ADVFN Morning London Market Report: Friday 15 January 2021

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London open: Stocks fall as investors mull UK GDP, Biden relief package

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London stocks fell in early trade on Friday as investors digested the latest UK GDP data and news of US President-elect Joe Biden’s Covid relief package.

At 0840 GMT, the FTSE 100 was down 0.5% at 6,771.51, after data from the Office for National Statistics showed the economy shrank 2.6% in November but beat expectations as the government imposed a second Covid-19 lockdown on England.

The drop in output ended six consecutive months of growth as all four nations in the UK put restrictions in place in an effort to stem a resurgence of coronavirus infections. Britain entered a stricter shutdown in early January that could last for months.

Output in November dropped back to 8.5% less than in February compared with a 61% shortfall in October. The economy was 8.9% smaller than a year earlier compared with an annual decline of 6.8% the month before.

The result showed the economy holding up better than the 4.6% average drop forecast by analysts as businesses adapted to restrictions.

The services sector was most affected, dropping 3.4%, with hairdressers and pubs the hardest hit. Production edged down 0.1% with factories open and often busy ahead of the Brexit trade deadline. Construction expanded 1.9%.

Spreadex analyst Connor Campbell said: “A $1.9trn stimulus package announcement from Joe Biden – including enhancing payments to Americans by $1,400 – failed to prevent losses at the European open.

“It seems the market’s view is that it is all well and good promising such stimulus – now Biden needs to get it through a precariously balanced, and distracted, Senate. If the incoming President can achieve that, then investors might be in the mood to celebrate.

“For now, however, they were too busy crunching the latest batch of Covid-19-impacted numbers. In the UK that meant news the economy contracted by 2.6% in November – better than the -4.6% expected, but a screeching halt to six consecutive months of expansion.

“The FTSE took little joy from the fact the UK economy didn’t suffer quite as bad as forecast – contraction is contraction whatever way you slice it, and this was during the lesser November lockdown.”

In equity marketsDS Smith was in the red after Merpas sold shares in the paper and packaging company in a placing.

Defence group Babcock tumbled after it said profits had fallen by more than a third in the nine months to date as the pandemic hit its civil aviation business.

Oilfield services provider Petrofac slid after the Serious Fraud Office said a former employee of one of its subsidiaries had admitted additional charges under the UK Bribery Act. No charges were brought against any group company or any other officers or employees, Petrofac said.

Wood Group was knocked lower by a downgrade to ‘equalweight’ at Barclays, while Vesuvius and Bodycote were weaker after downgrades to ‘sector perform’ at RBC Capital Markets.

On the upside, Aveva rallied as it said it was confident in its outlook for the current year after a “strong” third quarter improved revenue growth to about 1.5% in the nine months to the end of December.

Defence and aerospace engineer Meggitt rose after saying it expects full-year results to be in line with expectations but cautioning that the expected recovery in air travel from the pandemic would take longer than expected.

Opioid addiction treatment maker Indivior surged after it upped its full-year revenue guidance and said adjusted pre-tax income is set to beat its previous expectations, thanks in part to better-than-expected revenues from its Sublocade treatment.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Next Plc +0.85% +68.00 8,028.00
2 Easyjet Plc +0.61% +5.00 829.60
3 Sainsbury (j) Plc +0.45% +1.10 243.50
4 Melrose Industries Plc +0.43% +0.80 186.30
5 Tesco Plc +0.41% +1.00 242.40
6 Marks And Spencer Group Plc +0.40% +0.55 138.65
7 Whitbread Plc +0.34% +11.00 3,203.00
8 Ocado Group Plc +0.31% +8.00 2,592.00
9 Micro Focus International Plc +0.24% +1.00 421.40
10 Wpp Plc +0.22% +1.80 817.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Smith (ds) Plc -2.98% -12.10 393.40
2 Carnival Plc -2.66% -35.50 1,298.50
3 Smiths Group Plc -2.19% -33.50 1,493.50
4 Anglo American Plc -2.03% -57.00 2,756.00
5 Compass Group Plc -1.89% -27.00 1,401.00
6 Bhp Group Plc -1.72% -38.00 2,170.00
7 Auto Trader Group Plc -1.56% -9.00 568.80
8 Rolls-royce Holdings Plc -1.55% -1.65 105.00
9 Coca-cola Hbc Ag -1.46% -34.00 2,300.00
10 Bae Systems Plc -1.42% -7.10 494.50

 

US close: Stocks end session lower as Biden unveils stimulus package

Wall Street stocks closed lower on Thursday as market participants mulled over the details of president-elect Joe Biden’s planned economic stimulus package and this week’s jobless claims data.

