ADVFN Morning London Market Report: Thursday 25 November 2021

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London open: Stocks nudge up; Hochschild recovers some ground

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London stocks nudged a little higher in early trade on Thursday, but trading was expected to be fairly quiet due to the Thanksgiving holiday in the US.

At 0925 GMT, the FTSE 100 was up 0.1% at 7,296.67.

Victoria Scholar, head of investment at Interactive Investor, said: “European markets have opened stronger amid lighter volumes with US markets closed today for Thanksgiving.

“The FTSE 100 is drifting higher, inching closer to resistance at 7,300 with a break above potentially paving the way for further gains. Oil prices are steady for the second day in a row, holding onto Tuesday’s sharp gain with brent crude firmly above support at $80 a barrel.”

In equity marketsHochschild Mining rallied after the Peruvian government U-turned on a decision to close the company’s mines if legal requirements were met. Investors dumped the stock on Monday after Lima said four mines in Peru’s southern Ayacucho region, which included Hochschild’s flagship Inmaculada operation, would be closed as soon as possible.

However, it quickly switched tack on Wednesday after talks with the National Society of Mining, Petroleum and Energy.

Vivo Energy shot higher after agreeing to be taken over by Vitol Investment in a deal worth around $2.3bn.

Outsourcer Capita was lifted by an upgrade to ‘outperform’ at RBC Capital Markets.

Pub chain Mitchells & Butlers was in the black as it said it returned to profit after Covid-19 restrictions were lifted but also warned that rising energy costs and wages would affect its results in the current year.

Drinks maker Britvic fizzed higher after an upgrade to ‘buy’ at Societe Generale, while InterContinental Hotels and Whitbread were up after upgrades at Jefferies.

On the downside, Renishaw and Spectris were both knocked lower by rating downgrades at Morgan Stanley.

Hill & Smith lost ground even as it said it expects annual profit to meet market expectations after “robust” trading in the previous four months.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Micro Focus International Plc +2.96% +11.90 414.50
2 Antofagasta Plc +2.12% +31.00 1,495.50
3 Ashtead Group Plc +1.82% +112.00 6,272.00
4 Intercontinental Hotels Group Plc +1.53% +75.00 4,982.00
5 Scottish Mortgage Investment Trust Plc +1.49% +22.00 1,494.00
6 Berkeley Group Holdings (the) Plc +1.45% +64.00 4,476.00
7 Fresnillo Plc +1.42% +12.80 914.20
8 Bhp Group Plc +1.17% +23.50 2,039.50
9 Astrazeneca Plc +1.11% +94.00 8,565.00
10 Smurfit Kappa Group Plc +1.11% +43.00 3,933.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Vodafone Group Plc -4.25% -5.00 112.78
2 Imperial Brands Plc -1.92% -31.00 1,586.00
3 Carnival Plc -1.60% -22.20 1,363.80
4 British Land Company Plc -1.28% -6.80 526.40
5 Johnson Matthey Plc -1.12% -24.00 2,111.00
6 Bae Systems Plc -0.96% -5.40 558.40
7 Royal Dutch Shell Plc -0.87% -14.40 1,643.20
8 Melrose Industries Plc -0.84% -1.35 158.60
9 Royal Dutch Shell Plc -0.83% -13.80 1,646.60
10 Bunzl Plc -0.82% -23.00 2,797.00

 

Europe open: Shares up despite weak German data, rising Covid cases

European shares edged ahead at the open on Thursday despite data showing a bleak outlook for the German economy and rising Covid cases in the region.

The pan-European Stoxx 600 index was up 0.48% in early deals with all major Continental bourses following suit. Asian and US shares closed higher, providing some impetus. Wall Street will be shut for the Thanksgiving holiday.

On the economic front, the forward-looking German GfK barometer showed consumer confidence tumbled to -1.6 for December, down 2.6 points from the previous month.

Meanwhile, estimates for third quarter economic growth in Europe’s largest economy were revised down to 1.7% from 1.8%.

The figures reflect the huge inflationary pressures weighing on Germany’s manufacturing-heavy economy. These are now being compounded by renewed Covid worries, with a recent surge in cases sparking fears of another lockdown.

“Consumer sentiment is currently being squeezed from two sides. On the one hand, the number of cases in the fourth wave of the coronavirus pandemic is exploding, which threatens to overwhelm the health system and could lead to further restrictions,” said GfK consumer expert Rolf Buerkl said.

“On the other hand, the purchasing power of consumers is dwindling due to a high inflation rate of 4%. The outlook for the upcoming Christmas season is now somewhat bleak.”

Analysts at Pantheon Macroeconomics said they were concerned about figures for the fourth quarter.

“The fall in the advance GfK consumer sentiment index is just the beginning of what will likely be a sustained drag on sentiment between now and Christmas, as the virus re-imposes itself on the near-term economic outlook,” they said.

In equity news, Remy Cointreau jumped more than 10% to a record high after the drinks maker raised its annual profit outlook as strong demand for its premium cognac drove a stronger-than-expected operating profit in the first half.

Swedish radiation treatment equipment maker Elekta gained after the company won an order to supply the International Children’s Cancer Research Centre in Ghana.

 

US close: Street finishes mixed after tsunami of pre-Thanksgiving data

Wall Street closed in a mixed state on Wednesday, amid a sea of data points and rising rates.

At the close, the Dow Jones Industrial Average was down 0.03% at 35,804.38, while the S&P 500 added 0.23% to 4,701.465 and the Nasdaq Composite was ahead 0.44% at 15,845.23.

The Dow closed 9.42 points lower on Wednesday, taking a small bite out of the gains it recorded in the previous session.

