ADVFN Morning London Market Report: Wednesday 31 March 2021

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London open: Stocks edge lower as investors mull GDP data


London stocks edged lower in early trade on Wednesday following a negative session on Wall Street, as investors mulled the latest UK GDP reading.

At 0905 BST, the FTSE 100 was down 0.3% at 6,754.63.

Figures released earlier by the Office for National Statistics showed the economy grew a little more than initially estimated in the final quarter of last year but the performance for 2020 as a whole was still the worst on record amid the pandemic.

Fourth-quarter GDP grew by 1.3%, up from an initial estimate of 1.0.% growth. This left GDP 7.3% below the fourth quarter of 2019, revised from a previous estimate of 7.8%.

GDP for the third quarter was revised up by 0.8 percentage points to 16.9% growth. However, second-quarter GDP was revised down by 0.5 percentage points to a 19.5% decline.

This means GDP for 2020 as a whole contracted by 9.8%, revised up a touch from the first estimate of 9.8% but still the worst contraction on record.

The household saving ratio increased to 16.1% in the fourth quarter from a revised 14.3% in the third. Over the year, the ratio rose sharply, reaching a record high of 16.3%, compared with 6.8% in 2019.

Deputy national statistician for Economic Statistics Jonathan Athow said: “Our revised quarterly figures show the economy shrank a little more than previously estimated in the initial stages of the pandemic, before recovering slightly more strongly in the second half of last year.

“However, these new estimates paint the same overall picture as before, with historically large falls in GDP in the spring, followed by a recovery in the summer and autumn.”

Capital Economics said: “The upward revision to GDP in the second half of 2020 means the economy does not have quite as far to recover from the Covid-19 crisis. And Q4’s high saving rate leaves plenty of scope for a rapid rebound in 2021, spurred and financed by consumers.”

Meanwhile, the latest survey from Nationwide showed house prices unexpectedly dipped in March ahead of the original deadline for the stamp duty holiday.

House prices fell 0.2% on the month following a 0.7% increase in February, and versus expectations for a 0.4% rise. On the year, prices jumped 5.7% in March following a 6.9% jump the month before and compared to expectations of a 6.4% increase.

As we head towards the long Easter weekend, corporate news was scarce.

Hikma Pharmaceuticals was the standout gainer on the FTSE 100 after an upgrade to ‘buy’ at Jefferies, while BT was boosted by an upgrade to ‘buy’ at Bank of America Merrill Lynch.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Hikma Pharmaceuticals Plc +3.59% +79.00 2,279.00
2 Bt Group Plc +1.59% +2.45 156.15
3 Hiscox Ltd +1.44% +12.20 861.20
4 Sse Plc +1.19% +17.00 1,451.50
5 Admiral Group Plc +0.95% +29.00 3,068.00
6 Antofagasta Plc +0.95% +16.00 1,707.00
7 Evraz Plc +0.87% +5.00 578.40
8 Centrica Plc +0.84% +0.44 52.94
9 3i Group Plc +0.73% +8.50 1,176.00
10 Direct Line Insurance Group Plc +0.63% +2.00 317.20


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Micro Focus International Plc -3.91% -23.00 564.60
2 Itv Plc -1.95% -2.45 123.30
3 Standard Chartered Plc -1.95% -10.00 503.60
4 Bae Systems Plc -1.36% -7.00 506.00
5 Bp Plc -1.34% -4.05 297.45
6 Mondi Plc -1.23% -23.50 1,889.50
7 Compass Group Plc -1.15% -17.00 1,459.50
8 Burberry Group Plc -1.11% -21.50 1,914.50
9 Hsbc Holdings Plc -1.09% -4.70 425.95
10 Prudential Plc -1.01% -16.00 1,561.50


Europe open: No appetite for debutant Deliveroo from investors

European shares started Wednesday’s session cautiously as Deliveroo‘s stock market debut failed to inspire investors.

The pan-European Stoxx 600 was flat at the opening. The UK’s FTSE 100 was down 0.36% reflecting the lack of appetite for the latest public offering.

Shares in the fast food delivery platform opened well below the IPO price, and were down as much as a third to 275 pence. Deliveroo was priced at 390 pence per share, valuing the company at £7.6bn.

Peers Just Eat Takeaway and Delivery Hero fell 2.7% and 1.9%, respectively. chief analyst Neil Wilson said that even though the IPO was priced at the bottom of the range, “Deliveroo was demanding too high a price tag for a loss-making delivery platform in a very competitive space with a questionable path to profitability”.

“The books were covered, it was just plain mis-priced,” he said.

Spreadex analyst Connor Campbell said fund manager worries about Deliveroo’s labour practices had contributed to the poor market showing.

