ADVFN Morning London Market Report: Monday 20 June 2022

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London open: Stocks gain; Euromoney surges on takeover talks

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London stocks rose in early trade on Monday, but sentiment remained fragile amid ongoing concerns about a global recession.

At 0930 BST, the FTSE 100 was up 0.5% at 7,049.36.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “With the realisation the comfort blanket of cheap borrowing is being whipped away, investors are experiencing fresh chills at the start of the week. With no rally for beleaguered US indices on Friday, Japan’s Nikkei and Australia’s ASX 200 were around 0.7% lower. The FTSE 100 lifted slightly, but it’s still a pretty lacklustre start to early trade. The index is hovering close to the psychologically important 7,000 mark, a level it has not seen since early March soon after the invasion of Ukraine.

“Investors sense there is trouble ahead for the world economy, given that the priority of the powerful US Federal Reserve is to stamp out the flames of inflation even if that means extinguishing growth. Although US Treasury Secretary Janet Yellen said yesterday a recession is not at all inevitable, she cautioned that the economy would slow, indicating that the price spiral will take time to reverse, given that inflation’s causes were global.”

In equity markets, Euromoney Institutional Investor surged after it confirmed it was in talks with a consortium comprising of private equity firms Astorg Asset Management and Epiris about a possible £1.6bn cash takeover. Responding to media speculation over the weekend, Euromoney said they were in discussions about a possible offer at £14.61 per share. This follows earlier approaches from the consortium at £11.75, £12.50, £13.10 and £13.50 per share.

AB Foods rallied after a well-received trading update, as it said Primark sales in the third quarter were 4% higher than the comparable pre-Covid period three years ago.

On the downside, miners were under the cosh amid worries about a global slowdown, with Rio TintoAnglo AmericanAntofagasta and Glencore all down.

Low-cost airline easyJet flew lower after saying it was “consolidating” flights this summer and facing higher-than-expected costs as a result of staff shortages across the industry that has led to travel chaos at most British airports. The company said it expects fourth-quarter capacity to be around 90% of pre-Covid pandemic levels.

Rank Group slid after it warned on full-year profits, citing the recent performance in Grosvenor venues and continued inflationary cost pressures across the group. For the year to 30 June, it now expects like-for-like underlying operating profit of around £40m, down from previous guidance of between £47m and £55m.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Carnival Plc +6.19% +41.80 716.60
2 Bt Group Plc +4.00% +7.20 187.40
3 Itv Plc +3.36% +2.20 67.60
4 Tui Ag +3.24% +4.95 157.65
5 Hsbc Holdings Plc +3.18% +16.20 524.90
6 Informa Plc +3.03% +16.00 543.60
7 International Consolidated Airlines Group S.a. +2.77% +3.12 115.56
8 Ocado Group Plc +2.67% +22.20 853.20
9 Centrica Plc +2.32% +1.80 79.24
10 Shell Plc +2.18% +44.50 2,088.50

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Barratt Developments Plc -4.05% -19.10 452.80
2 Persimmon Plc -3.56% -69.00 1,868.50
3 Taylor Wimpey Plc -3.39% -4.10 116.75
4 Easyjet Plc -3.34% -14.60 422.40
5 Bhp Group Limited -3.03% -71.50 2,287.00
6 Rio Tinto Plc -2.90% -150.00 5,027.00
7 Ashtead Group Plc -2.85% -100.00 3,413.00
8 Crh Plc -2.79% -81.00 2,824.50
9 Berkeley Group Holdings (the) Plc -2.78% -108.00 3,783.00
10 British Land Company Plc -2.27% -11.60 499.00

 

US close: Dow Jones extends losses

Wall Street stocks delivered a mixed performance on Friday as fears of a potential economic slowdown continued to weigh on sentiment.

At the close, the Dow Jones Industrial Average was down 0.13% at 29,888.78, while the S&P 500 was 0.22% firmer at 3,674.84 and the Nasdaq Composite saw out the session 1.43% stronger at 10,798.35.

The Dow closed 38.29 points higher on Friday, extending heavy losses recorded in the previous session following rate hikes from the Federal Reserve, Swiss National Bank, and the Bank of England.

The blue-chip Dow Jones slipped below 30,000 for the first time in almost 18 months on Thursday, with the average on track for its 11th negative week in the last 12, while the S&P 500 was down 6% week-on-week, setting it on a course for its worst weekly performance since March 2020.

Quadruple witching also drew an amount of investor attention on Friday, with the final session of the week marking the simultaneous expiration of stock index futures, single-stock futures, stock options, and stock index options.

On the macro front, policymakers at the US central bank said they were “acutely” focused on maintaining price and financial stability, with the latter of key importance for meeting the Federal Reserve’s mandate of achieving 2.0% inflation and full employment. In remarks prepared for a speech at a research conference sponsored by the Fed board, chairman Jerome Powell also highlighted how price stability encouraged other countries to hold and use US dollars.

Elsewhere, industrial production increased 5.8% year-on-year in May following a 6.3% rise in April, according to the Federal Reserve, with the mining sector recording the biggest increase at 9%, followed by utilities at 8.4% and manufacturing at 4.8%.

Finally, the Conference Board‘s leading index decreased by 0.4% in May to 118.3, fuelled by tumbling stock prices, a slowdown in housing construction, and gloomier consumer expectations.

No major corporate earnings were released on Friday.

 

Monday newspaper round-up: House prices, UK manufacturers, Asda

House prices in Great Britain hit a record high in June but are likely to start falling during the next few months as five interest rate rises and a worsening cost of living crisis finally start to put the brakes on the property market’s record-breaking run, according to Rightmove. The property website said asking prices hit a record for a fifth consecutive month in June, rising by 0.3% – or £1,113 – to reach £368,614. However, this was the smallest monthly increase since January, with the site saying: “The exceptional pace of the market is easing a little.” – Guardian

British manufacturers have called on the Treasury to urgently provide more support amid a poor economic outlook to help “weather the immediate storm”. Make UK, the trade body for manufacturers, and the consultancy BDO found that costs were continuing to rise and output opportunities had been stifled. – Guardian

Germany is to reopen mothballed coal power plants to combat high gas prices, piling pressure on Boris Johnson to cut taxes on household energy bills. The German government will pass emergency laws to reactivate the coal plants as Europe takes steps to deal with reduced energy supplies from Russia. The announcement on Sunday came as part of a series of measures, including new incentives for companies to burn less natural gas. – Telegraph

The highly leveraged £6.8 billion takeover of Asda resulted in the supermarket paying £375.1 million in interest last year, new accounts have shown. Asda’s new owners are yet to take any dividends from the business, but, as a result of the £4.06 billion of debt used to finance their takeover, the company has paid £202 million of interest on external debt, £106 million on its lease liabilities, £56 million on intercompany loans and £2 million of additional undisclosed interest payments, according to Companies House filings from the owners’ Bellis Finco vehicle. – The Times

More than 6.5 million people plan to quit their jobs within the next year as they search for better pay and benefits and an improved work/life balance. Worsening staff shortages have forced companies to pay staff more, as well as to offer improved training and other incentives in the battle for talent. – The Times

 

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