ADVFN Morning London Market Report: Thursday 9 July 2020

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London open: Stocks steady as Persimmon rallies, Rolls-Royce slumps

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London stocks were steady in early trade on Thursday following weakness in the previous session, with gains in the housebuilding sector helping to offset heavy falls from the likes of Rolls-Royce and National Grid.

At 0840 BST, the FTSE 100 was flat at 6,154.16.

Oanda analyst Craig Erlam said: “There’s no doubt that the bounceback has stalled but, encouragingly, we’re not yet in reverse despite the growing concerns about Covid second waves. Naturally, the sheer amount of monetary and fiscal stimulus and the promise of more if needed, is giving investors reason to stay strong, despite the economic outlook being far from as promising as what the markets would suggest.

“Rishi Sunak added to the stimulus efforts on Wednesday, offering new incentives to support the hospitality and housing sectors, as well as employment more generally as businesses ponder redundancies and the furlough scheme winds down. The measures were bold and added to the UK’s Covid bill but thankfully comes at a time when borrowing costs are very low and the central bank is a keen buyer.”

Erlam said investors appear to be in a holding period ahead of earnings season, with much of the economic news at the moment being broadly priced in. “Whether earnings season proves to be much of a catalyst is another thing, with the doom and gloom of Q2 priced in at this stage, it may all hang on the optimism/pessimism heading into the end of the year.”

In equity marketsPersimmon was the standout gainer on the top-flight index after it reported a drop in half-year revenues and completions due to the coronavirus pandemic but said demand since its reopening has been “positive”, with weekly average net private sales reservations of 278 new homes being around 30% higher than the same period a year ago.

Other housebuilders followed suit, with Barratt DevelopmentsTaylor Wimpey and Berkeley all higher.

On the FTSE 250Vistry rallied after saying improving demand as the coronavirus lockdown eased would help to restore gross margin in the second half of the year.

Elsewhere, building materials distributor Grafton was on the rise as it posted a decline in six-month revenue due to the impact of the pandemic but said trading in June was more resilient than expected.

On the downside, Rolls-Royce slid after it said its free cash outflow was £3bn in the first half of 2020 as widebody engine flying hours halved because of the “historic shock” to civil aviation caused by the Covid-19 crisis. The engine maker said it expected performance to improve in the second half and that annual free cash outflow would be about £4bn. It warned that the civil aviation industry would take several years to recover but said its defence business was resilient.

SSE and National Grid were also under the cosh after energy regulator Ofgem said network operators should invest £25bn from 2021 to 2026 to deliver emissions-free energy. It also proposed cutting the returns companies can make to reduce household bills. Both SSE and National Grid said they were “disappointed” with the plans.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Persimmon Plc +4.93% +120.00 2,553.00
2 Marks And Spencer Group Plc +4.72% +4.48 99.48
3 Next Plc +4.02% +188.00 4,861.00
4 Taylor Wimpey Plc +3.25% +4.60 146.05
5 Berkeley Group Holdings (the) Plc +3.18% +135.00 4,374.00
6 Carnival Plc +2.93% +27.40 963.60
7 Barratt Developments Plc +2.87% +15.00 537.00
8 Fresnillo Plc +2.69% +24.40 933.00
9 Antofagasta Plc +2.66% +25.80 996.20
10 Auto Trader Group Plc +1.93% +10.00 527.40

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc -8.90% -25.60 262.20
2 National Grid Plc -3.49% -31.40 867.80
3 British American Tobacco Plc -3.17% -96.50 2,952.00
4 International Consolidated Airlines Group S.a. -2.22% -4.70 207.40
5 Micro Focus International Plc -1.70% -6.20 357.70
6 Informa Plc -1.68% -7.50 439.30
7 Compass Group Plc -1.64% -18.50 1,106.50
8 Ocado Group Plc -1.62% -33.00 2,008.00
9 Hiscox Ltd -1.48% -12.00 799.60
10 Hsbc Holdings Plc -1.43% -5.50 378.15

 

US close: Stocks finish higher as cruise lines surge

Wall Street equities finished in positive territory on Wednesday following the sharp sell-off seen during the prior session.

The Dow Jones Industrial Average ended the session up 0.68% at 26,067.28, the S&P 500 added 0.78% to 3,169.94, and the Nasdaq Composite was 1.44% firmer at 10,492.50.

It was a mixed session for the Dow, which had opened 155.37 points higher before dipping below the waterline several times, eventually clawing back some of the losses recorded on Tuesday as concerns around the global economic outlook due to the Covid-19 pandemic weighed on sentiment.

