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ADVFN Morning London Market Report: Friday 29 April 2022

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London open: Earnings focus sees stocks start stronger

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London stocks were in positive territory on Friday morning, following a solid session on Wall Street overnight, as investors waded through another flood of earnings reports.

At 0902 BST, the FTSE 100 was up 0.36% at 7,536.58, and the FTSE 250 was ahead 0.83% at 20,790.14.

“European markets have opened stronger on the final session of the month, with earnings front-and-centre again,” said Interactive Investor head of investment Victoria Scholar.

“Last night, Meta lifted the US equity market with the Nasdaq closing up by more than 3%, while the VIX volatility index shed 3.5%.

“There’s a sense of ebullience to round up a torrid month across global markets with a sea of green across Asia and positive momentum carrying forward to the European session.”

On the economic front, a closely-watched survey showed UK house price growth slowing more than expected in April amid the ongoing squeeze on household incomes and rising interest rates.

According to lender Nationwide, house prices rose at a month-on-month pace of 0.3%, which marked their slowest clip since September.

That dragged the annual rate of increase down to 12.1% from 14.3% in March, below consensus expectations for 12.6%.

“Nevertheless, it is surprising that conditions have remained so buoyant, given mounting pressure on household budgets which has severely dented consumer confidence,” said Nationwide chief economist Robert Gardner.

Gardner attributed that to the strikingly large proportion of Britons, 38%, who were either moving or planning to do so, as per the results of a separate survey conducted by Nationwide.

Elsewhere, industry research showed the number of shops standing empty fell in the first quarter, as the UK economy reopened following the worst of the pandemic.

According to the latest BRC-LDC Vacancy Monitor, the overall vacancy rate decreased to 14.1% in the first three months of the year, 0.3 percentage points down on the fourth quarter and only the second quarter of falling vacancy rates since the start of 2018.

All locations reported falls, with vacancies easing to 14.1% from 14.4% three months earlier on the high street and to 19.0% from 19.1% in shopping centres.

In retail parks, the number of empty shops eased by 0.7 percentage points to 10.6%.

“The economy has fully reopened, with more city workers back in the office and more tourists out on the streets,” said Helen Dickinson, chief executive of the British Retail Consortium.

“This allowed some businesses to grow and invest in repurposing and reopening empty units, especially in retail parks and high streets.”

In equities, packaging company Smurfit Kappa was in the green, after reporting that both revenue and underlying earnings had grown by a third in the three months ended 31 March as a result of “significant, ongoing capital investment” it had made.

The firm said revenues were up 33% year-on-year at €3.02bn, while EBITDA had also grown 33% to €514.0m, with an EBITDA margin of 17% for the period.

NatWest was managing small gains after it reported soaring first quarter profit driven by a rise in interest rates and income.

The state-backed bank said pre-tax profits for the three months to 31 March rose 41% to £1.2bn, up from £885m the previous year, and ahead of the £755m average of analyst forecasts compiled by the bank.

Education publisher Pearson was up after saying it would receive a one-off tax boost this fiscal year as it maintained annual guidance.

The company on Friday said its effective tax rate would fall to 15-17% from 21% after the statute of limitations lapsed on a number of provisions.

On the downside, building materials supplier Travis Perkins was falling after it said higher prices would form a higher proportion of sales growth this year due to inflation, as it posted a rise in first-quarter sales and maintained guidance.

Its total sales for the three months to 31 March were up 13.6%.

“The group’s forecast for materials price inflation, which was originally expected to ease into the second half of the year, is now more uncertain with pricing likely to form a higher proportion of sales growth across the year than previously thought,” the company said.

Elsewhere, manufacturer Rotork was falling despite trading in line with internal expectations in the first quarter, with order intake growing “high-single digits” year-on-year on an organic constant currency basis, as a fresh wave of Covid cases in China led to the shuttering of its key Shanghai factory.

Computer services provider Computacenter was tumbling after it reported “strong top-line growth” in the first quarter, with growth in adjusted pre-tax profits at a more modest level due to a “very large volume customer” diluting overall margins.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Johnson Matthey Plc +8.63% +161.50 2,033.00
2 Mondi Plc +3.73% +54.50 1,515.50
3 Carnival Plc +3.20% +40.00 1,289.50
4 Scottish Mortgage Investment Trust Plc +3.09% +27.40 913.60
5 Ocado Group Plc +2.99% +27.20 938.20
6 Smurfit Kappa Group Plc +2.97% +97.00 3,368.00
7 Sainsbury (j) Plc +2.49% +5.70 234.40
8 Smith (ds) Plc +2.36% +7.70 333.30
9 Melrose Industries Plc +2.36% +2.75 119.20
10 Burberry Group Plc +2.35% +37.00 1,610.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Hikma Pharmaceuticals Plc -4.61% -93.50 1,935.50
2 Vodafone Group Plc -2.19% -2.78 124.26
3 Hargreaves Lansdown Plc -1.75% -16.40 921.00
4 National Grid Plc -1.35% -16.50 1,209.00
5 Severn Trent Plc -0.82% -26.00 3,142.00
6 United Utilities Group Plc -0.77% -9.00 1,155.50
7 International Consolidated Airlines Group S.a. -0.72% -1.04 143.50
8 Glaxosmithkline Plc -0.57% -10.40 1,800.00
9 Flutter Entertainment Plc -0.55% -44.00 7,996.00
10 Hsbc Holdings Plc -0.45% -2.20 491.85

