ADVFN Morning London Market Report: Thursday 28 January 2021

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London open: Stocks fall but drinks maker Diageo bucks trend

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London stocks fell in early trade on Thursday following heavy losses in Asia and on Wall Street, as worries about the Covid-19 pandemic and the vaccine rollout dented sentiment.

At 0900 GMT, the FTSE 100 was down 1.3% at 6,481.51.

Spreadex analyst Connor Campbell said: “In what could the first major post-Brexit row between the UK and EU, both sides are at odds over the distribution of the Oxford/AstraZeneca vaccine.

“A shortage of preparations in the European bloc has led to a public spat with Astra, including Brussels dismissing the company’s claim that the UK has first dibs on locally-produced doses. As for the UK government, it appears to have no interest in a compromise, with reports suggesting that only after 100 million doses have been manufactured for the British population will plants in Oxford and Staffordshire be open to supply other nations.

“The argument appears to have undermined confidence in not only the vaccine rollout itself, but the market optimism that came alongside its development.”

Overnight, US stocks sank as Reddit retail investors continued to disrupt Wall Street.

CMC Markets analyst Michael Hewson said: “Large hedge fund short positions were getting liquidated, prompting margin calls, and the cashing out of more profitable positions to fund the losses being caused by the Reddit surge in the likes of heavily shorted stocks like GameStop as well as AMC Entertainment, owners of Odeon cinemas amongst others, which have seen huge gains, amidst big eye watering price swings.

“With large numbers of small investors swarming over heavily shorted stocks in what looked like a coordinated move, the frenzy raises all sorts of questions with respect to possible market manipulation.”

In UK equity markets, miners lost ground, with BHPGlencoreRio Tinto and Antofagasta all weaker.

EasyJet was also under the cosh after the budget airline said it expected to fly no more than 10% of 2019 capacity in the second quarter as tighter coronavirus restrictions triggered an 88% slump in revenue for the three months.

Paragon Banking Group and Victrex were in the red as their stock went ex-dividend.

On the upside, drinks company Diageo rallied after it increased its interim dividend as it reported first-half operating profit down 8.3% to £2.2bn.

Tate & Lyle was also on the rise after it hailed a “strong” third-quarter performance, with volume growth in each business and group revenue up 8% compared to the same period a year ago.

 

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Diageo Plc +3.87% +110.50 2,963.50
2 Sainsbury (j) Plc +2.37% +6.00 258.90
3 Tesco Plc +0.82% +2.00 246.90
4 Tui Ag +0.60% +2.00 338.00
5 Reckitt Benckiser Group Plc +0.50% +32.00 6,466.00
6 Morrison (wm) Supermarkets Plc +0.40% +0.75 186.00
7 Burberry Group Plc +0.38% +6.50 1,739.50
8 British American Tobacco Plc +0.23% +6.50 2,790.00
9 Kingfisher Plc +0.22% +0.60 274.80
10 Intertek Group Plc +0.18% +10.00 5,662.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Prudential Plc -8.91% -119.50 1,221.50
2 Pearson Plc -4.89% -42.40 825.40
3 Scottish Mortgage Investment Trust Plc -4.09% -52.00 1,219.00
4 Ashtead Group Plc -3.86% -141.00 3,509.00
5 Compass Group Plc -3.36% -46.00 1,324.50
6 Smith & Nephew Plc -3.22% -52.00 1,561.00
7 Itv Plc -2.86% -3.00 101.80
8 British Land Company Plc -2.78% -12.90 451.10
9 Wpp Plc -2.76% -21.40 753.80
10 Royal Dutch Shell Plc -2.74% -38.20 1,358.40

 

Europe open: Shares fall after Covid woes spark Wall St sell-off

European shares fell on Thursday morning after a sharp sell-off on Wall Street as investors continued to fret about more contagious variants of the coronavirus.

The pan-European Stoxx 600 was down 1.9% at 0913 GMT, with major regional bourses tracking the decline.

In the US overnight, strong earnings from Apple and Facebook and the US Federal Reserve’s pledge to stick to loose monetary policy were cast aside by investors as they focused on tighter Covid curbs in Europe and a row over vaccine allocations.

With new strains of the virus emerging in Britain, Brazil and South Africa, Germany was preparing entry restrictions for travellers from those countries.

German health minister Jens Spahn said he expected the current shortage of coronavirus vaccines to continue well into April.

Meanwhile the spat between the UK and European Union over the Oxford/AstraZeneca vaccine intensified.

Brussels has complained over the UK government’s decision to hoard locally-produced doses. The 27 member bloc has been angered after it reportedly allowed the pharma firm to use European sites to produce the vaccine when UK its UK facility ran into difficulties.