At the close, the Dow Jones Industrial Average was down 0.22% at 20,991.52, while the S&P 500 was 0.38% weaker at 3,795.54 and the Nasdaq Composite saw out the session 0.12% softer at 13,112.64.

The Dow closed 68.95 points lower on Thursday, extending yesterday’s minor losses that cane after the House of Representatives voted to impeach Donald Trump for a second time.

Thursday’s main focus was this week’s worse-than-expected jobless claims report from the Labor Department, which revealed the number of Americans filing for unemployment surged at the start of 2021. In seasonally adjusted terms, initial unemployment claims soared by 181,000 over the week ending on 9 January to reach 965,000. Economists had been expecting a dip from 787,000 to 775,000

In addition to the jobless data, Biden unveiled his stimulus plan, one that will include $1,400 direct payments, an extension of increased unemployment insurance and support for state and local governments in a package set to be as big as $1.9trn.

The benchmark 10-year note yield slipped to 1.09% on Thursday a day after hitting a high of 1.18%.

Also in focus, trial data from yesterday revealed that Johnson & Johnson‘s one-dose Covid-19 vaccine was both safe and capable of generating a beneficial immune response.

On the macro front, the cost of goods purchases overseas rose at nearly twice the expected pace at the end of 2020, driven by higher fuel prices. According to the Department of Labor, the US import price index increased at a 0.9% month-on-month pace, pushing the year-on-year rate of decline up to -0.3%.

Economists had forecast a 0.5% rise versus November and an annual rate of fall of -0.8%.

In the corporate space, Delta Air Lines said it halved its cash burn and narrowed its fourth-quarter losses amid the ongoing Covid-19 pandemic, while BlackRock said assets surged to a record $8.6trn.

 

Friday newspaper round-up: Working from home, UK population, Stamp Duty

The business secretary, Kwasi Kwarteng, has said companies must redouble efforts to ensure employees work from home unless their work is critical and cannot be done offsite, as the TUC urged the government to step up enforcement. Calls are growing for the government to rethink allowing construction sites to continue as normal and to permit only those whose operations are vital, with several industry employees telling the Guardian that safe practice has become impossible on sites. – Guardian

The UK’s service sector suffered the biggest fall in growth in November, contracting by 3.4%. Unsurprisingly, the hospitality sector shrank the most – with pubs and restaurants forced to close during the November lockdown. – Guardian

The UK population may have fallen by as much as 1.3m – the biggest decline since the Second World War – in the wake of the Covid-19 pandemic, academics have said. A study by the Economic Statistics Centre of Excellence highlighted an “unprecedented exodus” of foreign-born workers following the outbreak of the virus as well as shortcomings in official surveys inflating the number of UK workers. – Telegraph

A group of 50 Tory MPs in the party’s new Northern heartlands is calling on the Chancellor to extend the stamp duty cut in a major boost for The Telegraph’s campaign against the tax. The Northern Research Group (NRG) urged Rishi Sunak to continue a stamp duty holiday on properties worth less than £500,000 for a further 12 months. They also want him to extend a £20 increase to weekly Universal Credit payments until lockdown ends. – Telegraph

London-based start-ups raised more than $10 billion in funding last year, cementing the capital’s status as Europe’s leading technology hub. Investors continued to flock to London despite the shockwaves from Covid-19, as it received more venture capital funding than any European city, a new study has shown. – The Times

The bribery scandal at Petrofac deepened last night when a former senior executive at the oil services group pleaded guilty to three offences related to $3.3 billion of work that it secured in the United Arab Emirates. The Serious Fraud Office said that David Lufkin had pleaded guilty at Westminster magistrates’ court to three counts of bribery, which related to “corrupt offers and payments made between 2012 and 2018”. The timing is significant, since it implies that offences were committed even after the SFO had begun its inquiry into suspected bribery, corruption and money laundering at Petrofac in May 2017. – The Times

 

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