ADVFN Morning London Market Report: Thursday 29 April 2021

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London open: FTSE tops 7,000 led by StanChart and Unilever

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London shares are moving higher again after the US central bank signaled overnight that it was simply not yet time to be talking about tapering bond purchases and much less about interest rate hikes.

A raft of updates including from StanChartUnilever and St.James Place were also buoying sentiment.

Key to the Federal Reserve’s thinking were the still approximately more than 8.0 American left unemployed by the pandemic, although Fed chair Jerome Powell did concede that certain areas of the markets were frothy.

“Investors moved back into the global recovery trade overnight as the Federal Reserve stayed “on message” and was suitably dovish at its latest FOMC meeting,” said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.

As of 0836 BST, the Footsie was up by 0.58% or 41.25 points to 7,004.92, alongside a 0.17% or 37.90 point rise on the second-tier index to 22,478.1.

In parallel, futures on the S&P 500 were up 25.0 points at 4,201.25, boosted by gains in after hours trading in New York for Apple and Facebook shares.

As other market watchers, Interactive Investors‘s Head of Equity strategy, Lee Wild, singled out Apple, which as he explained “crushed” consensus forecasts for the first quarter thanks to record sales growth in all geographies.

To take note of, US 10-year Treasury bond yields were little changed at 1.61%.

No economic reports are scheduled for release in the UK.

Stateside, investors’ focus will be on a preliminary reading on US first quarter gross domestic product due out at 1330 BST.

The median forecast from economists is for an acceleration in US economic growth from a 4.3% pace in the last quarter of 2020 to 6.5% in the three months to 31 March.

On the broker recommendations front, analysts at Jefferies added buy-rated Anglo American (target price: 4,000.0p) to their Franchise Picks List.

StanChart and Unilever please, not so NatWest

Standard Chartered posted an 18% profit increase for the first quarter as lower provisions for bad debts offset falling income. The emerging markets-focused bank’s underlying pretax profit rose to $1.45bn (£1bn) in the three months to the end of March from $1.22bn a year earlier. Operating income fell 9% to €3.93bn as the bank’s net interest margin was squeezed by low interest rates but Standard Chartered predicted income would rise in the second half of 2021 as business momentum builds.

Unilever announced a €3bn (£2.2bn) share buyback as the consumer goods company predicted first-half sales growth near the top of its target range. Underlying sales rose 5.7% in the first quarter and turnover fell 0.9% to €12.3bn, the FTSE 100 group said in a trading update. Turnover declined because of currency movements, the company added.

Oil and gas giant Shell reported higher first quarter earnings and lifted its dividend on the back of higher commodity prices and refining margins. The company on Thursday said adjusted earnings rose to $3.2bn from $393m in the fourth quarter of 2020 and $2.8bn a year earlier. The dividend was lifted 4% to 0.1735 cents a share.

NatWest‘s first-quarter operating pretax profit rose to £946m from £519m a year earlier as the bank released money set aside for bad debts early in the pandemic. Revenue dropped to £2.66bn in the three months to the end of March from £3.16bn and the bank wrote back £102m of impairment charges.

Gamblers flocked to Flutter Entertainment‘s websites at the start of the year, boosting the sports betting company’s topline by a third. And the company was undaunted by the prospect of retail reopening across many of its markets as pandemic restrictions were eased. Power saw the average number of monthly players surge 36% to 7.67m, with those in the US more than doubling, up 132%.

St. James Place experienced an “exceptional” start to the year as investors piled their accumulated savings into longer-term investments. Activity was further boosted by tax year-end planning, the asset manager said.

Medical products supplier Smith & Nephew reinstated full year guidance after a rise in first quarter revenues driven by increased surgery volumes, acquisitions and new products. Revenue for the three months to April 3 came in at $1.26bn, up 11.5% on a reported basis and 6.2% on an underlying basis and including a 3.4% boost from foreign exchange and 1.9% from acquisitions.

