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ADVFN Morning London Market Report: Monday 31 January 2022

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London open: Stocks rise on positive US cues; Vodafone rallies

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London stocks rose in early trade on Monday, taking their cue from Wall Street, where equity markets closed out the week in the black.

At 0825 GMT, the FTSE 100 was up 0.55% at 7,504.43.

Richard Hunter, head of markets at Interactive Investor, said: “Amid the global tightening cycle, the UK is also expected to raise interest rates again this week to 0.5% from the current 0.25% in an attempt to put the brakes on inflation, thus lessening the effect of the emerging cost of living crisis.

“The decision also comes at a fragile time, with the associated additional costs for businesses weighing against the assumed rise in hospitality and to some extent consumer sales, as the variant begins to subside and restrictions have all but disappeared.

“In the meantime, the market has taken its lead from the late rebound in the US trading session which also followed through to some strength in Asian markets. While the broad mark-up of shares in early exchanges takes the FTSE 100 to stand ahead by 1.7% in the year to date, the situation remains delicately poised and the current levels of volatility are likely to be echoed by a continuation of the currently skittish sentiment.”

In equity markets, Vodafone was the standout gainer on the top-flight index following reports the telecoms company has been targeted by activist investor Cevian, putting management under pressure to revamp its struggling performance. The Sweden-based investment firm has built up holdings in the communications giant in recent months, which has seen its share price almost halved in value since 2018. It also holds stakes in insurer Aviva and educational publisher Pearson.

Pearson also rose after saying it had bought the remaining 80% of skills verification operator Credly it does not own for an undisclosed sum.

Barratt Development was on the rise after Sky News City editor Mark Kleinman tweeted over the weekend that the housebuilders was set to announce its “first significant corporate acquisition for years”, with the target being “a smaller regional player”.

Elsewhere, British Airways and Iberia parent IAG was a high flier after Morgan Stanley resumed coverage of the shares at ‘overweight’.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Vodafone Group Plc +3.09% +3.94 131.56
2 Centrica Plc +3.05% +2.20 74.26
3 Scottish Mortgage Investment Trust Plc +3.02% +31.00 1,059.00
4 Carnival Plc +2.95% +37.60 1,313.40
5 Berkeley Group Holdings (the) Plc +2.35% +97.00 4,218.00
6 Spirax-sarco Engineering Plc +2.35% +300.00 13,090.00
7 Ocado Group Plc +2.25% +32.50 1,474.50
8 Auto Trader Group Plc +2.17% +14.20 667.60
9 Crh Plc +2.12% +78.00 3,752.00
10 Smurfit Kappa Group Plc +2.05% +79.00 3,924.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Bt Group Plc -3.10% -6.10 190.90
2 Tesco Plc -2.16% -6.55 296.85
3 Sainsbury (j) Plc -2.07% -6.20 292.90
4 Rio Tinto Plc -1.76% -95.00 5,291.00
5 Astrazeneca Plc -1.32% -116.00 8,651.00
6 Anglo American Plc -1.26% -42.00 3,279.50
7 Imperial Brands Plc -1.10% -19.50 1,747.00
8 Marks And Spencer Group Plc -1.01% -2.20 215.90
9 Associated British Foods Plc -0.82% -16.00 1,943.00
10 Hikma Pharmaceuticals Plc -0.63% -13.00 2,064.00

 

Europe open: Shares make strong start with eyes on central bank meetings

European shares made a strong start to the opening session of the week after Wall Street closed higher on Friday and investors eyed key central bank meetings this week.

The pan-European Stoxx 600 was up 0.93% in early deals after a battering last week as investors fretted about higher interest rates and geopolitical tensions due to the Ukraine/Russia border crisis.

Britain is expected to be the latest country to tighten monetary policy, with economists expecting a rise in interest rates to 0.5% from 0.25% in an attempt to put the brakes on inflation.

“The decision also comes at a fragile time, with the associated additional costs for businesses weighing against the assumed rise in hospitality and to some extent consumer sales, as the (Omicron Covid) variant begins to subside and restrictions have all but disappeared,” said Interactive Investor head of markets Richard Hunter.

Meanwhile, the European Central Bank holds its February meeting as well with inflation expected to again dominate the agenda.

“We do not expect any clear policy signals or decisions given that the council made major changes only in December. But the press conference may offer early clues on whether a gradual shift to a more hawkish stance is underway in the council,” said analysts at Oxford Economics.

