ADVFN Morning London Market Report: Wednesday 17 February 2021

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London open: Stocks edge lower after inflation data

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London stocks edged lower in early trade on Wednesday as investors mulled an unexpected uptick in UK inflation.

At 0900 GMT, the FTSE 100 was 0.4% lower at 6,725.14, while sterling was down 0.1% against the dollar at 1.3888.

Data released earlier by the Office for National Statistics showed that consumer price inflation rose to 0.7% in January from 0.6% in December, with food and household goods the main drivers. Analysts had been expecting a nudge lower to 0.5%.

Core inflation – which strips out volatile food and energy prices – held steady at 1.4%, versus consensus expectations of 1.3%.

ONS deputy national statistician for Economic Statistics, Jonathan Athow, said: “Inflation rose slightly in January, with food prices increasing. Household goods also pushed up prices with less discounting this year on items such as bedding and settees.

“However, there were widespread January sales, with particular price cuts for clothing and footwear.”

Paul Dales, chief UK economist at Capital Economics, said the rise in CPI inflation is trivial given that a leap to around 2.0% in April and to around 2.5% by the end of the year appears to be “baked in the cake”.

“That would knock on the head any lingering hopes of more stimulus from the Bank of England, although we doubt it will prompt tighter monetary policy either,” he said.

In equity marketsHargreaves Lansdown was under the cosh after Peter Hargreaves sold £300m of shares, leaving him owning less than 20% of the company he co-founded 30 years ago.

British American Tobacco was also firmly in the red as it said full-year profits rose but the figure fell short of analysts’ expectations.

Plus500 lost ground after saying it would buy back up to $25m of shares and pay a special dividend as the trading platform announced record earnings driven by volatile markets during the Covid-19 crisis.

On the upside, Rio Tinto gained after it delivered a record dividend to shareholders as soaring iron ore prices last and demand from China drove full-year profits sharply higher. Miners more generally were on the rise, with AntofagastaBHP and Anglo American also higher.

Elsewhere, Ferrexpo rallied after an initiation at ‘buy’ at Peel Hunt, while Shaftesbury and Workspace were both boosted by upgrades to ‘buy’ at Jefferies.

Johnson Matthey was lifted by an upgrade to ‘reduce’ at AlphaValue.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Rio Tinto Plc +3.43% +215.00 6,475.00
2 Antofagasta Plc +3.12% +51.00 1,687.00
3 Bhp Group Plc +1.92% +43.50 2,304.00
4 Rolls-royce Holdings Plc +1.81% +1.81 101.75
5 Anglo American Plc +1.53% +43.00 2,861.50
6 Bp Plc +1.31% +3.65 281.85
7 Royal Dutch Shell Plc +1.30% +17.80 1,387.00
8 Royal Dutch Shell Plc +0.97% +13.80 1,443.60
9 Dcc Plc +0.94% +56.00 5,998.00
10 Glencore Plc +0.87% +2.50 290.50

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Hargreaves Lansdown Plc -7.11% -117.50 1,535.50
2 British American Tobacco Plc -5.13% -141.00 2,607.50
3 Ocado Group Plc -2.25% -60.00 2,601.00
4 St. James’s Place Plc -2.01% -25.00 1,220.50
5 Micro Focus International Plc -1.81% -8.00 433.10
6 Itv Plc -1.60% -1.80 110.65
7 Legal & General Group Plc -1.54% -4.20 268.70
8 Coca-cola Hbc Ag -1.52% -36.00 2,336.00
9 Bae Systems Plc -1.44% -7.00 478.90
10 Pearson Plc -1.39% -10.80 767.00

 

Europe open: Shares slide as rally loses momentum

European shares opened lower on Wednesday as the rally of recent days ran out of steam.

The pan-European Stoxx was down 0.36, with all major European bourses in the red. London’s FTSE 100 fell 0.41% as official data showed a slightly higher-than-expected rise in January inflation.

Data released earlier by the Office for National Statistics showed that consumer price inflation rose to 0.7% in January from 0.6% in December, with food and household goods the main drivers. Analysts had been expecting a nudge lower to 0.5%.

US futures indicates a muted opening later in the day as investors eye retail sales readings across the pond with the standard and core numbers expected to improve from December’s downturn, each estimated at 1.1%.

In equity news shares in luxury goods maker Kering slumped 7.8% after sales at its Gucci brand fell more than expected.

Kering, which also owns the Saint Laurent brand, slumped 8.2% as revenue for the whole group fell 8.2% in the fourth quarter.

Investment platform Hargreaves Lansdown plunged 7% in response to Tuesday’s post-close announcement that co-founder and ardent Brexiteer Peter Hargreaves had offloaded 18m shares in the company.

