ADVFN Morning London Market Report: Tuesday 26 January 2021

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London open: Stocks gain despite uninspiring jobs data


London stocks edged higher in early trade on Tuesday despite the release of uninspiring UK jobs data and further weakness in the travel and leisure sector.

At 0900 GMT, the FTSE was up 0.4% at 6,666.48.

Spreadex analyst Connor Campbell said the FTSE’s gains were “peculiar” given the grim jobs data and suggested that investors were trying to “force a positive angle on a jobs report that saw redundancies at a record high, and the unemployment rate hit 5% for the first time since mid-2016”.

“Yet that rise in the unemployment rate still leaves it short of the 5.1% forecast. The average earnings index surged past estimates, at 3.6% against the 2.9% estimated. And, in the most recent piece of data, December’s claimant count change reading came in at just 7.0k, a fraction of both the 38.1k seen the month prior, and the 47.5k analysts had expected.

“It helped the FTSE that the pound took the heat out of the negative elements of the report, falling 0.3% against the dollar and 0.2% versus the euro.”

In equity markets, caterer Compass Group was the top gainer on the FTSE 100 after an upgrade to ‘neutral’ from ‘underperform’ at Exane.

Opioid addiction treatment maker Indivior surged after Reckitt Benckiser said it will withdraw a $1.4bn claim against the company. Indivior will pay the consumer goods giant $50m to end the legal battle related to a US probe into opioid addition.

Crest Nicholson rallied after the housebuilder reinstated its dividend despite swinging to a full-year loss.

On the downside, Rolls-Royce slumped after saying it expects £2bn in cash burn this year, with widebody engine flying hours falling to 55% of 2019 levels compared with 70% previously forecast as new variants of Covid-19 and enhanced travel restrictions created short-term uncertainty.

JD Sports Fashion was also weaker after it confirmed it is exploring additional funding options with a view to increasing its flexibility “to invest in future strategic opportunities”, and said this may involve a non pre-emptive equity placing.

Trainline was knocked lower by a downgrade to ‘neutral’ at JPMorgan Cazenove.

More broadly, travel and leisure stocks were under pressure again amid worries about Covid restrictions, with British Airways parent IAG, Premier Inn owner WhitbreadInterContinental HotelsTuieasyJetCarnivalSSP and Wizz Air all lower.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Compass Group Plc +3.14% +41.50 1,363.00
2 Micro Focus International Plc +2.74% +10.50 393.70
3 Ocado Group Plc +2.32% +64.00 2,818.00
4 Itv Plc +2.27% +2.25 101.55
5 Johnson Matthey Plc +2.11% +61.00 2,954.00
6 Smith (ds) Plc +2.08% +7.70 378.10
7 Croda International Plc +2.01% +130.00 6,604.00
8 Smith & Nephew Plc +1.96% +31.50 1,642.50
9 3i Group Plc +1.90% +21.50 1,156.00
10 Pearson Plc +1.73% +12.40 730.40


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc -9.20% -9.02 88.98
2 Tui Ag -3.22% -11.20 337.10
3 International Consolidated Airlines Group S.a. -3.07% -4.30 135.70
4 Easyjet Plc -2.69% -19.60 709.00
5 Carnival Plc -2.03% -24.00 1,161.00
6 Glencore Plc -1.29% -3.35 256.40
7 Whitbread Plc -0.92% -28.00 3,007.00
8 Antofagasta Plc -0.92% -13.50 1,461.00
9 Direct Line Insurance Group Plc -0.89% -2.80 313.00
10 Hargreaves Lansdown Plc -0.72% -12.00 1,646.00


Europe open: Shares inch higher as Covid restrictions still worry

European shares crawled higher at the opening on Tuesday, with investor sentiment held back by worried over tighter coronavirus travel restrictions and rising UK unemployment.

The pan-European STOXX 600 index rose 0.4% after closing lower on Monday. The UK FTSE’s rose despite official data showing British redundancies at a record high, with the unemployment rate hitting 5% for the first time since mid-2016.

“Yet that rise in the unemployment rate still leaves it short of the 5.1% forecast. The average earnings index surged past estimates, at 3.6% against the 2.9% estimated. And, in the most recent piece of data, December’s claimant count change reading came in at just 7k, a fraction of both the 38.1k seen the month prior, and the 47.5k analysts had expected,” said Spreadex analyst Connor Campbell.

