ADVFN Morning London Market Report: Friday 8 January 2021

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London open: Stocks edge up ahead of payrolls; housebuilders rally

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London stocks edged higher in early trade on Friday, with housebuilders in the black after a solid update from Barratt Developments, as investors eyed the latest US non-farm payrolls report.

At 0840 GMT, the FTSE 100 was up 0.3% at 6,877.00.

Han Tan, market analyst at FXTM, said: “Fundamental investors will be focusing on the US non-farm payrolls release later today, amid expectations for a mere increase of 50,000 jobs in December. Such a figure would be a far cry from the millions of jobs that were restored in the months after the initial national lockdown was ended. A December NFP print of 50,000 would merely be one-fifth of the jobs added in the month prior which notably was below expectations, signaling that the post-lockdown recovery in the labour market is stalling.

“Still, the prospects of more fiscal stimulus under the incoming Biden administration should help tide the US economy over. After all, the President-elect did vow this week to mail out those US$2,000 cheques ‘immediately’ if the Democrats won the Georgia Senate runoffs.”

The payrolls report, unemployment rate and average earnings are all due at 1330 GMT.

In equity markets, housebuilders were the standout gainers after Barratt Developments said it planned to restart dividends as it reported strong trading in the first half. Forward sales in the six months to the end of December rose 14.3% to 13,588 homes from a year earlier at a value of £3.2bn – up 19.4%.

Barratt rallied, along with Taylor WimpeyPersimmonCrest Nicholson and Vistry.

Rentokil was also on the front foot after saying that annual results would be slightly better than expectations but warning the outlook was uncertain because of uncertainty over one-off disinfection sales.

Pets at Home surged as it upgraded its full-year profit guidance following strong sales growth in December.

Shipping services firm Clarkson also gained as it said that full-year underlying profit for 2020 is expected to be ahead of market consensus, at between £42m and £45m.

On the downside, Signature Aviation fell, having risen sharply on Thursday, after it confirmed it had received an approach from private equity firm Carlyle Investment Management regarding a possible offer for the company.

Food and clothing retailer Marks & Spencer was weaker after it reported a fall third-quarter revenue as it warned the latest UK Covid lockdown would hit sales and the Brexit trade deal “significantly impact” some of its European operations.

Like-for-like revenue in the 13 weeks to December 26 fell 7.6% to £2.5bn with a 4.4% rise on food sales over the festive period offset by a 24.1% slump in clothing and homewares.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Hargreaves Lansdown Plc +4.30% +67.50 1,637.50
2 Rentokil Initial Plc +3.20% +17.00 548.00
3 Compass Group Plc +2.97% +42.00 1,455.50
4 Barratt Developments Plc +2.93% +20.20 709.20
5 London Stock Exchange Group Plc +2.46% +222.00 9,240.00
6 Melrose Industries Plc +2.39% +4.35 186.30
7 Experian Plc +2.23% +63.00 2,886.00
8 Taylor Wimpey Plc +2.21% +3.65 168.60
9 Halma Plc +2.03% +52.00 2,612.00
10 Whitbread Plc +1.89% +59.00 3,173.00

 

Top 10 FTSE 100 Fallers

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76.4% of retail CFD accounts lose money.

 

# Name Change Pct Change Cur Price
1 Tui Ag -17.35% -84.50 402.40
2 Fresnillo Plc -3.25% -40.50 1,207.00
3 Sainsbury (j) Plc -3.06% -7.60 240.90
4 Rolls-royce Holdings Plc -2.79% -3.10 108.00
5 Marks And Spencer Group Plc -2.05% -2.90 138.45
6 Bt Group Plc -1.94% -2.85 144.00
7 Hsbc Holdings Plc -1.68% -7.00 410.05
8 Centrica Plc -1.57% -0.78 48.93
9 Reckitt Benckiser Group Plc -1.47% -98.00 6,570.00
10 Crh Plc -1.40% -49.00 3,455.00

 

Europe open: Markets higher as electronics spark investor sentiment

European stocks rose on Friday as electronics stocks drove sentiment after positive earnings updates from chipmakers and a strong US session overnight.

The pan-European Stoxx 600 index rose 0.6% at 0920 GMT and had gained 5% over the last month. Germany’s DAX index jumped 0.75% after economic data showed better-than-expected November industrial output and exports.

Investors were also eyeing US non-farm payrolls later in the day. Soon-to-be former US President Donald Trump overnight finally said there would be a peaceful transition of power to Joe Biden and condemned the violence perpetrated by his supporters on Wednesday when they stormed the Capitol building in Washington.

Markets.com analyst Neil Wilson said investors were hoping for “a more settled political environment in the US and the firm belief that fiscal expansion and continued monetary policy support will deliver further upside for equity markets”.

“The big concern is that procyclical fiscal policy is too hot: the stimulus isn’t really needed, inflation really gets out of hand, bonds crater and market interest rates move aggressively higher, forcing central banks into needing to make some unpalatable decisions later this year. ”

“The risk is the Democrats really over-egg the pudding, but this is not a significant worry today given we are still in the midst of a pandemic and, it should be said, most of the stimulus is supporting real people in the real economy and not being funnelled into financial institutions.”

In equity markets, computer chipmaker STMicroelectronics was higher after its early revenue estimate for the fourth-quarter came in above the previous range. Infeon and BE Semiconductor were also up.

UK housebuilders also gained after Barratt Developments said it planned to restart dividends as it reported strong trading in the first half. Forward sales in the six months to the end of December rose 14.3% to 13,588 homes from a year earlier at a value of £3.2bn – up 19.4%.

