ADVFN Morning London Market Report: Friday 29 January 2021

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London open: Stocks drop on vaccine rollout woes; Reddit frenzy in focus

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London stocks fell in early trade on Friday as worries about the Covid-19 vaccine rollout and Reddit-fuelled market chaos knocked sentiment.

At 0855 GMT, the FTSE 100 was down 1% at 6,464.42.

Spreadex analyst Connor Campbell said: “The Reddit revolution has done a number on the European and US markets, scaring investors away from the message board-led volatility.

“Of course, it’s not the GameStop saga alone. The vaccine rollout process in Europe has hit a confidence-undermining road bump this week, with the public spat between the UK, EU and AstraZeneca, while an end to lockdown in the UK appears nowhere in sight.

“It is telling how risk-off investors are feeling this Friday that news the Novavax covid-19 vaccine is nearly 90% effective – including against the UK variant – failed to induce the same dose of optimism as previous announcements of its kind.”

On the corporate front, specialist lender Paragon Banking Group edged lower after it reported a fall in first-quarter lending volumes as Covid-19 lockdowns stalled house sales, but said it expected a pickup as buyers rushed to complete purchases ahead of the end of the stamp duty holiday in March.

Evraz was also a touch weaker after it said steel production rose 7.4% in the fourth quarter as its Russian plant increased activity after repairs and volumes improved in North America.

Trainline was hit by a downgrade to ‘underweight’ at Barclays.

On the upside, Just Eat Takeaway, which has benefited from Covid restrictions and lockdowns, was the standout gainer on the FTSE 100.

Avon Rubber gained after saying it was confident about meeting expectations for annual results as the company reported strong demand from military customers and for respiratory products during the pandemic.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. +1.55% +2.25 147.85
2 Micro Focus International Plc +0.77% +3.30 431.40
3 Glencore Plc +0.70% +1.75 250.45
4 Johnson Matthey Plc +0.61% +18.00 2,977.00
5 Diageo Plc +0.53% +15.50 2,958.50
6 Royal Dutch Shell Plc +0.45% +6.20 1,373.00
7 Royal Dutch Shell Plc +0.45% +5.80 1,304.80
8 Pearson Plc +0.42% +3.40 803.40
9 Melrose Industries Plc +0.41% +0.70 170.40
10 Sse Plc +0.37% +5.50 1,498.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Berkeley Group Holdings (the) Plc -2.58% -111.00 4,188.00
2 Barratt Developments Plc -2.17% -14.40 649.60
3 Hsbc Holdings Plc -2.01% -7.95 387.40
4 Imperial Brands Plc -1.84% -28.00 1,491.00
5 Dcc Plc -1.78% -100.00 5,532.00
6 Intertek Group Plc -1.73% -98.00 5,556.00
7 Rolls-royce Holdings Plc -1.71% -1.66 95.28
8 Tui Ag -1.69% -6.10 354.20
9 Taylor Wimpey Plc -1.66% -2.50 148.30
10 Prudential Plc -1.62% -20.00 1,216.00

 

Europe open: Shares open lower on US shorting wars, EU vaccine spat

European stocks fell sharply at the opening on Friday, after falls on Wall Street overnight in a week that has saw small investors take on large US hedge funds and worries about vaccine rollouts on the Continent.

The pan-European Stoxx 600 index dropped 1.6% in early trading, but had settled back 0.96% lower at 0857 GM. All major regional bourses were lower.

US markets have this week seen large gains in heavily shorted stocks, including Gamestop and AMC Entertainment, sparking a war between small investors taking collective action via forums on the Reddit website and large hedge funds who had taken short positions.

“The Reddit revolution has done a number on the European and US markets, scaring investors away from the message board-led volatility,” said Spreadex analyst Connor Campbell.

“Of course, it’s not the Gamestop-saga alone. The vaccine rollout process in Europe has hit a confidence-undermining road bump this week, with the public spat between the UK, EU and AstraZeneca, while an end to lockdown in the UK appears nowhere in sight.”

“It is telling how risk-off investors are feeling this Friday that news the Novavax covid-19 vaccine is nearly 90% effective – including against the UK variant – failed to induce the same dose of optimism as previous announcements of its kind.”

In equity news at the end of a busy week for earnings, Sweden’s Ericsson jumped 9.16% after reporting fourth-quarter core earnings ahead of market estimates on the back of strong sales of 5G equipment. Shares in rival Nokia were up 4.5% on the news.

Swedish fashion retailer H&M fell 1.3% after full year profits plummeted and warned that the pandemic would hit it hard in the current quarter.

Trainline shares fell more than 5% after a downgrade to ‘underweight’ at Barclays.

On the upside, Just Eat Takeaway, which has benefited from Covid restrictions and lockdowns, was the standout gainer.

