ADVFN Morning London Market Report: Tuesday 12 October 2021

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London open: Stocks fall amid inflation concerns; jobs data in focus

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London stocks fell in early trade on Tuesday amid ongoing worries about inflation, as investors digested the latest UK jobs data.

At 0835 BST, the FTSE 100 was down 0.7% at 7,095.44.

Jeffrey Halley, senior market analyst at Oanda, said: “Despite US bond markets being closed for Columbus Day, inflation nerves continued to rattle market nerves driven by energy prices, which surged once again overnight.

“Equity markets retreated and the US dollar resumed its climb as inflation looks less transitory and more embedded by the day. Goldman Sachs downgraded its US growth forecasts overnight, and the quarterly earnings season, which starts this week, has equity markets on edge over whether profit forecasts will be tempered for 2022 given the rich valuations prevalent in stocks everywhere. Add in the creeping, but relentless implications of the Fed taper and it is no surprise that equity markets remain on edge.”

News that Chinese property group Evergrande had missed its third round of bond payments in three weeks added to the downbeat mood.

On home shores, figures released earlier by the Office for National Statistics showed that job vacancies hit a 20-year high between July and September. They rose by 318,000 from pre-pandemic January to March 2020 levels to 1.1 million, with accommodation and food services seeing a near-50,000 jump.

Meanwhile, the unemployment rate fell to 4.5% in the three months to August from 4.6% in the three months to July.

Data also showed that the number of payroll employees rose in September by 207,000 to a record 29.2m, and is now higher than it was before the pandemic.

Darren Morgan, director of economic statistics at the ONS, said: “The jobs market has continued to recover from the effects of the coronavirus, with the number of employees on payroll in September now well exceeding pre-pandemic levels.

“The latest earnings continue to show growth on the year, even after taking inflation into account.

“However, the figures are still being affected by special factors that make it hard to read underlying trends.”

Paul Dales, chief UK economist at Capital Economics, said: “The further rise in vacant positions to a new record high of 1.102m suggests that demand for workers remains strong. But crucially evidence from other surveys suggests that vacancies are high partly because employers are finding it increasingly hard to find workers.

“So there’s no real signs in this release that the labour shortages have started to ease. The end of the furlough scheme will probably help, but we’re increasingly of the view that labour shortages will last at least until the middle of next year.

“Meanwhile, the distortions from the furlough scheme and the change in the composition of employment that have boosted average earnings growth have now started to ease.”

In equity markets, low-cost airline easyJet flew lower despite saying it turned cash positive in the final quarter of its fiscal year, driven by an improvement in intra-European and UK domestic travel as Covid lockdown measures eased. The carrier said it generated £40m in cash in the three months to September 30. It expects a headline pre-tax loss of £1.14bn – £1.17bn compared to consensus of £1.175bn.

Elsewhere, gambling firm Entain was little changed after it said third-quarter revenue rose, with in-shop volumes improving as Covid lockdown measures were lifted.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Bunzl Plc +2.34% +56.00 2,453.00
2 Coca-cola Hbc Ag +0.93% +22.00 2,400.00
3 Croda International Plc +0.87% +72.00 8,338.00
4 Severn Trent Plc +0.46% +12.00 2,625.00
5 Centrica Plc +0.40% +0.24 60.96
6 Ocado Group Plc +0.35% +5.50 1,571.00
7 Sse Plc +0.32% +5.00 1,559.50
8 United Utilities Group Plc +0.28% +2.80 985.40
9 Sage Group Plc +0.23% +1.60 709.60
10 Fresnillo Plc +0.20% +1.60 813.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Anglo American Plc -2.40% -68.00 2,763.00
2 International Consolidated Airlines Group S.a. -2.34% -4.26 177.74
3 Rolls-royce Holdings Plc -2.30% -3.34 142.14
4 Rio Tinto Plc -2.20% -112.00 4,989.00
5 Carnival Plc -2.16% -34.80 1,577.60
6 Micro Focus International Plc -2.12% -8.00 370.00
7 Prudential Plc -2.05% -30.50 1,457.50
8 Easyjet Plc -2.01% -13.00 635.00
9 Legal & General Group Plc -1.69% -4.80 279.40
10 Johnson Matthey Plc -1.47% -39.00 2,609.00

 

Europe open: Shares downbeat as Evergrande, inflation woes hit sentiment

European stocks headed back into negative territory at the opening on Tuesday as weak US markets and news of China Evergrande missing a third bond payment hit sentiment.

The pan-European Stoxx 600 dropped 1% in early trade, with all major regional bourses lower.

Hong Kong’s Hang Seng index shed 1.71% as debt-burdened China Evergrande missed its third round of bond payments in three weeks, intensifying market fears over contagion involving other property developers.

Reports from the region cited some bondholders saying they did not receive coupon payments totalling $148m on Evergrande’s April 2022, April 2023 and April 2024 notes due on Tuesday, after two other payments it missed in September.

