ADVFN Morning London Market Report: Tuesday 27 July 2021

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London open: Stocks drop as Reckitt disappoints; investors eye US tech earnings

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London stocks fell in early trade on Tuesday as investors waded through a raft of earnings, with consumer goods giant Reckitt pacing the decline after disappointing results.

At 0900 BST, the FTSE 100 was down 1.2% at 6,939.10.

Lukman Otunuga, senior research analyst at FXTM, said investors were wary ahead of important tech earnings in the US.

“It’s a big day for big tech as heavyweights such as AppleMicrosoft and Alphabet will report their latest quarterly earnings. If these titans report much better-than-expected quarterly results and revenues, this could further empower US equity bulls.

“In the meantime, a sense of caution is likely to linger across markets as investors adopt a guarded approach due to the Asian volatility and Federal Reserve policy meeting on Wednesday.”

In equity marketsReckitt slid after saying it swung to a loss in the first half as it wrote down the value of its Infant Formula and China Nutrition assets.

Online greeting card company Moonpig was also in the red after saying it had doubled revenue and profits in its maiden results as a listed company, but warning of a fall in sales in the coming months as Covid restrictions were eased.

Ascential lost ground after it raised £153m in a placing to provide the group with greater balance sheet flexibility “to use its proven M&A playbook and execute on its strong pipeline of attractive, on-strategy target opportunities”.

Games Workshop retreated even as the miniature wargames manufacturer posted a jump in full-year profit and revenue and lifted its dividend as it continued to benefit from increased interest in its miniature figures since Covid restrictions were put in place.

On the upside, speciality chemicals company Croda jumped to the top of the FTSE 100 as it said annual profit was set to be well ahead of expectations and reported record results for the first half.

Irish convenience food group Greencore also rallied as it lifted annual profits guidance after a strong third quarter, as Covid lockdown measures were relaxed.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Croda International Plc +4.73% +370.00 8,196.00
2 Rightmove Plc +0.51% +3.40 671.60
3 Segro Plc +0.46% +5.50 1,196.00
4 Carnival Plc +0.37% +5.40 1,477.40
5 Morrison (wm) Supermarkets Plc +0.23% +0.60 265.60
6 Admiral Group Plc +0.15% +5.00 3,331.00
7 Intertek Group Plc +0.04% +2.00 5,472.00
8 Standard Life Aberdeen Plc +0.00% +0.00 274.10
9 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90
10 Reckitt Benckiser Group Plc +0.00% +0.00 6,498.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Melrose Industries Plc -2.89% -4.60 154.45
2 Informa Plc -2.84% -14.20 485.80
3 Barratt Developments Plc -2.81% -20.00 691.20
4 Prudential Plc -2.63% -36.00 1,330.50
5 Glencore Plc -2.21% -7.20 319.00
6 Micro Focus International Plc -2.15% -8.70 396.70
7 Scottish Mortgage Investment Trust Plc -2.13% -28.50 1,307.00
8 Persimmon Plc -2.11% -61.00 2,835.00
9 Itv Plc -1.98% -2.40 118.85
10 Taylor Wimpey Plc -1.91% -3.15 161.65

 

Europe open: China share slump, Reckitt weigh on stocks

European stocks fell at the open on Tuesday as sharp falls in Hong Kong and Shanghai dragged on sentiment along with below-par quarterly sales from Reckitt Benckiser.

The pan-European STOXX index fell 0.52% in early trade with all major regional bourses lower.

Fears of stricter regulation of China’s heavyweight technology sector have fuelled a selloff in global markets this week, despite optimism about US and European earnings season as a measure of progress from the Covid pandemic.

“The clampdown on various sectors within the Chinese economy that rely on overseas investment has seen a flight of capital out of Chinese stocks, particularly those with overseas listings, raising concerns as to what other sectors might be next,” said CMC Markets analyst Michael Hewson.

