ADVFN Morning London Market Report: Friday 12 February 2021

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London open: Stocks edge lower as UK economy contracts by record 9.9% in 2020

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London stocks fell in early trade on Friday as investors mulled the latest UK GDP data, with travel and leisure issues under the cosh.

At 0900 GMT, the FTSE 100 was 0.4% lower at 6,505.52, while sterling was down 0.3% against the dollar at 1.3780 after figures from the Office for National Statistics showed the economy contracted by a record 9.9% last year as the coronavirus pandemic took its toll, but avoided a double-dip recession.

In the fourth quarter, GDP rose 1%, following 16.1% growth in the third quarter.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The UK may have swerved a technical double dip recession, but the record breaking annual fall in economic output underlines the damage wreaked by Covid on businesses up and down the country.

“The temporary reprieve from lockdown in December gave a leg up to the services industry which grew by 1.7%, helping push overall growth up to 1.2% in December slightly higher than expected.

“But the economy is almost 10% smaller than it was before the pandemic hit. There is still a mountain to climb in this recovery and there will be a lot more pain to come given the current nationwide shutdowns.”

She added that with no road map yet laid out to the re-opening of the economy, “it’s hard to see the light at the end of the tunnel when the tunnel keeps getting longer”.

In equity markets, travel and leisure stocks were the worst performers, with British Airways parent IAG, engine maker Rolls-RoyceInterContinental Hotels, pub groups Mitchells & Butlers and Wetherspoons, cruise operator Carnival, holiday company TUI and budget airline easyJet all weaker.

CMC Markets analyst Michael Hewson said that as far as the airline sector is concerned, it is becoming “increasingly apparent that the summer holiday season this year is likely to see the UK population confined to the home market, with very restricted access to holidays abroad”.

Elsewhere, Victrex fell despite saying that first-quarter revenues and sales were slightly ahead of expectations as the polymer maker maintained full-year guidance.

On the upside, Vivo Energy gained after saying it expects full-year adjusted earnings before interest, tax, depreciation and amortisation to be above the top end of the range of consensus expectations of between $331m and $354m.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Astrazeneca Plc +1.37% +99.00 7,345.00
2 Marks And Spencer Group Plc +1.20% +1.55 131.00
3 Hikma Pharmaceuticals Plc +1.18% +27.00 2,322.00
4 Admiral Group Plc +1.01% +30.00 3,012.00
5 Severn Trent Plc +0.91% +21.00 2,321.00
6 Unilever Plc +0.90% +35.00 3,938.00
7 Rentokil Initial Plc +0.74% +3.80 516.40
8 Spirax-sarco Engineering Plc +0.56% +65.00 11,615.00
9 Glaxosmithkline Plc +0.56% +7.00 1,262.20
10 St. James’s Place Plc +0.55% +6.50 1,185.50

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Easyjet Plc -4.35% -33.20 729.40
2 Tui Ag -4.28% -13.80 308.90
3 Carnival Plc -4.27% -55.50 1,245.00
4 International Consolidated Airlines Group S.a. -2.72% -4.05 144.85
5 Antofagasta Plc -2.24% -34.50 1,505.50
6 Glencore Plc -2.12% -5.70 263.80
7 Fresnillo Plc -1.94% -20.00 1,010.50
8 Compass Group Plc -1.85% -26.00 1,377.00
9 Kingfisher Plc -1.84% -5.10 271.90
10 Intercontinental Hotels Group Plc -1.75% -86.00 4,839.00

 

Europe open: Travel stocks slide on summer booking slump fears

European stocks started the Friday session lower as travel stocks fell on fears of a summer bookings slump and investors continued to hold out for progress on US stimulus measures.

The pan-European Stoxx 600 index slipped 0.2%, with all major regional bourses in the red. The UK’s FTSE 100 was down 0.36% after official data revealed the Covid-ravaged economy slumped 9.9% in 2020 – its worst contraction since 1709.

However, fourth quarter GDP rose by more than 1%, helping the economy to avoid a double dip recession for the time being.

“It has been a fairly uneventful week for European equity markets, with US markets continuing to grab the headlines with another series of record highs, and though the DAX also managed to eke out a new record at the beginning of the week, there has been little in the way of momentum behind any of this week’s moves,” said CMC Markets analyst Michael Hewson.

