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ADVFN Morning London Market Report: Monday 24 January 2022

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London open: Stocks edge lower amid Russia-Ukraine tensions; Unilever rallies

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London stocks edged lower in early trade on Monday as tensions grew between Russia and Ukraine, with all eyes on this week’s US Federal Reserve meeting.

At 0850 GMT, the FTSE 100 was down 0.2% at 7,478.39.

Richard Hunter, head of markets at Interactive Investor, said: “The Federal Reserve meeting later this week is expected to confirm the fears which investors have been harbouring so far this year, namely that that apart from an acceleration of tapering, interest rate cards are also likely to pepper the remainder of 2022.

“The current consensus is for an initial hike in March, followed by a further two or three rises which could take the rate to 1% by year end. While the moves are increasingly necessary given relatively rampant inflation, they also bring the likelihood of dampening earnings prospects.

“More broadly, the apparently worsening of relations between Russia and Ukraine has put investors on alert, as any possible attacks by Russia will have wider implications which other major powers will be unable to ignore. Whether this results in military action or strict sanctions remains to be seen, but in any event the developments are adding to general investor unease.

“This cocktail of concerns also swept through Asian markets and landed at the door of UK markets in early exchanges.”

In equity markets, housebuilders were under the cosh, with Barratt and Berkeley both lower after downgrades at Jefferies.

On the upside, Unilever was the top riser on the FTSE 100 following reports that Nelson Peltz’s activist hedge fund Trian has built a stake in the consumer goods maker.

Vodafone gained following a report that it has approached the Hong Kong owners of rival mobile phone company Three UK about a merger amid rumours the company itself could be a takeover target for a predator. According to the Mail on Sunday, Vodafone held talks late last year with Asian conglomerate CK Hutchison, owner of Three UK, about buying its rival.

Computacenter rose as it forecast annual profits to be slightly in excess of £250m after a better-than-expected fourth quarter despite a higher pound and supply shortages.

Outside the FTSE 350, De La Rue tumbled nearly 30% after the banknote printer warned over full-year profits, pinning the blame on Covid-related disruptions and supply chain issues.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Unilever Plc +5.43% +199.50 3,874.50
2 Vodafone Group Plc +4.71% +5.54 123.08
3 Hargreaves Lansdown Plc +2.27% +29.50 1,331.00
4 Bt Group Plc +1.99% +3.75 192.50
5 Imperial Brands Plc +0.98% +17.00 1,748.00
6 British American Tobacco Plc +0.83% +26.00 3,164.00
7 Sainsbury (j) Plc +0.56% +1.60 285.30
8 Tesco Plc +0.47% +1.35 290.10
9 Sage Group Plc +0.43% +3.40 791.60
10 Direct Line Insurance Group Plc +0.33% +1.00 302.10

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Barratt Developments Plc -4.51% -30.40 644.00
2 Scottish Mortgage Investment Trust Plc -3.33% -37.00 1,072.50
3 Evraz Plc -3.18% -17.20 523.40
4 Persimmon Plc -3.10% -79.00 2,470.00
5 Berkeley Group Holdings (the) Plc -2.97% -130.00 4,240.00
6 Pearson Plc -2.97% -19.60 639.40
7 Ocado Group Plc -2.84% -40.50 1,385.00
8 Taylor Wimpey Plc -2.84% -4.45 152.20
9 International Consolidated Airlines Group S.a. -2.62% -4.14 153.66
10 Next Plc -2.48% -186.00 7,300.00

 

Europe open: Ukraine tensions hit shares; Kingspan out of favour

European shares opened lower on Monday as investors continued to fret about the pace of interest rate rises and growing US/Russian tensions over Ukraine.

The pan-European STOXX 600 index slipped 0.35% in early deals with Asian stocks closing lower.

Investors are also eyeing a possible Russian attack on Ukraine as the US State Department pulled out family members of its embassy staff in Kyiv.