“A sharp drop in initial claims has provided the fundamental reason for optimism, helping to alleviate some of the worries about global growth that seemed to dominate the first two sessions of the week,” said IG chief market analyst Chris Beauchamp earlier in the session.

“Crucially, we have seen a number of the weakest stocks in the US start to stabilise, with names like PayPal and Twitter either holding their ground or beginning to edge higher.

“Bank stocks are still under pressure, holding back the market from making a better move to the upside, but with heavyweight Boeing also holding up well the outlook appears to be brightening for US equities.”

The first cab off the data rank on Wednesday was weekly US mortgage applications numbers, which grew 1.8% in the week ended 19 November following a 2.8% fall in the previous week.

According to the Mortgage Bankers Association, its purchase index jumped 4.7% week-on-week and its refinancing one edged up 0.4% despite the average fixed 30-year mortgage rate increasing four basis points to 3.24%.

Next up, initial jobless claims dive-bombed in the week ended 20 November, according to the Labor Department, as first-time claims for unemployment totalled 199,000, a drop of 71,000 from the prior week to a seasonally adjusted print of 199,000 – a number not seen since November 1969 and well below median estimates for a reading of 260,000 applications.

Continuing claims fell from 2.10m to 2.04m, while the four-week moving average dropped from 273,250 to 252,250.

Elsewhere, orders for goods made to last more than three years undershot forecasts last month amid a decline in orders for airplanes, both civilian and military.

According to the Department of Commerce, in seasonally-adjusted terms durable goods orders slipped by 0.5% month-on-month to reach $260.1bn.

America’s shortfall on trade with the rest of the world, meanwhile, dropped sharply last month amid a jump in exports.

According to the Department of Commerce, in seasonally adjusted terms, the US foreign trade deficit shrank at a month-on-month pace of 14.6% to reach $82.9bn.

Exports increased by 10.8% on the month to reach $157.4bn, while imports increased by just 0.5% to hit $240.3bn.

Turning to US gross domestic product, growth in the US economy decelerated to a modest annual rate of 2.1% in the October-December quarter, according to the Commerce Department, slightly better than initially reported.

Economists were now predicting a strong rebound in the current quarter, assuming rising inflation and a recent uptick in Covid-19 cases don’t impact activity.

Still on data, Americans continued splashing out briskly last month with price gains continuing to accelerate alongside.

According to the Department of Commerce, personal incomes increased by 0.5% month-on-month, beating economists’ forecasts for a rise of 0.3%.

Personal consumption expenditures, meanwhile, jumped by 1.3% versus September.

When adjusted for inflation, incomes were 0.3% lower, while spending was up by a more restrained 0.7%.

The annual rate of increase in the PCE price index rose from 4.4% in September to 5.0% for October and from 3.7% to 4.1% at the core level.

Finally, new home sales edged up 0.4% month-on-month in October to a seasonally adjusted annual rate of 745,000, according to the Census Bureau, following a downwardly revised print of 742,000 in September and below expectations for a print to 800,000.

The University of Michigan‘s final November consumer sentiment index for November fell to 67.4 in November, slightly above flash estimates for a print of 66.8 but well down from October’s reading of 71.7 and its weakest reading since 2011.

On the corporate front, fashion retail stalwart Gap tumbled 24.12% after it slashed its full-year earnings guidance amid “significant” disruption to its supply chain, with third quarter numbers also coming in well below expectations.

Upmarket department store chain Nordstrom was 29.03% weaker, after its third quarter earnings also came in short of what analysts had pencilled in.

On the upside, tractor maker Deere & Company jumped 5.53% after its fourth quarter sales and profit grew beyond expectations.

Tesla managed gains of 0.63%, after ARK Funds sold down its stake in the electric car manufacturer to increase its holding in lockdown meeting facilitator Zoom Video Communications.

 

Thursday newspaper round-up: Bulb, LV=, Opec, Lidl

The government has begun to count the cost of Bulb Energy’s collapse as many begin to wonder whether it is a fair price to pay for policymakers’ failure to spot a looming market breakdown. The life-support scheme set up to allow Bulb to keep supplying gas and electricity to its 1.7 million customers through the winter months could cost taxpayers up to £1.7bn according to a court application to hand the company to a special administrator. – Guardian

Bosses at the insurer LV= have been criticised over alleged conflicts of interest in its controversial £530m private equity takeover, which has been labelled a “three-act tragedy”. LV= plans to demutualise in order to receive investment from Bain Capital, a US private equity firm. However, three-quarters of its member-customers must back the plan in a vote on 10 December. – Guardian

Major oil states including Russia and Saudi Arabia have been urged to ramp up production in a bid to bring prices down to “reasonable levels”. Fatih Birol, head of the International Energy Agency (IEA), called on members of the Opec+ cartel to “make the necessary steps in order to comfort the global oil markets”. – Telegraph

The introduction of short-term visas will not solve labour shortages in the food industry, the boss of Lidl has warned, adding that the retailer was working “harder than ever before” to keep shelves stocked. Christian Härtnagel, chief executive of the German discount retailer’s UK business, said that there were labour shortages “in every corner you look at the moment”. The supermarket chain is raising wages for its lowest-paid workers, from £9.50 to £10.10 per hour outside London and from £10.85 to £11.30 in the capital from March next year as it battles with rivals to recruit staff. – The Times

When Steve Ballmer became Microsoft chief executive in 2000, the company was dominant; a tank, unstoppable. University students discussed how to answer likely interview questions if they were lucky enough to be considered for a job there. However, technology rarely stays still and soon new competitors such as Google and the once-mighty Nokia were threatening its dominance. In theory, this could have been Ballmer’s chance to understand what had succeeded in the past and work out what to do next. He wasn’t a man who operated like that, however. If there were threats coming from outside, he felt his job wasn’t merely to block them – it was to obliterate them. – The Times

 

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