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London open: Stocks flat; housebuilders hit by JPM note
London stocks were steady in early trade on Tuesday, with the session likely to be fairly quiet as US markets will be closed for Independence Day, and as investors mulled news of China’s export restrictions on metals.
At 0855 BST, the FTSE 100 was flat at 7,528.93.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Just when the battle to tame inflation appears to be working, a fresh skirmish in the trade war between the US and China, threatens to snarl up supply chains, potentially pushing up prices.
“China’s move to restrict exports of some rare earth metals, used in highly sought-after products such as semi-conductors, appears to be a tit-for-tat move, in response to US curbs on the sales of chips which are in high demand for AI capabilities.
“Coming just days before Janet Yellen, the US Treasury Secretary is due to visit Beijing, the policy is likely to have been designed to put pressure on the US to release its current export bans and drop further curbs which are expected.”
In equity markets, supermarket chain Sainsbury’s was in the red as it reported an 11% rise in grocery sales in the four months to June 24 and maintained annual guidance.
The company said total like-for-like sales were up 9.8% in the period, adding it had spent £60m lowering prices amid criticisms that supermarkets were fuelling inflation by widening profit margins during the cost-of-living crisis.
Sainsbury’s said it still expected underlying pre-tax profit of £640 – 700m in 2023-24, compared with £690m a year earlier.
Housebuilders were also under the cosh on the back of a downbeat note by JPMorgan Cazenove, which reiterated its cautious stance on the sector, arguing that valuations are still above October 2022 levels and that it sees “incremental downside risks to estimates”.
The bank downgraded Persimmon to ‘neutral’ and placed Taylor Wimpey and Vistry on ‘negative catalyst watch’.
Homeware retailer Dunelm was knocked lower by a downgrade to ‘underperform’ at RBC Capital Markets.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Tui Ag | +4.27% | +25.00 | 610.00 |
| 2 |  |
Ocado Group Plc | +3.22% | +19.40 | 621.20 |
| 3 |  |
Astrazeneca Plc | +1.91% | +198.00 | 10,572.00 |
| 4 |  |
Centrica Plc | +1.68% | +2.10 | 126.80 |
| 5 |  |
Smith & Nephew Plc | +1.59% | +19.00 | 1,214.00 |
| 6 |  |
Segro Plc | +1.21% | +8.80 | 735.20 |
| 7 |  |
Land Securities Group Plc | +1.12% | +6.60 | 594.60 |
| 8 |  |
British Land Company Plc | +0.99% | +3.10 | 316.40 |
| 9 |  |
Direct Line Insurance Group Plc | +0.81% | +1.10 | 137.25 |
| 10 |  |
Bt Group Plc | +0.72% | +0.90 | 125.25 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Sainsbury (j) Plc | -1.49% | -4.10 | 270.50 |
| 2 |  |
Marks And Spencer Group Plc | -1.25% | -2.45 | 193.30 |
| 3 |  |
Rolls-royce Holdings Plc | -1.24% | -1.90 | 151.70 |
| 4 |  |
Barclays Plc | -0.95% | -1.48 | 154.14 |
| 5 |  |
Ashtead Group Plc | -0.93% | -50.00 | 5,354.00 |
| 6 |  |
Halma Plc | -0.90% | -20.00 | 2,207.00 |
| 7 |  |
Auto Trader Group Plc | -0.89% | -5.40 | 601.80 |
| 8 |  |
3i Group Plc | -0.88% | -17.00 | 1,909.00 |
| 9 |  |
Rio Tinto Plc | -0.84% | -43.00 | 5,048.00 |
| 10 |  |
Taylor Wimpey Plc | -0.77% | -0.80 | 102.70 |
US close: Stocks make gains ahead of 4 July holiday
Wall Street saw a slight uptick in its major stock indices on a short-but-sweet Monday, as markets closed early ahead of the July 4th holiday.
The Dow Jones Industrial Average ended the day 0.03% higher at 34,418.47, and the broader S&P 500 advanced 0.12% to 4,455.59.
Leading the pack was the tech-heavy Nasdaq Composite, which increased 0.21% to end the session at 13,816.77.
On the currency front, the dollar was last up 0.03% on sterling at 78.8p, while it dipped 0.02% against the common currency to trade at 91.63 euro cents.
The greenback meanwhile remained steady on the yen, last changing hands at JPY 144.68.
