ADVFN Morning London Market Report: Wednesday 21 April 2021

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London open: Investors shake off overnight losses in Asia-Pacific


Stocks are bouncing back although rising numbers of Covid-19 infections outside of Europe, particularly in Japan and India, continue to dominate the headlines and weigh on stock markets in Asia Pacific.

Helping to offset the drag from the pandemic was a slightly lower-than-expected CPI print in the UK.

“Pandemic concerns have provided markets with an excuse to book some of the last week’s profits. Rich valuations, notably in the US, mean that even as corporate America rolls out the juicy earnings as expected, investors will be asking themselves, “what’s next?” That is a valid point when one ponders the implications of the Biden administrations taxation plans,” Oanda Senior Market Analyst for Asia Pacific, Jefrrey Halley, told clients.

“It does, however, look like noise and not a structural turn in sentiment. That will require our good friend, the US 10-year yield, to move quite a bit higher from here and for the US yield curve to steepen. I believe we have not heard the last of that story. Rather than seconding guess it, a wiser strategy is to wait for it to unfold.”

As of 0847 BST, the FTSE 100 was bouncing back by 0.65% or 45.98 points to 6,905.18, alongside a gain of 0.3% or 65.75 points to 22,174.3 for the second-tier index.

In parallel, futures tracking the S&P 500 were 2.5 points higher to 4,129.0.

Japan’s Nikkei-225 lost 2.03% to 28,508.55, but India’s Sensex dipped just 0.51% to 47,705.8 and the Shanghai Stock Exchange’s composite index was flat at 3,604.14.

According to reports, local authorities in Osaka and Tokyo were moving closer to imposing lockdowns in Japan’s two largest economic centres.

Meanwhile, the latest wave of Covid-19 infections in India was being described by some as “out of control”.

On home shores, the Office for National Statistics reported a year-on-year rate of increase in headline consumer prices in the UK accelerated from 0.4% in February to 0.7% for March, undershooting the consensus estimate of 0.8%.

Core CPI however did hit the consensus projection for a rise of 1.1%, which was up from 0.9% in the month before.

Commenting on Wednesdays CPI release, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, predicted that CPI would rise past the Bank of England’s 2.0% target “only briefly”, arguing that rate-setters shouldn’t flinch and anticipating little pressure to raise rates before 2023.

Worth noting, Reuters published the contents of the US Federal Reserve chairman’s written response, dated 8 April, to a US Senator.

In that missive, Jerome Powell said the Fed does “not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period.”

No major economic reports are scheduled for release in the UK or US on Wednesday.

Also impacting on trading, overnight US media giant Netflix posted lower-than-expected earnings per share and revenues for its first quarter.

Critically, it also reported just 3.98m new subscriber adds (consensus: 6.0m) and guided towards just 1.0m adds for the second quarter (consensus: 4.4m) as the pandemic ebbs.

Miner BHP confident

BHP said it was ready to finish the year strongly as the miner reported record production at its Western Australia iron ore business in the first nine months. The company left annual production guidance for iron ore and petroleum unchanged but reduced guidance for metallurgical coal and energy coal, partly due to wet weather.

Hikma Pharmaceuticals has resumed the launch of its generic version of GlaxoSmithKline’s ‘Advair Diskus’ in the United States, it announced on Wednesday, following Fod and Drug Administration (FDA) approval of an amendment to its Abbreviated New Drug Application in January. The FTSE 100 pharmaceuticals maker said the amendment reflected enhanced packaging controls to meet new industry standards adopted since its initial submission. It said it would immediately resume launch activities of its generic product.

Distribution specialist Bunzl reported a rise in first quarter revenue driven by demand for Covid-related products, but warned of a slight slowdown in the second half as it maintained full year guidance. The company said group revenue in the first quarter was up 5.4% at actual exchange rates, with acquisitions contributing revenue growth of 4.3%. Bunzl expected “robust” revenue growth in 2021 after excluding larger Covid-19 related orders which contributed approximately £550m last year.