The EU argues that Britain should share its output as a quid pro quo for that act of solidarity.

Reports suggested the UK would only supply other countries after it had made 100 million doses for local distribution.

In equity news, easyJet shares fell as the budget airline said it expected to fly no more than 10% of 2019 capacity in the second quarter as tighter coronavirus restrictions triggered an 88% slump in revenue for the three months.

Drinks maker Diageo bucked the trend with a 3.4% rise after the company reported a surprise jump in underlying first-half net sales growth, helped by strong US demand.

Tate & Lyle was also on the rise after it hailed a “strong” third-quarter performance, with volume growth in each business and group revenue up 8% compared to the same period a year ago.

 

US close: Stocks weaker as Fed maintains accommodative policy

Stocks on Wall Street had their worst day in months on Wednesday, as market participants digested the latest rate decision from the Federal Reserve, as well as updates from Apple, Facebook and Tesla.

At the close, the Dow Jones Industrial Average was down 2.05% at 30,303.17, the S&P 500 lost 2.57% to 3,750.77, and the Nasdaq Composite was 2.61% weaker at 13.270.60.

Late in the session, the Federal Reserve sated market expectations by standing pat on interest rate targets, while maintaining asset purchases of at least $120bn every month.

““The economy is a long way from our monetary policy and inflation goals, and it’s likely to take some time for substantial further progress to be achieved,” said the central bank’s chair, Jerome Powell, in his press conference after the meeting.

He said policy would remain “highly accommodative” as the country’s economy climbed its way out of the Covid-19 hole.

On the macro front, mortgage application numbers decreased 4.1% on a seasonally-adjusted basis in the week ended 22 January, according to the Mortgage Bankers Association.

Elsewhere, the Commerce Department said new orders for US manufactured durable goods rose much less than anticipated in December, edging up just 0.2% last month after surging by an upwardly revised 1.2% in November.

Economists had pencilled an increase of 0.9%.

In corporate news, quarterly numbers from a number of tech firms led to declines, with Apple down 0.77%, Facebook losing 3.51% and Tesla 2.14% weaker.

Results from AT&T revealed solid wireless, fibre and HBO Max subscriber gains, although its shares still closed down 2.05%.

Boeing was 3.97% lower after it reported weak earnings, and AMD shares slid 6.2% despite the chipmaker posting revenue and earnings that beat Wall Street expectations.

Appliances giant Whirlpool was up 2.9% and apparel firm Levi Strauss & Co was ahead 3.04%, ahead of both companies reporting their latest numbers after the closing bell.

 

Thursday newspaper round-up: UK car production, GameStop, Tesla

UK car production slumped to its lowest level since 1984 last year amid the turmoil caused by the coronavirus pandemic, and Nissan overtook Jaguar Land Rover as the biggest British manufacturer. The output of British car factories dropped by 29% compared with the year before – to about 921,000. It was the first time annual production had fallen below 1m since 2009, during the depths of the financial crisis. – Guardian

The three largest shareholders in GameStop, the video game retailer at the center of a frenzied dual between Wall Street and small investors, have made more than $2bn from the company’s astronomic recent share rise. Stock in the company continued its vertiginous rise on Wednesday, hitting a fresh 52-week high of $354.83, making the 13% stake held by Ryan Cohen, 34, GameStop’s largest single shareholder, worth more than $1.3bn. – Guardian

Tesla is celebrating its first ever year-long run of profitability despite chaotic factory closures resulting from the Covid-19 regulations in a turbulent year. The electric carmaker made $721m in 2020, with $270m generated in the last three months of the year thanks to “substantial growth” in deliveries. It fell just shy of its ambitious target of shipping 500,000 cars in 2020, but said it expected to see annual 50pc growth in deliveries each year and was on track to exceed that in 2021, Tesla announced on Wednesday. – Telegraph

The government has been criticised for the “piecemeal” nature of its disclosure of hundreds of thousands of recipients of emergency state support. Revenue & Customs this week published the names of about 750,000 employers to have accessed the £46.4 billion wage furlough scheme in what it said was “part of our commitment to transparency and to deter fraudulent claims”. – The Times

The number of empty shops and offices in Britain increased at the fastest pace in decades at the end of last year, an influential survey has found. The Royal Institution of Chartered Surveyors’ quarterly survey found that the retail sector experienced its sharpest increase in vacancy levels in the three months to the end of December since the survey began 30 years ago. Availability of office space recorded its strongest rate of increase since the global financial crisis. – The Times

 

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