 

Europe open: Shares make strong start as earnings please

European markets made a strong start to the final session of the week as another raft of strong corporate earnings drove sentiment.

The pan-European Stoxx 600 index was up 1% with all major bourses following suit after positive Wall Street and Asia sessions.

US stock futures pointed to a mixed open on Friday in early pre-market trade, with Nasdaq futures pulling back after Amazon‘s and Apple‘s quarterly results disappointed.

On the data front, the French economy stagnated in the first quarter of the year as weak domestic demand continued despite an easing of Covid-19 restrictions.

The euro zone’s second-largest economy was unchanged following growth of 0.8% in the final quarter of 2021, with economists expecting a quarterly

In equity news, Dutch investment group Prosus, which owns a 29% stake in Tencent, tracked the Chinese tech giant’s rise on Friday after China said it would implement measures to aid the development of its platform economy.

German consumer goods group Henkel slid more than 7% after cutting its 2022 profit forecast on the back of rising material costs as a result of the Russia-Ukraine war.

Dutch food and biochemicals group Corbion fell after releasing quarterly results.

 

US close: Dow adds more than 600 points despite GDP fall

Wall Street stocks were firmly in the green by the close on Thursday, as corporate earnings continued to stream in and investors digested an unexpected decline in first-quarter gross domestic product.

At the close, the Dow Jones Industrial Average was up 1.85% at 33,916.39, as the S&P 500 added 3.47% to 4,287.50 and the Nasdaq Composite was 3.06% higher at 12,871.53.

The Dow closed 614.46 points higher on Thursday, extending gains recorded in the previous session.

“The Nasdaq has seesawed its way through earnings season, ultimately ending 10% down in the last month,” said Hargreaves Lansdown lead equity analyst Sophie Lund-Yates.

“Huge insecurities around the long-term attractions of growth stocks in a high inflationary environment have sent jitters through global markets.

“Long seen as the untouchables of the investing universe, big tech has had a rude awakening – there have been times in recent weeks when some big tech names have come within a whisker of being considered truly valuable.”

Lund-Yates said belt-tightening had caused the investment cases of some huge names to be called into question, with “sticky” subscription-based revenues not proving as reliable as once thought.

“The spate of volatility is unlikely over for growth names, but for those with a long-term investing horizon there are some diamonds among this rough.

“With Apple and Amazon the latest in the spotlight, it has been a very big finish for the end of earnings season, and for very different reasons”

On the data front, US gross domestic product declined at a 1.4% clip in the first quarter, according to the Commerce Department, missing estimates for a 1% increase.

The negative growth marked an abrupt reversal for the US economy that was coming off its best showing in 38 years.

Looking at bonds, the yield on the benchmark 10-year Treasury note was trading slightly higher at 2.852% following the GDP reading.

In other macro news, the US personal consumption expenditure price index increased 6.4% year-on-year in February, according to the Bureau of Economic Analysis, accelerating from a downwardly revised 6.0% increase in the previous month for the steepest rise since February 1982.

Gains were seen in prices of goods, up 9.6%, while services rose at the same 4.6% pace as in January.

Finally, US initial jobless claims dropped 180,000 in the week ended 23 April, according to the Labor Department, bang in line with analysts’ expectations and down from an upwardly revised print of 185,000 a week earlier.

In the corporate space, shares in Facebook parent Meta Platforms rocketed 17.59% after the social media giant reported better than expected quarterly earnings overnight despite posting some disappointing earnings.

Chip behemoth Qualcomm was ahead 9.69%, meanwhile, on the back of some strong quarterly earnings, while PayPal advanced 11.48% despite issuing weak second-quarter guidance.

As far as Thursday’s earnings were concerned, Eli Lilly jumped 4.27% after reporting a quarterly earnings beat after Covid-19 antibodies revenue surged 81%, while Merck added 4.94% after its first quarter worldwide sales came in at $15.9bn- an increase of 50% year-on-year.