Glencore said it was on track to deliver earnings at the top half of guidance on the back of rising commodities prices. The company said it expected earnings before interest and tax to be in a range of $2.2bn – $3.2bn this year as it held production targets.

Evraz reported a 1.7% fall in consolidated crude steel output quarter-on-quarter on Thursday, to 3.41 million tonnes, which it put down to unscheduled downtime of the sintering machine at ZSMK.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Smith & Nephew Plc +6.20% +92.00 1,577.00
2 Standard Chartered Plc +3.12% +15.40 509.20
3 Unilever Plc +2.70% +110.00 4,187.50
4 Tui Ag +2.67% +11.50 442.90
5 St. James’s Place Plc +2.38% +31.50 1,355.00
6 Antofagasta Plc +1.88% +36.00 1,951.00
7 Bhp Group Plc +1.83% +40.50 2,257.00
8 Associated British Foods Plc +1.70% +39.00 2,338.00
9 Carnival Plc +1.62% +27.40 1,720.00
10 Smith (ds) Plc +1.57% +6.50 420.30

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Relx Plc -2.00% -38.50 1,889.00
2 British American Tobacco Plc -1.21% -32.50 2,648.00
3 Rentokil Initial Plc -0.78% -4.00 505.60
4 Imperial Brands Plc -0.54% -8.00 1,470.00
5 Prudential Plc -0.52% -8.00 1,530.00
6 Crh Plc -0.43% -15.00 3,449.00
7 Barratt Developments Plc -0.39% -3.00 770.40
8 Phoenix Group Holdings Plc -0.36% -2.60 714.60
9 Taylor Wimpey Plc -0.33% -0.60 182.35
10 Severn Trent Plc -0.29% -7.00 2,433.00

 

Europe open: Shares bounce on earnings, Fed policy stance

European stocks edged back towards record-highs on Thursday after a slew of upbeat earnings reports and the US Federal Reserve’s pledge to stick to loose monetary policy.

The pan-European STOXX 600 index rose 0.4% by 0713 GMT, trading just about 3 points below its record peak.

“Reassuring investors that it is nowhere need pulling the plug on its stimulus programme, the Federal Reserve helped lead to a broadly positive European open,” said Spreadex analyst Connor Campbell.

“Though the Fed acknowledged that the US economy is continuing to recover, while removing the word ‘considerable’ when discussing the risks posed by the pandemic, (Fed chairman) Jerome Powell and co. were keen to stress that ‘substantial further progress’ needs to be made regarding full employment and the 2% inflation target before the taps are turned off.”

In equity news, Finnish telecoms heavyweight Nokia topped the index, surging 12.4% as growth in sales of network and 5G equipment boosted quarterly earnings.

Shares in medical equipment specialist Smith & Nephew rose 5% as the company reinstated full year guidance after a rise in first quarter revenues driven by increased surgery volumes, acquisitions and new products.

Revenue for the three months to April 3 came in at $1.26bn, up 11.5% on a reported basis and 6.2% on an underlying basis and including a 3.4% boost from foreign exchange and 1.9% from acquisitions.

Consumer goods giant Unilever rose 3.2% as a pick up in home cooking and a strong economic recovery in China drove better-than-expected quarterly sales. The company also announced a share buyback programme up to 3 billion euros ($3.6 billion).

Oil giant Royal Dutch Shell gained after it raised its dividend by 4% after increasing first quarter profits, while French peer Total rose after reporting first-quarter earnings close to pre-pandemic levels.

French planemaker Airbus added 3.0% after it posted higher quarterly core earnings.

UK bank NatWest fell 4% despite NatWest’s reporting an 82% rise in first-quarter profit as its released money set aside for bad debts early in the Covid pandemic.

 

US close: Wall Street weaker as Fed stays firm on easy policy

Wall Street stocks finished in negative territory on Wednesday, as the Fed announced the continuation of its current easy policy, even while acknowledging that the US economy was accelerating.

At the close, the Dow Jones Industrial Average was down 0.48% at 33,820.38, as the S&P 500 lost 0.09% to 4,183.18, and the Nasdaq Composite was off 0.28% at 14,051.03.