Contracts-for-difference trading platform Plus500 has made its first foray into the US market after buying Cunningham Commodities and Cunningham Trading Systems for $30m. The deal, which “brings with it a scarce and valuable license” to operate US markets, will be funded from Plus500’s existing cash balances, the company said on Wednesday, adding that some of the cash would be held in escrow for two years from completion for retention purposes.

Telecommunications and mobile money provider Airtel Africa announced the signing of a new $500m (£359.35m) loan facility with a group of relationship banks. The FTSE 250 company said the new committed facility consisted of a combination of a revolving credit facility and term loans, with tenor of up to four years. It said the facility would be used to partially refinance its €750m (£647.14m) euro-denominated bond due 20 May.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Carnival Plc +3.87% +59.20 1,590.40
2 International Consolidated Airlines Group S.a. +3.55% +6.86 199.96
3 Easyjet Plc +3.38% +31.60 966.20
4 Hikma Pharmaceuticals Plc +2.61% +62.00 2,440.00
5 Next Plc +2.18% +170.00 7,964.00
6 Marks And Spencer Group Plc +2.11% +3.25 157.20
7 Bp Plc +2.07% +6.05 297.80
8 Evraz Plc +1.81% +11.00 619.00
9 Royal Dutch Shell Plc +1.81% +24.40 1,374.60
10 Royal Dutch Shell Plc +1.64% +21.20 1,312.20


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Bunzl Plc -2.80% -70.00 2,434.00
2 Spirax-sarco Engineering Plc -1.23% -150.00 12,005.00
3 Micro Focus International Plc -0.69% -3.60 514.80
4 United Utilities Group Plc -0.53% -5.20 968.60
5 Sainsbury (j) Plc -0.52% -1.30 247.20
6 Dcc Plc -0.50% -32.00 6,344.00
7 Ocado Group Plc -0.41% -9.00 2,169.00
8 Pearson Plc -0.41% -3.20 785.80
9 Rentokil Initial Plc -0.35% -1.80 514.60
10 Segro Plc -0.30% -3.00 1,001.50


Europe open: Shares rebound on positive earnings outlooks

European stocks rebounded from Tuesday’s pummelling as investors were cheered by a positive earnings update from Heineken and semiconductor maker ASML.

The pan-European Stoxx 600 index was up 0.47% in early deals, after closing almost 2% lower in the previous session on fears over the Indian variant of Covid-19. All major regional bourses were higher.

UK inflation rose to 0.7% in March as the cost of fuel and clothing rose, setting the scene for sharper increases later in 2021.

Consumer price inflation increased from an annual rate of 0.4% the previous month and was slightly below the 0.8% average forecast in a Reuters poll.

Rising fuel and clothing prices were partly offset by food prices that were lower than a year earlier, the Office for National Statistics said.

“Though it wouldn’t have been a shock to see a UK CPI reading of 0.7% cause further losses, especially compared to the 0.4% posted the month prior, the fact it fell short of the 0.8% forecast helped nip any inflationary pressure panic in the bud,” said Spreadex analyst Connor Campbell.

“Instead, the FTSE rose 0.8%, pushing back above 6,900 after shrinking to a two-week low on Tuesday evening.”

“Hanging over the markets is the question of the India Covid variant, or variants. The travel-related concerns, and subsequent heavy losses, sparked on Tuesday are still there. Investors are just choosing to ignore them, something that could easily change before the day is over.”

ASML shares led the index, up 4.55% after the company raised its full-year sales forecast, citing strong demand amid a global computer chip shortage.

Smaller rival ASM International rose 4.2% on forecasting a rise in second-quarter orders.

Heineken shares surged by nearly 45% after its trading update pointed to better-than-expected beer volumes for the first quarter.

