ADVFN Morning London Market Report: Tuesday 11 August 2020

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London open: Stocks rally despite weak UK jobs data

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London stocks rose in early trade on Tuesday, tracking solid gains for the Dow overnight as investors shrugged off the latest UK employment data.

At 0845 BST, the FTSE 100 was up 1.1% at 6,116.92.

Spreadex analyst Connor Campbell said: “With the Dow Jones gathering steam last night as investors focused on Trump’s controversial ‘aid’-extending executive orders, the European markets exploded out of gate on Tuesday morning.

“Specifically, this meant the FTSE could ignore the latest jobs data out of the UK.

“Choosing not to linger on the US-China tensions – the latest development in which was Beijing slapping sanctions on the likes of Ted Cruz and Marco Rubio – the Dow Jones is aiming to add another 150 points this afternoon. That would leave the Dow at 27,930, its best price since late-February, and around 1,500 points away from its all-time highs.”

Market participants were digesting the latest figures from the Office for National Statistics, which showed that employment fell at its fastest rate in more than a decade between April and June, while wages shrank as the Covid-19 pandemic took its toll.

Employment declined by 220,000 on the quarter, marking the largest quarterly fall since the wake of the financial crisis in 2009. The figures also showed that a further 81,000 people fell off company payrolls last month, giving a total of 730,000 since March, when the coronavirus lockdown began.

Meanwhile, between January to March and April to June, the total actual weekly hours worked fell by a record 191.3 million, or 18.4%, to 849.3 million hours. This was the largest quarterly decline since estimates began in 1971, with total hours dropping to its lowest level since September to November 1994.

The unemployment rate was unchanged in June at 3.9% versus expectations of an increase to 4.2%, but this was just a reflection of the fact that more people gave up looking for work. Average earnings excluding bonuses were down 0.2%, while earnings including bonuses were 1.2% lower compared to expectations for a 1.1% fall.

ONS deputy national statistician for Economic Statistics Jonathan Athow said: “The labour market continues recent trends, with a fall in employment and significantly reduced hours of work as many people are furloughed.

“Figures from our main survey show there has been a rise in people without a job and not looking for one, though wanting to work. In addition, there are still a large number of people who say they are working no hours and getting zero pay.

“The falls in employment are greatest among the youngest and oldest workers, along with those in lower-skilled jobs.

“Vacancies numbers began to recover in July, especially in small businesses and sectors such as hospitality, but demand for workers remains depressed.”

Ruth Gregory, senior UK economist at Capital Economics, said: “Overall, we doubt the apparent stability in the ILO unemployment rate will last long. Indeed, with further rises in unemployment in the coming months all but inevitable as the furlough scheme unwinds, this is just the lull before the storm.

“Our forecast that the unemployment rate will peak at 7% in mid-2021 and remain above its pre-pandemic level of 4% until the end of 2022, suggests that the economic recovery will be slow going.”

In corporate newsInterContinental Hotels was on the rise despite suffering a $233m (£178m) loss in the first half as occupancy at its hotels plunged during the Covid-19 crisis.

Plus500 surged to the top of the FTSE 250 as the trading platform more than tripled its interim dividend and reported soaring first-half revenue and profit driven by “unprecedented” volatile markets during the pandemic.

Cineworld gained amid takeover speculation, after a US judge granted the government’s request to end the Paramount Decrees, a set of antitrust rules from the 1940s and 1950s that banned film studios from owning theatres.

Online software development and gaming company Gamesys rallied as it declared a maiden dividend and said full-year gaming revenue and adjusted earnings were set to be ahead of its previous expectations following a strong performance in the first seven months of the year.

On the downside, housebuilder Bellway was a little weaker after it reported a fall in the number of homes constructed as the coronavirus lockdown forced a halt to sales. It also deferred a dividend but said it was “keen” to reinstate payouts if there was no second wave of the pandemic.

Oilfield services provider Petrofac tumbled as it posted a first-half loss and said it won’t pay a dividend.

Pizza delivery company Dominos was also in the red after it reinstated a deferred dividend but said the risk of a second lockdown meant an interim payout would be suspended as it reported a fall in underlying profits due to Covid-19 costs.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. +6.74% +13.60 215.30
2 Tui Ag +6.13% +21.40 370.30
3 Rolls-royce Holdings Plc +6.06% +16.10 281.80
4 Easyjet Plc +5.66% +34.20 638.60
5 Informa Plc +5.42% +21.70 422.20
6 Carnival Plc +4.44% +43.00 1,012.00
7 Associated British Foods Plc +4.37% +83.50 1,992.50
8 Bp Plc +4.27% +12.60 308.00
9 Intercontinental Hotels Group Plc +4.20% +168.00 4,169.00
10 Marks And Spencer Group Plc +4.17% +4.60 114.90

 

Top 10 FTSE 100 Fallers

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76.4% of retail CFD accounts lose money.

