ADVFN Morning London Market Report: Tuesday 13 April 2021

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London open: Stocks nudge lower after UK GDP, ahead of US inflation

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London stocks nudged lower in early trade on Tuesday as investors mulled the latest UK GDP reading and looked ahead to the release of US inflation data.

At 0845 BST, the FTSE 100 was down 0.2% at 6,878.04.

Spreadex analyst Connor Campbell said: “It was an exceedingly quiet start to trading – perhaps because Tuesday afternoon sees the latest US inflation reading.

“Yesterday’s bond auction proved to be something of a non-event, failing to cause any truly noticeable movement. That’s the first obstacle, then, cleared for the Dow Jones et al.

“Next up is this afternoon’s CPI data. Analysts are expecting the standard figure to rise from 0.4% to 0.5% month-on-month, with the core reading up from 0.1% to 0.2%. Anything higher than those estimates will likely set alarm bells ringing; anything lower will act as reassurance about the pace of building inflationary pressures.

“Since the entire market has been caught up in the inflation/interest rates/bond yield fears that have intermittently taken hold this year, Tuesday’s inflation figures are almost as relevant for Europe as they are for the US.”

On home shores, figures released earlier by the Office for National Statistics showed the economy returned to growth in February despite Covid-19 restrictions.

The economy grew 0.4% following a 2.2% decline in January, and versus expectations of 0.6% growth. January’s figure was revised up from a previous estimate of a 2.9% drop.

Still, GDP remained 7.8% below the levels seen in February 2020 – before the pandemic hit – compared with 3.1% below the initial recovery peak in October 2020.

An ONS spokesperson said: “The economy showed some improvement in February after the large falls seen at the start of the year but remains around 8% below its pre-pandemic level.

“Wholesalers and retailers both saw sales pick up a little, while manufacturing improved with car producers experiencing a partial recovery from a poor January.

“Construction grew strongly after revised figures showed they had struggled in the last couple of months.

“Exports to the EU recovered significantly from their January fall, though still remain below 2020 levels. However, imports from the EU are yet to significantly rebound, with a number of issues hampering trade.”

In equity markets, travel and leisure stocks were weaker, with InterContinental Hotels, British Airways owner IAG, Premier Inn owner Whitbread and engine maker Rolls-Royce all down.

On the upside, Babcock surged even as it cautioned investors to expect impairments and charges worth £1.7bn for the full year ending 31 March following a contract profitability and balance sheet review.

Hays rallied after the recruiter said full-year operating profit is set to be at least £85m, beating market expectations of around £61m, given improving fees and good underlying cost management, and assuming a continuation of current market conditions.

XP Power gained ground as it reported a 16% jump in first-quarter revenue and said it was recommending a dividend of 18p a share.

JD Sports Fashion advanced as it missed annual profits expectations despite more people buying sports and casualwear during the pandemic lockdown, but reinstated dividend payments and forecast higher earnings for the current year.

Just Eat Takeaway was also in the black after it said first-quarter orders rose 79%.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Evraz Plc +2.42% +14.40 609.60
2 Marks And Spencer Group Plc +1.97% +3.05 157.90
3 Auto Trader Group Plc +1.96% +11.20 581.80
4 Taylor Wimpey Plc +1.65% +3.05 187.90
5 Bunzl Plc +1.44% +35.00 2,469.00
6 Tui Ag +1.42% +5.30 377.40
7 Itv Plc +1.35% +1.65 123.45
8 Burberry Group Plc +1.32% +27.00 2,079.00
9 Ocado Group Plc +1.29% +27.00 2,127.00
10 Johnson Matthey Plc +1.24% +39.00 3,191.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Royal Dutch Shell Plc -1.05% -14.00 1,322.80
2 Micro Focus International Plc -1.00% -5.40 535.20
3 Astrazeneca Plc -1.00% -72.00 7,153.00
4 Royal Dutch Shell Plc -0.94% -13.20 1,389.40
5 British American Tobacco Plc -0.91% -25.50 2,763.00
6 Sse Plc -0.88% -13.50 1,519.50
7 Tesco Plc -0.84% -1.95 230.05
8 Diageo Plc -0.82% -26.00 3,136.00
9 Intercontinental Hotels Group Plc -0.82% -42.00 5,082.00
10 Glaxosmithkline Plc -0.82% -10.60 1,287.00

 

Europe open: Shares edge higher as investors eye US inflation data

European shares edged towards record levels on Tuesday as investors eyed US inflation later in the day, while strong China export data boosted sentiment.

The pan-European STOXX 600 was up 0.14 with most markets slightly higher. The UK’s FTSE 100 was down as February GDP figures missed estimates, despite the economy returning to growth amid Covid-19 restrictions.

GDP grew 0.4% following a 2.2% decline in January, and versus expectations of 0.6% growth. January’s figure was revised up from a previous estimate of a 2.9% drop, according to figures released by the Office for National Statistics.

Industrial and manufacturing production both exceeded expectations, while construction output also outstripped forecasts, the ONS figures showed.

In China, data showed the country’s exports grew at a robust pace in March and import growth surged to its highest in four years.

Across the pond, analysts are expecting the standard US inflation figure to rise from 0.4% to 0.5% month-on-month, with the core reading up from 0.1% to 0.2%.

