ADVFN Morning London Market Report: Friday 26 February 2021

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London open: Stocks slump amid bond market selloff

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London stocks slid in early trade on Friday as the selloff in bond markets spooked investors.

At 0830 GMT, the FTSE 100 was down 0.9% at 6,594.03.

Richard Hunter, head of markets at Interactive Investor, said: “The tantrum in the bond market has inevitably spilled over into equities as the spectre of inflation increases.

“Despite the soothing noises of the Federal Reserve, the repricing of inflation expectations is of concern. With excessive liquidity in the system and with the likelihood of a major release of pent-up demand as pandemic restrictions ease, inflation could soon spiral. In turn, this would put pressure on central banks to raise interest rates to quell the rise, affecting corporate lending and, importantly, the US mortgage market.”

In equity markets, Rightmove was in the red as it reported a drop in full-year profit as revenue took a hit after it gave discounts to customers during the coronavirus pandemic.

RSA Insurance was little changed as it posted a 15% rise in full-year operating profit to £751m ahead of its £7.2bn takeover by Denmark’s Tryg and Canada’s Intact Financial.

On the upside, British Airways and Iberia owner IAG flew higher despite swinging to a massive €7.4bn annual operating loss and pulling guidance for 2021, reflecting the impact of the Covid-19 crisis. The loss compares with a profit of €2.61m a year ago.

Jupiter Fund Management rallied after saying it ended 2020 with assets under management at a record high of £58.7bn.

Pets at Home gained as it upgraded its full-year outlook after a strong fourth quarter.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. +2.98% +5.55 191.80
2 Reckitt Benckiser Group Plc +2.08% +124.00 6,074.00
3 Hikma Pharmaceuticals Plc +1.58% +37.00 2,376.00
4 Astrazeneca Plc +1.37% +96.00 7,106.00
5 Croda International Plc +1.35% +84.00 6,324.00
6 Easyjet Plc +1.32% +12.80 984.00
7 Severn Trent Plc +1.03% +23.00 2,259.00
8 Kingfisher Plc +0.95% +2.50 266.30
9 United Utilities Group Plc +0.88% +7.80 892.40
10 Tui Ag +0.86% +3.70 432.60

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Scottish Mortgage Investment Trust Plc -4.35% -52.00 1,144.00
2 Mondi Plc -2.25% -40.50 1,760.00
3 British Land Company Plc -2.23% -11.60 508.00
4 Evraz Plc -2.14% -12.80 585.60
5 Anglo American Plc -1.91% -56.50 2,897.00
6 Bp Plc -1.90% -5.80 298.75
7 Land Securities Group Plc -1.81% -12.50 677.50
8 Carnival Plc -1.74% -27.50 1,554.50
9 Informa Plc -1.73% -9.60 545.40
10 Bae Systems Plc -1.63% -8.20 493.40

 

Europe open: Shares fall as rising bond yields send investors scurrying

European shares fell at the opening of the week’s last session as rising bond yields and a softer Wall Street dampened sentiment.

The pan-European Stoxx 600 index was down 0.79%, marking a 1.55% fall over the last five days. All major regional bourses were lower.

Wall Street stocks finished in negative territory on Thursday, with the Dow Jones easing off highs after registering another record close.

Rising rates were again in focus after the US 10-year Treasury yield rose above 1.5% to end the day at 1.52%, with fears that higher rates could spur investors to rotate out of stocks and into bonds persisting.

“The tantrum in the bond market has inevitably spilled over into equities as the spectre of inflation increases,” said Richard Hunter, head of markets at Interactive Investor.

“Despite the soothing noises of the Federal Reserve, the repricing of inflation expectations is of concern. With excessive liquidity in the system and with the likelihood of a major release of pent-up demand as pandemic restrictions ease, inflation could soon spiral. In turn, this would put pressure on central banks to raise interest rates to quell the rise, affecting corporate lending and, importantly, the US mortgage market.”

In equity news, shares in Belgian telecoms group Proximus slumped as the company on Friday said it expected lower core profit for 2021 on the back of anticipated additional spending on fibre migrations and IT transformation, and less savings from Covid-19 measures.

French information tech group Sopra Steria fell after the company said the Covid-19 pandemic and October 2020 cyberattack had a negative impact on business activity estimated at around 10 points of growth.

