ADVFN Morning London Market Report: Friday 23 January 2021

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London open: Stocks fall after retail sales, borrowing data


London equity markets fell in early trade on Friday as investors digested disappointing UK data, with travel and leisure shares under the cosh.

At 0840 GMT, the FTSE 100 was 0.4% lower at 6,690.01, while the pound was down 0.6% against the dollar at 1.3658, having hit its best level on Thursday since spring 2008.

Richard Hunter, head of markets at Interactive Investor, said: “Markets have stumbled at the end of a generally directionless week.

“The wave of optimism which had gripped the US markets the previous day, as the inauguration of the new President passed without incident, and as investors took hope from some positive political noises around the stimulus package, subsided.”

Market participants were mulling over the latest figures from the Office for National Statistics, which showed retail sales suffered their biggest ever year-on-year fall in 2020 as the Covid-19 pandemic took its toll.

Sales declined 1.9% last year compared with 2019. Clothing retailers in particular fared badly, with a record annual fall of more than 25%, while restrictions on movement led to a record year-on-year decline for fuel sales.

Lockdowns and restrictions boosted online sales, however, which surged 46.1% on the year in 2020 – the highest annual growth reported since 2008.

ONS deputy national statistician for Economic Statistics, Jonathan Athow, said: “Some sectors were able to buck the trend in 2020. The increased popularity of click and collect and people buying more items from home led to a strong year for overall internet sales, with record highs for food and household goods sales online.”

In December, sales rose 0.3% on the month, which was an improvement on the 4.1% drop seen in November but undershot expectations for a 1.2% jump. This left sales up 2.7% compared with February’s pre-lockdown level.

Clothing sales pushed up 21.5% in December, recovering from a 19.6% slump the month before when non-essential retailers were closed due to lockdown restrictions. Non-essential retailers were allowed to open again in early December, albeit not for long.

Separate data showed the UK borrowed £34.1bn in December, exceeding forecasts and recording the highest level for that month on record as Covid-19 forced the government to issue more debt.

Public sector net borrowing was £28.2bn more than a year earlier, the third-highest month on record and the highest December figure since records began in 1993, the ONS said. Economists had on average expected borrowing of £32bn.

In equity markets, travel and leisure stocks with particular exposure to the Covid-19 pandemic and related restrictions took a hit. British Airways parent IAG, Premier Inn owner Whitbread, travel company TUI, Upper Crust owner SSP, budget airline easyJet and Cineworld were all weaker.

Mediclinic International was trading lower even as it said third-quarter revenue rose 2.5% as the private healthcare group experienced unusually high inpatient levels in southern Africa and the Middle East.

On the upside, dollar-earners rallied as sterling weakened, with drinks maker Diageo and equipment rental firm Ashtead the top risers.

Kainos surged after the IT provider lifted full-year guidance as it reported strong trading momentum towards the end of 2020.

Computacenter gained as it lifted its full-year profit guidance after trading continued strongly until the end of the year.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Sse Plc +1.29% +19.50 1,528.00
2 Relx Plc +1.24% +22.50 1,842.00
3 Ashtead Group Plc +1.12% +42.00 3,802.00
4 Smith & Nephew Plc +1.08% +17.50 1,642.00
5 Segro Plc +0.88% +8.40 968.20
6 Hikma Pharmaceuticals Plc +0.83% +21.00 2,556.00
7 National Grid Plc +0.76% +6.60 875.40
8 Sage Group Plc +0.73% +4.40 605.60
9 Admiral Group Plc +0.61% +18.00 2,961.00
10 Glaxosmithkline Plc +0.56% +7.60 1,372.40


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Tui Ag -8.07% -34.10 388.50
2 Easyjet Plc -3.84% -31.00 776.20
3 International Consolidated Airlines Group S.a. -3.54% -5.55 151.40
4 Prudential Plc -2.70% -38.50 1,387.50
5 Melrose Industries Plc -2.30% -4.15 176.40
6 Rolls-royce Holdings Plc -2.27% -2.35 100.95
7 Bp Plc -1.91% -5.60 287.75
8 Itv Plc -1.90% -2.05 105.85
9 Whitbread Plc -1.85% -59.00 3,122.00
10 Next Plc -1.81% -148.00 8,010.00


US close: Stocks finish mixed as Biden gets to work

Wall Street stocks closed in a mixed state on Thursday, after major indices hit fresh record highs in the previous session on Inauguration Day.