While those same concerns also seemed to be in focus on Wednesday, with investors struggling to shake off fears around the rising number of new Covid-19 cases across the US, companies set to benefit from the reopening of the US economy like CarnivalNorwegian Cruise Line and Royal Caribbean were all higher.

The trio of cruise giants were up 5.08%, 4.65% and 5.28%, respectively.

Wednesday’s positive moves came after White House economic advisor Larry Kudlow tried to calm fears around the coronavirus’ impact on the US economy.

“No one’s denied we’ve had a huge jump in cases in certain hot spots,” Kudlow said on Wednesday.

However, he noted that there were a number of scenarios at play.

“We really don’t have any real experience in econometrics modelling for this type of thing. Because so much is generated by the virus.”

Kudlow added that the US had created 8.0m new jobs over the last couple of months, highlighting that “virtually every piece of data” showed a “V-shaped recovery”.

Discussing the economic impact of the recent spike in new cases across the US, Oanda‘s Craig Erlam said the use of targeted lockdowns would likely alleviate concerns, although a number of states in the US did seem to be struggling with the spread of the virus.

“The Fed has repeatedly reiterated that it stands ready to act and Loretta Mester added her voice to those warning of a levelling off in the economic rebound as case numbers rise.

“This may prove to be supportive to these equity markets just as they’re looking a little vulnerable and ensure the dips are still attracting buyers,” he said.

“I guess we’ll soon see whether that’s enough as the cracks are appearing at a time when there is a huge gap between stock markets and reality.”

The total tally of confirmed cases of Covid-19 across the globe hit 11.8 million earlier on Wednesday, according to Johns Hopkins University, with the US easily leading the way with its 2.99 million cases.

Also in focus, the White House was said to be looking at ways to undermine the Hong Kong dollar’s peg to the US dollar as a potential way to hit China.

Markets.com analyst Neil Wilson said it was “probably not” a tactic that will be considered seriously or pursued by the administration, it was definitely one worth watching out for.

“If such a tactic were to be deployed, it could raise risks for Hong Kong banks to access dollars and we could feasibly see ripple effects across the FX space – albeit I don’t see the US embarking on any kind of outright manipulation to weaken or strengthen the dollar,” he said.

In macro news, following a brief pullback at the end of last month, US homebuyers returned to the mortgage market last week in order to take advantage of all-time-low mortgage rates.

Mortgage applications to purchase a home increased 5% week-on-week and a much sharper 33% year-on-year, according to the Mortgage Bankers Association.

“Mortgage rates declined to another record low as renewed fears of a coronavirus resurgence offset the impacts from a week of mostly positive economic data, such as June factory orders and payroll employment,” said MBA economist Joel Kan.

“The average purchase loan size increased to $365,700 — also another high — as borrowers contend with limited supply and higher home prices.”

 

Thursday newspaper round-up: Jobs market, Uber Eats, Burger King, Brooks Brothers

The negative impact of the coronavirus lockdown on Britain’s jobs market appears to have been greatest in May before a partial recovery in June, according to the Office for National Statistics (ONS). Both demand for and supply of labour were affected by lockdown restrictions, and the temporary closure of non-essential businesses caused demand for labour to fall, leading to fewer job vacancies, the ONS found, by studying job advert data from the online job search engine Adzuna. – Guardian

Uber Eats has joined up with Asda in the US tech firm’s first step into fast-track grocery delivery in the UK. The supermarket chain, which has previously tested takeaway and limited grocery deliveries via the Just Eat app in a handful of stores, said the new service would start in two outlets and could be extended to more if successful. – Guardian

Burger King UK’s boss has warned that up to 1,600 jobs could be lost as a result of the coronavirus pandemic. Only about 370 of the restaurant chain’s 530 UK stores have reopened since the nation went into lockdown. Chief executive Alasdair Murdoch told the BBC’s Newscast the economic damage stemming from the crisis could ultimately force the company to permanently close up to 10pc of its stores. – Telegraph

The taxpayer has stumped up £10billion for the Government’s bungled test and trace system, it emerged on Wednesday night. Calls for an inquiry mounted after it emerged the taxpayer has also spent an “eye-watering” £15billion on PPE amid scrutiny of the Government’s procurement process. Campaigners blasted officials for an “enormous waste” of public money after PPE and the NHS’s bungled testing and contact tracing programmes accounted for almost four-fifths of extra health spending. – Telegraph

Brooks Brothers, the preppy American clothing chain once owned by Marks & Spencer, has filed for bankruptcy. The 202-year-old retailer, which has dressed 41 of 45 US presidents, from Franklin Roosevelt to Barack Obama, and which was used for all the seasons of the Mad Men television series, has requested protection from its creditors and plans to cut 700 jobs. – The Times

 

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