“Deliveroo has been able to grow to the point of launching on the stock market in part thanks to the exploitation of its workers. Now, said exploitation is one of the main reasons behind its sour start to life as a public company, with multiple leading fund managers expressing concern over its labour practices,” he said.

“It is maybe a case of a perfectly zeitgeisty company in one sense – Deliveroo is a primary pandemic beneficiary – coming of age in the wrong moment, i.e. in the era of ostensible environmental, social and corporate governance.

“And before asset managers start feeling too angelic, the fact Deliveroo is yet to make a profit, even with the help of the pandemic, is likely also a cause for concern.”

In other equity news, Swedish clothing retailer H&M fell after the company reported a quarterly loss and said it would not propose a dividend at its annual general meeting.

Credit Suisse shares fell again on concerns over a possible link to the worries of Archegos Capital, which defaulted on margin calls earlier this week.


US close: Stocks end session lower as bond yields come back into focus

Wall Street stocks closed lower on Tuesday after the Dow Jones saw out the previous session at a fresh all-time high as elevated bond yields weighed on sentiment yet again.

At the close, the Dow Jones Industrial Average was down 0.31% at 33,066.96, while the S&P 500 was 0.32% weaker at 3,958.55 and the Nasdaq Composite was 0.11% softer at 13,045.39.

The Dow Jones closed 104.41 points lower, reversing gains recorded in the previous session.

Rising bond yields were in focus again on Tuesday, with the yield on the benchmark 10-year Treasury note rising to 1.72%, at the top end of its recent range, stoking fears that the recent advance in yields would lead money managers to make significant adjustments in their portfolios, creating heightened volatility during the Easter holiday-shortened week.

As a result of the elevated bond yields, the US dollar hit its highest point since November, while gold slumped to the bottom of its recent range and tested $1,700. Rising bond yields also saw traders exit their positions in high-flying tech shares, sending stock in several of the industry’s biggest names into the red on Tuesday.

Uncertainties stemming from the collapse of Archegos Capital, which sold major blocks of stock in the likes of ViacomCBS and Discovery last week, were also still hanging over markets, with Credit Suisse and Nomura both cautioning of “significant” hits to their first-quarter results following the hedge fund’s fire sale.

On the macro front, home-price growth sped up to a 15-year high in January as the supply of homes dropped to a new low, with the S&P CoreLogic Case-Shiller National Home Price Index rising 11.2% in the year ended 31 January, up from 10.4% annual a month earlier to the highest annual rate of price growth since February 2006.

Elsewhere, the Conference Board‘s consumer confidence index jumped to a print of 109.7 in March, the highest level since the onset of the pandemic a year ago and up from 90.4 in February but still well below its reading of 132.6 in February 2020.

No major corporate earnings were released on Tuesday.


Wednesday newspaper round-up: Liberty Steel, Serco, Archegos

When Boris Johnson announced the first stay-at-home order, effectively shutting down whole sections of the economy, it was hoped the tide could be turned within 12 weeks. As many months later, lockdown measures are being relaxed for a third time and Britain still faces a lengthy road to recovery from the worst recession for 300 years. As restrictions ease, the chief economist at the Bank of England, Andy Haldane, warned that despite the reopening of the economy, the risk of a “jobs equivalent of long Covid” remains for workers across the country. – Guardian

The government “talks a good game” on supporting steelmakers but should set targets for the use of British steel in big infrastructure projects, the industry trade body has said. As the financial turmoil threatening 5,000 jobs at Liberty Steel reignited concern about the sector, UK Steel said ministers had failed to come up with practical action to arrest the decline of an industry that has lurched from crisis to crisis in recent years. – Guardian

Senior managers at outsourcer Serco carried out a “fraud on the taxpayer” by hiding the scale of its profits so that civil servants would not cut payments from the public purse, a court heard. The FTSE 250 firm made a £27m profit from keeping track of criminals and defendants for the Ministry of Justice between 2010 and 2012, but claimed it had only made £15m, prosecutors allege. – Telegraph

Regulators are questioning banks’ multibillion-dollar fire sale of shares in the past few days which were linked to the stricken investment firm Archegos Capital Management. America’s Securities and Exchange Commission and the Financial Conduct Authority in the UK are examining the actions of several banks over the way they unloaded large blocks of shares after US-based Archegos failed to meet margin calls. – The Times

Britain’s biggest fund management house opposed the election of more than 4,700 company directors around the world last year as it voiced concerns about their corporate governance. The investment arm of Legal & General, the FTSE 100 insurer, said that it had conducted 21 per cent more engagements with companies compared with 2019 as it stepped up its efforts to force change at businesses. – The Times


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