“The Federal Reserve meeting later this week is expected to confirm the fears which investors have been harbouring so far this year, namely that that apart from an acceleration of tapering, interest rate cards are also likely to pepper the remainder of 2022,” said Interactive Investor head of markets Richard Hunter.

“The current consensus is for an initial hike in March, followed by a further two or three rises which could take the rate to 1% by year end. While the moves are increasingly necessary given relatively rampant inflation, they also bring the likelihood of dampening earnings prospects.”

In equity news, shares in building cladding maker Kingspan fell more than 6% as the UK government threatened to restrict trading unless the industry paid to fix dangerous housing in the wake of the 2017 Grenfell tower fire which killed 72 people.

Renault gained 3.6% as the French carmaker, Japan’s Nissan and Mitsubishi Motors reportedly planned to triple their investment to jointly develop electric vehicles.

Unilever climbed 4.6% after reports that activist hedge fund Trian Partners, owned by Nelson Peltz, had built a stake in the consumer goods company.

Vodafone was up 4% on a report the company and Iliad were in talks to strike a deal in Italy that would combine their respective businesses.

 

US close: Major indices sharply lower as bond yields remain in focus

Wall Street stocks closed lower again on Friday as Netflix weighed on the tech-heavy Nasdaq and bond yields eased off somewhat but remained elevated.

At the close, the Dow Jones Industrial Average was down 1.30% at 34,265.37, while the S&P 500 was 1.89% softer at 4,397.94 and the Nasdaq Composite saw out the session 2.72% weaker at 13,768.92.

The Dow closed 450.02 points lower on Friday, extending losses recorded in the previous session after this week’s jobless claims figures came in hotter than expected.

The yield on the benchmark 10-year Treasury note was still in focus on Friday, although the note slipped back slightly and was hovering at around 1.763% ahead of the Federal Reserve Bank’s two-day meeting next week.

In the corporate space, Netflix shares tumbled after the streaming giant’s fourth-quarter earnings revealed a slowdown in subscriber growth throughout the period, while Peleton shares were also in focus after news broke that the company will temporarily cease production of its fitness products.

On the macro front, the Conference Board‘s leading index increased 0.8% in December to 120.8, following a 0.7% increase in November, suggesting the economy will continue to expand well into the spring.

No major earnings were released on Friday.

 

Monday newspaper round-up: Gambling industry, rate hikes, Unilever

Britain’s biggest cities have lost almost a year’s worth of sales during the coronavirus pandemic as lockdowns and a lack of office workers and tourists caused a collapse in consumer spending. As offices have started to reopen following the relaxation of plan B restrictions, the Centre for Cities said Covid-19 had “levelled down” historically more prosperous high street destinations. – Guardian

A committee of MPs has produced a report criticising the gambling industry regulator for trying to reduce addiction and urging ministers to take it into special measures. The findings by the all-party parliamentary group (APPG) on betting and gaming have been described as “ludicrous” by a campaigner for regulatory reform and met with a frosty reception from the regulator. – Guardian

Office workers returning to their desks this week will no doubt mark their comeback with a lengthy analysis of the morning commute. Miserable and footsore, they will reunite with colleagues by regaling their tales of nightmare train delays and packed carriages. As the trains fill up over the coming weeks, so too will the everyday grumbles of the commuter as pre-pandemic frustrations resurface. – Telegraph

The Bank of England has taken too long to raise interest rates and will need to “move faster” to get a grip on inflation, one of its former deputy governors has said. Sir Charlie Bean, who was a senior official on Threadneedle Street throughout the financial crisis, criticised the Bank’s recent decision to hold off from raising rates until December and said households should brace for a looming “shock”. – Telegraph

Unilever’s management is facing more difficulties after it emerged that Nelson Peltz’s activist hedge fund had acquired an interest in the group. News that Trian Partners has taken a position in the company was disclosed by the Financial Times yesterday after a torrid week for Unilever in which its £50 billion pursuit of GlaxoSmithKline’s consumer arm was abandoned in the face of investor opposition. – The Times

 

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