“Doves will point to a January inflation print that is likely to show a sharp fall in core inflation on the back of large base effects and to still subdued wage growth. Hawks will point to energy prices that are well above levels assumed in the ECB forecasts and to lingering supply bottlenecks. This could keep inflation higher for longer and eventually lead to undue second round effects on wages.”

In equity markets, Vodafone shares gained on reports the telecoms company has been targeted by activist investor Cevian, putting management under pressure to revamp its struggling performance.

The Sweden-based investment firm has built up holdings in the communications giant in recent months, which has seen its share price almost halved in value since 2018.

Pearson rose after saying it had bought the remaining 80% of skills verification operator Credly it does not own for an undisclosed sum.

Barratt Development shares gained on a report over the weekend that the housebuilders was set to announce its first significant corporate acquisition for years.

Elsewhere, British Airways and Iberia parent IAG flew higher after Morgan Stanley resumed coverage of the shares at ‘overweight’.

 

US close: Major indices wrap up rollercoaster week with solid gains

Wall Street stocks recorded solid gains on Friday as a rollercoaster week for major indices drew to a close.

At the close, the Dow Jones Industrial Average was up 1.65% at 34,725.47, while the S&P 500 was 2.43% weaker at 4,431.85 and the Nasdaq Composite saw out the session 3.13% stronger at 13,770.57.

The Dow closed 564.69 points higher on Friday after a broadly flat session a day earlier as investors digested comments from Federal Reserve chairman Jerome Powell and a number of data points.

Friday’s primary focus, however, was data from the Commerce Department that revealed its December personal consumption expenditures price index had risen 4.9% year-on-year, ahead of expectations of a 4.8% gain for its fastest gain since September 1983. Alongside the inflation figure, personal income rose 0.3% month-on-month, slightly lower than the 0.4% estimate, while consumer spending declined 0.6%, less than the 0.7% predicted.

Elsewhere on the macro front, the University of Michigan‘s consumer sentiment index fell to 67.2 in December, down from the flash estimate of 68.7 and well below November’s reading of 70.6 to its lowest reading since 2011.

In the corporate space, Apple shares were up 6.98% at the end of trading after the tech behemoth posted its largest-ever single quarter revenue performance overnight despite supply challenges and the ongoing effects of the Covid-19 pandemic, while Chevron shares were in the red 3.52% after the firm’s fourth-quarter profits fell short of expectations.

The yield on the benchmark 10-year Treasury note was slightly lower ahead of the bell at 1.771%.

 

Monday newspaper round-up: EU regulations, Vodafone, Entain

Boris Johnson has announced plans for legislation to make it easier to rip up EU regulations and protections, amid criticism from Conservative MPs that the government has not taken sufficient advantage of Brexit. The plans claim to cut £1bn in red tape expenses for businesses, but Johnson gave no firm details on which regulations are intended to be repealed or enhanced, instead stating five principles that would be applied, including the value of sovereignty and creating new markets. – Guardian

Rishi Sunak is being urged by a leading centre-right thinktank to limit the impact of April’s controversial £12bn increase in national insurance contributions by shifting the burden of tax from work to wealth. Highlighting disquiet in Tory ranks over the looming national insurance rise, a report from Bright Blue has called for higher taxes on capital, inheritance and rents as a way of making the system fairer. – Guardian

Rishi Sunak has sunk millions of pounds of taxpayer funds into an online betting company and a luxury Caribbean firm selling holidays on private islands as controversy over investments made by the Government’s £1.1bn startups scheme grows. Taxpayer groups and gambling charities sounded the alarm over investments made under the Future Fund as criticism over wasteful Covid spending by the Chancellor mounts. – Telegraph

Richard Caring, the owner of the Ivy and Sexy Fish, is considering a bid for the restaurant group which houses The Wolseley and The Delaunay after a row with its largest shareholder plunged it into administration. Mr Caring, who also owns private members’ club Annabel’s, is due to meet with Corbin & King’s majority shareholder Minor International early this week over a potential deal, The Sunday Times reported. – Telegraph

London has been chosen by the gambling operator behind Ladbrokes and Sportingbet as the location for a £40 million global innovation technology hub. Entain may be one of the world’s biggest betting groups, but it is increasingly turning its focus to entertainment and its first innovation lab will be in Farringdon, close to the UK headquarters of TikTok and Snapchat. – The Times

Vodafone is expected to accelerate its transformation after a Swedish activist investor with stakes in Aviva and Pearson trained its sights on the FTSE 100 telecoms group. Cevian Capital, one of Europe’s biggest activists, has taken a stake in the company after a dismal share price performance, with the stock almost halving in value to 128p since the beginning of 2018, valuing Vodafone at £34 billion. – The Times

 

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