Net annual profit fell to €106.8m from €160.3m in 2019.

 

US close: Stocks come off yesterday’s highs as bond yields rise further

Wall Street stocks finished in negative territory on Thursday, with the Dow Jones easing off highs after registering another record close.

At the close, the Dow Jones Industrial Average was down 1.75% at 31.402.01, the S&P 500 lost 2.45% at 3,829.34, and the Nasdaq Composite was off 3.52% at 13,119.43.

The Dow closed 559.85 points lower on Thursday, cutting into gains recorded in what was a volatile session for major indices.

Rising rates were again in focus after the US 10-year Treasury yield rose above 1.5% to end the day at 1.52%, with fears that higher rates could spur investors to rotate out of stocks and into bonds persisting.

Some key data points also drew investor attention, with US jobless claims in the week ended 20 February coming in shy of economists’ forecasts.

According to the Department of Labor, in seasonally adjusted terms, the number of Americans filing for unemployment claims fell for the first time in five weeks, coming in at 730,000 – an improvement on last week’s revised print of 841,000 and better than expectations for a reading of 825,000.

The four-week moving average of initial claims fell to 807,750 for a decrease of 20,500 from the prior week and secondary unemployment claims, which tally those not being filed for the first time, also continued to retreat, declining by 101,000 to 4.42m.

Also in focus was a report from the Bureau of Economic Analysis that revealed the United States’ real gross domestic product had expanded at an annual rate of 4.1% in the fourth quarter, a slight increase on initial estimates of 4% and in line with market expectations.

Elsewhere on the macro front, monthly durable goods orders shot up 3.4% in January, crippling economists’ estimates, boosted up by surging orders for civilian aircraft, according to the Commerce Department.

Still on data, contracts to buy previously owned US homes fell in January amid a dearth of houses on the market, according to the National Association of Realtors.

The Pending Home Sales Index, based on contracts signed last month, dropped 2.8% to 122.8. Economists predicted that sales would be unchanged in January.

As far as Covid-19 figures were concerned, the US has now recorded more than 28.97m total cases, claiming the lives of over 518,360 Americans in the process.

In the corporate space, SeaWorld Entertainment surged 11.13% after reporting a narrower-than-expected fourth quarter loss of $45.4m, as both attendance and guest spending levels came in ahead of forecasts.

Electronics retailer Best Buy plunged 9.33% even after it beat earnings expectations but cautioned of slowing sales growth.

Domino’s Pizza lost 7.09% after it missed on earnings and revenue estimates, while takeaway rival Papa John’s lost 11.58% after it also fell short of expectations after being weighed down by higher costs during the quarter.

 

Friday newspaper round-up: Vauxhall, Covid grants, business confidence

The owner of Vauxhall has claimed it is considering the closure of its Ellesmere Port factory unless the UK government offers financial support after extended negotiations. An executive of Stellantis, the carmaker, on Thursday said it hoped to reach a binding agreement with the government on aid. – Guardian

The UK government is considering nationwide kerbside collection of used electrical appliances and gadgets to help improve the recycling of electronic waste. Local councils in some areas already collect broken washing machines and toasters in schemes funded by waste collection fees that all retailers selling electrical goods must pay. The government is consulting on the best way to implement such schemes across the country and how to fund them. – Guardian

Ministers are demanding answers after councils across Britain failed to hand out more than £1.6bn of emergency Covid grants to struggling businesses. There is growing fury in Whitehall over failure to dish out money that is meant to keep small firms afloat – with almost 90pc of funds from one scheme meant to be shared out over Christmas still not yet delivered. – Telegraph

Rishi Sunak is under growing pressure to slash beer duty at the Budget as a group of Conservative MPs called for the levy to be cut dramatically to support the ailing pub sector. In a letter to the Chancellor co-signed by 68 Conservative MPs, Richard Holden, a Tory MP and member of the All-Party Parliamentary Beer Group, warned that the tax was “extraordinarily high” and risked stunting the recovery of the beer and pub industry as it emerges from the pandemic. – Telegraph

Business confidence has risen to its highest level since the start of the pandemic amid optimism about Britain’s vaccination programme. The Lloyds Bank Business Barometer has risen by nine percentage points to 2 per cent this month. Though confidence levels are still considerably below their pre-pandemic peak, it is the first positive reading since March. – The Times

 

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