Travel and leisure stocks were out of favour as people looked set to delay any overseas holidays this summer due to the coronavirus pandemic with mixed and muddled messages coming from the UK government in particular. Shares in British Airways owner IAGeasyJetCarnival and TUI were all lower.

Carnival Cruise Lines suffered a double whammy after being downgraded to a ‘sell’ by Berenberg, along with Norwegian Cruise Lines, as the brokerage said it was “negatively disposed” toward leisure stocks in the aftermath of the pandemic.

ING Groep jumped 4.22% after the Dutch bank reported better-than-expected fourth-quarter pre-tax earnings of €1.05bn.

Shares in French lottery operator Les Francaise des Jeux rose 6.1% after the company said strong business in the second half helped limit the decline in annual stakes – down 7% to €16bn and revenue 6% lower at €1.9bn.

 

US close: Stocks finish mixed as investors mull jobless claims

Wall Street stocks closed in a mixed state on Thursday, as jobless claims last week fell by less than anticipated.

At the close, the Dow Jones Industrial Average was down 0.02% at 31,430.70, while the S&P 500 added 0.17% to 3,916.38 and the Nasdaq Composite added 0.38% to 14,025.77.

The Dow closed 7.1 points lower on Thursday, reversing course from the gains it recorded earlier in the day and in the previous session.

US jobless claims were in focus, with the Department of Labor reporting that the number of initial unemployment claims fell by 19,000 over the week ended 6 February, to 793,000.

Economists had penciled in a reading of 765,000.

The preliminary estimate for the week before, meanwhile, was revised upwards by 33,000 to 812,000, while the four-week moving average of claims dropped by 33,500 to 823,000.

Secondary unemployment claims, those which are not being filed for the first time and referencing the previous week, fell by 145,000 to 4.5 million.

Also in focus were comments from Federal Reserve chairman Jerome Powell who warned overnight that the US economy still faced many challenges in the labour market.

He said monetary policy would need to stay “patiently accommodative” as a result, while ongoing stimulus talks in Washington were still drawing an amount of investors’ attention.

Corporate earnings were again in focus on Thursday, with Molson Coors falling 9.2% after it reinstated its full-year guidance, despite reporting a 7.7% decrease in net sales revenues and a $1.4bn net loss in the fourth quarter.

Kraft Heinz added 4.87% after it outperformed market expectations and announced the sale of its Planters peanuts business to Hormel Foods for $3.35bn in cash.

PepsiCo was 1.98% weaker even after it posted a quarterly earnings beat thanks to 8.8% revenue growth in the period, while cereal maker Kellogg was in the red by 1.89% after posting a profit and sales miss for the fourth quarter.

 

Friday newspaper round-up: Huawei, Bumble, Paperchase

Huawei’s battle to prevent the extradition of its chief financial officer from Canada to the US will open a new front at the British high court on Friday when the Chinese telecoms giant seeks an application to access records from inside HSBC in a bid to prove that she did not mislead the bank. The future of Meng Wanzhou has become a major three-way point of diplomatic and legal tension between China, Canada and the US since she was arrested at Vancouver airport in December 2018. – Guardian

Shares in the dating app Bumble have soared by more than 76% in its stock market debut in New York, giving the company a $14bn (£10bn) valuation. The shares opened at $76 (£55) on the Nasdaq on Thursday, well above the initial public offering price of $43. Bumble, which is backed by the private equity firm Blackstone, joins the ranks of Snowflake, Airbnb and DoorDash, all of which had strong first days when they debuted last year. – Guardian

The City will lift its horizons and double down on global trade if the European Union cuts off access to its financial markets, grandees and experts have said. Senior figures across the Square Mile said that London will thrive after Brexit by focusing on fast-growing economies in Asia and Africa and investing heavily in new products such as green bonds. – Telegraph

The new owners of Paperchase chose not to refer their acquisition to a scheme that reviews the sale of failed companies’ assets to connected parties. Permira Debt Managers, the credit arm of the eponymous private equity firm and a secured creditor to Paperchase, the stationer that collapsed last month, acquired the key assets of the business via a pre-pack administration. – The Times

The former head of the City regulator has announced he is joining the professional services firm that audits Klarna, a week after completing a review of the booming “buy now, pay later” sector. Chris Woolard is joining EY as a partner and will lead its financial services regulatory division across Europe, which seeks to advise banks and other financial services businesses on how to navigate regulation. – The Times

 

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