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ADVFN Morning London Market Report: Thursday 20 January 2022

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London open: Stocks edge down; AB Foods slumps on update

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London stocks fell in early trade on Thursday, having opened in the black, as investors digested news that China had cut lending rates.

At 0935 GMT, the FTSE 100 was down 0.4% at 7,563.32.

Neil Wilson, chief market analyst at Markets.com, said: “After a decent start for stocks in Europe, the main bourses turned broadly lower, after more selling in the US, whilst Asian markets snapped a week’s run of losses as China cut benchmark mortgage rates.

“As the UK and US tighten policy, they are leaving many peers behind…The Bank of Canada might hike next week, the RBA likely later this year. The ECB is way behind and looks deaf to cries of inflation – German PPI inflation rose to a record-breaking 24.2% in December, data this morning shows.

“The FTSE 100 marked a fresh post-pandemic high at almost 7,620 in early trade but turned lower to trade down about 0.3% after the first hour of trade.”

Overnight, China’s central bank trimmed two key lending rates in a bid to bolster activity in the country’s property sector and in order to help small businesses.

The People’s Bank of China cut its one-year loan prime rate by 10 basis points from 3.8% to 3.7%, as expected by economists, and the five-year loan prime rate by five basis points from 4.65% to 4.60%.

The reduction in the 10-year rate was the first since April 2020 and although the market consensus had been for a larger reduction, it was the first time in 21 months that both lending rates were reduced simultaneously.

In UK corporate news, Associated British Foods lost ground after it said fourth quarter sales at its Primark stores had been hit by the surge in Covid Omicron cases, but were now showing signs of recovery as it maintained full-year guidance.

Shell and BP gushed lower as oil prices dropped, while Compass and Games Workshop declined as they traded without entitlement to the dividend.

Consumer goods giant Unilever gained after it said late on Wednesday that it would not be lifting its £50bn offer for GlaxoSmithKline’s consumer healthcare business. Glaxo was on the back foot.

Network International rallied after it said full-year revenue and adjusted EBITDA were ahead of market expectations, while Spirent Communications rose after lifting its full-year expectations for adjusted operating profit.

Premier Foods advanced as it said full-year profit was set to be above market expectations after three strong quarters of trading and after the Mr Kipling brand enjoyed its “biggest ever” Christmas.

Clay and concrete building products manufacturer Ibstock rose after it said full-year profit was set to be “modestly” ahead of its previous expectations following strong trading in the final quarter.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Tui Ag +2.42% +5.90 249.80
2 Fresnillo Plc +2.07% +17.40 856.60
3 Hikma Pharmaceuticals Plc +1.88% +38.00 2,058.00
4 Rentokil Initial Plc +1.67% +8.60 524.60
5 Prudential Plc +1.55% +20.00 1,306.50
6 Micro Focus International Plc +1.53% +6.80 451.30
7 Pearson Plc +1.52% +10.00 670.00
8 Unilever Plc +1.44% +53.00 3,728.50
9 Scottish Mortgage Investment Trust Plc +1.25% +14.00 1,132.00
10 Burberry Group Plc +1.04% +19.50 1,886.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Lloyds Banking Group Plc -2.86% -1.54 52.34
2 Hiscox Ltd -2.05% -20.20 964.60
3 Associated British Foods Plc -1.97% -42.00 2,089.00
4 Compass Group Plc -1.93% -33.00 1,676.50
5 Glaxosmithkline Plc -1.90% -31.60 1,634.80
6 Carnival Plc -1.83% -26.40 1,419.40
7 Royal Dutch Shell Plc -1.80% -33.60 1,835.80
8 Bp Plc -1.75% -6.90 387.20
9 Royal Dutch Shell Plc -1.74% -32.60 1,838.80
10 Informa Plc -1.51% -8.60 560.40

 

Europe open: Shares lower as inflation worries hit sentiment

European stocks opened in subdued mood on Thursday despite a rally in Asian stocks overnight, as investors fretted about inflationary pressures.

The pan-European Stoxx 600 was down 0.10% in early deals after starting the session higher. Inflation worries continue to put a brake on equities with investors eyeing the potential path and pace of US rate hikes as the Federal Reserve tightens its pandemic-enforced loose monetary policy.

US markets were mixed with the tech-heavy Nasdaq falling sharply. Asian stock markets closed higher as China cut interest rates in response to a slowdown in economic growth and Japan reported a rise in export values.

The Chinese one-year loan prime rate was cut by 10 basis points, while the five-year LPR, which influences the pricing of home mortgages, was cut by 5 basis points, the first time since April 2020.

In equity news, shares in Swiss online pharmacy Zur Rose rose 5.6% to top the Stoxx 600 after a strong earnings report.

French industrial company Soitec plunged more than 14% to the bottom of the index after announcing that senior Atos executive Pierre Barnabe will succeed outgoing CEO Paul Boudre.

Deliveroo shares were up after the fast food delivery platform said the gross value of orders on its platform rose 36% year-on-year in the fourth quarter, resulting in its hitting the top of guidance with a 70% rise for the year.