The Dow closed 164.55 points lower on Wednesday, reversing modest gains recorded in the previous session.

Market participants had their expectations met by the Federal Reserve late in the session, as the central bank kept its short-term interest rate targets near zero, and confirmed it would continue to buy at least $120bn per month of bonds.

That standstill on policy came even as the Fed acknowledged the strength shown by the US economy in the early months of 2021, and offered no signals that its policy would change in the foreseeable future.

The central bank’s chairman Jerome Powell described the economic recovery as “uneven and far from complete”, noting that a likely uptick in prices in the coming months were likely to be one-time movements, with a minimal impact on real inflation.

“It will take some time before we see substantial further progress,” Powell said after the two-day meeting of the Federal Open Market Committee.

In economic news, mortgage application volume fell 2.5% week-on-week in the seven days ended 23 April according to the Mortgage Bankers Association.

That was despite the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreasing to 3.17% from 3.20%, with points decreasing to 0.30 from 0.36 for loans with a 20% down payment, to their lowest rate since the end of February.

Elsewhere, the US trade goods balance for March came in at -$90.6bn, a 4% widening month-on-month, with exports increasing 8.7% and imports growing 6.8%, according to the Commerce Department.

An advance reading of last month’s wholesale inventories report revealed wholesale inventories shot up 1.4% after rising 0.9% in February.

However, stocks at retailers tumbled 1.4% after ticking up 0.1% in February.

On the equity front, Google parent company Alphabet rose 3.16% after posting better-than-expected earnings after the close on Tuesday.

Microsoft shares, meanwhile, slid 2.83% despite topping analyst’s estimates with its largest revenue growth since 2018.

Starbucks lost 3.23% after the caffeine pusher hiked its full-year outlook, with US same-store sales growth predicted to return to pre-pandemic levels.

Aircraft manufacturer Boeing was 2.89% weaker after posting a sixth consecutive quarterly loss, although it did still expect to turn a profit for 2021.

 

Thursday newspaper round-up: Apple, Facebook, BT Sport, Greensill, Nestle

Surging iPhone sales have given Apple its best-ever start to the year as the technology group continued to ride the latest wave in demand for its devices. Total revenues rose by 53 per cent, beating forecasts on Wall Street to hit $89.6 billion – a record for its second quarter – amid unexpectedly strong smartphone and computer sales. – The Times

The failure of Greensill Capital will cost UK taxpayers up to £5bn, a parliamentary inquiry has heard, as one expert said the lender’s business model was “as close to fraud as you could imagine”. The former City minister Paul Myners said the government could end up footing the bill of unpaid state-backed loans and social support for thousands of steelworkers whose jobs are currently at risk at one of Greensill’s largest borrowers, Liberty Steel, owned by metals magnate Sanjeev Gupta. – Guardian

BT is in talks with AmazonDisney and others to offload a stake in its television arm, the Telegraph reported, as the pandemic casts doubt over the future of sport. The telecoms operator has appointed the investment bank Lazard to explore a partial sale of BT Sport as it focuses on upgrading Britain’s broadband network. – Telegraph

A sharp rise in digital advertising enabled Facebook to comfortably beat Wall Street expectations as its profits almost doubled. Shares in the world’s largest social media company are set to open at an all-time high today after it posted a 48 per cent jump in total revenue, to $26.17 billion. – The Times

Nestlé is planning to cut almost 600 jobs in the UK, close a factory and switch production of some products to Europe. The Swiss-owned confectioner said it was considering closing its site in Fawdon, Newcastle upon Tyne, in late 2023, with the loss of about 475 jobs, with a further 98 to go in York. – Guardian

The eurozone is at risk of a “tsunami” of bankruptcies as Covid life-support schemes for businesses are wound up, regulators have warned. A report by the EU’s key risk watchdog, which is chaired by European Central Bank president Christine Lagarde, said that companies may struggle to stay solvent the longer they relied on emergency financial support. – Telegraph

 

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