ADVFN Morning London Market Report: Monday 1 February 2021

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London open: Stocks edge up as silver prices rally


London stocks edged up in early trade on Monday, with precious metals miners on the front foot as silver prices surged.

At 0855 GMT, the FTSE 100 was up 0.5% at 6,438.48.

In equity markets, precious metals miner Fresnillo surged to the top of the FTSE 100 as silver prices shot to a six-month high, targeted by Reddit retail traders. PolymetalHochschild and Centamin also shone.

FXTM market strategist Hussein Sayed said: “Following successful attacks against short-sellers on game retailer GameStop and other heavily-shorted stocks like AMCNokiaBlackberry and Bed Bath & Beyond, retail traders’ next target has become silver.

“iShare Silver Trust, the world’s largest silver-backed exchange-traded fund, recorded a one-day inflow of almost $1 billion on Friday and is likely to see more inflows today as more traders become familiar with the trade.

“Miners of silver were the biggest beneficiaries of the latest Reddit’s users’ recommendation, who are betting this time against large banks. However, the targeting of Wall Street may be misplaced as most big banks hold short positions in the silver futures markets to hedge their physical holdings. If their short positions lose value, their physical holdings gain, hence from a price perspective they are neutral.”

Miners and housebuilders were on the rise, with BarrattPersimmonAnglo American and Glencore all firmer.

Elsewhere, JD Sports Fashion jumped after agreeing to buy DTLR Villa, a US sports retailer, for $495m (£360m), of which about $100m will be used to repay debt.

Outside the FTSE 350, online fashion retailer Asos gained after buying four brands from the collapsed Arcadia group for £330m. The deal includes Topshop, Topman, Miss Selfridge and HIIT brands to Asos, but not physical stores, Deloitte said in a statement. Asos will pay around £295m for the brands, goodwill and stock on hand, and also take on liabilities for forward committed stock orders.

On the downside, investment platform Hargreaves Lansdown fell despite lifting its interim dividend and reporting a 10% rise in first-half profit.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Fresnillo Plc +19.68% +194.40 1,182.00
2 Barratt Developments Plc +4.41% +28.20 667.00
3 Berkeley Group Holdings (the) Plc +3.72% +156.00 4,345.00
4 Taylor Wimpey Plc +3.45% +5.05 151.50
5 Persimmon Plc +3.29% +84.00 2,635.00
6 Kingfisher Plc +3.13% +8.70 286.40
7 Spirax-sarco Engineering Plc +2.98% +330.00 11,410.00
8 Glencore Plc +2.88% +7.10 253.50
9 Smiths Group Plc +2.78% +39.50 1,458.00
10 Rightmove Plc +2.64% +15.80 615.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Micro Focus International Plc -4.31% -19.20 425.90
2 Tui Ag -2.44% -8.60 344.40
3 Hargreaves Lansdown Plc -1.99% -34.00 1,674.50
4 Diageo Plc -1.31% -38.50 2,910.50
5 Royal Dutch Shell Plc -0.97% -13.00 1,325.00
6 Royal Dutch Shell Plc -0.94% -12.00 1,260.20
7 Hsbc Holdings Plc -0.42% -1.60 381.15
8 Schroders Plc -0.23% -8.00 3,409.00
9 Prudential Plc -0.21% -2.50 1,170.00
10 International Consolidated Airlines Group S.a. -0.14% -0.20 142.80


Europe open: Shares rise as Reddit revolution makes silver shine

European shares rose on Monday as the the Reddit retail frenzy turned its attention to silver, within precious metals miners boosted as a result.

The pan-European STOXX 600 index rose 1.07% a7 9.17 GMT, with shares of miners including FresnilloPolymetal InternationalBolidenHochschild and Centamin all shining.

GlencoreBHP and Anglo-American were also higher as silver prices hit their highest levels since 2013. The metal has become the latest focus of a frenzied online movement by retail traders to push up values of assets that big fund managers had bet against.

German shares rose 1% despite official data showing retail sales plunged far more than expected in December as a decision to tighten lockdown measures in the COVID-19 pandemic choked consumer spending in Europe’s largest economy.

Last week’s volatility inspired by Reddit forum members boosting GameStop and other heavily shorted company stocks, “raised concerns about the fallout that may come about from well intentioned, but ill-informed political interventions” said CMC Markets analyst Michael Hewson.

“The passions being aroused by these events are also causing significant concerns about the wider implications about other areas of the market that might be over-leveraged, as the big unsustainable gains in these vulnerable stocks causes de-risking in other areas of the market.

Oil stocks lagged the market ahead of full year results later this week. BP announced the sale of a 20% stake in its Oman gas block program for $2.6bn as it continued its program of disposals to cut its debt pile towards its longer-term target of $35bn.

Shares in JD Sports jumped 7% after the company announced a conditional agreement to the purchase of Maryland based sportswear retailer DTLR for $495m, as it continues to boost its brand across the US.

Housebuilders were on the rise, with Barratt and Persimmon making strong gains.


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.


Monday newspaper round-up: Silver, Heathrow, Arcadia

Silver prices surged to a five-month high on Monday, silver-mining stocks leapt and coin-selling websites were swamped as small-time investors piled in to the metal, the latest focus of a retail-trading frenzy that has set financial markets on edge. Silver has become the latest asset to surge after the GameStop frenzy, when Redditors drove up the share price that big fund managers had bet against. – Guardian

The chief executives of American oil companies ExxonMobil and Chevron held preliminary talks in early 2020 to explore combining the two largest US oil producers in what would have been the biggest merger of all time, according to people familiar with the matter. The discussions, which are no longer ongoing, are being seen as having tested the waters for the huge corporate marriage after the coronavirus pandemic shook the world last year, the Wall Street Journal reported on Sunday. – Guardian

A row between Heathrow and Britain’s aviation regulator is set to reignite this week over the airport’s demand to hike charges levied on airlines and passengers by £1.7bn. The Civil Aviation Authority is expected to rubber-stamp its rejection in October of the price increase, which Heathrow has said it is entitled to charge for losses suffered during the pandemic. – Telegraph

The sale of Sir Philip Green’s Arcadia empire could leave the taxpayer and the pensions lifeboat with a bill for hundreds of millions of pounds, experts have warned. Arcadia’s pension fund has a deficit of about £300 million, some of which will be covered as the individual chains are sold off. However, experts said that the Pension Protection Fund could be left with a £200 million hit after the various deals are done. – The Times

The Bank of England will set out whether it thinks negative interest rates should be part of its armoury when it makes its latest monetary policy decision on Thursday. Although the bank is expected to keep policy unchanged, its latest report will include evidence collected from commercial banks about whether negative interest rates are operationally feasible in Britain. – The Times


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