ADVFN Morning London Market Report: Wednesday 28 July 2021

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London open: Stocks little changed as investors mull earnings, eye Fed


London stocks were little changed at the open on Wednesday as investors sifted through a raft of earnings and looked ahead to the latest policy announcement from the US Federal Reserve.

At 0900 BST, the FTSE 100 was just 0.1% firmer at 7,000.75. Overnight, earnings from US tech giants AppleMicrosoft and Alphabet all came in ahead of expectations.

As far as the Fed is concerned, CMC Markets analyst Michael Hewson said Wednesday’s meeting is unlikely to change the overall narrative when it comes to the timing of a taper, but it could offer an insight into whether some of the recent hawkishness from the likes of Bullard and Bostic is starting to spread to other members of the FOMC.

“The prevailing narrative appears to be one of a greater concern about the employment situation than the big rise in prices that we are currently seeing in some of the latest economic data.

“New York Fed President John Williams is one member concerned about the lacklustre participation rate, given where it was pre-pandemic at 63.4%. Since the June payrolls report little has changed when it comes to the US economy, with most expectations that the Fed is set to remain on autopilot until Q4 whatever inflation does. It seems unlikely that today’s meeting will change that perception.”

In equity marketsBarclays rallied to the top of the FTSE 100 after it smashed first-half profit estimates as it released £700m in impairments, resumed dividends and announced a £500m share buyback. The bank reported pre-tax profit of £5bn for the six months to June 30, well above the consensus forecast of £4.1bn, and up from £1.3bn.

St James’s Place was higher after it reported a jump in its first-half underlying cash result amid a sharp increase in funds under management.

Precious metals miner Fresnillo shone after saying it was on track to meet its full-year targets as second-quarter silver production rose 18%.

Broadcaster ITV was up as it reported rise in interim profit and revenue and said it was “emerging from the worst effects of the pandemic”, with a recovery in advertising revenues.

Wizz Air flew higher after the budget airline reported a widening of its losses for the first quarter as it continues to be hit by pandemic restrictions, but struck an upbeat note on summer capacity and said it expects to be the first major European airline to fully recover capacity to pre-Covid-19 levels.

Airlines more broadly were in the black, with British Airways owner IAG and easyJet also up after the government said double-jabbed ex pats were free to travel to England without having to quarantine from 16 August.

Lancashire was in the black as the insurer swung to a profit in the first half as gross premiums written jumped 40%.

Luxury car maker Aston Martin gained after saying that first-half losses narrowed as revenues surged, thanks in part to its first sport utility vehicle, the DBX.

On the downside, miners lost ground even as Rio Tinto posted its highest ever interim profit, with BHP, Rio and Glencore all down.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 St. James’s Place Plc +5.47% +82.50 1,590.50
2 Barclays Plc +4.71% +7.98 177.36
3 Easyjet Plc +4.57% +38.80 888.20
4 Fresnillo Plc +4.24% +32.00 786.00
5 International Consolidated Airlines Group S.a. +3.89% +6.82 182.14
6 Intertek Group Plc +2.82% +154.00 5,622.00
7 Carnival Plc +2.69% +39.40 1,505.40
8 Rolls-royce Holdings Plc +2.55% +2.51 100.78
9 Smith & Nephew Plc +2.00% +30.50 1,552.00
10 Micro Focus International Plc +1.96% +7.80 406.60


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Hsbc Holdings Plc -1.48% -5.95 397.35
2 Bhp Group Plc -1.42% -33.00 2,283.50
3 Croda International Plc -1.26% -104.00 8,162.00
4 Johnson Matthey Plc -0.96% -29.00 2,983.00
5 Auto Trader Group Plc -0.87% -5.60 641.40
6 Ferguson Plc -0.74% -75.00 10,090.00
7 Ashtead Group Plc -0.67% -38.00 5,592.00
8 Relx Plc -0.49% -10.00 2,019.00
9 United Utilities Group Plc -0.47% -5.00 1,049.50
10 Glaxosmithkline Plc -0.41% -5.80 1,393.40


Europe open: Shares up as bank earnings cheer investors

European stocks rallied on Wednesday as investors were cheered by positive bank earnings in the region.

The pan-European Stoxx 600 index was up 0.21% in early trade after a weaker session on Tuesday when fears of tighter regulation of Chinese tech companies shook investors.

Eyes are also firmly on the US Federal Reserve’s two-day policy meeting which starts today.

“It almost seems counterintuitive that the change of narrative from the June Fed meeting, which saw a number of Fed members start to talk in terms of a tapering of asset purchases, as well as a 2022 rate hike, appears to have come just before an increase in concerns about a slowdown in the global recovery story,” said CMC Markets analyst Michael Hewson.

“The sharp rise in Delta variant cases seen in the last few weeks has fuelled concerns, that for all the optimism over economic reopening, the reality is that coming out of the pandemic is likely to be a much longer road than the market has been originally pricing.”

“Some of the fears over inflation have already started to subside in the bond markets, whether by accident or design, largely due to cooling commodity prices, as well as concerns that the global recovery may well be weaker than anticipated all the way back in March.”

In equity news, German lender Deutsche Bank rose after it delivered a better-than-expected quarterly profit, while UK’s Barclays jumped 4% as it announced resumption of shareholder payouts after beating first-half profit expectations.

Shares in French consulting and IT services provider Capgemini were up after it raised its 2021 outlook.

Wizz Air gained 4.4% after it forecast capacity to ramp up to between 90% – 100% of pre-pandemic levels in July and August. Rival budget carrier easyJet and British Airways owner IAG were higher on a readacross.