“The first half of the year finished with most indices heading higher,” said IG chief market analyst Chris Beauchamp earlier.
“The bullish atmosphere from Friday has not carried over into the new week however, mainly thanks to the US holiday tomorrow.
“After the caution of the first half, a lot of investors will be looking to put their money to work, even if it comes after six months of solid gains.”
Factory sector activity faces increased slowdown amid declining prices
On the economic front, the US manufacturing sector experienced a noticeable deceleration in its activity over the last month, alongside an accelerated decrease in prices, according to the Institute for Supply Management (ISM).
The survey results revealed a decline in the manufacturing purchasing managers’ index (PMI) from 46.9 in May to 46.0 in June, falling short of the anticipated mild improvement to 47.1.
An important component of the survey, the new orders sub-index, did register a minor increase, moving from 42.6 to 45.6.
However, with a reading still below the 50-point threshold, the figure suggested an ongoing contraction, albeit at a somewhat reduced rate.
On the other hand, the sub-index for production experienced a decline, slipping from 51.1 to 46.7, indicating a setback in manufacturing output.
Additionally, the survey revealed a drop in the prices paid sub-index, which tracks the cost burdens shouldered by firms.
The index receded from 44.2 to 41.8, implying a more rapid decline in prices.
Survey responses across various sub-sectors painted a nearly uniform picture of a softer outlook for demand.
However, purchasing managers in the fabricated metal products and primary metals industries provided some exceptions to the trend.
Electric vehicle stocks rev up; Tattooed Chef tumbles amid bankruptcy filing
In equities, Tesla‘s shares accelerated 6.9% after the electric car maker announced record-breaking delivery numbers.
“Tesla’s cut price gamble appears to be paying off handsomely as it makes deeper inroads into the Chinese market,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“Offering more affordable price tags has been a shrewd move in other markets too, where consumers have been grappling with the cost-of-living crisis but are still eager to join the electric vehicle revolution.”
Rivian Automotive, another player in the EV market, surged a robust 17.41% after the company reaffirmed its 2023 production guidance of 50,000 vehicles, effectively doubling its output from the prior year.
Adding fuel to the optimism, Bloomberg reported that the company had internally communicated to staff that a production level of 62,000 units was a feasible target.
On the downside, Tattooed Chef, a producer of plant-based food, plummeted 46.58% after the company announced at the end of last week its intention to file for Chapter 11 bankruptcy protection.
Tuesday newspaper round-up: Broadband, National Grid, energy companies
More than half of UK broadband customers have experienced problems with their connections, according to a report that says telecoms providers are adding “insult to injury” after forcing inflation-busting price rises on to their customers. Many of the UK’s mobile and telecoms companies have been accused of “greedflation” for pushing through mid-contract price increases of up to 17.3%. – Guardian
The former finance director of the collapsed outsourcing company Carillion has been banned from serving as a company director for 11 years over his role in the company dishing out dividends of more than £50m while misstating its financial position by more than £200m. The outsourcer’s implosion in 2018 was one of the most high-profile failures in British corporate history, costing 3,000 jobs and plunging 450 public sector projects, including hospitals, schools and prisons, into chaos. – Guardian
Off a backroad and behind a gate near Heathrow Airport stands one of the UK’s handful of hydrogen filling stations. The familiar canopy, pumps, no smoking signs and other paraphernalia are present, but there are none of the smells or stains of a petrol station as enough fuel to travel hundreds of miles is dispensed in under four minutes in the form of a clear, odourless gas. – Telegraph
National Grid is urging factory owners to cut their electricity use at peak times as part of efforts to bolster power supplies this winter. The Grid is in talks with the Energy Intensive Users Group (EIUG), which represents heavy industry, over ways for members to reduce their consumption amid concerns of another supply crunch as the war in Ukraine drags on. – Telegraph
Insurance companies have sounded a warning note before a key policy initiative to encourage British pension funds to invest more domestically and in higher-risk assets. Ahead of the announcement, which is expected from the chancellor next week, the Association of British Insurers said there must be no mandatory rules forcing pension funds to invest in any particular area, adding that any compulsion would raise “the real risk of asset bubbles”. – The Times
Energy companies supplying about a third of British households do not meet Ofgem’s financial resilience standards, according to the regulator’s latest analysis. Ofgem has written to energy companies warning them that they must use an expected return to profitability this year to bolster their balance sheets before they consider paying dividends to shareholders. – The Times
