ADVFN Morning London Market Report: Thursday 16 July 2020

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London open: Stocks edge lower as investors mull Chinese, UK data


London stocks edged lower in early trade on Thursday following strong gains in the previous session, as investors digested the latest UK jobs data and economic growth figures out of China.

At 0840 BST, the FTSE 100 was down 0.4% at 6,265.92, having rallied on Wednesday amid reports that positive results would soon be announced from the Oxford coronavirus vaccine trials.

Data from the National Bureau of Statistics showed that China’s economy bounced back in the second quarter after taking a hit from the pandemic.

Gross domestic product grew 3.2% year-on-year following a 6.8% contraction in the first quarter, beating expectations for 2.5% growth. The first quarter contraction was the worst since quarterly GDP records began.

In seasonally adjusted terms, GDP rose 11.5% quarter-on-quarter following a 10% decline the first quarter, taking GDP back above the pre-coronavirus high reached in the fourth quarter of last year.

Industrial production and fixed asset investment data also beat expectations, but retail sales were a disappointment.

On home shores, meanwhile, figures from the Office for National Statistics showed the number of people on UK payrolls declined by 649,000 between March and June. Compared with May, 74,000 people lost their jobs.

ONS deputy national statistician for Economic Statistics, Jonathan Athow, said: “As the pandemic took hold, the labour market weakened markedly, but that rate of decline slowed into June, though this is before recent reports of job losses. There are now almost two-thirds of a million fewer employees on the payroll than before the lockdown, according to the latest tax data.”

The unemployment rate was steady at 3.9% for the three months to May, beating expectations for a rise to 4.2%.

In addition, vacancies in April to June were at their lowest level since the vacancy survey began, at an estimated 333,000. This is 23% lower than the previous record low in April to June 2009.

The claimant count rate came in at 7.3% in June compared to 7.4% in May, which was the highest level since May 1996. The figures also showed that jobless claims fell by 28,100 in May after surging by 853,000 in April and 566,400 in March.

Spreadex analyst Connor Campbell said: “An overall positive morning for data – including a return to growth for China – didn’t mean as much to the markets as yesterday’s vaccine updates, meaning European started the session in the red on Thursday.”

He said the UK jobs data painted a mixed picture. “The self-employed suffered their worst quarter on record. Job vacancies are non-existent. Weekly hours worked from March to May dropped by 5.5 hours. And, reportedly, 29% of UK businesses are preparing to cut jobs across the next three months.

“Confused by the jobs data, unbothered by China’s upswing – perhaps because the lockdown situation there was so different to what has been seen in, say, the UK and US that a comparison isn’t possible – and fatigued from yesterday’s gains, Europe opened at a loss.”

In equity markets, Coral and Ladbrokes owner GVC Holdings slid after it reported a fall in net gaming revenue as coronavirus lockdowns forced store closures. The company also announced the departure of chief executive Kenneth Alexander.

Hays was in the red as the recruiter said annual profit would almost halve after recruitment fees fell by a third in the fourth quarter, with the UK and Ireland the worst-hit.

Energy company SSE gained after saying it still intended to declare a dividend in November as the impact of Covid-19 on the business remained in line with expectations during the first three months of the fiscal year.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Informa Plc +1.94% +8.40 442.30
2 Wpp Plc +1.80% +11.00 621.40
3 Sse Plc +1.32% +18.00 1,381.50
4 Flutter Entertainment Plc +1.17% +135.00 11,645.00
5 British Land Company Plc +1.07% +4.00 377.70
6 Halma Plc +1.06% +24.00 2,278.00
7 Antofagasta Plc +0.79% +8.00 1,014.50
8 Intercontinental Hotels Group Plc +0.78% +31.00 3,995.00
9 Pearson Plc +0.72% +4.00 556.20
10 Marks And Spencer Group Plc +0.65% +0.64 99.68


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Micro Focus International Plc -3.77% -12.20 311.20
2 Smith & Nephew Plc -3.31% -55.00 1,605.00
3 Melrose Industries Plc -3.02% -3.70 118.80
4 Ocado Group Plc -2.83% -60.00 2,060.00
5 Burberry Group Plc -2.65% -39.00 1,431.00
6 Bae Systems Plc -2.49% -12.20 477.20
7 Tui Ag -2.37% -9.00 371.50
8 Diageo Plc -2.23% -63.50 2,782.00
9 Anglo American Plc -2.19% -42.80 1,910.60
10 British American Tobacco Plc -2.02% -58.00 2,812.50


US close: Stocks close higher amid optimism around potential vaccine

US stocks closed higher on Wednesday following positive results from early trials of a coronavirus vaccine and more quarterly earnings reports.