At the close, the Dow Jones Industrial Average was down 0.04% at 31,176.01, while the S&P 500 eked out gains of 0.03% to 3,853.07, and the Nasdaq Composite was 0.55% firmer at 13,530.92.

The Dow closed 12.37 points lower on Thursday, having recorded gains in the previous session as market participants focussed on Joe Biden’s inauguration in Washington DC and a flurry of executive orders signed by the new President.

Almost immediately after taking the oath of office, Biden released details of his Covid-19 plan, detailing ten executive orders that would increase testing, speed up the rate of vaccinations, provide further funding to local officials and utilise the Defense Production Act to manufacture additional supplies, including masks.

With total confirmed coronavirus cases in the US exceeding 25.0m, claiming the lives of more than 416,160 Americans in the process, investors will now be keen to see if Biden can push his proposed $1.9trn Covid-19 relief bill through Congress.

On the macro front, US jobless claims undershot economists’ forecasts slightly over the past week, according to the Department of Labor, as the number of initial unemployment claims declined by 26,000, in seasonally adjusted terms, over the week ended 16 January.

That number came in on top of a downwards revision of 39,000 for the next to last week, while the four-week moving average, which aims to smooth out the changes in claims from one week to the next, increased by 23,500 to 848,000.

Elsewhere, manufacturing conditions in the Philadelphia region improved significantly in January, according to the Federal Reserve Bank of Philadelphia.

The Philadelphia Fed current manufacturing index rose to 26.5 from a revised 9.1 in December, beating expectations for a reading of 12.0 and reaching its best level in nearly a year, while the new orders index increased 28 points to 30.0, hitting its highest level in three months, and the shipments index was up 11 points to 22.7 in January.

Lastly, homebuilding in the US continued to accelerate at a brisk pace at the tail-end of the previous year.

According to the Department of Commerce, in seasonally-adjusted terms the annualised pace of new home sales jumped in December at a month-on-month pace of 5.8% to reach 1.669m.

Economists’ had forecast a reading of 1.564m.

In the corporate space, United Airlines shares were in the red by 5.73%, after the legacy carrier fell short of both top and bottom-line expectations in its latest quarter.

Baker Hughes lost 1.49% even after it reported its first profitable quarter since it lost $9.9bn as a result of last year’s Covid-19 fuelled oil crash.

Union Pacific was down 4.67%, after it also topped profit and revenue expectations on higher shipment volumes.


Friday newspaper round-up: Next, Cineworld, border chaos

Next has pulled out of the race to acquire Topshop, the jewel in the crown of Sir Philip Green’s collapsed fashion empire Arcadia, after rival bidders trumped its offer. Arcadia, which employed 13,000 people across 500 outlets when it fell into administration last year, is being broken up. Interested parties had been asked to submit bids for the whole company or individual brands at the start of this week. – Guardian

Britain’s largest cinema chain is facing a shareholder backlash over a scheme that could result in senior bosses being allocated up to £208m in share awards while thousands of staff remain on furlough as all 127 of its UK sites remain closed. Cineworld’s shareholders are due to vote on a new pay policy and long-term incentive plan (LTIP) at a special meeting next week. The shareholder advisory groups Glass Lewis and ISS have recommended that investors vote against the plans. – Guardian

Nearly 6,000 licensed venues disappeared from high streets and city centres last year, almost triple the number in 2019, as the pandemic wreaked havoc on the hospitality sector. Government restrictions introduced to curb the spread of the coronavirus combined with a slump in consumer confidence contributed to a net decline of 5,975 sites during 2020, according to the latest Market Recovery Monitor from consultancies CGA and AlixPartners. – Telegraph

Shops will start to run out stock within weeks if chaos at the borders does not ease, according to supply chain experts. Six out of 10 supply chain managers said they are running into problems with new customs controls and Covid-19 checks that are delaying goods coming into the UK from Europe, research by the Chartered Institute of Procurement & Supply (CIPS) found. Delays ran for several days in about a third of cases. – Telegraph

The state body that runs premium bonds and other savings products has apologised to customers for its poor service after admitting that it took an average of 20 minutes simply to answer the phone in the autumn. National Savings & Investments accepted that it had been wrongfooted by the sheer volume of savings flooding into it over the summer and then wrongfooted a second time by the wave flooding out again in the autumn after it announced cuts in interest rates and prize money. – The Times

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