Barratt rallied, along with Taylor WimpeyPersimmonCrest Nicholson and Vistry.

Signature Aviation fell, having risen sharply on Thursday, after it confirmed it had received an approach from private equity firm Carlyle Investment Management regarding a possible offer for the company.

Food and clothing retailer Marks & Spencer was weaker after it reported a fall third-quarter revenue as it warned the latest UK Covid lockdown would hit sales and the Brexit trade deal “significantly impact” some of its European operations.

Like-for-like revenue in the 13 weeks to December 26 fell 7.6% to £2.5bn with a 4.4% rise on food sales over the festive period offset by a 24.1% slump in clothing and homewares.

 

US close: Markets put in decent gains as Biden is confirmed

Wall Street stocks finished in positive territory on Thursday, after Joe Biden was confirmed by Congress as the 46th President of the United States, hours after a mob incited by the incumbent stormed and occupied the Capitol building.

At the close, the Dow Jones Industrial Average was up 0.69% at 31,041.13, the S&P 500 added 1.48% to 3,803.79, and the Nasdaq Composite was 2.56% firmer at 13,067.48.

The Dow closed 211.73 points higher, despite a large number of pro-Donald Trump protestors gathering outside the Capitol turned violent overnight, making their way through security barricades and entering the building.

The violence broke out following a Senate run-off race in Georgia, with the Democrats needing to win both seats to take the balance of power from the Republicans

Multiple media outlets had called winners for both seats for the Democrats, with Raphael Warnock and Jon Ossoff beating Kelly Loeffler and David Perdue, respectively, giving both parties 50 seats in the Senate, meaning vice president-elect Kamala Harris would have a tie-breaking vote.

Following the news, 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 National Guard was then called to help to secure the Capitol, while crowds were dispersed by police using teargas and concussion grenades as the nation’s capital was placed under a 12-hour curfew.

As far as Biden’s confirmation was concerned, Senators and House Representatives certified the electoral college votes in the early hours of Thursday morning in Washington as America reeled at the scenes of anarchy overnight

However, the process was more drawn out than usual after more than 130 Congress members supported Trump’s baseless claims of electoral fraud, meaning that each objection had to be debated.

On the macro front, unemployment claims dipped in the US during the latest week for which data was available.

According to the Department of Labor, initial jobless claims slipped by 3,000 over the week ending on 2 January to reach 787,000.

Initial claims data for the prior week were revised up by the same amount to 790,000, while secondary claims fell by 126,000 to 5.072m

Still on jobs, planned job cuts jumped to 77,030 in December, up 18.9% from the 64,797 in November and 134.5% higher than the 32,843 cuts announced in the final month of 2019, according to Challenger, Gray & Christmas.

Elsewhere, America’s shortfall on trade with the rest of the world widened more than expected in November, in part amid stockpiling of cell phones and other household goods by firms ahead of the Christmas holidays.

According to the Department of Labor, in seasonally adjusted terms the deficit on trade in goods and services increased by 8.0% month-on-month to reach $68.1bn.

Lastly, the Institute for Supply Management‘s non-manufacturing PMI increased to 57.2 in December of 2020 from 55.9 in November, beating market forecasts of 54.6 and pointing to the strongest growth in the services sector in three months.

In the corporate space, Walgreens Boots Alliance was 5.18% higher after it beat estimates as the international drugstore chain’s sales weathered coronavirus-related disruptions in both the UK and the US.

Bed Bath & Beyond plunged 10.94%, meanwhile, as it revealed that earnings had fallen short amid store closures.

WD-40 rose 1.66% and Micron Technology was 2.59% firmer at the closing bell, ahead of both firms updating the market on their trading after hours.

 

Friday newspaper round-up: Boeing, Grant Thornton, Signature Aviation

Boeing has been fined $2.5bn by the US justice department after being charged with fraud and conspiracy in connection with two fatal crashes of its 737 Max airliner. Boeing’s employees chose “the path of profit over candor by concealing material information” from the Federal Aviation Administration (FAA), the US’s top airline regulator, David Burns, the acting assistant attorney general of the justice department’s criminal division, wrote in a release. – Guardian

International travellers will need to show a negative Covid-19 test before being allowed into the UK, the government has announced, in a significant toughening of border controls to try to stem the spread of new coronavirus variants. The new rules will take effect next week and apply to returning UK nationals as well as foreign citizens. Passengers will need to produce a test result taken less than 72 hours before boarding planes, boats or trains to the UK, and could be fined £500 in border spot checks without a negative result. – Guardian

As many as a quarter of British employees could end up working from home for good, bosses anticipate, as companies plan for permanent changes after Covid. Almost every chief finance officer – 97pc – surveyed by Deloitte expects more flexible and home working in the long-term. This is expected to lead to a five-fold increase in the number of people clocking in from their spare room or kitchen table, taking the share of remote workers up from 5pc in 2019 to about 25pc in 2025. – Telegraph

Audit firm Grant Thornton is being sued for £200m by liquidators of cake seller Patisserie Valerie which collapsed in 2019 following a major accounting scandal. Liquidators FRP Advisory told creditors they had been advised that Grant Thornton was negligent in the preparation of Patisserie Valerie’s financial statements between 2014 and 2017. – Telegraph

Bill Gates, the co-founder of Microsoft, could join forces with Blackstone, one of the world’s biggest private equity firms, to make a £3 billion takeover bid for Signature Aviation, a provider of services to private jet owners. Cascade Investment, a vehicle which manages part of Mr Gates’ personal wealth, and Blackstone were last night close to agreeing the basis on which they would make a joint offer for Signature, according to Sky News. – The Times

 

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