ADVFN Morning London Market Report: Monday 3 August 2020

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London open: HSBC results, lockdown speculation weighs on Footsie


Stocks in London are on the back foot at the start of August, weighed down by a retreat in lenders’ shares and reports pointing to increasing odds that stricter Covid-19 restrictions were in the pipeline, both in the UK and the US.

So while HSBC warned that its full-year loan losses could hit $13bn, it was reported at the weekend that while the UK government wants to avoid another full national lockdown, special measures could be put in place, especially for London.

Nevertheless, JP Morgan strategist, John Normand, was relatively sanguine, writing: “Some misgivings are justified given a macro backdrop that is becoming muddied, but not muddied enough to justify bearish targets or a defensive investment strategy.

“The intersection of a U.S. growth downshift with expiring income supports preserves the risk of a market correction in August, but drawdown should be limited due to investor positioning.”

Against that backdrop, as of 0831 BST the FTSE 100 was down by 0.61% or 17.6 points to 5,880.16, while sterling was at 1.3079 and remained near its roughly two year highs.

And it wasn’t all bad news on Monday morning.

Overnight, survey compiler Caixin’s Purchasing Managers’ Index printed at more than nine-year high of 52.8 for July from 51.2 for June (consensus: 51.1).

A late rally on Wall Street last Friday was also propping up sentiment.

To take note of, also at the weekend, Federal Reserve Bank of Minneapolis chief, Neel Kashkari, pushed at the weekend for a “hard” four-to-six week lockdown which he said would be optimal for the economy.

Once cases were low enough, authorities would then be able to implement a ‘track and trace’ strategy.

Coincidentally, last Friday Google announced that it was working with 20 US states and Apple to roll-out a coronavirus contact-tracing app over the following weeks.

Tensions between Beijing and Washington continued in the background meanwhile, with US Secretary of State, Mike Pompeo, signalling at the weekend that the Trump administration was set to clamp down on an array of Chinese state-controlled software manufacturers due to national security concerns.

The main data release ahead on Monday will be the US Institute for Supply Management’s manufacturing PMI, at 1500 BST.

Final readings on comparable surveys for the UK and euro area are scheduled to be published at 0930 BST and 0900 BST.

Hammerson in push to boost liquidity

Following press speculation over the weekend, Hammerson confirmed on Monday that it is in discussions over a possible disposal of its 50% interest in VIA Outlets to its joint venture partner APG, and was also considering an equity raise via a rights issue. The FTSE 250 firm said it was taking “proactive measures” around its cost base and cash flow, and had secured approval for the issue of up to £300m under the Covid Corporate Finance Facility (CCFF) from the Bank of England. It said that, following the reopening of its flagship destinations across Europe, footfall and sales were improving, with third quarter rent collection in the UK now over 30%.

HSBC interim profits plunged 65% as it increased provisions for bad debts by $3.8b amid the coronavirus crisis. The Asian-Anglo bank set aside $3.8bn to cover potential loan losses in the three months to June from $555m a year ago, more than the $2.7bn estimated in company-compiled analyst forecasts. Full-year loan losses could be $8bn – $13bn, HSBC said, “given the deterioration in consensus economic forecasts and actual loss experience” during the second quarter.

Hiscox swung to a loss in the first half as the Lloyd’s of London insurer set aside $232m for Covid-19 related claims. The company reported a pretax loss of $138.9m (£106m) for the six months to the end of June compared with a $168m profit a year earlier. Gross premiums written fell to $2.236bn from $2.338bn.


Top 10 FTSE 100 Risers

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76.4% of retail CFD accounts lose money.


# Name Change Pct Change Cur Price
1 Fresnillo Plc +3.37% +41.50 1,274.00
2 Intertek Group Plc +2.12% +114.00 5,492.00
3 Easyjet Plc +2.07% +10.20 503.40
4 Hargreaves Lansdown Plc +1.92% +33.50 1,782.50
5 Smurfit Kappa Group Plc +1.89% +48.00 2,588.00
6 Ashtead Group Plc +1.85% +45.00 2,480.00
7 Crh Plc +1.84% +51.00 2,817.00
8 Rio Tinto Plc +1.64% +75.50 4,690.50
9 Bunzl Plc +1.46% +32.00 2,230.00
10 Experian Plc +1.34% +36.00 2,713.00


Top 10 FTSE 100 Fallers

Sponsored by
76.4% of retail CFD accounts lose money.


# Name Change Pct Change Cur Price
1 Hiscox Ltd -6.50% -50.80 730.80
2 Rolls-royce Holdings Plc -5.83% -13.50 218.10
3 Itv Plc -3.88% -2.20 54.48
4 Hsbc Holdings Plc -3.54% -12.10 330.10
5 Carnival Plc -3.36% -27.80 798.80
6 Standard Chartered Plc -2.98% -11.50 374.30
7 Melrose Industries Plc -2.96% -2.52 82.74
8 British Land Company Plc -2.76% -10.10 356.00
9 International Consolidated Airlines Group S.a. -2.46% -4.05 160.70
10 Legal & General Group Plc -1.82% -3.90 210.10


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.


