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ADVFN Morning London Market Report: Tuesday 25 January 2022

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London open: Stocks recover after positive Wall St close


London stocks rose in early trade on Tuesday, recovering from heavy losses in the previous session and taking their cue from a positive close on Wall Street.

At 0830 GMT, the FTSE 100 was up 0.7% at 7,344.57, having slumped 2.6% on Monday amid growing tensions between Russia and Ukraine.

Investors were digesting the latest figures from the Office for National Statistics, which showed that government borrowing fell more than expected in December thanks to improved tax revenues.

Public sector net borrowing, excluding state banks, fell by £7.6bn from December 2020 to £16.8bn, coming in below consensus expectations of £18.5bn, as tax receipts rose. This marked the fourth-highest December borrowing figure since monthly records began in 1993.

Tax receipts were up £6.2bn on the year, while government spending fell £1bn to £86.7bn. Meanwhile, interest payments increased by £5.4bn on the year to £8.1bn in December.

For the 2021/22 financial year so far, Britain has borrowed £146.8bn, down £129.3bn from the same period a year ago.

Bethany Beckett, UK economist at Capital Economics, said public sector net borrowing in December was broadly in line with the Office for Budget Responsibility’s forecast from last October. “But, with inflation set to keep pushing higher until April, borrowing is likely to return to overshooting the OBR’s forecast in the coming months.”

Market participants were eyeing the latest policy announcement from the US Federal Reserve due on Wednesday.

Richard Hunter, head of markets at Interactive Investor, said: “An increasingly hawkish Federal Reserve is expected to be confirmed with a wind down of easing and an indication of interest rate hikes largely expected. At the same time, the persistently high level of inflation at present has led some observers to wonder whether the Fed is actually behind the curve, and whether any monetary tightening could be even more harsh than anticipated.

“More positively, the message may be delivered to reflect the likely improvement in economic fortunes as the variant subsides, allowing the recovery to resume and with the possibility of full employment, thus easing some of the inflationary concerns. Equally, the falls seen this year are enough to tempt in some buyers on the dips, on the basis of easing supply chain blockages and what is still hoped will be a strong earnings season.”

In equity markets, Royal Mail rallied even as it said it was axing 700 managers at a cost of £70m, and lowered its annual profit outlook.

Capricorn Energy was also trading up after saying it was “very encouraged” by the initial operating performance of its newly-acquired Western Desert Assets in Egypt, with production growth ahead of expectations.

On the downside, Unilever lost ground following reports the consumer goods giant is planning to slash thousands of jobs after its failed £50bn bid for GlaxoSmithKline’s consumer healthcare arm.


Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Micro Focus International Plc +3.35% +14.00 431.80
2 Tui Ag +2.92% +6.90 243.20
3 Antofagasta Plc +2.91% +39.50 1,396.00
4 Carnival Plc +2.86% +36.60 1,314.80
5 Scottish Mortgage Investment Trust Plc +2.76% +28.00 1,042.50
6 Rolls-royce Holdings Plc +2.65% +3.00 116.00
7 Standard Chartered Plc +2.64% +12.90 500.80
8 Informa Plc +2.54% +13.40 540.40
9 Anglo American Plc +2.42% +78.00 3,299.00
10 Lloyds Banking Group Plc +2.42% +1.19 50.46


Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Imperial Brands Plc -1.93% -33.50 1,702.50
2 British American Tobacco Plc -1.81% -57.50 3,127.00
3 Burberry Group Plc -1.51% -28.50 1,857.50
4 Halma Plc -1.47% -36.00 2,407.00
5 Intertek Group Plc -1.44% -76.00 5,208.00
6 Auto Trader Group Plc -0.94% -6.20 653.00
7 Glaxosmithkline Plc -0.85% -13.80 1,600.80
8 Sainsbury (j) Plc -0.67% -1.90 282.10
9 Bunzl Plc -0.63% -17.00 2,682.00
10 Spirax-sarco Engineering Plc -0.55% -70.00 12,620.00


Europe open: Shares steady after Monday’s sell-off

European shares were back in the green on Tuesday at the open on the back of a firmer Wall Street and despite increased tensions over Ukraine.

The pan-European Stoxx 600 was up 0.6% in early deals. Monday’s 3.8% slump was the worst since June 2020 as a military build-up on Ukraine’s border with Russia saw investors dump equities.