Unilever climbed after abandoning its plans to buy GlaxoSmithKline’s consumer healthcare business, saying it would not raise its rejected £50bn offer.

 

US close: Major indices sharply lower as sell-off continues

Wall Street stocks closed lower yet again on Wednesday amid elevated bond yields, with the Nasdaq Composite falling into correction territory.

At the close, the Dow Jones Industrial Average was down 0.96% at 35,028.65, while the S&P 500 was 0.97% weaker at 4,532.76 and the Nasdaq Composite saw out the session 1.15% softer at 14,340.26.

The Dow closed 339.82 points lower on Wednesday, extending losses recorded in the previous session as market participants digested more corporate earnings and kept one eye on government bond yields sitting at pandemic-era highs.

Corporate earnings were again one of the session’s primary focusses on Wednesday, with Bank of America beating estimates on the Street after releasing its Covid-19 pandemic-related loan loss reserves, while Procter & Gamble earnings topped estimates and raised its 2022 full-year forecasts.

UnitedHealth reiterated its full-year guidance after its fourth-quarter earnings came in slightly ahead of estimates and Morgan Stanley posted quarterly profits that beat expectations.

Bond yields also still drew investor attention as they remained elevated, with the yield on the benchmark 10-year Treasury note hovering around 1.869% at the end of play.

On the macro front, mortgage applications rose 2.3% in the US last week, according to the Mortgage Bankers Association, driven by a 7.9% increase in loans to buy a home, which was somewhat offset by a 3.1% drop in refinancing applications to their lowest level in over two years.

The move comes as the MBA’s weekly measure of the average contract rate on a 30-year, fixed-rate mortgage climbed to 3.64% in the week ended 14 January, up from 3.52% a week earlier to the highest level seen since March 2020, when the pandemic triggered a recession and drove borrowing costs to historic lows.

Elsewhere, US homebuilding unexpectedly increased in December but elevated prices for materials following a government decision to almost double duties on imported softwood lumber from Canada to 17.9% after a review of its anti-dumping and countervailing duty orders could potentially limit activity over the next few months.

According to the National Association of Housebuilders, housing starts rose 1.4% to a seasonally adjusted annual rate of 1.7m units last month, according to the Commerce Department, while data for November was revised slightly lower to a rate of 1.67m units. Economists had forecast starts slipping to 1.65m.

 

Thursday newspaper round-up: Meta, AA, Go-Ahead, carbon emission permits

An extraordinary battle pitting New York multimillionaires against their billionaire neighbours is expected to reach fever pitch on Thursday when local politicians in the Hamptons vote on proposals to close an airport in the super-rich enclave. The East Hampton town board is expected to vote in favour of a plan to “deactivate” the local airport that buzzes with helicopters and private jets ferrying the uber-wealthy from Manhattan to their luxury beach houses. – Guardian

Mark Zuckerberg has a fascination with ancient Rome, but last week a court decision threatened the future of another empire: his own. Judge James Boasberg said the US competition watchdog can pursue the break up of Meta – the owner of Facebook, Instagram and WhatsApp – paving the way for a costly and lengthy legal battle. Boasberg had dismissed the Federal Trade Commission’s first attempt in June, but this time he was swayed by a revised FTC complaint under its new chair, Lina Khan. – Guardian

The AA has told unvaccinated staff that they will no longer receive sick pay if they are unable to work while self-isolating due to coming into contact with someone who has Covid. In an email sent to the AA’s 7,000 staff and seen by The Telegraph, the roadside assistance company said that workers who turn down the vaccine and have no medical exemption face unpaid periods of quarantine, which lasts 10 days for unjabbed contacts of a Covid case. – Telegraph

Good chefs have always been in high demand but Covid means they are now scarcer than ever, scattered across the world rather than in Britain. Neil Harris, at recruiter Hashtag Chefs, says: “A lot of Europeans went home and never came back. A lot of people like the Aussies, New Zealanders and South Africans are not coming over at the moment because of the pandemic.” Salaries are up by as much as 30pc, says Harris. On Wednesday Bob Bob Ricard, a French and Russian-themed restaurant in London’s Soho district, advertised a salary of £91,000 for a head chef – plus on-site dining of up to £6,000 per year – as restaurants and hotels compete for talent. – Telegraph

Troubles at Go-Ahead deepened after the transport group announced yesterday that the company’s senior independent director and head of the board’s audit committee would stand down with immediate effect after further votes against his appointment at the recent annual meeting came to light. Shares in Go-Ahead are suspended from trading after the company discovered last year that “serious errors” had led to its failure to return at least £25 million to the taxpayer from its operation of Southeastern Trains. – The Times

Industrialists have criticised a government decision not to intervene to push down the price of carbon-emission permits, stoking a row between ministers and business over rising energy costs. Prices have nearly doubled in the past six months, from £40 per tonne of carbon dioxide to more than £70. The spike has triggered a “cost containment mechanism” that allows ministers to step in but they have refused to do so for a second month in a row. – The Times

 

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