US stocks fell overnight as investors fretted over surging oil prices and the impact of cost inflation ahead of major third quarter earnings results.

In the UK, job vacancies hit a 20-year high between July and September, while the unemployment rate fell in the three months to August as the jobs market continues to recover.

According to figures released on Tuesday by the Office for National Statistics, job vacancies rose by 318,000 from pre-pandemic January to March 2020 levels to 1.1 million, with accommodation and food services seeing a near-50,000 jump.

Meanwhile, the unemployment rate fell to 4.5% in the three months to August from 4.6% in the three months to July. The figures also showed that the number of payroll employees rose in September by 207,000 to a record 29.2m, and is now higher than it was before the pandemic.

“Despite US bond markets being closed for Columbus Day, inflation nerves continued to rattle market nerves driven by energy prices, which surged once again overnight,” said Oanda analyst Jeffrey Halley.

“Goldman Sachs downgraded its US growth forecasts overnight, and the quarterly earnings season, which starts this week, has equity markets on edge over whether profit forecasts will be tempered for 2022 given the rich valuations prevalent in stocks everywhere.

“Add in the creeping, but relentless implications of the Fed taper and it is no surprise that equity markets remain on edge.”

In equity news, shares in low-cost airline easyJet fell despite the company saying it turned cash positive in the final quarter of its fiscal year, driven by an improvement in intra-European and UK domestic travel as Covid lockdown measures eased.

The carrier said it generated £40m in cash in the three months to September 30. It expects a headline pre-tax loss of £1.14bn – £1.17bn compared to consensus of £1.175bn.

Swiss fragrance and flavour maker Givaudan slipped 2.3% despite reporting a sales growth of 7.7% in the first nine months of the year.

 

US close: Stocks end session lower ahead of Q3 earnings

Wall Street stocks closed lower on Monday as market participants geared up for the start of third quarter earnings season later in the week.

At the close, the Dow Jones Industrial Average was down 0.72% at 34,496.06, while the S&P 500 was 0.69% weaker at 4,361.19 and the Nasdaq Composite saw out the session 0.64% softer at 14,486.20.

The Dow closed 250.19 points lower on Monday, reversing modest gains recorded on Friday following a poor jobs report.

Monday’s principal focus was surging energy prices, with West Texas Intermediate crude jumping 1.45% to $80.50 per barrel.

Also weighing on sentiment was a report from Goldman Sachs that saw the bank cut its economic growth forecasts for 2022 to 4% from 4.4% and lower its 2021 estimate to 5.6% from 5.7%, pointing to the expiration of fiscal support from Congress and a slower-than-expected recovery in consumer spending as its reasoning.

Looking ahead, third quarter earnings season will kick off on Wednesday, with Delta Air LinesBlackRock and JP Morgan Chase all reporting earnings, while Goldman SachsBank of AmericaMorgan StanleyWells Fargo and Citigroup will follow later in the week.

No major data points or corporate earnings were released on Monday.

 

Tuesday newspaper round-up: Ryanair, City real estate, energy prices

Rish Sunak is poised to usher in cuts worth £2bn for government departments tasked with meeting the Tories’ flagship “levelling up” agenda, despite planning for the biggest tax raid in a generation. The Institute for Fiscal Studies (IFS) said the chancellor was on track to lift the UK’s tax burden to the highest sustained level in peacetime with a package of manifesto-busting tax increases at this month’s budget and spending review. – Guardian

Ryanair has been accused of barring passengers who pursued chargebacks against the airline during the pandemic from taking new flights this year – unless they return their refunds. An investigation by MoneySavingExpert (MSE) has found that holidaymakers who sought refunds from their credit card provider have faced last-minute demands of up to £600 if they want to board a Ryanair plane. During the lockdowns, Ryanair carried on flying many of its routes even though most tourists were in effect barred by government rules from travelling. – Guardian

German investors have ploughed £847m into City of London property so far this year, the second-highest level since 2013, in a boost for post-Brexit Britain. One in five property transactions in the Square Mile were carried out by German investors in the year to mid-September, according to findings from Savills, the estate agent. – Telegraph

As Westminster-watchers salivated at an extraordinary political row between the business department and the Treasury at the weekend over helping companies with high energy costs, industry chiefs looked on in despair. “We want the prime minister to now bang ministerial heads together,” Gareth Stace, director-general of UK Steel, told Times Radio yesterday. “If he does nothing, his ambition in terms of levelling up, the high-wage economy, will be in tatters.” – The Times

Rampant inflation and rising interest rates will increase the cost of servicing Britain’s £2.2 trillion debt by £15 billion a year, a leading think tank has warned. In its annual “green budget”, published yesterday, the Institute for Fiscal Studies said that the chancellor would have to account for a sharp rise in government borrowing costs even though the outlook for the public finances had improved overall. – The Times

 

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