders have told Boris Johnson that his roadmap for exiting the third Covid lockdown in England remains incomplete without fresh financial support for companies and workers hardest hit by the pandemic. The prime minister promised the government would “not pull the rug out” from under struggling firms and workers while restrictions remain in place during the phased relaxation of lockdown, but to the disappointment of company bosses and trade unions he deferred details of future economic support to the budget in 10 days’ time. – Guardian

Uber has been accused of trying to deter drivers from seeking compensation for missed holiday and minimum wage payments after a landmark court ruling. The taxi-hailing app may have to pay out more than £100m to more than 10,000 drivers involved in cases linked to a UK supreme court ruling on Friday that they must be classified as workers. Uber has previously argued that its 60,000 UK drivers are self-employed independent contractors with no right to holiday pay, a company pension or the national minimum wage. – Guardian

Boris Johnson’s plan to reopen international travel does not go fast enough to allow a summer holiday season and could put hopes of a swift industry recovery at risk, his predecessor Theresa May has said. Mr Johnson pledged to map out a return to foreign vacations by Apr 12 and said he will reopen borders as early as May 17, allaying concerns that there would be no route to recovery for the travel sector. But Mrs May warned this simply does not given businesses and the public enough time to plan a getaway – and companies will suffer as a result. – Telegraph

IG Group is withdrawing leveraged bets on hundreds of companies as Britain’s oldest spread-betting firm scrambles to react to the day-trading mania gripping financial markets. It emerged yesterday that IG had decided to stop offering margin trading on 900 shares, including those of some British companies, and had given its customers 30 days to unwind existing positions. The company said it was pulling the leveraged products it had been offering on the stocks as part of efforts to allocate its resources in the face of spiralling demand to play the markets after the GameStop saga in America. – The Times

A group of 1,600 Londoners made more in capital gains than the entire north of England, according to a new report. Tax Justice UK, a campaign group, found that the ultra-wealthy group had made £9 billion from assets in 2019. By comparison, the entire population of the north of England made £8 billion. Tax Justice said that the figures, based on a freedom of information request to HM Revenue & Customs, underscored the need for the government to equalise capital gains and income tax rates. At present, basic rate capital gains taxpayers are charged 10 per cent, compared with 20 per cent for payers of income tax. – The Times


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