Wealth manager St James’s Place topped the Stoxx with a rise of 5.37% as it reported a jump in its first half underlying cash result amid a sharp increase in its funds under management.

Shares in Adecco Group fell 6% after the company said it had agreed to buy AKKA Technologies in a €2bn deal, with Adecco combining AKKA with its own Modis tech brand.


US close: Stocks weaker as earnings season rolls on

Wall Street stocks finished in the red on Tuesday, as market participants digested earnings from some of the nation’s biggest firms and held their breath ahead of a flurry of tech results after the close.

At the close, the Dow Jones Industrial Average was down 0.24% at 35,058.52, while the S&P 500 lost 0.47% to 4,401.46, and the Nasdaq Composite was off 1.21% at 14,660.58.

The Dow closed 85.79 points lower on Tuesday, reversing gains recorded on the first day of a tech-heavy week on the earnings front.

On the macro front, demand for goods made to last more than three years grew a bit more slowly than anticipated last month, but economists said that the underlying trends remained strong.

According to the Department of Commerce, durable goods orders grew at a month-on-month clip of 0.8% to reach $257.7bn.

That was less than the 2.1% increase that economists had pencilled-in, but was offset in part by an upwards revision to May’s increase from 2.3% to 3.2%.

Elsewhere, US house price gains accelerated further in May with the annual rate of increase rising at its fastest pace in over 30 years, the results of a closely-followed survey revealed.

In seasonally adjusted terms, the S&P Case Shiller national house price index rose by 1.7% month-on-month and by 16.6% year-on-year.

A separate index for the country’s 20 largest cities meanwhile rose by 1.8% versus April, higher than consensus expectations for 1.5%, and by 17.0% from one year ago.

Still on data, the Conference Board‘s consumer confidence index was relatively unchanged in July, following gains in each of the prior five months, with the index now standing at 129.1, up from 128.9 in June.

The present situation index – based on consumers’ assessment of current business and labour market conditions – rose from 159.6 to 160.3, while the expectations index – based on consumers’ short-term outlook for income, business, and labour market conditions – was virtually unchanged at 108.4.

Lastly, the Richmond Fed’s manufacturing index rose to 27.0 in July, up from 26.0 in June and well ahead of expectations for a print of 20.

The Federal Reserve’s two-day policy meeting also kicked off during the day, with investors awaiting insights into the central bank’s monetary policy.

Corporate results were the primary focus of the session again, with several of the Street’s biggest names reporting throughout the course of the day.

3M slipped 0.6% after it increased its full-year earnings outlook, following a beat on second-quarter estimates, while General Electric rose 1.24% after its earnings also came in at the higher end of second-quarter forecasts.

Stanley Black & Decker lost 2.12% after it raised its full-year earnings outlook on the back of a second-quarter adjusted earnings beat, while United Parcel Service slid 6.99% after it beat revenue estimates as online shipments remained steady throughout the quarter.

Raytheon jumped 2.64% after it came in 10 cents above earnings per share estimates and posted quarterly revenues of $15.88bn, while JetBlue descended 6.91% after returning to profitability in the second quarter thanks to US government Covid-19 related aid.

Tesla shares reversed earlier gains to close down 1.95% after the company posted better-than-expected second-quarter earnings overnight, with quarterly net income exceeding $1.0bn for the first time.

Traders were still busy after the closing bell, however, with AlphabetAppleAMDStarbucksChubbMicrosoft and Visa publishing their latest quarterly earnings after hours.


Wednesday newspaper round-up: Travel list, Morrisons, Ultra Electronics, Greensill

Plans to significantly open up international travel are expected to be announced on Wednesday, with UK ministers poised to let people who have been fully vaccinated in the US and EU avoid quarantine if arriving from amber list countries. The move would benefit millions of people by finally letting them be reunited with family and friends based in the UK, as well as businesses in the aviation and tourism sectors that have been hit hard by the pandemic. – Guardian

Boris Johnson may block a Chinese-owned company from purchasing the UK’s largest producer of semiconductors, a senior government adviser has suggested, as they warned Beijing was on the brink of initiating a new “cold war”. Tony Abbott, the former prime minister of Australia recruited by Johnson to advise on post-Brexit trade, said he was heartened by a review being launched into the takeover of Welsh microchip manufacturer Newport Wafer Fab by Nexperia and suggested it meant the process could be paused. – Guardian

The biggest shareholder in Morrisons has come out against a £6.3bn takeover bid for the supermarket chain in an embarrassing setback for the grocer’s board. Silchester, which owns a 15.4pc stake in Morrisons, said it is not inclined to back the bid from Fortress, a US private equity firm, and described it as “disadvantageous” for existing investors. – Telegraph

Separate UK and US boards could be formed to protect Britain’s national security as a condition of Ultra Electronics’ potential takeover by Cobham, which is owned by US private equity firm Advent. Senior industry sources familiar with Ultra’s secret operations said creating the two management structures would ease government concerns about the £2.6bn deal. – Telegraph

The collapse of Greensill, the supply chain finance firm, has resulted in a £12 million hit for Iceland, the frozen foods supermarket group. The disclosure in Iceland’s financial accounts reveals that the company’s cash balances had fallen from £140.3 million to £125.5 million after the loss of its supply chain facility provided by Greensill Capital. The retailer declined to comment but it is understood that Iceland had a “supplier portal” that allows its food and drink suppliers to accelerate the payment of their bills, which Greensill facilitated. – The Times


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