Fast-food giant McDonald’s gained 2.85% after it beat Wall Street expectations with first quarter revenues of $5.67bn, and adjusted earnings per share of $2.28 each.

Mastercard rose 4.77% after its earnings came in ahead of expectations thanks to a heightened level of travel spending, and Twitter, in possibly its last full quarter as a public company, was up 0.97% after it reported declining revenues despite a jump in users.

On the downside, Stanley Black & Decker lost 8.63% after it cut full-year earnings guidance to $9.50 per share, despite posting a 20% jump in first quarter revenues, while Caterpillar slipped 0.71% after earnings topped estimates.

Comcast tumbled 6.19% even after its first quarter figures beat across the board, boosted by both media and theme park revenues.

 

Friday newspaper round-up: BBC licence fee, Gazprom, Amazon, Apple, inflation

Ministers have formally signalled the death of the licence fee after deciding to overhaul the BBC’s 100-year-old funding model. In the first big update to British broadcasting laws for nearly 20 years, the government said it would set out a timetable for a review of the licence fee over the coming months, during which alternatives would be considered. – The Times

Boris Johnson is under increasing pressure to take immediate disciplinary action against the Conservative MP accused of watching pornography in the House of Commons. The chief whip issued a statement on Wednesday suggesting the matter should be referred to parliament’s Independent Complaints and Grievance Scheme (ICGS), which deals with sexual harassment and other disciplinary matters. But senior Tories questioned why he had not taken action directly against the MP, whose alleged behaviour was witnessed by two female colleagues in recent months. – Guardian

The Kremlin has earned a record profit from its state-owned energy company Gazprom as Britain scrambles to free itself from foreign gas supplies amid fears the West could be cut off. Gazprom profits surged to two trillion roubles (£22bn) in 2021, the company announced on Thursday, with its finances expected to be buoyed again this year as it cashes in on sharply higher gas prices for its European customers following Vladimir Putin’s invasion of Ukraine. – Telegraph

Amazon rattled Wall Street last night by unexpectedly announcing its first quarterly loss since 2015 and forecasting a slowdown in growth as people curtail their online spending in the face of rampant inflation. Shares in the world’s largest retailer dropped by almost 12 per cent in after-hours trading after it reported its smallest rise in sales in two decades. – The Times

Some of Britain’s biggest seaports are considering legal action against the government to recover the costs of building border control posts they fear will never be used, after confirmation that post-Brexit import checks will be delayed for a fourth time. Physical checks on fresh food and plants from the EU were due to begin in July but have been pushed back to the end of 2023, the Brexit opportunities minister, Jacob Rees-Mogg, confirmed in a written statement published on Thursday. Instead, he announced plans to digitise all checks and paperwork at the border, with a new strategy published in the autumn. – Guardian

City insurers are poised to pour billions of pounds into Britain’s energy security following a post-Brexit overhaul of EU rules. Rishi Sunak, the Chancellor, launched a consultation on Thursday aimed at radically changing the Solvency II rulebook governing British insurers. The reforms will allow FTSE 100 insurance giants such as Aviva, Legal & General and Phoenix to collectively plough more than £80bn into the economy, including into assets such as green energy infrastructure. – Telegraph

Three of Britain’s biggest consumer businesses yesterday added to the gloom surrounding the prospects for inflation this year. Simon Roberts, chief executive of J Sainsbury, said that “customers are watching every penny and every pound” as he warned that the supermarket would make lower profits. – The Times

Apple on Thursday reported strong quarterly results despite supply shortages, but warned that its growth slowdown is likely to deepen. The company said it’s still struggling to get enough chips to meet demand and is contending with Covid-related shutdowns at factories in China that make iPhones and other products. Although initial results for the January-March period topped analysts’ projections, the good news was quickly eclipsed when management warned of trouble ahead during a conference call. – Guardian

Britain is sending 8,000 troops to Eastern Europe in one of the largest deployments since the Cold War. Tanks, artillery guns, armoured assault vehicles and aircraft are also being sent to bolster Nato forces, in what Ben Wallace, the Defence Secretary, described as a “show of solidarity and strength”. – Telegraph

One of the country’s most senior civil servants has put himself at odds with the Government over working from home by issuing a public statement in support of the beleaguered head of the Passport Office. Matthew Rycroft, permanent secretary at the Home Office, said that where the Passport Office’s director-general worked had “precisely zero bearing” on the crisis engulfing her organisation. – Telegraph

The premier of the British Virgin Islands (BVI) has been arrested in a sting operation in Miami on charges of conspiring to import cocaine into the United States and money laundering. The BVI governor, John Rankin, confirmed in a statement that Andrew Fahie had been arrested on Thursday morning, saying: “I realise this will be shocking news for people in the territory. And I would call for calm at this time.” – Guardian

 

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