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ADVFN Morning London Market Report: Wednesday 10 August 2022

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London open: FTSE edges lower ahead of US inflation data

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London stocks edged lower in early trade on Wednesday as investors eyed the release of the latest US inflation data.

At 0830 BST, the FTSE 100 was down 0.2% at 7,470.58.

On the macro front, the US consumer price index for July is due at 1330 BST, with economists expecting an easing to 8.7% from 9.1 in June.

Oanda market analyst Craig Erlam said: “I don’t think it’s an exaggeration to say that today’s inflation number could set the tone for the markets for the rest of the month.

“A lower-than-expected number could be a major tailwind for the markets while anything around or above the June reading could trigger a big risk reversal in the markets as the debate shifts to 75 or 100 basis points, with 50 left in the rear-view mirror.”

In equity markets, Prudential slumped as the Asia-focused insurer reported a rise in first-half operating profit but struck a cautious note over the outlook.

“Although there are signs that Covid-19-related impacts in many of our markets are stabilising, over the remainder of the year we expect that operating conditions may continue to be challenging,” it said.

Holiday company TUI was in the red as it said the travel chaos seen across Europe this summer had pushed it to a third-quarter operating loss as it incurred extra costs, but added that summer bookings were close to pre-pandemic levels.

Royal Mail lost ground as it emerged that around 115,000 of its workers are set to strike on four days in August and September in a dispute over pay.

Elsewhere, XP Power was knocked lower by a downgrade to ‘hold’ at HSBC.

On the upside, Admiral surged to the top of the FTSE 100 even as the insurer posted a drop in first-half profit, pointing to a “more turbulent cycle than usual” and high inflation. In the six months to 30 June, pre-tax profit fell 48% to £251.3m. Versus the same period in pre-pandemic 2019, however, pre-tax profit was ahead 19%. Peer Direct Line rose as well.

Aviva gained as the insurer reported a 14% increase in first-half operating profit and said it expects to announce a share buyback with its full-year results.

TP Icap was boosted by well-received half-year results, while 4Imprint advanced as it said customer demand was at record levels and posted a surge in first-half profits.

Pets at Home was also up after an initiation at ‘buy’ by Jefferies.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Aviva Plc +8.95% +37.10 451.40
2 Admiral Group Plc +4.80% +94.50 2,062.00
3 Mondi Plc +3.32% +49.00 1,526.00
4 Flutter Entertainment Plc +3.18% +274.00 8,888.00
5 Legal & General Group Plc +2.56% +6.90 276.90
6 Direct Line Insurance Group Plc +2.21% +4.60 212.70
7 Johnson Matthey Plc +2.08% +45.00 2,207.00
8 Fresnillo Plc +2.07% +15.00 739.20
9 Smurfit Kappa Group Plc +2.01% +61.00 3,099.00
10 Easyjet Plc +1.84% +7.30 403.40

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Gsk Plc -1.99% -32.80 1,614.00
2 Hikma Pharmaceuticals Plc -1.98% -31.50 1,562.50
3 Unilever Plc -1.43% -57.00 3,936.50
4 Centrica Plc -1.24% -1.04 83.08
5 Smith & Nephew Plc -1.16% -12.50 1,067.50
6 Bhp Group Limited -0.94% -21.00 2,204.00
7 Diageo Plc -0.78% -30.00 3,836.50
8 Rightmove Plc -0.75% -4.80 631.20
9 National Grid Plc -0.69% -8.00 1,144.50
10 Experian Plc -0.66% -19.00 2,840.00

 

US close: Stocks slide ahead of key inflation data

Wall Street stocks closed weaker on Tuesday, as market participants digested more second-quarter earnings and closed their pocketbooks ahead of Wednesday’s inflation reading.

At the close, the Dow Jones Industrial Average was down 0.18% at 32,774.41, while the S&P 500 was 0.42% weaker at 4,122.47 and the Nasdaq Composite lost 1.19% to end the session at 12,493.93.

The Dow closed 58.13 points lower on Tuesday, taking a bite out of gains recorded in the previous session.

“The fears around another potential inflation-fuelled selloff in high multiple stocks has dented the likes of the Nasdaq in particular, with the recent earnings-based optimism starting to wane ahead of tomorrow’s crucial US inflation release,” said IG senior market analyst Joshua Mahony.

“For traders, there is an innate risk associated with the widespread expectation that inflation will remain at 9.1%, for any upside surprise could easily spark fears of another sharp increase in rates thanks to Friday’s bumper jobs report.

“With earnings season drawing to an end – 89% reported – there is a distinct possibility that we will see the focus shift back to the worrisome economic and monetary policy outlook that lies ahead.”

Traders were indeed looking ahead to key inflation data scheduled for release on Wednesday, with the CPI print likely to help determine the pace of future interest rate hikes from the Federal Reserve.

There were again no major data points scheduled for release on Tuesday, while on the equities front, Novavax plunged 29.64% after slashing full-year earnings guidance overnight on the back of poor demand for its Covid-19 vaccines.

Nvidia slumped 3.97% after issuing weaker-than-expected revenue guidance, while Micron Technology slid 3.74% after cautioning that “macroeconomic factors and supply chain constraints” meant its revenues could fall short of previous guidance.

Capri Holdings was 4.71% weaker despite reporting a beat on both earnings and revenue estimates, while Ralph Lauren lost 4.34% even after it delivered upbeat growth forecasts and earnings that beat expectations.

On the upside, Hyatt Hotels gained 2.7% after it surpassed expectations on both revenue and profit, as demand for accommodation continued to recover.

Video game engine developer Unity Software was ahead 1.19% after Applovin Corporation made an unsolicited, all-stock offer for the company worth $20bn.

Applovin’s own shares tumbled 10.29% by the closing bell.

 

Wednesday newspaper round-up: Elon Musk, stealth raid, EDF

Elon Musk has sold $6.9bn (£5.7bn) worth of shares in Tesla after admitting that he could need the funds if he loses a legal battle with Twitter and is forced to buy the social media platform. The Tesla CEO walked away from a $44bn deal to buy Twitter in July but the company has launched a lawsuit demanding that he complete the deal. A trial will take place in Delaware in October. – Guardian

Businesses and even consumers could face blackouts this winter under government crisis plans as concerns grow over power supplies, it has emerged. Under the government’s latest “reasonable worst case scenario”, officials believe the UK could experience blackouts for several days in January if cold weather combines with gas shortages to leave the country short of power. – Guardian

Families will pay an extra £30bn a year in tax as soaring inflation drags millions of people into higher income tax bands, according to a leading think-tank. Rising prices and former chancellor Rishi Sunak’s freeze on tax thresholds has left workers facing a stealth raid on their earnings, the Institute for Fiscal Studies (IFS) said. – Telegraph

EDF is suing the French government for €8.3bn (£7bn) after Emmanuel Macron forced the nuclear giant to sell energy at a loss. The company has filed a compensation claim with the Conseil d’Etat, the French administrative supreme court, over “losses incurred” as a result of a price cap extended in January. – Telegraph

The number of used cars sold fell by nearly a fifth in the second quarter as the supply issues that have put the brakes on the new car market finally hit the availability of second-hand vehicles. Figures out today from the Society of Motor Manufacturers and Traders showed a 18.8 per cent fall in the second quarter of 2022, with 1,759,684 transactions. Some 407,820 fewer vehicles changed hands compared with the same period last year. – The Times

 

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