ADVFN Morning London Market Report: Friday 31 July 2020

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London open: Stocks rise after solid US tech results; IAG slides

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London stocks rose in early trade on Friday, underpinned by solid results from US tech giants, although worries about the coronavirus pandemic continued to weigh on investors’ minds.

At 0900 BST, the FTSE 100 was up 0.5% at 6,019.49.

CMC Markets analyst Michael Hewson said: “Despite the bleak economic data yesterday, the Nasdaq still managed to finish the day higher even if the S&P 500 and Dow finished the day lower.

“This Nasdaq optimism turned out to be well founded as after the bell, AppleAmazon and Facebook all smashed expectations on their latest quarterly numbers. Apple also announced a 4 for 1 stock split, while posting its best ever Q3 performance.”

Despite the positive tone, market participants remained concerned about a resurgence of Covid-19 cases across Europe and in the UK, with new restrictions implemented across Northern England after a spike in cases.

Elsewhere, the latest survey from Nationwide showed house prices bounced back in July, boosted by pent-up demand after the coronavirus lockdown ended.

Annual house price growth recovered to 1.5% from a 1.6% decline June. On the year, prices were up 1.5% compared to a 0.1% dip the month before.

Nationwide’s chief economist, Robert Gardner, said the pick-up in prices “reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions”.

“Pent-up demand is coming through, where decisions taken to move before lockdown are progressing. Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.

“Our own research, conducted in May, indicated that around 15% of people surveyed were considering moving as a result of life in lockdown.”

He said these trends look set to continue in the near term, with the recently-announced stamp duty holiday serving to bring some activity forward. However, he also warned that this could be “something of a false dawn”.

“Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”

In equity markets, precious metals miners FresnilloPolymetal and Hochschild were the standout gainers amid firmer gold prices.

Pets at Home surged to the top of the FTSE 250 after it said first-quarter group revenue fell 1% but that momentum was returning across all areas of the business.

On the downside, British Airways and Iberia parent IAG was sharply lower after it posted a second-quarter operating loss before exceptional items of €1.36bn as the Covid-19 pandemic led to a 95.3% drop in passenger capacity. It also said it will tap financial markets for €2.75bn in fresh equity.

BT was in the red as it reported a 13% drop in first-quarter pre-tax profit, with revenue down 7% due to the impact of Covid-19, which weighed on BT Sport revenue.

Inspection, product testing and certification company Intertek was weaker as it posted a decline in first-half profit and announced an exclusive partnership with Bangladeshi textile and garment company BEXIMCO to meet the growing demand for PPE.

 

Top 10 FTSE 100 Risers

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Name Change Pct Change Cur Price
1 Fresnillo Plc +5.05% +61.00 1,269.50
2 Barclays Plc +2.98% +3.00 103.78
3 Smurfit Kappa Group Plc +2.81% +72.00 2,630.00
4 St. James’s Place Plc +2.78% +26.00 961.60
5 Legal & General Group Plc +2.75% +5.80 217.00
6 Scottish Mortgage Investment Trust Plc +2.72% +23.50 888.50
7 Hargreaves Lansdown Plc +2.68% +46.00 1,762.50
8 Standard Life Aberdeen Plc +2.47% +6.20 257.50
9 Antofagasta Plc +2.24% +23.00 1,051.00
10 Rsa Insurance Group Plc +2.21% +9.30 429.30

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. -6.82% -12.35 168.70
2 Rentokil Initial Plc -2.83% -15.80 541.80
3 Itv Plc -2.51% -1.48 57.54
4 Easyjet Plc -1.95% -10.20 512.40
5 Bt Group Plc -1.95% -2.10 105.75
6 Intertek Group Plc -1.42% -80.00 5,542.00
7 Bae Systems Plc -1.39% -7.00 498.00
8 Rolls-royce Holdings Plc -1.35% -3.30 242.00
9 Whitbread Plc -1.05% -24.00 2,262.00
10 Informa Plc -0.94% -3.60 377.80

 

US close: Stocks finish lower after mammoth plunge in GDP

Wall Street closed mostly lower on Thursday, after an epic plunge in second-quarter gross domestic product and another week’s worth of jobless claims figures.

