ADVFN Morning London Market Report: Thursday 21 October 2021

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London open: Stocks fall amid concerns about China’s Evergrande

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London stocks fell in early trade on Thursday amid concerns about Chinese property group Evergrande, after it failed to complete a $2.6bn asset sale.

At 0920 BST, the FTSE 100 was down 0.3% at 7,199.21.

AJ Bell financial analyst Danni Hewson said: “The FTSE 100 slipped in early trading on Thursday as China’s Evergrande crisis reared its ugly head again. The heavily indebted property developer failed to complete a key asset sale to leave it teetering amid fears of wider contagion from a potential collapse of the business.

“This hit stocks with Chinese exposure, most notably the mining sector. China is the world’s biggest consumer of many metals and minerals.

“Rising Covid-19 cases in the UK were also affecting sentiment amid fears measures might need to be brought in over the winter to control the spread of the virus.”

On the macro front, data released earlier by the Office for National Statistics showed UK public borrowing fell by almost half in the first six months of the financial year as it continued to recover from the impact of the Covid-19 pandemic.

Public sector borrowing fell to £108.1bn, down by £101.2bn in April-September 2020 but around three times its level before the pandemic.

Government borrowing fell to £21.8bn in September, a drop of around £7bn compared with September 2020, and lower than economists had forecast. It was also sharply lower than the £151.1bn the Office for Budget Responsibility had expected.

Britain’s budget deficit soared last financial year to its highest since World War Two at 15% of GDP but is expected to drop to just over half that this year due to the end of emergency economic support and stronger tax revenues.

Last month Finance Minister Rishi Sunak announced a manifesto-breaking £12bn tax rise on workers and employers, starting next year, to fund health and social care.

Thursday’s data showed public sector net debt totalled £2.22trn, or 95.5% of gross domestic product.

In equity markets, miners were under the cosh again as metals prices fell, with Anglo AmericanRioBHP and Glencore all lower.

Barclays was trading down a touch despite reporting a record £6.9bn of profit for the first nine months of 2021 as the securities business performed strongly and the retail bank released bad debt provisions made earlier in the pandemic.

Lancashire was the worst performer on the FTSE 250 as it said it expects net ultimate losses of between $165m and $185m from natural catastrophes including Hurricane Ida and European storms Bernd, Volker and Xero.

Meanwhile, greeting cards retailer Moonpig slumped after shareholders placed 30m shares, or a stake of around 8.8%, in the company.

On the upside, consumer goods giant Unilever rallied as it reported higher-than-expected third-quarter underlying sales growth, driven by higher prices and strong demand in the US, India, China and Turkey.

Relx gained after the company upgraded its full-year outlook for underlying growth rates in revenue and adjusted operating profit, as well as constant currency growth in adjusted earnings per share.

St James’s Place and Renishaw were also in the black after well-received updates.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Unilever Plc +2.21% +84.50 3,903.50
2 Easyjet Plc +1.35% +8.00 599.20
3 St. James’s Place Plc +1.24% +19.00 1,556.50
4 Halma Plc +1.10% +32.00 2,930.00
5 Legal & General Group Plc +1.09% +3.00 277.80
6 International Consolidated Airlines Group S.a. +1.00% +1.58 159.08
7 Relx Plc +0.99% +22.00 2,237.00
8 Hikma Pharmaceuticals Plc +0.87% +21.00 2,441.00
9 Bunzl Plc +0.75% +19.00 2,536.00
10 British Land Company Plc +0.66% +3.20 488.40

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Tui Ag -6.07% -13.80 213.60
2 Rio Tinto Plc -3.67% -179.50 4,706.00
3 Anglo American Plc -3.58% -101.50 2,736.50
4 Rentokil Initial Plc -2.92% -17.60 586.00
5 Bhp Group Plc -2.86% -57.20 1,945.80
6 Johnson Matthey Plc -2.53% -68.00 2,623.00
7 Glencore Plc -2.08% -7.85 370.10
8 Intercontinental Hotels Group Plc -2.01% -101.00 4,933.00
9 Smiths Group Plc -1.93% -28.00 1,424.00
10 Lloyds Banking Group Plc -1.91% -0.93 48.12

 

Europe open: Shares fall on Evergrande woes as Nel bucks trend

European shares opening lower on Thursday as the spectre of China Evergrande‘s debt mountain resurfaced to spook investors while cost inflation worries continued to hit sentiment.