In equity news, computer peripherals-maker Logitech International jumped 7% after raising its earnings forecast for the current fiscal year.

Watchmaker Swatch Group climbed 2.7% as it forecast double-digit sales growth in local currencies this year.

Ericsson topped the Stoxx with a 7.6% gain as it reported better-than-expected fourth-quarter earnings, helped by higher sales of telecoms gear with more countries rolling out 5G networks.

Royal Mail shares gained as the British postal carrier reported a smaller-than-expected fall in parcel volumes over Christmas, and despite lowering annual profits guidance as it announced 700 managerial job cuts.

At the bottom of the index, Danish IT consultancy Netcompany fell more than 6% after its interim full-year earnings report.

Credit Suisse slipped 0.3% after the scandal-hit bank issued a profits warning as it flagged fresh legal costs and said business in its trading and wealth management divisions had slowed.


US close: Stocks end session higher as Dow stages biggest comeback since March 2020

Wall Street stocks closed slightly on Monday as market participants piled on battered tech stocks following a sharp sell-off at the end of last week.

At the close, the Dow Jones Industrial Average was up 0.29% at 34,364.50, while the S&P 500 was 0.28% firmer at 4,410.13 and the Nasdaq Composite saw out the session 0.63% softer at 13,855.13.

The Dow closed 99.13 points higher on Monday, taking a small bit out of heavy losses recorded in the previous session after Netflix weighed on the tech-heavy Nasdaq.

Stocks halted their recent fall on Monday as the Nasdaq Composite, which was down more than 4% early on in the session, still managed to close out the day’s trading in the green – the first time that has happened since 2008. The Dow also staged its largest intraday comeback since March 2020.

The CBOE Volatility Index, commonly referred to as Wall Street’s “fear gauge”, hit its highest level since November 2020, surpassing the 38 level at its intraday highs.

Market participants were looking ahead to the central bank’s two-day policy meeting on Wednesday, with investors hoping to gather any hints on exactly how much the Fed will look to raise interest rates by in 2022 and when it will start doing so.

Also in focus, the yield on the benchmark 10-year Treasury note remained elevated at around 1.764% and roughly a quarter of a percentage point higher for the year-to-date.

On the macro front, the Chicago Federal Reserve‘s national activity index printed at -0.15 in December, down from 0.44 in November and short of estimates for a reading of 0.25.

Elsewhere, a flash reading of IHS Markit‘s manufacturing PMI revealed that US business activity expanded its slowest pace in 18 months January amid a winter surge in new Covid-19 cases. According to the report, IHS’ output index fell to a reading of 50.8 from 57.0 in December, while the flash composite orders index slipped to a reading of 55.0 from 56.6 in December

In the corporate space, Halliburton declared a quarterly dividend of $0.12 per share as it posted fourth-quarter revenues and earnings per share that well and truly beat the firm’s 2020 performance, while Peloton shares closed almost 10% higher after bouncing back over 11% on Friday.

IBM shares were up more than 6% in after-hours trading after the company’s latest batch of quarterly earnings topped expectations, while MicrosoftTesla and Apple will publish their latest quarterly figures later on in the week.


Tuesday newspaper round-up: Meta, Aviva Investors, Govia Thameslink

Mark Zuckerberg has announced his social media empire is building what he claims is the world’s fastest artificial intelligence supercomputer as part of plans to build a virtual metaverse. The Facebook founder said in a blogpost that the metaverse, a concept that blends the physical and digital world via virtual and augmented reality, will require “enormous” computing power. The AI supercomputer, dubbed AI Research SuperCluster (RSC) by Zuckerberg’s Meta business, is already the fifth fastest in the world, the company said. – Guardian

Aviva Investors, an important UK asset manager, has put the directors of 1,500 companies on notice that it is willing to seek their removal if they fail to show enough urgency in tackling issues including the climate crisis and human rights. The firm said the way it votes on the re-election of company board members in the upcoming AGM season would be heavily influenced by its four key stewardship priorities for the year, which also include biodiversity and executive pay. – Guardian

The biggest train operator in Britain is racing to avoid nationalisation as it struggles to overcome accounting failures in time to renew its contract. Plans have been drawn up to take Govia Thameslink into public control after its co-owner, Go-Ahead, on Monday delayed its accounts for a second time following a scandal at another of its rail franchises. – Telegraph


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