ADVFN Morning London Market Report: Thursday 29 July 2021

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London open: Stocks rise amid earnings avalanche; Lloyds, Shell rally


London stocks rose in early trade on Thursday as investors waded through an avalanche of earnings, with well-received results from the likes of RentokilShell and Lloyds helping to underpin the mood.

At 0900 BST, the FTSE 100 was up 0.4% at 7,047.85.

Market participants were mulling the latest policy announcement from the US Federal Reserve.

Rabobank said: “The FOMC struck a rather dovish tone yesterday, seemingly unfazed by the risks to their inflation and economic growth outlook. In its formal statement, it noted that economic activity and employment have continued to strengthen and that sectors most affected by the pandemic have shown improvement but have not fully recovered.

“The path of the economy continues to depend on the course of the virus. The FOMC repeated the line that progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy. The delta variant isn’t seen as a game changer.”

On home shores, earnings came in thick and fast, with Rentokil the top gainer on the FTSE 100 after saying it expects market expectations for annual profit to increase as the pest control and hygiene company reported sharp rises in interim profit and its dividend.

Shell gushed higher as the oil giant lifted its dividend, launched a $2bn buyback and posted a rise in second-quarter profits.

Lloyds Banking Group rallied after saying it swung to an interim pre-tax profit of £3.9bn from a loss of £602m the year before, as it released £837m set aside for bad debts amid the Covid pandemic due to an improved UK economic outlook.

Caterer Compass was on the front foot as it said it expected trading to be around 80% to 85% of pre-Covid-pandemic levels in the fourth quarter as its larger markets reopened.

BAE Systems pushed up after it increased its dividend and announced a £500m share buyback as the arms and aerospace company reported a 61% increase in first-half profit.

Opioid addiction treatment maker Indivior gained as it said pre-tax profit jumped in the first half and announced a $100m share buyback.

On the downside, Smith & Nephew retreated even as it posted a 48% increase in second-quarter revenues.

Telecoms and broadcasting group BT was weaker despite reporting better-than-expected first-quarter core earnings as trading improved across most of its businesses.

Weir was also in the red despite reinstating its dividend and hailing a “strong” first-half performance.

Drinks maker Diageo fizzed lower as it reported a sharp jump in annual profits but said it expects near-term volatility to remain.

Iconic boot maker Dr Martens also lost ground even as it said revenues surged in the first quarter, with trading “slightly” ahead of its expectations and growth across all regions.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Anglo American Plc +4.94% +154.50 3,280.00
2 Rentokil Initial Plc +4.78% +25.20 552.60
3 Royal Dutch Shell Plc +4.25% +58.80 1,442.80
4 Royal Dutch Shell Plc +3.74% +52.60 1,458.20
5 Informa Plc +3.55% +17.20 501.20
6 Compass Group Plc +3.07% +46.00 1,544.50
7 Fresnillo Plc +2.80% +22.60 829.00
8 Tui Ag +2.58% +8.90 353.70
9 Rio Tinto Plc +2.58% +158.00 6,285.00
10 Bhp Group Plc +2.50% +58.00 2,381.50


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Smith & Nephew Plc -6.97% -109.00 1,454.50
2 Bt Group Plc -6.33% -11.65 172.30
3 Sse Plc -4.08% -62.50 1,471.00
4 Johnson Matthey Plc -2.35% -71.00 2,947.00
5 Kingfisher Plc -1.71% -6.40 367.50
6 Flutter Entertainment Plc -1.47% -185.00 12,440.00
7 Easyjet Plc -1.33% -11.80 877.00
8 Ashtead Group Plc -1.26% -70.00 5,490.00
9 Next Plc -1.22% -98.00 7,940.00
10 International Consolidated Airlines Group S.a. -1.21% -2.20 179.72


Europe open: Shares hit record highs as investors shrug off China worries

European stocks hit record highs at the open on Thursday on the back of a day of strong corporate earnings, shrugging off worries about China’s regulatory moves on tech firms.

The pan-European STOXX 600 index rose 0.3% to an all-time high of 463.51 points in early trading. All major regional bourses were up.

“After the debacle involving a big sell-off in China-related stocks, Asian markets staged a big comeback … on chatter that Beijing wouldn’t be overtly draconian towards Chinese companies with listings in foreign markets if they kept in line with local laws,” said AJ Bell analyst Danni Hewson.

In equity news, shares in telecom equipment maker Nokia rose almost 7% as the company reported a stronger-than-expected second-quarter operating profit on Thursday and raised its full-year outlook as promised, thanks to a turnaround of its business.

Aircraft maker, Airbus, jumped 3.6% after it sharply raised its forecasts for full-year deliveries and earnings.