“Anything higher than those estimates will likely set alarm bells ringing; anything lower will act as reassurance about the pace of building inflationary pressures,” said Spreadex analyst Connor Campbell.

“Since the entire market has been caught up in the inflation/interest rates/bond yield fears that have intermittently taken hold this year, Tuesday’s inflation figures are almost as relevant for Europe as they are for the US. That explains why the European indices didn’t do much after the bell.”

In equity news, shares in Swedish IT solutions provider Dustin jumped 1% after the company said it would buy Benelux hardware and software seller Centralpoint, for €425m.

 

US close: Stocks slip on Monday ahead of key inflation data and earnings later in the week

Wall Street stocks closed lower on Monday as investors awaited the beginning of the first-quarter earnings season and the release of some key inflation data later in the week.

At the close, the Dow Jones Industrial Average was down 0.16% at 33,745.40, while the S&P 500 was 0.02% weaker at 4,127.99 and the Nasdaq Composite saw out the session 0.36% softer at 13,850.00.

The Dow closed 55.20 points lower on Monday, cutting into gains recorded in the previous session when the index closed at yet another fresh record.

Market participants will be focussed on corporate earnings throughout the week, with expectations set for mostly positive news thanks to a recovering US economy amid the White House’s ongoing Covid-19 vaccine rollout. Some of the country’s largest banks, such as Goldman Sachs and JPMorgan Chase, will report results this week.

Comments from Federal Reserve chairman Jerome Powell that central bank wanted to see inflation rise above its 2% for an extended period before officials move to raise interest rates and reports that President Joe Biden, along with other Democrats, was set to meet with a bipartisan group of lawmakers to try to convince Capitol Hill to back his $2.0trn infrastructure package were both also in focus throughout the session on Monday.

On the macro front, March’s consumer inflation expectations numbers from the Federal Reserve Bank of New York hit their highest levels last month since March 2014, with the central bank’s survey revealing those polled saw inflation at 3.2% in twelve months from now and at 3.1% three years from now, with both readings being a 0.1 percentage point increase from February.

Elsewhere, the White House posted a March budget deficit of $660.0bn, a record high for the month, with direct payments to Americans as a result of Biden’s stimulus package being distributed throughout the period, according to the Treasury Department. The deficit for the first six months of the 2021 financial year widened to a record $1.70trn, compared to the $743.0bn deficit posted at the same time a year earlier.

Turning again to the central bank, Federal Reserve Bank of Boston president Eric Rosengren said the labour market could tighten significantly later in the year and 2022 as Covid-19 numbers get under control and more Americans return to work. Rosengren stated that many employers that hold off on hiring now could have to face serious competition for workers later on down the line, with some businesses already raising salaries in order to attract workers for relatively low-wage jobs.

In the corporate space, reopening plays like CarnivalNorwegian Cruise Lines and United Airlines were lower on the day, while Tesla shares picked up about 3.7% after analysts at Canaccord Genuity upgraded the stock to ‘buy’.

Nuance Communications shares surged nearly 16% after Microsoft revealed it would be snapping up the speech recognition firm as part of a $16.0bn deal – the tech giant’s biggest acquisition since it absorbed LinkedIn for $26.0bn back in 2016.

 

Tuesday newspaper round-up: Darktrace, Liberty Steel, fast fashion

The cybersecurity provider Darktrace has warned that the fraud allegations against its founding shareholder, the former Autonomy chief executive Mike Lynch, threaten its prospects as it gears up for a £3bn stock market debut. In documents published as part of the formal process that must be followed before a London float, Darktrace admitted that the criminal and civil charges against Dr Lynch “could result in a material adverse effect” on its business and prospects. – Telegraph

Extending the retirement age to cut down on pension costs risks backfiring by piling more pressure on the NHS, new research warns. Economists found the rise in the state pension age “substantially” reduced the informal care provided to elderly parents by older workers, threatening to worsen Britain’s mounting social care pressures. – Telegraph

Growing awareness about the environmental impact of “fast fashion” could result in sales of cheap clothing dropping by as much as 30 per cent in the next five to ten years, according to a leading investment bank. As customers formed long queues to get into Primark shops reopening yesterday, analysts at UBS said the retailer’s owner Associated British Foods could be one of the worst-hit stocks if shoppers abandoned their love affair with “throwaway” clothing. – The Times

Last month much of the traditional art world had not heard of Mike Winkelmann. Then the digital artist sold a piece that only exists online for £50 million at a Christie’s auction. Beeple, as he is professionally known, is now the third most expensive living artist in terms of auction prices, after Jeff Koons and David Hockney. The sale of Winkelmann’s computerised collage of 5,000 images – which include a pregnant cyborg Michael Jackson and a Buzz Lightyear with breasts – has catapulted the digital art scene into the spotlight. – The Times

Liberty Steel has missed deadlines to file accounts for some of its biggest British businesses, in the latest sign of the struggles facing Sanjeev Gupta’s industrial empire. Gupta is listed as director of 15 companies whose accounts are overdue at Companies House, including those that operate the Liberty Steel works in Rotherham and Stocksbridge in South Yorkshire.- Guardian

 

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