 

# Name Change Pct Change Cur Price
1 Fresnillo Plc -2.44% -31.50 1,261.50
2 Rentokil Initial Plc -0.74% -4.00 535.40
3 Hikma Pharmaceuticals Plc -0.35% -8.00 2,289.00
4 Segro Plc -0.18% -1.80 972.00
5 Barratt Developments Plc -0.12% -0.60 502.80
6 Nmc Health Plc -0.00% -0.00 938.40
7 Just Eat Plc -0.00% -0.00 861.00
8 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90

 

US close: Stocks close mixed following extension to unemployment relief

Wall Street trading was mixed on Monday after Donald Trump signed an executive order extending the nation’s Covid-19 unemployment relief programme.

At the close, the Dow Jones Industrial Average was up 1.30% at 27,791.44 and the S&P 500 was 0.27% firmer at 3,360.47, while the Nasdaq Composite was 0.39% lower at 10,968.36.

The Dow Jones closed 357.96 points higher after the President’s orders to carry on the distribution of expanded benefits.

The executive order will see unemployment payments reduced from $600 a week to $400 and will also continue the deferment of student loan payments through 2020, extend a federal moratorium on evictions and provide a payroll tax holiday.

The move comes after congressional leaders were unable to make any headway on a new Covid-19 stimulus package last week, raising uncertainty about the US economy going forward.

However, Trump’s orders will still face a legal challenge, with continuing the programs requiring federal funding from Congress and Democrats have vowed to not support the bill.

Treasury Secretary Steven Mnuchin said he was open to further stimulus talks, stating: “We’re prepared to put more money on the table.”

Intensified US-Sino tensions were also in focus, with Beijing announcing unspecified sanctions against 11 US politicians and heads of organisations promoting democratic causes in retaliation to a similar move made by the White House last week.

Escalating those tensions further, Chinese jet fighters crossed the mid-line of the Taiwan Strait on Monday as US Health and Human Services Secretary Alex Azar visited the island nation.

On the macro front, US job openings increased in June but remained below their pre-pandemic level, adding weight to the argument that it may take years for the labour market to absorb the millions of unemployed Americans.

Job openings rose 518,000 to 5.9m as of 30 June, according to the Labor Department‘s Job Openings and Labor Turnover survey. Vacancies were below the level of 7.0 recorded in February, while the job openings rate increased to 4.1% from a reading of 3.9% in May.

On the corporate front, SeaWorld swung to a wider-than-expected quarterly loss as revenues tumbled 96% due to Covid-19 leading to closures of its theme parks, while the outbreak also led to hotel operator Marriott posting an 84.4% decline in second-quarter revenue per available room.

Royal Caribbean plunged to a worse-than-expected $1.6bn (£1.2bn) second-quarter loss after the Covid-19 crisis forced it to cancel all sailings in the period.

Twitter was also in focus as reports circulated that the social media giant was in talks to purchase controversial video group TikTok’s US business, while McDonald’s shares were lower in early trade after the fast-food giant filed a lawsuit against former CEO Steve Easterbrook.

 

Tuesday newspaper round-up: Bank transfer scams, high streets, NMC Health

Many victims of bank transfer scams are being treated unfairly and the chances of them getting their money back is often a lottery, according to Which?. The UK consumer association is pressing for the voluntary code that is supposed to protect consumers to be made mandatory, and said the number of people being reimbursed by their bank was “woefully low”. – Guardian

The problems facing high streets up and down Britain are laid bare by analysis of official data showing the struggles that retailers were already facing before the Covid pandemic hit. In the three years to 2018, retail employment had declined across all regions, except in the north-west of England, according to the report for the Office for National Statistics. – Guardian

Collapsed hospital firm NMC Health is being investigated over claims of fake invoices and forged documents relating to hundreds of millions of dollars worth of sales. – Telegraph

The Bank of England will do more and faster quantitative easing if the economy slows and markets wobble again, a senior official has said. Sir Dave Ramsden, deputy governor for markets and banking and a member of the Bank’s monetary policy committee, said that the pace of gilt purchases under QE would accelerate if “we saw signs of [market] dysfunction” and that the Bank had “significant headroom to do more QE” if economic risks crystallised. – The Times

The first six months of this year was the worst on record for British travel, leisure and retail companies, with record numbers having to issue profit warnings as the pandemic wreaked havoc on them. Almost three quarters of listed businesses in those industries were forced to warn shareholders that profits would be materially below what had been expected before coronavirus struck, according to a report from EY, one of the Big Four accountancy firms. – The Times

 

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