ADVFN Morning London Market Report: Monday 26 July 2021

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London open: Stocks edge lower ahead of busy earnings week


London stocks edged lower in early trade on Monday as investors looked ahead to a busy week of corporate news.

At 0825 BST, the FTSE 100 was down 0.4% at 6,996.68, after China’s Hang Seng slumped 3.4%, while the Shanghai Composite index declined 2.3% as the country continued its crackdown on technology companies.

China announced strict new restrictions on education tech firms, while Tencent was ordered to give up its exclusive music licensing rights and fined for anti-competitive behaviour.

On home turf, investors were eyeing a packed corporate calendar this week.

Richard Hunter, head of markets at Interactive Investor, said: “Markets face a stern test this week ahead of an avalanche of corporate earnings, with high expectations attached.

BarclaysLloyds Banking and NatWest all report after their US counterparts provided clues on what to expect having reported earlier this month. In particular, there could be further large releases of impairment provisions as economic recovery has proved stronger than expected, lessening the levels of bad debts. For those with an investment banking operation, there could also be a further boost to earnings given the heightened levels of M&A activity and IPOs. In any event, given that the banks are each strongly capitalised going into the numbers, strong earnings could prompt further dividend increases, particularly with the regulatory shackles having been lifted.

“Results are also expected from GlaxoSmithKline and AstraZenecaRoyal Dutch ShellITVBT and International Consolidated Airlines in what will be a decisive week in driving nearer term sentiment. With the FTSE100 ahead by 8.4% and the more domestically-focused FTSE250 by 11.4% so far this year, investors will be pinning their hopes on markets making further earnings-driven progress.”

In equity markets, discount retailer B&M European Value Retail was knocked lower by a downgrade to ‘sector perform’ from ‘outperform’ at RBC Capital Markets, which argued there was more valuation upside for several other general retailers.

On the upside, food producer Cranswick ticked higher as it reported a rise in first-quarter revenue, driven by strong retail demand and increased poultry sales.

Budget airline Ryanair gained ground after it reported a widening of its first-quarter losses as it continued to be impacted by Covid restrictions, but lifted its traffic forecast as bookings have surged in recent weeks.



Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Easyjet Plc +1.99% +16.20 830.00
2 Antofagasta Plc +1.88% +27.00 1,464.00
3 Whitbread Plc +1.55% +47.00 3,080.00
4 Rio Tinto Plc +1.54% +91.00 6,017.00
5 International Consolidated Airlines Group S.a. +1.08% +1.82 170.28
6 Anglo American Plc +1.03% +30.50 2,994.50
7 Persimmon Plc +0.93% +27.00 2,920.00
8 Fresnillo Plc +0.91% +6.80 752.00
9 Bhp Group Plc +0.78% +17.50 2,275.50
10 Halma Plc +0.67% +19.00 2,875.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Prudential Plc -2.16% -29.50 1,335.00
2 Barclays Plc -1.95% -3.26 163.86
3 Standard Chartered Plc -1.88% -8.10 423.60
4 Vodafone Group Plc -1.70% -2.02 116.82
5 Lloyds Banking Group Plc -1.66% -0.76 45.13
6 Hsbc Holdings Plc -1.41% -5.65 395.95
7 Bt Group Plc -1.35% -2.50 182.25
8 St. James’s Place Plc -1.25% -19.00 1,507.00
9 Hiscox Ltd -1.23% -11.00 883.00
10 Coca-cola Hbc Ag -1.18% -32.00 2,678.00


Europe open: Shares lower as Prosus falls on China Tencent crackdown

European stocks opened the week lower after regulatory worries hit Asian markets and ahead of a busy week for corporate earnings and economic data.

The pan-European Stoxx 600 index was down 0.36% in early trade with all major regional bourses following suit.

Investors were preparing for a deluge of corporate earnings in Europe and the US, providing a snapshot of the strength of any recovery from the Covid pandemic.

US second-quarter GDP figures are also due out later this week along with a two-day meeting of the Federal Reserve.

In equity news, Porsche slid 4.5% as the stock went ex-dividend, while French car parts maker Faurecia slipped 1.1% despite raising its 2021 net cash flow target.

Dutch technology investor Prosus, which has a 28.9% stake in Chinese internet giant Tencent, fell 6.8% to the bottom of the Stoxx after Beijing intensified its regulatory crackdown on Tencent.

Meanwhile, Europe’s largest low-cost carrier Ryanair topped the index with a 3% rise as it lifted full-year traffic forecasts on strong summer bookings.


