ADVFN Morning London Market Report: Tuesday 28 June 2022

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London open: FTSE up as miners rally; Pennon slumps


London stocks rose in early trade on Tuesday following a positive session in Asia, with miners pacing the gains.

At 0915 BST, the FTSE 100 was up 0.9% at 7,324.15.

Russ Mould, investment director at AJ Bell, said: “Boom! Periods when the FTSE 100 rises in the region of 1% in a day should be celebrated given how this year has been so gloomy for investors. Today, the fireworks are most definitely lighting up the sky and the UK market is regaining its mojo.

“Miners revved their engines yesterday following the G7 $600 billion infrastructure plan and were striking more gold today as investors continue to flock to the sector.

“Perhaps helping the cause was news that China would reduce the Covid quarantine period for visitors from overseas, perhaps a sign that the Asian superpower’s extra tough pandemic measures might be relaxed going forward. That would help to alleviate fears that commodities demand would be weaker from China if it shut up shop every time a new Covid wave came.”

In equity markets, miners were among the top performers again, with Rio TintoAnglo AmericanGlencore and Antofagasta all higher.

Energy services company Petrofac rallied as it said trading and expectations were in line with guidance, adding that its engineering and construction division was set to secure strong order intake in the second half and deliver backlog growth year on year.

On the downside, Pennon slumped as it said that as part of its ongoing investigation into how water and wastewater companies manage their wastewater treatment works, Ofwat has included South West Water alongside the five companies which received formal notices in March 2022.

Severn Trent and United Utilities were also in the red, with a note on the sector by JPMorgan Cazenove also having an impact. JPM downgraded Severn Trent to ‘underweight’ from ‘neutral’.

“The UK water sector has performed well since the start of the regulatory period on 1 April 2020, with all three listed companies delivering strong returns and asset growth, while maintaining dividend growth at least in line with inflation,” JPM said.

“However, we are turning cautious on the subsector, given our belief that returns from April 2025 will be lower than the market currently expects.”

It put Severn Trent and Pennon on “negative Catalyst Watch” into July 7th, when regulator Ofwat is due to publish a draft methodology for the next regulatory period.


Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc +5.66% +4.63 86.44
2 Centrica Plc +4.36% +3.58 85.78
3 Prudential Plc +3.72% +37.50 1,046.50
4 Rio Tinto Plc +3.54% +179.00 5,230.00
5 Bhp Group Limited +3.30% +77.50 2,428.50
6 Shell Plc +2.91% +61.50 2,174.00
7 Anglo American Plc +2.90% +91.00 3,224.50
8 Bp Plc +2.90% +11.35 402.95
9 Glencore Plc +2.65% +12.00 464.75
10 Standard Chartered Plc +2.44% +14.80 620.60


Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Severn Trent Plc -5.54% -158.00 2,695.00
2 United Utilities Group Plc -1.50% -15.50 1,019.50
3 Spirax-sarco Engineering Plc -0.94% -92.00 9,680.00
4 Experian Plc -0.83% -20.00 2,385.00
5 Segro Plc -0.73% -7.50 1,026.00
6 Berkeley Group Holdings (the) Plc -0.71% -27.00 3,785.00
7 Scottish Mortgage Investment Trust Plc -0.69% -5.20 743.80
8 Rightmove Plc -0.66% -3.80 574.40
9 Fresnillo Plc -0.55% -4.40 798.20
10 Bunzl Plc -0.49% -13.00 2,652.00


US close: Dow Jones gives back some of prior week’s gains

Major indices closed lower on Monday following a banner week that saw the blue-chip Dow Jones register more than 800 points in gains.

At the close, the Dow Jones Industrial Average was down 0.20% at 31,438.26, while the S&P 500 was 0.30% softer at 3,900.11 and the Nasdaq Composite saw out the session 0.72% weaker at 11,524.55.

The Dow closed 62.42 points lower on Monday, taking a bite out of solid gains recorded throughout the preceding week.

Stocks headed south on Monday as investors remained keenly focussed on whether US stocks have now reached their bottom or if markets were simply rebounding from oversold conditions ahead of the end of the second quarter.

The bond market was also in focus on Monday, with the yield on the benchmark 10-year Treasury note trading a little more than seven basis points higher at 3.210%.

On the macro front, orders in the US for goods made to last more than three years rose more quickly than expected last month. According to the Department of Commerce, in seasonally adjusted terms, durable goods orders grew at a month-on-month clip of 0.7% in May (consensus: 0.1%).

April’s gain, on the other hand, was revised down by one-tenth of a percentage point to show a rise of 0.4%. Excluding orders from the transportation sector, which are often volatile from one month to the next, May’s tally for durable goods orders also beat forecasts, rising by 0.7% (consensus: 0.4%).

Elsewhere, US pending home sales rose 0.7% in May, according to the National Association of Realtors, snapping a six-month run of declines but were still 13.6% weaker year-on-year.

On the corporate front, Spirit Airlines was in focus after Frontier Airlines sweetened its offer for the company by $2.00 to $4.13 in cash, while Nike reported earnings of $0.90 per share for the fourth and final quarter of its trading year as revenues dipped 1% year-on-year to $12.2bn and gross margins contracted 80 basis points to 45%.

Coinbase shares closed 10.76% lower after Goldman Sachs reportedly cut its rating on the shares to ‘sell’ from ‘buy’.


Tuesday newspaper round-up: UK telecoms industry, shop workers, BoE staff

The UK’s biggest mobile and broadband companies have agreed a plan to help customers struggling to pay bills amid the cost of living crisis, including moves to allow switching to cheaper deals without paying a penalty. The package was agreed at a summit at Downing Street, co-chaired by the culture secretary, Nadine Dorries, and the cost of living business tsar, David Buttress, and attended by the top executives of the country’s biggest telecoms firms, including BT, Virgin Media O2, Vodafone, Three, Sky and TalkTalk. – Guardian

Abuse and violence towards shop workers and service staff is on the rise again, research shows, with a quarter of those reporting hostility blaming the cost of living crisis putting increased stress on customers. Figures from the trade body the Institute of Customer Service (ICS) revealed 44% of frontline retail staff have experienced hostility from customers in the past six months – up by a quarter from the figure of 35% in February. – Guardian

Staff at the Bank of England are to demand a major pay rise in the face of surging inflation, despite pleas for restraint on wages from their own Governor. The trade union Unite is consulting staff on Threadneedle Street this summer about securing a “decent pay rise” to cushion the blow of soaring living costs. Staff received just a 1.5pc increase this year, far below the 9.1pc rate of inflation reached in May. – Telegraph

Councils will be forced to ditch spending plans and draw up emergency cuts to public services after the highest inflation in 40 years sparks an £800m surge in costs. The Local Government Association (LGA) warned that inflation will force local leaders to make cuts to frontline services and poses a “serious risk to the future financial viability” of some councils. – Telegraph

The devastating impact of rising energy, goods and labour costs on hospitality businesses has been laid bare in a survey showing that only 37 per cent are still profitable. Despite the launch by the governmen last year of a post-Covid hospitality recovery strategy, the picture remains bleak, with 45 per cent of businesses forced to reduce opening hours to avoid closing permanently and 17 per cent having no cash reserves. – The Times


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