The pan-European Stoxx 600 index was down 0.2% with all regional bourses lower. Asian stocks fell on news about the collapse of a $2.6bn sale at property developer China Evergrande.

Shares in the troubled firm fell more than 12% on Thursday, returning to trade after a a two week suspension. China Evergrande announced in an exchange filing late Wednesday that a deal to sell a 50.1% stake in its property services business to rival developer Hopson had fallen through.

Mining shares also fell on the news on fears a default could hit China’s broader economic recovery with Rio Tinto and Anglo American lower.

In other equity news, shares in Norwegian hydrogen producer Nel bucked the trend to top the Stoxx, gaining almost 11% as the company reported record third quarter revenues.

Zur Rose shares fell 6.8% despite the online pharmacy reporting a strong rise in nine-month revenues.

Computer game maker CD Projekt fell 7% after the company said its latest edition of Cyberpunk 2077 would now be released in the first quarter of 2022, while the next-generation version of The Witcher 3: Wild Hunt was scheduled for a release in the second quarter of 2022.

Swiss engineering and tech group ABB fell on lowering its full-year sales forecast after warning of parts shortages.

Shares in Volvo were lower after the vehicle maker beat profit expectations but warned that persisting chip shortages hampered production.

Barclays slipped even as the British bank posted a bumper third-quarter performance.

Unilever rose as the consumer goods giant beat third-quarter sales growth forecasts as it hiked prices to try to offset surging costs.

 

US close: Stocks mixed as earnings season rolls on

Wall Street stocks closed in a mixed state on Wednesday, with the S&P 500 recording its sixth winning session on the trot.

At the close, the Dow Jones Industrial Average was up 0.43% at 35,609.34 and the S&P 500 added 0.37% to 4,536.19, while the Nasdaq Composite slipped 0.05% to settle at 15,121.68.

The Dow closed 152.03 points higher on Wednesday, extending gains recorded in the previous session as the release of some solid third quarter earnings from a number of big-name US firms gave sentiment a boost.

On the macro front, mortgage applications fell 6.3% in the week ended 15 October, according to the Mortgage Bankers Association, primarily due to an increase in the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances from 3.18% to 3.23%.

Applications to refinance a home fell 7% week-on-week, and those to purchase a home declined 4.9%.

In equities, Netflix was down 2.17% after it published its third-quarter earnings late on Tuesday, with the group reporting that it had snapped up 4.4m new subscribers during the period, ahead of estimates of 3.84m.

Sentiment around the streaming giant was dented on Wednesday, however, after analysts at Deutsche Bank downgraded the stock, stating its valuation was hard to justify given that revenue growth was expected to slow in 2022.

United Airlines descended 0.58% after the legacy carrier also released its quarterly results overnight, coming in ahead of expectations on both the top and bottom line thanks to an ongoing rebound in travel demand.

Biogen slipped 0.58% after it reported smaller-than-anticipated quarterly sales of its Alzheimer’s drug Aduhelm earlier in the session, although it still managed to beat expectations with group revenues of $2.78bn and earnings per share of $4.77.

Elsewhere, Baker Hughes slid 5.66% after it posted a quarterly profit that fell short of expectations amid supply chain issues, while Verizon rose 2.41% after its quarterly profits topped expectations as its broadband segment continued to experience growth throughout the period.

Tesla closed up 0.18%, but was down 0.62% in after-hours action, as it prepared to publish its earnings after the closing bell.