“Concerns over the length of the UK’s current lockdown remain an underlying issue for the index, especially since the Conservative party seem to have shifted their strategy away from the make-and-then-break promises policy of 2020.”

The UK government was expected on Monday to announce a mandatory 14 day quarantine for all arriving passengers.

Italy’s FTSE MIB was up 0.49% with Prime Minister Giuseppe Conte set to resign later on Tuesday on hopes President Sergio Mattarella will give him a mandate to form a new government with broader backing in parliament.

In equity news, shares in Spanish energy company Naturgy Energy Group soared after it revealed a Global InfraCo planned a cash offer for a 22.69% stake. Global InfraCo will offer 23 euros a share, for a maximum €5.06bn.

Shares in wealth manager UBS gained as high levels of client activity helped it record a 137% rise in net profit.

Swedish buyout group EQT jumping 9.7% after it signed a deal to buy global real estate investment manager Exeter Property Group for $1.87 billion.

Aircraft engine maker Rolls-Royce plunged almost 10% as the company revised down its 2021 outlook for engine flying hours as Covid travel restrictions and new strains of the virus continue to batter the travel industry.


US close: Stocks mixed ahead of major corporate earnings

Wall Street stocks turned in a mixed performance on Monday ahead of some key corporate earnings later in the week.

At the close, the Dow Jones Industrial Average was down 0.12% at 30,960.00, while the S&P 500 was 0.36% firmer at 3,855.36 and the Nasdaq Composite saw out the session 0.69% stronger at 13,635.99.

The Dow closed 36.98 points lower on Monday, extending losses recorded at the tail end of last week after new President Joe Biden got to work on pushing his proposed $1.9trn stimulus package through Congress.

With things being quiet on the earnings front on Monday, market participants held out hope for updates on the aforementioned stimulus programme and mulling over the Covid-19 pandemic itself.

Joe Biden’s pick for surgeon general said over the weekend that the US would have to race to keep up with the now mutating coronavirus.

“The virus is basically telling us that it’s going to continue to change and we’ve got to be ready for it,” said Dr Vivek Murthy. “We’ve got to number one, do much better genomic surveillance, so we can identify variants when they arise and that means we’ve got to double down on public health measures like masking and avoiding indoor gatherings.”

The US has now recorded more than 25.7m confirmed cases of Covid-19, claiming the lives of roughly 429,515 Americans in the process.

In the corporate space, quarterly results from AppleMicrosoftNetflixTeslaMcDonald’sHoneywellCaterpillar and Boeing were all slated for release this week.

On the macro front, the Chicago Fed‘s national activity index for December edged higher to 0.52 from 0.31 in November, while the Dallas Fed‘s manufacturing index revealed Texas factory activity continued to expand in January, albeit at a markedly slower pace, as the production index fell from 26.8 to 4.6.


Tuesday newspaper round-up: Construction materials, tax reforms, emergency Covid schemes

A growing shortage of key construction materials could delay housebuilding this year as builders fight for fresh supplies against a backdrop of coronavirus-related challenges and price increases. One builders’ merchant said they were being given an August delivery date for roofing materials, such as pitched roof tiles, compared with a usual three-month wait because, even with extra shifts, UK factories were struggling to keep up. – Guardian

Janet Yellen has been confirmed as the first woman to head the US Treasury. The former chair of the Federal Reserve and noted economist was approved by the Senate on an 84-15 vote. She sailed through a congressional hearing last week and had already been unanimously approved by the Senate finance committee and backed by all living former treasury secretaries. – Guardian

One of the country’s leading think tanks has called for controversial tax reforms that could increase bills for millions of self-employed workers and business owners. The Institute for Fiscal Studies’ new report took aim at a tax system which “discourages employment, investment and risk-taking” and criticised the lower rates levied on capital gains, dividends and self-employment income.- Telegraph

Leon Black, founder and chief executive of private equity giant Apollo Global Management, is stepping aside after a review found he made larger-than-expected payments to the late Jeffrey Epstein. The billionaire paid Epstein a total of $158m (£116m) in fees for advice on trust and estate tax planning in the five years to 2017, according to a report by law firm Dechert. This is much more than was previously known. – Telegraph

Emergency Covid-19 schemes are being subjected to an “eye-watering” level of fraud, one of Britain’s most senior crime fighters has warned. Graeme Biggar, of the National Crime Agency, said that there would be “substantial” losses for the taxpayer related to criminals targeting multibillion-pound taxpayer support such as the wage furlough and the bounce back loan schemes.- The Times


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