Shares in pharmaceutical company Hikma jumped as the company said it had resumed the launch of its generic version of GlaxoSmithKline’s asthma Advair Diskus in the US following approval from US Food and Drug Administration.

Italian football giant Juventus saw its shares plunge 10% after six English clubs who had pledged to join the proposed European super league pulled out after a storm of protest from supporters.


US close: Stocks extend losses despite some solid earnings

Wall Street stocks closed lower on Tuesday as market participants ignored solid quarterly earnings reports from some of the nation’s largest companies.

At the close, the Dow Jones Industrial Average was down 0.75% at 33,821.30, while the S&P 500 was 0.68% weaker at 4,134.94 and the Nasdaq Composite started out the session 0.92% softer at 13,786.27.

The Dow closed 256.33 points lower on Tuesday, extending losses recorded in the previous session amid a sell-off in tech stocks.

Corporate earnings were firmly in focus again on Tuesday, with Procter & Gamble beating earnings expectations amid an uptick in beauty products sales, while Johnson & Johnson posted $100.0m in quarterly sales of its Covid-19 vaccine, helping both earnings and revenue beat Wall Street expectations.

Travellers Companies was also in the spotlight after posting quarterly earnings that topped expectations on the Street as the group also raised its quarterly cash dividend and approved an additional $5.0bn of share buybacks.

Elsewhere, CSX beat on revenues but fell short on earnings, while Netflix‘s latest earnings revealed the streaming giant fell well and truly short of expectations for new subscribers last quarter.

No major data points were released on Tuesday.


Wednesday newspaper round-up: FTSE, Just Eat, Netflix, Asda, European Super League

The FTSE 100 endured its worst day for two months yesterday as concerns about rising Covid-19 infections hit travel companies and the threat of new nicotine rules in the United States led to sharp falls for tobacco stocks. London’s main index was part of a global stock market sell-off, ending the day down 140.21 points, or 2 per cent, to 6,859.87. The fall pushed it back below the 7,000 point mark that it had broken through last week for the first time since February last year. – The Times

Just Eat is to offer 1,500 takeaway couriers in Liverpool minimum pay, sick pay and holiday pay by the end of the year as it shifts away from using independent contractors. The food delivery group, which recently began building its own courier network in the UK alongside putting customers in touch with takeaways that carry out their own delivery, said it would expand a worker model for couriers that it was already operating in London and Birmingham, where 2,000 riders had signed up. – Guardian

Netflix shares tanked as the streaming giant revealed it had signed up 12m fewer subscribers in the first three months of the year than in 2020, signalling the pandemic-induced box set binging boom may be coming to an end. The streaming giant booked revenues of $7.2bn (£5.2bn) but signed up just 4m new people, the lowest first quarter figure for four years, and shy of its 6m forecast made three months ago. – Telegraph

The competition watchdog has warned that the takeover of Asda by the billionaire Issa brothers and TDR, the buyout firm, could lead to higher prices at the pumps for motorists. The Competition & Markets Authority (CMA) said that the sale of the supermarket had raised “local competition concerns”, with car owners in some parts of Britain at risk of paying more to fill their tanks. Asda operates 323 petrol stations, while EG Group, which is owned by Mohsin and Zuber Issa and TDR, operates 395 forecourts. – The Times

The European Super League was collapsing on Tuesday night after all six English clubs dramatically signalled their intention to withdraw from the competition after being taken aback by the furious backlash from fans and the government. It left the £4.5bn league dead in the water less than 48 hours after it was launched, with Chelsea the first to go followed by Manchester City and then, shortly before 11pm, by Arsenal, Manchester United, Liverpool and Tottenham. – Guardian

Apple has made a push into paid-for podcasts, allowing users to subscribe to advertising free versions of the audio shows and intensifying its rivalry with Spotify. The iPhone maker announced that it would allow podcast creators to sell subscriptions through a redesigned app, with Apple itself taking a cut of up to 30pc, from next month. – Telegraph


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