 

Thursday newspaper round-up: Covid booster, NZ trade deal, Evergrande, energy crisis, Tesla

Further coronavirus restrictions will be needed if people do not have a booster jab and get serious about facemasks, the health secretary said yesterday as he predicted cases could reach 100,000 a day. Sajid Javid insisted that “life is not back to normal” and urged people to take precautions such as meeting outdoors and regular lateral flow testing. – The Times

People who are vaccinated against Covid are highly unlikely to die of the virus unless they are very old and already ill, a study in Italy has shown. The data adds more pressure on the UK Government to speed up the booster programme for protecting double jabbed older and vulnerable people who will be beginning to lose immunity. – Telegraph

Pupils in England whose learning has been severely disrupted by the pandemic could lose up to £46,000 in lifetime earnings, costing the economy hundreds of billions of pounds, without additional government investment, according to research. The report by the Education Policy Institute (EPI) identified stark regional differences in learning loss – with pupils in parts of the north and Midlands worst affected – which it warned would undermine the government’s levelling-up agenda. – Guardian

Ministers sealed what is only the second bespoke Brexit trade deal after agreeing terms with New Zealand that will allow cheaper wine imports but open British farmers up to competition. Under the terms of the agreement tariffs will be waived on a range of New Zealand imports, potentially reducing the price of Sauvignon Blanc by 20p and reducing taxes on products such as Manuka honey and kiwi fruit. – The Times

The crisis in energy markets risks sparking a cascade of bankruptcies which will leave as few as five domestic suppliers standing unless ministers introduce urgent reforms, the boss of Scottish Power has warned. Keith Anderson, head of one of Britain’s largest gas and electricity companies, said the industry is “sleepwalking into a massacre” amid a global gas supply crunch which shows little sign of easing off. – Telegraph

Nearly 4 million low-income households are behind on rent, bills or debt payments, up threefold since the pandemic hit, according to a study revealing the growing cost of the living crisis facing the UK’s poorest families. A third of the 11.6 million working-age households in the UK earning £25,000 or less were found to be in arrears on their rent or mortgage, utility bills, council tax bills or personal debt repayments, according to the Joseph Rowntree Foundation (JRF). – Guardian

Tesla defied the disruption wrought by chip shortages and port congestion across the motor industry to announce record profits in the latest quarter. The maker of electric cars pledged to keep raising production levels in Shanghai, Texas and at its new site on the outskirts of Berlin, after a 73 per cent increase in manufacturing enabled it to beat Wall Street expectations. – The Times

Joe Biden may resort to calling in the National Guard to tackle mounting logjams at ports and distribution centres, according to reports. White House officials are reportedly discussing the measure as part of efforts to tackle supply chain problems that have caused widespread delays in the delivery of goods across the US. – Telegraph

Five of the UK’s leading manufacturing industries have issued a plea for more government financial support to boost capital investment in research and development as well as new factories and equipment with lower carbon emissions. Carmakers, aerospace, chemicals, pharmaceuticals and food and drinks manufacturers banded together on Wednesday to call for a long-term strategy for industry as the chancellor, Rishi Sunak, prepares for the budget next week. – Guardian

A deal to sell a $2.6 billion stake in the world’s most indebted property firm to a rival company has fallen through. Evergrande, the Chinese property group, suspended its shares on October 4 before “an announcement containing inside information about a major transaction”. – The Times

British shoppers should be hit with higher prices on meat to help the environment, according to suggestions for a tax on “high-carbon foods” drawn up for the Government. In a move that replicates the rollout of a “sugar tax” three years ago, the paper explored a levy on red meat and dairy to “help everyone eat more sustainably”. – Telegraph

A government taskforce is to meet on Thursday to discuss ways to tackle the sharp rise in scams that has hit the UK since the start of the pandemic. Groups representing banks, telecoms companies and consumers will meet with the minister for security, Damien Hinds, to discuss measures to tackle online fraud, and increase public awareness. – Guardian

 

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