In equity news Lysol maker Reckitt tumbled 7.39% as easing demand for its soaps and cold remedies led the company to miss analysts’ estimates for quarterly sales.

Dutch tech investor Prosus, which has a stake in China tech giant Tencent, slumped 8.4%, hitting new lows since May 2020, weighed down by the selloff in Hong Kong and mainland China shares.

Shares in Croda International topped the Stoxx with a gain of 5% as the speciality chemicals company said it expected annual profit to be well ahead of expectations after reporting record results for the first half.

The world’s biggest luxury goods group LVMH inched up after posting higher sales and profits.

 

US close: Stocks firmer as earnings season kicks off

Wall Street stocks were in positive territory as they closed on Monday, on the first day of a tech-heavy week on the earnings front.

At the close, the Dow Jones Industrial Average was up 0.24% at 35,144.31, as the S&P 500 added 0.24% to 4,422.30, and the Nasdaq Composite was 0.03% firmer at 14,870.71.

The Dow closed 82.76 points higher on Monday, adding to gains recorded on Friday when all three major averages closed out the week at record highs, after markets tumbled at the start of the week on concerns about the spread of the Covid-19 ‘Delta’ variant.

Earnings were set to be firmly in focus this week, with tech giants Apple, Alphabet and Microsoft set to report on Tuesday, while Facebook and Amazon will report later in the week.

In terms of today’s earnings, toymaker Hasbro advanced 12.24% after the company posted a 54% increase in second-quarter earnings to $1.32bn, with operating profits growing to $76.6m, or 5.8% of revenues.

Aerospace and defence giant Lockheed Martin was 3.34% weaker, as it reported mixed second-quarter earnings but raised its full-year guidance.

On the macro front, sales of new single-family homes crashed in June, while the previous month’s numbers were downwardly revised, indicating that the US housing market was losing momentum amid soaring prices.

According to the Commerce Department, new home sales dropped 6.6% to a seasonally-adjusted annual rate of 676,000 units last month, while May’s sales pace was revised down to 724,000 units from the previously reported 769,000 units.

Market participants were also glued to the Federal Reserve’s two-day policy meeting this week, beginning on Tuesday, with the Federal Open Market Committee and the Board of Governors expected to issue a statement on their current stance on monetary policy on Wednesday.

 

Tuesday newspaper round-up: Tesla, house prices, Hinkley Point, Ultra

Tesla made a profit of more than $1bn in the last three months even as it struggled to keep up with demand for electric cars in the face of a global chip shortage. The company announced Monday that it has made a profit of $1.14bn in its second quarter, 10 times what it made a year ago and its eighth quarter of back-to-back profits. – Guardian

UK house prices hit a new high in June and are 30% higher than the peak they hit before the 2008 financial crisis, according to the latest snapshot of the market. The property website Zoopla said the average price of a home was now £230,700 – as much as 5.4% higher than the same month a year ago. – Guardian

The flagship of Britain’s new nuclear power fleet is under threat as the Government prepares curbs on Chinese involvement in critical national infrastructure. Whitehall sources admitted last night that the £23bn Hinkley Point C project underway in Somerset could be jeopardised by plans to block China General Nuclear (CGN) from future UK projects. – Telegraph

Kwasi Kwarteng, the business secretary, is taking an “active interest” in the national security implications of a £2.6 billion takeover offer for Ultra Electronics, the UK defence company, by US private equity, it has emerged. Ultra said on Friday that it is “minded to recommend” a £35-a-share cash offer from Advent International to merge it with Cobham, another British defence company that the American buyout firm acquired two years ago in a controversial £4 billion deal. – The Times

Jaguar Land Rover has cut its quarterly losses after a recovery in sales but warned that a shortage of semiconductors is likely to worsen over the next three months. JLR confirmed yesterday that wholesale volumes are likely to be about 50 per cent lower than planned in the next quarter because of the chip supply crunch. – The Times

 

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