ADVFN Morning London Market Report: Thursday 1 April 2021

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London open: Stocks in the black as Next rallies after profit upgrade

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London stocks rose in early trade on Thursday, with a profit upgrade from Next and US President Joe Biden’s $2trn infrastructure plan helping to underpin sentiment, amid rising Covid cases and tighter restrictions in Europe.

At 0900 BST, the FTSE 100 was up 0.5% at 6,745.05, on what is set to be a fairly quiet day ahead of the long Easter weekend.

On the data front, Markit’s manufacturing PMI for March is due at 0930 BST.

Spreadex analyst Connor Campbell said: “Despite the Dow Jones failing to finish March at an all-time high, the European indices had a spring in their step on the first day of April.

“Climbing half a percent, the FTSE found its way back above 6,750 after the bell. The index spent the final week or so of March repeatedly hitting its head on 6,775 before retreating, even with the confidence boost of Monday’s re-opening. And Thursday doesn’t look like it is going to offer up the kind of surge in energy the UK index needs to firmly cross that level pre-Easter.

“There was some good news from the retail sector, however, as Next unexpectedly lifted its guidance for this year.”

Next rallied after saying it now expects profits of £700m, up £30m after a boom in sales during February and March. It also reported a slump in annual profits, but this was expected.

Steve Clayton, fund manager of the Hargreaves Lansdown Select funds, which holds Next shares, said: “Profits may have more than halved, but to be reporting any sort of profit at all as a fashion retailer after a year like 2020 is a remarkable achievement.

“But Next is a remarkable business. The group saw the potential of online retailing years before their rivals took it seriously. As a result Next was earning most of its money online, even before the pandemic struck. That has left it in a far stronger position than rivals like M&S (loss-making), or Arcadia and Debenhams (both now bankrupt).

“When Next does reopen their doors they will be perhaps the strongest of the survivors and Britons have saved up a lot of spending money during lockdown. We see Next as incredibly well positioned to generate profit and cash in the years ahead.”

Elsewhere, travel-related stocks were on the rise following a Financial Times report that ministers are planning a traffic light system to unlock foreign travel. GKN owner Melrose Industries, British Airways owner IAG, engine maker Rolls-RoyceSSP – which operates food and beverages outlets at travel locations – and Tui were all higher.

Quilter gained after agreeing to sell its international business to life assurance company Utmost for around £483m as it looks to simplify the group and focus on its higher growth UK wealth management business.

Airtel Africa advanced as it said Mastercard will invest $100m in its mobile money business, Airtel Mobile Commerce.

On the downside, Phoenix Group and Smith & Nephew were both weaker as their stock went ex-dividend.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Melrose Industries Plc +4.58% +7.65 174.55
2 Informa Plc +3.18% +17.80 577.60
3 Next Plc +3.15% +248.00 8,114.00
4 Carnival Plc +3.12% +49.50 1,635.00
5 International Consolidated Airlines Group S.a. +3.03% +6.00 204.30
6 Ashtead Group Plc +2.80% +121.00 4,448.00
7 Easyjet Plc +2.54% +24.80 1,003.00
8 Centrica Plc +2.40% +1.30 55.44
9 Compass Group Plc +2.39% +35.00 1,496.50
10 Tui Ag +2.18% +8.00 375.20

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Phoenix Group Holdings Plc -2.86% -21.00 713.20
2 Smith & Nephew Plc -1.31% -18.00 1,360.00
3 British American Tobacco Plc -0.85% -23.50 2,750.50
4 Standard Chartered Plc -0.46% -2.30 497.20
5 Astrazeneca Plc -0.40% -29.00 7,218.00
6 Hsbc Holdings Plc -0.30% -1.25 421.95
7 Tesco Plc -0.24% -0.55 228.30
8 Glaxosmithkline Plc -0.22% -2.80 1,285.20
9 Unilever Plc -0.06% -2.50 4,053.50
10 Crh Plc -0.06% -2.00 3,389.00

 

Europe open: US spending plan overshadows France lockdown

European shares continued to rally on the last day of trading before the Easter break, as new US plans for massive infrastructure spending offset worries about a third Covid lockdown in France.

The pan-European Stoxx 600 index rose 0.44% in early trading with most major bourses higher. Wall Street stocks were on the rise overnight as US President Joe Biden unveiled a $2.3rtn spending plan on roads, railways, broadband, clean energy and semiconductor manufacture.