Monday newspaper round-up: Covid testing, John Laing, BAE, casinos, Sirius Minerals, TikTok

Two new tests for Covid-19 that are said to deliver results within 90 minutes are to be introduced across NHS hospitals and care homes, to speed up diagnosis ahead of winter and differentiate coronavirus infection from flu, the government says. But some experts were surprised by the government’s decision, saying the particular tests were not well-known. No data had been published concerning their evaluation. The government had made mistakes in buying tests that turned out to be substandard in the past, they said. – Guardian

The sale of a £400m stake in inter-city express rolling stock running into and out of London King’s Cross on the main line to and from Edinburgh is set for the green signal, with bids due to arrive today for the train ownership and maintenance contracts. The 30% stake in the 65-strong fleet of Azuma trains, operated by London North Eastern Railway, is being sold by John Laing, the listed infrastructure investment group that was the original investor with Hitachi, which assembled the trains at its factory in Co Durham. – The Times

Up to 6,000 jobs are at risk from Boris Johnson’s eleventh-hour reversal on re-opening casinos, gambling leaders have warned. Bosses accused the prime minister of “swinging a wrecking ball right through the middle of our industry” as plans to re-open casinos on August 1 were put on ice on Friday. – Telegraph

BAE Systems is poised to rescue suppliers and other aerospace companies that are struggling because of the crisis in the aviation industry. Chief executive Charles Woodburn has said the defence giant is open to buying firms to ‘strengthen its portfolio’, even though coronavirus is squeezing its own finances. – Daily Mail

Donald Trump will take action in coming days to tackle an array of national security risks presented by TikTok and other Chinese software companies, Mike Pompeo has said, as Microsoft revealed it was pursuing a deal after speaking to the US president. Microsoft said late on Sunday that – after a conversation between Trump and its CEO, Satya Nadella – it would move quickly on acquisition talks with TikTok’s parent company, ByteDance, completing talks no later than 15 September. – Guardian

Two former top bosses of Sirius Minerals were paid almost £2.2 million in bonuses before it was sold to Anglo American in a deal that inflicted heavy losses on many retail investors. Chris Fraser, 46, who was chief executive of the fertiliser miner, received about £1.3 million and Thomas Staley, 39, the finance chief, was paid more than £870,000, according to its accounts. – The Times

Developers and landowners will be required to pay more towards building schools, hospitals and local infrastructure under a major Government shake-up of the planning system. The Housing Secretary Robert Jenrick will this week propose a new system of contributions from developers which will require them to handover more of the profits generated from rising land values. – Telegraph

Huawei has become the biggest maker of smartphones after rivals took a hit from the Covid crisis. The Chinese company, whose brand ambassadors include Wonder Woman film star Gal Gadot, shipped 55.8 million phones in the second quarter of this year, outpacing Korea’s Samsung for the first time. – Daily Mail

Major cities such as London face more economic pain as some companies resist the government’s efforts to encourage workers back to their desks this week, and its discounted meal deal begins. Pablo Shah, a senior economist at the Centre for Economics and Business Research (CEBR), fears that the capital could have lost its aura as a “fun” place to work, particularly in the digital and creative industries. – Guardian

Pro-Brexit and right-wing academics feel forced to censor their political views, putting free speech at universities under threat, a report has said. Campuses are increasingly governed by unwritten rules that mean lecturers are under pressure to muzzle unfashionable opinions for fear of being ostracised or passed over for promotion, the Policy Exchange think tank said. – The Times

The Bank of England is under pressure to open up about its controversial flirtation with negative interest rates as markets cut the odds on a dip below zero next year. City economists said the Bank’s monetary policy report this week should set out Threadneedle Street’s initial verdict on a policy tool already used for years by major institutions including the European Central Bank, the Bank of Japan and the Swiss National Bank. – Telegraph

The government could be poised to seal off coronavirus-hit regions by imposing domestic travel bans, it emerged last night. The radical proposal is under discussion as Downing Street shakes up its crisis response in the wake of localised flare-ups. – Daily Mail

Furloughed workers are three times more likely than other employees to have defaulted on a payment last month, in a sign of the economic distress caused by the Covid-19 pandemic. As the UK government started unwinding the furlough operation that has paid millions of workers 80% of their salary, a survey by Which? has found that those still relying on the scheme are starting to feel the financial heat. – Guardian

A major incident was declared in Greater Manchester last night after coronavirus infection rates continued to rise. Gold command meetings of senior figures from the police, local officials and other agencies were held at the weekend. – The Times

Spain embarked on a secret lobbying drive to push US congressmen into supporting a plan to strip Britain of sole sovereignty over Gibraltar, The Daily Telegraph can reveal. Seven current and former members of the House of Representatives told this newspaper the Spanish Embassy in Washington DC pushed back after they signed a resolution backing Gibraltar’s British status or visited the territory. – Telegraph

Mass developments could be rushed through without full consultation from locals under the government’s radical overhaul of the current planning system, experts fear. Boris Johnson is planning to revolutionise the process as part of a ‘once-in-a-generation’ reform that will divide the country into three types of land: areas earmarked for ‘growth’, those for ‘renewal’ and others for ‘protection’. – Daily Mail


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