ADVFN Morning London Market Report: Thursday 7 January 2021

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London open: Stocks edge higher despite Capitol Hill chaos


London stocks edged higher in early trade on Thursday despite the chaos on Capitol Hill overnight, with hopes of further US stimulus continuing to underpin sentiment.

At 0835 GMT, the FTSE 100 was up 0.3% at 6,858.65.

Spreadex analyst Connor Campbell said: “The assault on Capitol Hill failed to shake the market’s resolve to start 2021 with their best foot forward. However, Europe did struggle to match its recent growth after the bell.

“Though Biden’s electoral victory is still yet to be officiated due to Wednesday’s attempted fascist insurrection, investors have had confirmed a pair of Democrat victories in Georgia’s run-off races, with Raphael Warnock and Jon Ossoff becoming the first Black and first Jewish senators in the state’s history.

“Now that the incoming administration has control of the upper and lower chambers of Congress, it is on the Biden government to show they can get things done – and from a market perspective that means a chunky stimulus package to compensate for the compromised bill agreed before Christmas.

“Hopes that Biden and co. will deliver drove the markets higher on Wednesday, and just about allowed Europe to keep its green sheen at the start of Thursday’s trading.”

In equity markets, supermarket chain Sainsbury’s rallied as it lifted profit forecasts after a booming festive period as Britons treated themselves to champagne and steaks in response to pandemic restrictions on the size of gatherings and online orders hit record levels.

Sainsbury’s said it now expected to report underlying profit before tax of at least £330m in the year to March 2021 against previous expectations of £270m and compared with £586m a year ago after forgoing business rates relief of £410m.

Ladbrokes owner Entain gained after saying it had offered to buy Swedish sports betting firm Enlabs AB for around SEK2.80bn (£250m), and upgrading its full-year expectations after a “strong” final quarter.

Paper and packaging companies Smurfit KappaDS Smith and Mondi were among the top gainers on the back of a bullish note from Jefferies, which upgraded its packaging sector outlook to positive.

Building materials group CRH was also higher after an upgrade to ‘buy’ at Societe Generale.

On the downside, Mitchells & Butlers fell after saying it was planning to raise capital from shareholders with no pubs trading and the company burning through up to £40m a month of cash during the Covid-19 lockdown.

IP Group was under the cosh after Invesco sold 61.9m shares in the company in a placing at 100.5p each.

B&M European Value Retail edged lower after saying that revenue increased 22.5% to £1.4bn in the third quarter on a constant currency basis and that it would pay a special dividend of 20p a share.


Top 10 FTSE 100 Risers

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76.4% of retail CFD accounts lose money.


# Name Change Pct Change Cur Price
1 Sainsbury (j) Plc +3.83% +8.90 241.40
2 Ashtead Group Plc +2.66% +97.00 3,748.00
3 Crh Plc +2.42% +82.00 3,464.00
4 Ferguson Plc +2.42% +216.00 9,130.00
5 Rio Tinto Plc +2.01% +123.00 6,238.00
6 Hargreaves Lansdown Plc +1.95% +30.00 1,572.00
7 Smith (ds) Plc +1.84% +7.30 404.80
8 Imperial Brands Plc +1.72% +27.50 1,623.00
9 Mondi Plc +1.64% +30.00 1,854.50
10 Smurfit Kappa Group Plc +1.55% +56.00 3,670.00


Top 10 FTSE 100 Fallers

Sponsored by
76.4% of retail CFD accounts lose money.


# Name Change Pct Change Cur Price
1 British Land Company Plc -2.91% -14.20 474.60
2 International Consolidated Airlines Group S.a. -2.53% -4.00 154.10
3 Carnival Plc -2.38% -31.50 1,294.50
4 Easyjet Plc -2.18% -17.40 782.00
5 Auto Trader Group Plc -2.10% -12.80 597.00
6 Hsbc Holdings Plc -1.75% -7.30 408.85
7 Experian Plc -1.60% -46.00 2,833.00
8 Associated British Foods Plc -1.59% -36.00 2,226.00
9 Taylor Wimpey Plc -1.58% -2.60 162.00
10 Whitbread Plc -1.53% -48.00 3,094.00


US close: Stocks mixed amid Georgia vote, Washington violence

Stocks on Wall Street finished on a mixed note on Wednesday, as the Democrats looked set to win both seats in Georgia’s run-off election to the Senate, while violence on Capitol Hill saw the official count of the Electoral College vote suspended.

At the close, the Dow Jones Industrial Average was up 1.44% at 30,829.40 and the S&P 500 added 0.57%, while the Nasdaq Composite was 0.61% weaker at 12,740.79.

The Dow closed 437.8 points higher on Wednesday, extending gains recorded in the previous session.

Senators began the official counting and certifying of the Electoral College vote earlier on Thursday – a largely ceremonial process to confirm Joe Biden as the winner of November’s presidential election.

A large number of pro-Donald Trump protestors gathered outside the Capitol turned violent, however, breaking through security barricades and storming the building which contains both houses of Congress.

Senators, Representatives and staff were locked down and subsequently evacuated as an armed standoff between a rioter and police took place at the doors to the House chamber.

Other rioters made it onto the Senate floor, while images also showed a pro-Trump protestor inside House Speaker Nancy Pelosi’s office.