This spurred a rise in European chip companies including ASMLASMI and Infineon Technologies and BE Semiconductor. The sector was also boosted by an upbeat revenue forecast from US chipmaker Micron Technology.

News that France was back in full lockdown hit retailers and travel stocks with catering companies Sodexo and Elior dropped almost 2%.

Shares in UK fashion retailer Next rose 3% after the company lifted annual profits guidance on the back of soaring online sales in the first eight weeks of the current fiscal year while 2020/21 profits were halved due to the pandemic.

 

US close: Markets mixed, Biden details $2trn infrastructure plan

Wall Street trading finished in a mixed state on Wednesday, with markets closing not long before president Joe Biden took the wraps off his $2trn infrastructure spending plan.

At the close, the Dow Jones Industrial Average was down 0.26% at 32,981.55, while the S&P 500 managed gains of 0.36% to 3,972.89, and the Nasdaq Composite rose 1.54% to 13,246.87.

The Dow closed 85.41 points lower on Wednesday, extending losses recorded in the prior session.

After the closing bell, Biden said in a speech that his $2trn plan would turn around America’s “crumbling” infrastructure, promising massive cash injections for roads and bridges, railways and mass transit, electric vehicles, ports and airports, and the country’s electricity network.

The president said his plan would bring “transformation progress” in the way the US handles climate change.

Earlier, elevated bond yields continued to weigh on sentiment, with the benchmark 10-year Treasury note last at 1.745% amid the continued success of the Covid-19 vaccine rollout and expectations of a broad economic recovery.

It had reached as high as 1.77% earlier in the day.

On the macro front, higher mortgage rates led to a 2.2% drop in mortgage application volume last week, according to the Mortgage Bankers Association.

Elsewhere, private sector employment grew by 517,000 jobs in March, according to ADP‘s national employment report, the strongest gain seen since September.

Job growth in the service sector significantly outpaced its recent monthly average, led by notable increases in the leisure and hospitality industry.

Still on data, the Institute of Supply Management‘s Chicago purchasing managers’ index improved sharply in March to a print of 66.3, up from 59.5 in February and better than the market expectation of 60.7.

Lastly, pending home sales fell the most it had in almost a year in February, with rising home prices and a dearth of available properties deterring buyers.

According to the National Association of Realtors‘ index, pending home sales decreased 10.6% month-on-month to 110.3, the lowest reading since May, and a much sharper drop than the 3% expected by economists.

 

Thursday newspaper round-up: Bet365, homeworkers, Link Fund Solutions

The boss of gambling website Bet365, Denise Coates, was paid nearly half a billion pounds in salary and dividends last year, as the latest in a string of record-breaking awards took her total pay since 2016 to nearly £1.3bn. After an unusual delay in filing its accounts at Companies House, Bet365 revealed that its highest-paid director, understood to be Coates as chief executive, received £421m – or £48,000 every hour of every day throughout the 12-month period. In its accounts, the company said its pay arrangements were “appropriate and fair”. – Guardian

Approximately 2 million of the UK’s lowest-paid workers will receive a raise from Thursday after increases to statutory minimum wage rates. However, many workers are unlikely to feel better off as the pay rise comes on the same day as inflation-busting increases hit household bills. Workers aged 23-24 are expected be the biggest beneficiaries after the government announced that they will start receiving the new minimum living wage of £8.91 a hour – up from the £8.20 a hour they are currently entitled to. – Guardian

Homeworkers banished to studies and spare bedrooms did not suffer a productivity slump at most firms after Covid hit – with a third of businesses even finding they could get more done, according to new research. A report by the Chartered Institute of Personnel and Development (CIPD) found that remote working did not cause a fall in productivity at 71pc of firms, suggesting many could make the shift permanent after the crisis ends. – Telegraph

A key part of Sanjeev Gupta’s metals empire is on the brink of insolvency, threatening the entire GFG Alliance group, as Credit Suisse seeks a winding-up order of Liberty Commodities. Citigroup, acting on behalf of the Swiss bank, has applied to a UK court for the order, Bloomberg reported. – The Times

The company that oversaw the business of Neil Woodford has revealed that it knew of his relationship with an American firm that was selling assets in his former fund only by reading about it in the press. Link Fund Solutions, which ultimately was in charge of the failed Woodford Equity Income Fund, said that it had had no idea that he was an adviser to Acacia Research. – The Times

 

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