Shares in British American Tobacco fell 5.69% as the prospect of mid-single figure earnings growth for 2021 countered a 10% rise in 2020 profit.

The Lucky Strike and Camel maker reported a 10% rise in pre-tax profits to £8.7bn in 2020. On an underlying basis, pre-tax profits lifted 1% to £10.2bn.

On the upside, shares in Swedish cloud computing services provider Sinch soared as the company agreed to buy US communications company Inteliquent for $1.14bn in cash.

Sinch shares have nearly tripled over the past year on the back of the work-from-home trend prompted by the Covid-19 pandemic. The company said it expected the transaction to close in the second half of the year.

Rio Tinto shares were higher after the mining giant delivered a record dividend to shareholders as soaring iron ore prices and demand from China drove full-year profits sharply higher. Miners more generally were on the rise, with AntofagastaBHP and Anglo American also higher.

 

US close: Stocks mixed as 10-year Treasury yield jumps nine basis points

Wall Street stocks turned in a mixed performance on Tuesday as the Dow Jones managed to extend its February rally a little further.

At the close, the Dow Jones Industrial Average was up 0.20% at 31,522.75, while the S&P 500 was 0.06% softer at 3,932.59 and the Nasdaq Composite saw out the session 0.34% weaker at 14,047.50.

The Dow closed 64.35 points higher on Tuesday after traders took a break on Monday in observance of George Washington’s Birthday.

In focus on Tuesday, the Cboe Volatility Index, considered to be the Street’s best fear gauge, fell to 19.97 on Friday, the first breach of the 20-point threshold since the Covid-19 pandemic began in 2020, a move seen by some as a big “risk on” signal, one which could potentially trigger buying from algorithmic traders. It crossed the line again on Tuesday, hitting 21.

However, the main driver of the day’s moves was news that the 10-year Treasury yield jumped nine basis points to top 1.30%, a high watermark last seen in February 2020, while the 30-year rate also hit its highest level in a year.

Worries that a rebound in rates might possible weigh on the US’ economic recovery from the Covid-19 pandemic-induced recession were already doing the rounds, while others mulled over whether or not a deluge of fiscal stimulus could possibly spark a run on prices following a decade of dormant inflation.

On the macro front, manufacturing activity in the state of New York expanded at a quicker month-on-month pace in February, snapping a four-month decline, according to the Federal Reserve Bank of New York. The Empire State Manufacturing Survey’s general business conditions index increased to 12.1 in February, up from 3.5 in January to the highest level since September and well ahead of estimates for a print of 5.9.

In the corporate space, CVS Health beat on both profit and revenue expectations, partly due to having administered more than 3.0m Covid-19 vaccinations, while restaurant chain Denny’s reported an operating loss of $1.1m for the fourth quarter after the close.

 

Wednesday newspaper round-up: British Gas, Iceland, Lloyds Pharmacy

Millions of British Gas customers will be asked to pay almost £100 a year more for their gas and electricity after the regulator lifted its cap on energy bills. The UK’s biggest energy supplier confirmed that it would raise the price of its standard variable energy tariff by £97 a year, less than a fortnight after Ofgem said it would lift the cap to an annual average of £1,138 for a dual fuel bill. – Guardian

Ministers should cut VAT on repairs for electrical goods and green home improvements, to help people reduce greenhouse gas emissions in their everyday lives, an influential committee of MPs has urged. Funding for green home grants to install insulation and low-carbon heating, should also be restored to kickstart a “green recovery” in the UK, said the environmental audit committee in a report on how to “grow back better” from the coronavirus crisis. – Guardian

The UK’s financial watchdog has linked up with its counterpart in Jersey following fears that disgraced stock-picker Neil Woodford could avoid sufficient regulatory oversight if he registers his new business in the Channel Islands. The Financial Conduct Authority (FCA) also warned Mr Woodford that any new company would only be allowed to operate in the UK if the regulator was satisfied with the “fitness of its management”. – Telegraph

The boss of Iceland has claimed the frozen foods retailer cannot afford to pay back business rates relief after the heavy costs of making shops safe and buying out its foreign shareholder. Richard Walker, 40, managing director of Iceland and son of Malcolm Walker, 75, the supermarket’s founder, has defended the grocer’s decision to keep £40 million of taxpayer support by arguing that it helped meet the “very substantial direct costs” of making shops Covid-secure, hiring 6,000 new workers to expand its delivery service and giving staff sick pay. – The Times

The owner of Lloyds Pharmacy is exploring a £400 million sale of the business as the chemist chain struggles with rising costs and government funding cuts. The New York-listed McKesson, which bought Lloyds in a $8.3 billion takeover of its German parent Celesio in 2014, has hired bankers at Barclays to contact prospective buyers. – The Times

 

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