The primary focus before the violence broke out in Washington was the Senate run-off race in Georgia, with the Democrats needing to win both seats to take the balance of power from the Republicans.

Late in the session, a number of media outlets had called winners for both seats for the Democrats, with Raphael Warnock and Jon Ossoff beating Kelly Loeffler and David Perdue, respectively.

Those two wins give each party 50 seats in the Senate, meaning vice president-elect Kamala Harris would have a tie-breaking vote, giving the Democrats control of the Senate and making it far easier for Joe Biden to enact his policies.

While many traders fear that a Democrat-run Senate will lead to increased corporate taxes and tighter regulations on firms, the outcome was also seen as potentially speeding up the passing of further Covid-19 stimulus, potentially boosting to companies hit the hardest by the pandemic.

“Everything has changed in Washington after the Democrats won the Georgia Senate runoff elections, except the need to find 60 votes for fiscal measures which can’t be passed via reconciliation,” said Pantheon Macroeconomics chief economist Ian Shepherdson.

To use reconciliation, the Byrd Rule says that budget measures must not increase the deficit after the 10-year-window over which all tax and spending changes are costed, Shepherdson explained.

“The rule means that any attempt to pass President-elect Biden’s ‘Build Back Better’ plan in its entirety is doomed to fail, because the spending measures – on green energy, education, infrastructure, and elsewhere – totalling more than $5trn over 10 years, are offset only partly by the proposed tax increases, totalling $2.8trn, according to the Tax Foundation.

“No Republican will vote for the tax increases.”

The minutes from the December Federal Reserve meeting were also released during the day, with most members agreeing not to expand the central bank’s purchasing of long-term bonds.

Still, the Fed adopted new guidance on its asset purchase programme, saying increases would continue “until substantial further progress has been made toward reaching the committee’s maximum employment and price stability goals”.

Berenburg’s Roiana Reid said the Fed’s large-scale asset purchases (LSAPs) had resulted in a “massive” $2.8trn increase in its balance sheet since mid-March, as it continued to purchase $120bn in securities per month, being $80bn per month in Treasury securities and $40b per month in mortgage-backed securities.

“Although the Fed has not provided any quantitative thresholds for this enhanced LSAP forward guidance, we expect the Fed to continue purchases at this current pace in the medium-term and consider tapering purchases only after real GDP has regained its pre-pandemic level,” Reid said.

“The minutes indicated that the tapering of its asset purchases would follow a sequence similar to the one implemented in 2013 and 2014.”

On the macro front, private sector employment in the US unexpectedly fell in December as the Covid-19 crisis took its toll on the leisure and hospitality sector, according to the latest figures from ADP.

Employment declined by 123,000 from November, versus expectations for an 88,000 increase and marking the first drop since April.

The November total of jobs added, meanwhile, was revised to 304,000 from 307,000.

Elsewhere, IHS Markit‘s final composite PMI for December revealed economic activity in the US service sector expanded at a softer pace last month than it had in November, hitting its lowest level in three months at 55.3, down from 58.6.

That was still above the 50-point mark that separates expansion from contraction, however.

Lastly, new orders for manufactured goods in the US rose by $5.0bn, or 1%, to $487.2bn in November, according to the Census Bureau, followed October’s increase of 1.3% and better than market expectations for growth of 0.7%.

In equities, banks were among the leading gainers, with Bank of America up 6.25% and JPMorgan & Chase 4.7% firmer.

Biopharmaceutical manufacturer Moderna was ahead 6.48% after the European Medicines Agency recommended the European Commission authorise the company’s Covid-19 vaccine.

On the downside, the major technology plays dragged the Nasdaq into the red, with Alphabet off 0.32%, Amazon down 2.49%, Apple behind by 3.32%, Facebook 2.83% weaker and Netflix falling 3.9%.

There were no major corporate earnings releases on Wednesday.


Thursday newspaper round-up: London population, British Gas, Autonomy

London’s population is set to decline for the first time in more than 30 years, driven by the economic fallout from the coronavirus pandemic and people reassessing where they live during the crisis, according to a report. The accountancy firm PwC said the number of people living in the capital could fall by more than 300,000 this year, from a record level of about 9 million in 2020, to as low as 8.7 million. This would end decades of growth with the first annual drop since 1988. – Guardian

Thousands of British Gas engineers and call centre workers will down tools from Thursday as part of a national five-day strike in response to the energy giant’s “fire and rehire” plans. The GMB trade union called the strike after 89% of its 9,000 British Gas members voted in favour of industrial action following the breakdown of talks with executives at Britain’s biggest energy supplier last year. – Guardian

Workers will flock back to offices and power an economic recovery once the Covid pandemic is over, Boris Johnson said in an upbeat call with 250 business leaders as he sought to paint a picture of a brighter future. The Prime Minister said that fears the city centre is doomed are misguided and that firms will not change their business models to permanently rely on video calls and remote working. – Telegraph

A tribunal report has laid bare how Deloitte and two of its former audit partners succumbed to pressure to help Autonomy meet market expectations. Autonomy, founded by Mike Lynch, was the sole FTSE 100 audit client of Deloitte’s Cambridge office in 2009, when the software company’s revenue figures began to be bolstered by substantial sales of pure hardware. However, the hardware sales were not disclosed in the 2009 and 2010 financial statements. – The Times


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