The Dow Jones Industrial Average ended the session down 0.85% at 26,313.65 and the S&P 500 was off 0.38% at 3,246.22, while the Nasdaq Composite was 0.43% firmer at 10,587.81.

During the session, the Dow did manage to recover some of its earlier losses, after it opened down 457.83 points, more than reversing the gains recorded on Wednesday after the Federal Reserve vowed to maintain its current stimulus measures.

Overnight, the Fed kept the US interest rate in a range between 0% and 0.25%, stating that while the economy had somewhat recovered of late, activity and employment remained “well below their levels at the beginning of the year”.

Chairman Jerome Powell also said the central bank would keep an accommodative stance until the economy had fully “weathered” the effects of the coronavirus storm.

As far as the new day’s trading was concerned, market participants digested news that economic activity in the US collapsed during the second quarter, even if at a marginally slower than expected pace.

Preliminary data from the Department of Commerce showed that gross domestic product fell at a quarterly annualised pace of 32.9% over the three months to June – slightly ahead of consensus estimates for a 34% drop.

The GDP price index for domestic purchases meanwhile fell by 1.5%, following a 1.4% rise during the first three months of the year, while the price deflator for personal consumption expenditures dropped by 1.9% after having risen 1.3% at the start of 2020.

That data also sent the benchmark 10-year Treasury yield lower to around 0.5% early in the session, applying pressure to bank stocks.

Elsewhere on the macro front, initial jobless claims in the US were little changed last week, but secondary claims jumped, possibly underlining the difficulty of rejoining the labour force.

According to the Department of Labour, initial unemployment rose by 12,000 over the week ending on 25 July to reach a still extremely high 1.434m.

However, secondary unemployment claims, which track those not filing for the first time, rose by 867,000 to 17,018m over the week ending on 18 July.

On the corporate front, one thing seen as potentially being able to help the Dow recover from the painful GDP reading was earnings from FacebookAmazonAlphabet and Apple after all four of the companies’ respective chief executives testified in front of Congress on Wednesday to address antitrust concerns.

Still on corporate news, PayPal was ahead 4.28% after it posted some solid second-quarter figures overnight, while Qualcomm rocketed 15.22% after beating estimates on both earnings and revenue.

Procter & Gamble shares were up after posting a marked increase in cleaning products throughout the quarter, and UPS stock surged 14.38% after reporting a sharp increase in home deliveries.

 

Friday newspaper round-up: Working from home, tech giants, Hinkley Point

A slew of England’s biggest businesses are set to defy the government’s push to get workers back into offices in August, a Guardian analysis shows, with many big businesses sticking to home working arrangements or delaying a partial return until September at the earliest. Law firms, insurers, energy providers and tech firms are among those reacting cautiously to the change in government advice, which means from Saturday employers can decide whether staff can safely come back to offices. Some companies, such as Google and NatWest Group, are allowing workers to stay at home until 2021 amid signs of a permanent shift in working culture. – Guardian

Sky has reported a $750m (£575m) plunge in revenues as more than 200,000 customers switched off in the three months to the end of June while key programming such as Premier League football was off air during the coronavirus pandemic. Sky, which is owned by US pay-TV giant Comcast, reported a 15.5% year on year fall in revenues from $4.8bn to $4bn in the period as coronavirus impacted sports fixtures, subscriber viewing and advertising. – Guardian

Silicon Valley giants Amazon, Apple and Facebook enjoyed a dramatic boom during the worst months of the pandemic, posting rises in quarterly profits last night that will add fuel to claims they are becoming too dominant. Shares in the companies jumped in after-hours trading as they revealed that rises in online shopping and internet use during lockdowns meant soaring revenues in the three months to the end of June, despite wider economic pain. – Telegraph

The Covid-19 pandemic is threatening delays and further cost increases in the construction of the Hinkley Point C nuclear plant, the developer EDF has warned. A slowdown in work at the Somerset site has increased the risk that Britain’s first new nuclear plant in a generation will not be ready to generate power by December 2025 as planned, the French energy giant said. – The Times

 

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