ADVFN Morning London Market Report: Friday 18 June 2021

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London open: Stocks flat after disappointing retail sales data


London stocks were steady in early trade on Friday as investors digested disappointing retail sales data.

At 0835 BST, the FTSE 100 was flat at 7,150.26, while sterling was down 0.4% at $1.3866 amid continued dollar strength and after figures from the Office for National Statistics showed retail sales unexpectedly fell in May as restaurants reopened and people shifted some of their spending from food stores, although they remained above pre-pandemic levels.

Retail sales declined by 1.4% on the month, versus expectations for a 1.5% increase. Sales at food stores saw the biggest drop, with volumes down 5.7% as the hospitality industry reopened after Covid restrictions eased and people returned to eating and drinking in pubs and restaurants.

Meanwhile, clothing and department stores reported monthly declines of 2.5% and 6.7%, respectively, while sales at non-store retailers fell 4.2% as non-essential retail reopened.

Despite the overall monthly fall, the ONS said that over April and May combined, retail sales were still 7.7% higher than in March 2021, and 9.1% above where they were in February 2020, before the impact of the coronavirus pandemic.

Paul Dales, chief UK economist at Capital Economics, said: “Rather than suggest the economic recovery is already spluttering, the decline in retail sales in May is probably just a result of the reopening of indoor hospitality in mid-May prompting households to spend less time shopping and more time socialising.”

In equity markets, safety equipment specialist Halma was the standout gainer on the FTSE 100, having slumped on Thursday after Berenberg said the stock’s valuation “remains a hurdle”.

Precious metals miners Fresnillo and Polymetal shone as gold prices rose.

Car dealership Inchcape surged as it said full-year pre-tax profit was set to be “significantly ahead” of market consensus of £216m after a better-than-expected performance in the first half.

Rotork was boosted by an upgrade to ‘overweight’ at Morgan Stanley, while easyJet and Wizz Air flew higher after upgrades to ‘buy’ and ‘hold’ respectively at HSBC.

On the downside, supermarket group Tesco was weaker even as it reported a small rise in first-quarter like-for-like sales, reflecting the lifting of Covid restrictions as more people started to eat out again.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Fresnillo Plc +2.58% +20.80 826.00
2 Halma Plc +1.76% +48.00 2,770.00
3 Easyjet Plc +1.54% +15.00 988.60
4 Ashtead Group Plc +0.86% +44.00 5,156.00
5 Flutter Entertainment Plc +0.77% +105.00 13,800.00
6 Berkeley Group Holdings (the) Plc +0.76% +35.00 4,647.00
7 Spirax-sarco Engineering Plc +0.75% +100.00 13,375.00
8 Rio Tinto Plc +0.73% +43.00 5,925.00
9 Tui Ag +0.72% +2.90 408.10
10 Smurfit Kappa Group Plc +0.62% +24.00 3,866.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Bt Group Plc -2.63% -5.40 200.20
2 Johnson Matthey Plc -1.75% -55.00 3,083.00
3 Tesco Plc -1.73% -4.00 227.15
4 Hikma Pharmaceuticals Plc -1.67% -41.00 2,407.00
5 Barclays Plc -1.44% -2.58 176.24
6 Ocado Group Plc -1.20% -23.00 1,890.00
7 Rolls-royce Holdings Plc -1.16% -1.30 110.62
8 Royal Dutch Shell Plc -1.09% -15.40 1,403.00
9 Morrison (wm) Supermarkets Plc -1.07% -1.95 179.75
10 Phoenix Group Holdings Plc -1.06% -7.60 712.60


Europe open: Shares in downbeat mood on Fed’s hawkish talk

European shares started the final session of the week in downbeat mood investors continued to fret over the US Federal Reserve adopting a hawkish tone on asset purchases.

The pan-European Stoxx 600 was flat in early trade with regional bourses following suit. The Dow Jones close 0.62% lower overnight.

In the UK, official data revealed an unexpected 1.4% fall in May retail sales against forecasts of a 1.5% – 1.6% rise as restaurants reopened and people shifted some of their spending from food stores, although they remained above pre-pandemic levels.

The pound fell to a new six-week low on the news, shedding a further 0.4% against the dollar on Friday morning, leaving it at $1.3865 for the first time in close to seven weeks.

In Germany, the May Producer Price Index (PPI) rose 1.5% against April outstripping the 0.7% consensus forecast. On an annual basis, the PPI was 7.2% against a projection of 6.4%.

