ADVFN Morning London Market Report: Thursday 17 June 2021

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London open: Stocks fall after hawkish Fed comments

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London stocks fell in early trade on Thursday after the US Federal Reserve signalled that it could hike interest rates earlier than expected.

At 0840 BST, the FTSE 100 was down 0.4% at 7,156.95.

CMC Markets analyst Michael Hewson said: “US markets closed lower yesterday after the Fed threw the market a bit of a curve ball, as the timeline for a possible rise in interest rates was brought forward, with the consensus for a possible two hikes by the end of 2023, much sooner than the previous 2024, although the underlying tone remained cautious.

“The Federal Reserve also unexpectedly nudged higher the interest rate on excess reserves (IOER) by 5 basis points to 0.15% in a sign that perhaps there was a degree of concern about rising inflation expectations. The central bank also upgraded its growth forecasts to 7% for this year, along with its core inflation forecast to 3%, a sharp adjustment up from the previous 2.2%.

“This unexpectedly hawkish tilt saw yields on US government bonds rise sharply, while US stocks rolled over, slipping to the downside, though the eventual losses were fairly well contained.”

In equity markets, miners fell as metals prices retreated, with Anglo AmericanBHPAntofagasta and Glencore all trading lower.

On the upside, banks fared well, with NatWestHSBCBarclays and Lloyds all gaining.

Premier Inn owner Whitbread rallied as it maintained guidance despite an extension of the UK government’s lockdown, forecasting strong summer demand in coastal destinations.

Travel and leisure stocks were higher following reports that fully vaccinated Britons could be exempt from quarantine after an amber list holiday. British Airways and Iberia parent IAG, budget airlines easyJet and Wizz, travel company Tui, cruise operator Carnival, Upper Crust owner SSP, engine maker Rolls-RoyceInterContinental Hotels and WH Smith were all higher.

EasyJet also got a boost after The Telegraph reported that it will announce 12 new routes to capitalise on a staycation boom with the launch of new domestic services

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Easyjet Plc +4.06% +38.60 989.00
2 Whitbread Plc +3.77% +124.00 3,414.00
3 International Consolidated Airlines Group S.a. +3.44% +6.76 203.40
4 Bt Group Plc +2.55% +5.10 205.30
5 Tui Ag +2.50% +9.90 405.50
6 Morrison (wm) Supermarkets Plc +2.24% +3.95 180.55
7 Barclays Plc +2.10% +3.72 180.84
8 Hsbc Holdings Plc +2.08% +9.10 447.15
9 Standard Chartered Plc +1.92% +9.30 494.60
10 Lloyds Banking Group Plc +1.66% +0.79 48.49

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Halma Plc -4.42% -126.00 2,725.00
2 3i Group Plc -2.94% -37.00 1,221.00
3 Evraz Plc -2.47% -15.40 609.20
4 Anglo American Plc -2.43% -72.00 2,891.50
5 Antofagasta Plc -2.27% -33.00 1,421.00
6 Spirax-sarco Engineering Plc -2.17% -295.00 13,300.00
7 Glencore Plc -1.97% -6.25 310.80
8 Fresnillo Plc -1.97% -16.40 816.80
9 Bhp Group Plc -1.74% -37.00 2,092.00
10 Smurfit Kappa Group Plc -1.48% -58.00 3,858.00

 

Europe open: Shares open lower as Fed turns hawkish on rates

European shares opened lower on Thursday after the US Federal Reserve said it might curb stimulus measures sooner than expected as the pace of the post Covid pandemic recovery stoked inflationary fears.

The pan-European Stoxx 600 index was down 0.4%, with the UK’s FTSE 100 down 0.66%. US markets closed lower overnight as the US central bank said two possible rate rises could be implemented by the end of 2023.

“The bond market reaction was a little sharper with 10-year yields pushing back towards the 1.6% level, putting them back where they were at the beginning of last week, while the 2-year yields shot up to a post pandemic high above 0.20%,” said Michael Hewson at CMC Markets.

“This reaction may serve as a useful reminder that while central banks may seem fairly relaxed about the inflation outlook, they still have to look a lot further out, and realistically if the economy improves as expected, monetary policy will have to change.”