US close: Stocks close higher despite surprise uptick in jobless claims

Wall Street stocks closed higher on Thursday despite a surprise increase in weekly jobless claims.

At the close, the Dow Jones Industrial Average was up 0.07% at 34,823.35, while the S&P 500 was 0.20% firmer at 4,367.48 and the Nasdaq Composite saw out the session 0.36% stronger at 14,684.60.

The Dow closed 25.35 points higher on Thursday as strong second-quarter earnings continued to flow in.

The yield on the benchmark 10-year Treasury note was slightly higher on Thursday at 1.29%, up from the 1.17% seen earlier in the week that startled investors.

As always, market participants were digesting this week’s jobless claims report, this time revealing that first time unemployment claims in the US bounced back unexpectedly in the week ended 17 July, pushed higher by the annual retooling of automakers.

According to the Department of Labor, the seasonally adjusted number of initial jobless claims rose by 50,000 over the week ended 17 July to 419,000. Economists had pencilled-in a reading of 350,000. Data for the previous week was also upwardly revised by 8,000 to 368,000, while the four-week moving average of initial claims meanwhile was little changed, up 750 to 385,520, and secondary claims for the week ended 10 July dipped 29,000 to approximately 3.24m for their lowest reading since 21 March 2020.

Economic reopening plays were also in focus, with names like Royal Caribbean trading lower, while investors were also eyeing energy stocks after oil rebounded back above $70 a barrel and bank shares as a result of the more stable yields.

Also in the corporate space, second-quarter earnings from AT&T topped analysts estimates, while CSX shares advanced after the railroad operator said second-quarter profits more than doubled.

Going the other way, Texas Instruments was weighing on tech stocks after the chipmaker topped expectations but cautioned that third-quarter results would likely fall short of estimates.

On the macro front, the Chicago Fed‘s national activity index declined to 0.09 in June, down from 0.26 in May, with three broad categories of indicators used to construct the index making positive contributions in June, but with two categories deteriorating when compared to May.

Elsewhere, the Conference Board‘s leading index improved 0.7% to 115.1 in June, just shy of consensus estimates for a reading of 1.0% and last month’s revised print of 1.2%.

Still on data, US home sales bounced back in June following four consecutive monthly declines, however, the pace was moderate as higher prices and low inventory continued to weigh on the property market. Existing home sales increased 1.4% to a seasonally adjusted annual rate of 5.86m units last month, according to the National Association of Realtors, with sales rising in the Northeast, West and Midwest.

Lastly, the Kansas Fed‘s July manufacturing index came in at 41, up from a reading of the 30 a month earlier.


Monday newspaper round-up: British economy, Post Office, Selfridges

The British economy is growing at its fastest pace in 80 years and could recover its pre-pandemic size by the end of this year, according to a leading economic forecaster. Buoyed by the vaccine rollout and a bounce back in consumer spending, the EY Item Club said it now expected GDP to grow by 7.6% – which would be the fastest annual growth in national income since 1941. The UK economy shrank by 9.8% in 2020, the worst performance in the G7. – Guardian

The government has set aside as much as £233m to cover payouts from the Post Office to wronged postmasters who were forced to cover shortfalls caused by a broken computer system. State aid disclosures analysed by the Guardian show that taxpayers’ share of funding for the payments could be significantly larger than the £153m which the Post Office has reserved to make restitution to the postmasters. – Guardian

China’s role in building nuclear power stations in the UK is under threat amid growing concern about the emerging superpower’s involvement in critical national infrastructure. The Government is exploring ways to stop state-owned China General Nuclear (CGN) taking part in the £20bn Sizewell C power plant that CGN’s partner EDF wants to build in Suffolk, along with all future UK power projects, the Financial Times reported. – Telegraph

Credit Suisse has reached an out-of-court settlement with one of its former top bankers over the spying scandal that rocked the Swiss business world and led to the resignation of former chief executive Tidjane Thiam. The Zurich-based bank confirmed Swiss newspaper reports, with a spokesman telling Reuters: “Everybody involved has agreed to settle and this matter is now closed.” – Telegraph

The billionaire Weston family is kicking off a formal auction of Selfridges to flush out a buyer for the department stores business. It is understood that advisers at Credit Suisse will start to send out information memoranda – documents that pitch a business to prospective buyers and that include its strengths, competitive advantages and latest financial details – imminently amid hopes that a deal could be completed by the end of the year. – The Times


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