In equity news, shares in car dealership Inchcape rose 6.6% as the company said full-year pre-tax profit is set to be “significantly ahead” of market consensus of £216m after a better-than-expected performance in the first half.

Irish food company Kerry rose after agreeing to sell its consumer foods’ meats and meals business in the UK and Ireland to Pilgrim’s Pride for €819m.

Tesco shares slipped after the UK supermarket giant revealed a slowdown in first-quarter sales as coronavirus pandemic restrictions were lifted and people started to eat out more.


US close: Stocks mixed following FOMC meeting, unexpected jump in jobless claims

Major US indices put on a mixed performance on Thursday after the Federal Reserve stepped up its timeline for rate hikes and weekly initial jobless claims jumped unexpectedly.

At the close, the Dow Jones Industrial Average was down 0.62% at 33,823.45, while the S&P 500 was 0.04% weaker at 4,221.86 and the Nasdaq Composite saw out the session 0.87% stronger at 14,161.35.

The Dow closed 210.22 points lower on Thursday, extending losses recorded in the previous session.

The move by Central bankers in the US to nudge up their individual projections for short-term interest rates in 2022 and 2023 at their two-day policy meeting remained in focus on Thursday, with the median projection of participants on the Federal Open Market Committee now being for two hikes in 2023.

However, Fed chair Jerome Powell stated the projections should be taken with “a big grain of salt” and said the central bank would continue to monitor the US economic recovery and vowed to provide “advanced notice” before any updates regarding the tapering of the central bank’s bond-buying program.

On the macro front, weekly jobless claims rose last week for the first time since April, according to the Department of Labor, with initial unemployment claims increasing by 37,000 over the week ending on 12 June to reach 412,000 – well ahead of analyst forecasts a reading of 350,000.

The four-week moving average, however, which smoothes out the variations in the claims figures from one week to the next, slipped by 8,000 to 395,000. Secondary unemployment claims, which reference the week ending on 5 June, edged up by 1,000 to 3.518m.

Elsewhere, manufacturing activity in the US mid-Atlantic region continued growing at a robust pace in June, the results of one of the most closely followed surveys for the sector showed. The Federal Reserve Bank of Philadelphia‘s factory sector index dipped from May’s reading of 31.5 to 30.7 for June. Economists had projected a fall to 30.5.

Still on data, the Conference Board‘s leading economic index increased by 1.3% in May to 114.5 in May, following a 1.3% increase in April and a 1.4% increase in March, with the CB now forecasting real GDP growth in the second quarter of 2021 could reach 9% on an annualised basis and year-on-year economic growth of 6.6% for the year as a whole.

In the corporate space, Lennar was in the green after posting better-than-expected earnings, while Wells Fargo and Citigroup closed lower despite hopes that higher rates will drive profits for banks.


Friday newspaper round-up: UK economy, Tesla, Channel 4, Nutmeg

Britain’s economic recovery will accelerate into the autumn despite the threat from staff shortages and higher inflation, according to a forecast by the business lobby group, the CBI. The economy will expand by 8.2% this year and by 6.1% next year as the successful vaccination programme allows lockdown easing to continue next month, driving a surge in consumer spending and business activity in the second half of 2021, the CBI said. – Guardian

US safety regulators have opened 30 investigations into Tesla crashes involving 10 deaths since 2016 where an advanced driver assistance system was suspected to have been in use. The National Highway Traffic Safety Administration (NHTSA) released a list offering details about crashes under review by its special crash investigations programs. – Guardian

Channel 4 could be privatised as soon as next year as ministers prepare to launch a consultation on its future within weeks. The government-owned broadcaster could be sold to a private buyer within a year as part of the review, the Financial Times reported. Oliver Dowden, the Culture Secretary, said last month that Channel 4 could be sold by 2024 to “provide a sustainable future for the broadcaster”. – Telegraph

JP Morgan Chase has bought UK robo wealth manager Nutmeg as it plots an assault on the British banking market. The Wall Street giant said the deal will complement the mobile banking service it plans to launch in the UK later this year under the Chase brand. Nutmeg has expanded rapidly since its launch in 2012 and manages assets worth £3.5bn on behalf of 140,000 clients. – Telegraph

Mark Carney was paid more than half a million pounds for 14 days’ work as governor of the Bank of England last year. The Bank’s annual report showed that Carney, 56, received £443,965 in pay, benefits and pension contributions and a one-off £113,821 relocation expense to move him and his family back to Canada. – The Times


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