France’s TotalEnergies and UK-listed Royal Dutch Shell both gained after announcing share buybacks as a sharp rise in oil and gas prices boosted their earnings.

Food giant Nestle and brewer Anheuser-Busch InBev fell after their results.

Swiss bank Credit Suisse fell after reporting a near 80% fall in its second-quarter profit, hit by the fallout from the collapse of Archegos.


US close: Major indices put on mixed performance as Fed vows to keep rates near zero

Wall Street stocks turned in a mixed performance on Wednesday as market participants digested earnings from major US firms and the outcome of the Federal Reserve’s latest two-day meeting.

At the close, the Dow Jones Industrial Average was down 0.36% at 34,930.93 and the S&P 500 was 0.02% weaker at 4,400.64, while the Nasdaq Composite saw out the session 0.70% stronger at 14,762.58.

The Dow closed 127.59 points lower on Wednesday, extending losses recorded in the previous session as major averages pulled back from record highs to snap a five-day winning streak.

Focus was again on earnings throughout the early part of the day, with Alphabet shares in the green in after the Google parent posted a 69% jump in quarterly advertising revenues, while Apple shares were in the red despite beating both top and bottom-line estimates.

Microsoft also traded higher after the bell despite reporting a contraction of revenues in its Windows unit, while McDonald’s posted a marked increase in quarterly sales on the back of new menu items.

Drugmaker Pfizer raised its 2021 full-year guidance from $26.0bn to $33.5bn after revealing it had sold $7.8bn worth of Covid-19 shots in the second quarter.

On the macro front, the number of Americans applying for home mortgages increased in the week ended 23 July, driven by an increase in refinancing activity and a drop in purchase activity amid falling mortgage rates. According to the Mortgage Bankers Association, its seasonally adjusted market index rose 5.7% from a week earlier, reflecting a 9.3% increase in applications to refinance existing loans and a 1.6% decline in purchase applications. The average contract interest rate for traditional 30-year mortgages also decreased, down to 3.01% from 3.11% – its lowest level since February.

Elsewhere, an advance reading of the US goods trade balance revealed it had risen 3.5% to $91.2bn in June, according to the Census Bureau, yet another fresh record high, reflecting a strong appetite amongst Americans for imported goods.

For the latter part of the day, attention shifted towards the Federal Reserve‘s interest rate decision, with the central bank keeping its benchmark interest rate in a target range between zero and 0.25%. Despite the optimism surrounding the future of the US economy, chairman Jerome Powell said the Fed was nowhere near considering a rate hike.

The yield on the benchmark 10-year Treasury note slipped slightly lower to 1.234% following the meeting’s conclusion.


Thursday newspaper round-up: HSBC, UK car production, Facebook, Vectura

HSBC discovered a suspected money laundering network that received $4.2bn (£3bn) worth of payments, it has emerged, raising questions over whether it disclosed the information to US monitors who at the time were ensuring the bank cleaned up its act. Insiders who spoke to journalists as part of a joint investigation by the Guardian and the Bureau of Investigative Journalism, have suggested that HSBC may not have appropriately shared the information with the monitoring team installed by US regulators in 2012 after HSBC allowed drug cartels in Latin America to launder hundreds of millions of dollars through its accounts. – Guardian

The number of cars rolling off UK production lines last month slumped to the lowest June level in almost 70 years, as car manufacturers were hit by shortages of both staff and semiconductors. The Society of Motor Manufacturers and Traders (SMMT) said just over 69,000 cars were produced in UK car plants last month, the lowest June total since 1953, although this excludes June 2020 when factories were slowly getting back up to speed after the first lockdown. – Guardian

The US private equity firm seeking to take over Morrisons was fighting a rearguard action after a second shareholder came out against its £9.5bn bid. Fortress is scrambling to get back on the front foot after top ten investor JO Hambro said that its 254p a share offer was too low. The intervention came a day after Morrsions’ biggest shareholder Silchester said it was opposed to the deal. – Telegraph

Facebook shrugged off its feud with Apple to double its profits in the three months ending in June, smashing past Wall Street’s expectations. The social media titan increased its profits from $5.2bn (£3.7bn) in the same period in 2020 to $10.4bn this year, while its revenue rose 53pc from $18.7bn to $28.6bn, the biggest year on year rise since at least 2017. – Telegraph

The government is looking into whether the takeover of Vectura, a respiratory drugs business, by Philip Morris International, the tobacco company, raises public interest concerns, the business secretary has confirmed. Kwasi Kwarteng gave the reassurance in response to a letter from Labour shadow ministers that had urged the government to consider blocking the £927 million deal. – The Times


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