At the close, the Dow Jones Industrial Average was up 0.85% at 26,870.10, while the S&P 500 was 0.91% firmer at 3,226.56 and the Nasdaq Composite saw out the session 0.59% stronger at 10,550.49.

The Dow closed 227.51 points higher on Wednesday, carrying on a rally started at the end of the previous session thanks to some positive news regarding trials on a potential Covid-19 vaccine.

Stocks surged on Wednesday after pharmaceutical giant Moderna revealed that its coronavirus vaccine had produced antibodies in all patients taking part in an early trial of the drug, raising hopes of a faster economic turnaround.

Moderna said its potential Covid-19 vaccine produced a “robust” immune response in all 45 patients in its early stage human trial, according to the peer-reviewed New England Journal of Medicine. Although the company had already flagged that result in May, it had not provided a full readout of the data from the trial.

On the corporate front, Boeing and other stocks linked to the reopening of the economy traded higher on the news and market participants also locked in on another raft of corporate earnings.

Goldman Sachs shares traded higher after reporting a 41% increase in revenues to $4.24bn – blowing past estimates on the Street and leading to the bank’s second-highest ever quarterly revenue performance in its history.

Bank of NY Mellon posted a 2% jump in total revenues and flat earnings, while US Bancorp revealed revenues had also beat expectations but took a hit from its decision to set aside a further $1.7bn to insulate itself from any potential Covid-19 fallouts.

Rising tensions between Washington and Beijing were also in focus after Donald Trump signed legislation to revoke Hong Kong’s privileges in response to Beijing’s interference in the special administrative region’s autonomy.

On the macro front, with fuel prices continuing to surge, the Labor Department revealed US import prices had shot up by more than expected in June. Import prices shot up by 1.4% in June after climbing by a downwardly revised 0.8% in May – ahead of estimates for a 1.0%. Export prices also increased by 1.4%

Elsewhere, a closely-followed gauge of factory sector conditions in and around New York state improved more quickly than expected in July as the pandemic situation improved. The Federal Reserve Bank of New York‘s manufacturing sector gauge jumped from a reading of -0.2 points for June to 17.2 in July – smashing consensus estimates for a reading of 5.5.

Lastly, industrial production in the US bounced back last month, led by sharp gains in manufacturing. According to the Department of Commerce, total output jumped at a 5.4% month-on-month clip in June, adding to the 1.4% rise seen in May.


Thursday newspaper round-up: Boohoo, retailers, Sainsburys

Boohoo has been criticised by the chair of an influential committee of MPs, who said the online fashion firm had failed to address warnings of malpractice at Leicester factories. Philip Dunne, the chairman of the environmental audit committee, which questioned Boohoo co-founder Carol Kane about problems in Leicester factories in November 2018 for a report on the fast fashion industry, has disputed claims the group was not aware of potentially illegal working practices at factories making its garments.- Guardian

Rents have continued to climb across England, but they are sliding in London as Airbnb owners abandon hopes of attracting holidaymakers and put their properties on the long-term rental market. Property website Rightmove said asking rents outside London hit a record of £845 a month in early July, up 3.4% on the same time last year. – Guardian

Retailers have opened only half of shops since the lockdown restrictions were eased as some customers are still avoiding stores. Of the 20,351 sites that were allowed to reopen, including restaurants, takeaway shops and travel agents, 52pc had done so, according to a new survey from the Local Data Company (LDC). – Telegraph

Dobbies Garden Centres has struck a deal to stock Sainsbury’s food, four years after the business was sold by Tesco. The retailer will sell 3,000 of Sainsbury’s own-branded products in 66 of its 68 garden centres. Graeme Jenkins, Dobbies’ chief executive, said: “The partnership between Dobbies and Sainsbury’s is an excellent fit, with a shared goal of offering the best to our customers.” – The Times


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