 

US close: Markets close firmer after Wednesday’s losses

Wall Street stocks finished in positive territory on Thursday, following a heavy sell-off in the previous session and some better than expected jobless claims numbers.

At the close, the Dow Jones Industrial Average was up 0.99% at 30,603.36, as the S&P 500 added 0.98% to 3,787.38 and the Nasdaq Composite advanced 0.5% to 13,337.16.

The Dow closed 300.19 points higher on Thursday, cutting into losses recorded in the previous session – its worst since October.

Earlier in the session, comments from the Federal Reserve were in focus, with the central bank making it clear it was content on maintaining existing monetary policy.

However, sentiment was still taking a hit even though the central bank vowed to continue supporting the economy.

On the macro front, America’s economy continued expanding at the tail-end of 2020 with economists anticipating that the rebound from the Covid-19 crisis was set to continue.

According to the Department of Commerce, US gross domestic product grew at an annualised pace of 4.0% over the three months ending in December, against consensus forecasts for 4.1%.

The goods gap in the US narrowed to $82.5bn in December of 2020 from a revised $85.5bn in the previous month, an advance estimate from the Census Bureau showed, with exports increasing 4.6%, mainly boosted by sales of industrial supplies and imports rising at a slower 1.4%.

Elsewhere, the number of Americans filing for unemployment claims slipped again during the latest week.

According to the Department of Labor, initial unemployment claims for the week ending on 23 January dropped by 67,000 from the week before to reach 847,000.

Still on data, new home sales rose for the first time in five months in December, topping off the best year for the market since 2006 amid record-low mortgage rates.

Purchases of new single-family houses increased 1.6% to an 842,000 annualised pace in December, up from a downwardly revised 829,000 clip in the prior month, according to the Census Bureau.

Lastly, the Conference Board’s leading index increased just 0.3% in December to 109.5, suggesting that US economic growth was continuing to moderate in the first quarter of 2021.

In equities, Facebook was down 2.62% even after it beat on top and bottom lines in its fourth-quarter earnings overnight.

The social media behemoth cautioned that a reversal in Covid-19 pandemic trends would likely impact its advertising business.

Worse-than-expected quarterly numbers from electric carmaker Tesla saw its stock fall 3.32%.

Apple was off 3.5% even after it turned in its largest quarterly revenue performance in history overnight, bringing in $111.4bn.

On Thursday’s earnings slate, Mastercard added 2.66% after the credit card giant topped earnings expectations, while McDonald’s was off 0.47% after its earnings fell short of predictions on the Street as European lockdowns weighed on sales.

American Airlines surged 9.3% despite posting a record quarterly loss as a result of chatter on the same Reddit forum that has sent GameStop shares through the roof in recent days and led the likes of Interactive Brokers and Robinhood to limit transactions for several heavily shorted names.

 

Friday newspaper round-up: UK economy, Wework, Softbank

Britain’s economy is suffering the most damage since the first wave of Covid-19 as persistently high infection rates and renewed lockdown measures delay the economic recovery from the pandemic, according to a Guardian analysis. Almost a year on since the pandemic spread to Europe, focus is shifting towards how quickly coronavirus vaccines can be deployed, with the UK, for now, among countries leading the pack. Economists said this could increase the likelihood of the British economy outperforming other countries’ later this spring, depending on when lockdown restrictions are lifted. – Guardian

The leaders of Britain’s five largest business groups have warned the government that firms face “substantial difficulties” at UK ports since Brexit, with the prospect of a “significant loss of business” if the situation is allowed to continue. Following a round table meeting on Thursday evening with Cabinet Office minister Michael Gove, a letter was issued by the CBI, the British Chambers of Commerce, the manufacturers’ group Make UK, the Federation of Small Businesses and the Institute of Directors. – Guardian

Peter Cruddas, the boss of CMC Markets who was once dubbed the City’s richest person, has warned that the Reddit-driven trading frenzy against shorted stocks is the new normal as traders fear the chaos could be “career threatening”. Mr Cruddas, the former Conservative Party co-treasurer, said that the Redditors’ war with Wall Street “is just the beginning of retail investor power in the financial markets”, adding: “I expect it to be the norm in the future.” – Telegraph

Wework is in talks to go public through a merger with a special purpose acquisition company and is also exploring raising funds from private investors a little over a year after its failed stock market flotation. The office-sharing start-up is in talks with a company affiliated with Bow Capital Management and a deal could value Wework at nearly $10 billion, according to The Wall Street Journal. – The Times

Four senior executives at Softbank have accumulated paper profits worth hundreds of millions of dollars through an unusual incentive scheme that gave them loans to buy large amounts of the Japanese conglomerate’s shares. By the end of March last year Marcelo Claure, chief operating officer, and Rajeev Misra, head of the Softbank Vision Fund, had each used about $250 million of loans from Softbank to buy the company’s stock, according to details of the scheme in Softbank’s annual report. – The Times

 

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