“The fact that the Federal Reserve are slowly preparing the ground now may well be unsettling for markets but it is also necessary, and in the here and now, monetary policy still hasn’t changed that much.”

In equity markets, shares in online train and coach ticket platform Trainline topped the Stoxx after reporting a 324% rise in first quarter sales as commuter travel started to recover as Covid lockdowns eased.

Premier Inn owner Whitbread was also higher as it held guidance and forecast strong UK summer demand, despite a slump in sales growth and extension of the UK government’s lockdown by a month.

Mining stocks were lower as the gold price fell, with GlencoreBHPAnglo American and Antofagasta all down.

 

US close: Stocks end session lower following FOMC update

Wall Street stocks ended the session in the red following a press conference held by Federal Reserve chairman Jerome Powell.

At the close, the Dow Jones Industrial Average was down 0.77% at 34,033.67, while the S&P 500 was 0.54% weaker at 4,223.70 and the Nasdaq Composite saw out the session 0.24% softer at 14,039.68.

The Dow Jones closed 265.66 points lower on Wednesday as eyes were fixed on the Federal Reserve.

Wednesday’s primary focus was a move by Central bankers in the US that saw them nudged up their individual projections for short-term interest rates in 2022 and 2023 at their two-day policy meeting, although they didn’t actually discuss potential dates for the so-called ‘lift-off’ in rates. The median projection of participants on the Federal Open Market Committee, the Fed’s main policy-making body, was now for two hikes in 2023.

Furthermore, while no interest rate hikes were expected in 2021, a few more FOMC participants than at March’s policy meeting now also expected hikes in 2022 while many more now saw hikes arriving in 2023. The highest projection for the Fed funds rate in 2023 was now at 1.6%, versus 1.1% in March, when policy-makers last published their projections for rates.

In the corporate arena, Citigroup chief financial officer Mark Mason warned that trading revenues could fall by around 30% in the second quarter, while Regeneron shares were down despite a large trial showing that its antibody cocktail cut the risk of death among Covid-19 patients in the hospital by 20%.

Elsewhere, WalkMe was in focus after the firm’s initial public offering had reportedly been priced to go at $31 per share – versus an anticipated IPO range of $29-32.

 

Thursday newspaper round-up: Greensill, easyJet, Spire Healthcare

The number of EU citizens searching for work in Britain has fallen by more than a third since Brexit, according to a study that exposes the impact on UK employers as they struggle to recruit staff. Figures from the jobs website Indeed show searches by EU-based jobseekers for work in the UK were down by 36% in May from average levels in 2019. Low-paid jobs in hospitality, the care sector and warehouses recorded the biggest declines at 41%. – Guardian

MPs have accused financier Lex Greensill of acting suspiciously and being disrespectful towards parliament by refusing to appear in front of an inquiry into the steel industry and one of Greensill Capital largest borrowers, Liberty Steel. The business, energy and industrial strategy (BEIS) committee claimed Greensill had failed to give legitimate reasons for rebuffing multiple requests to answer live questions in front of parliamentarians at the end of the month. – Guardian

Global interest in Britain’s best-paid jobs has soared in the wake of Brexit, as the UK’s new immigration rules attract talent from around the world. Searches for UK-based jobs from beyond the EU have returned to pre-pandemic levels after jumping sharply since the start of the year, according to jobs site Indeed. – Telegraph

Airline easyJet is preparing to capitalise on a staycation boom with the launch new domestic services. It will announce 12 new routes on Thursday, The Daily Telegraph has learnt. Industry sources said that easyJet will fly five times a week between Manchester and Edinburgh. There are also expected to be new ­services to Newquay from Inverness and Liverpool. – Telegraph

A second large shareholder in Spire Healthcare has come out against the £1 billion takeover of the listed private hospitals chain by an Australian rival. Toscafund Asset Management, which owns 5.4 per cent of Spire’s shares, has urged other investors to reject the 240p-a-share bid from Ramsay Health Care, which was recommended by Spire’s board last month. – The Times

 

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