ADVFN Morning London Market Report: Friday 23 April 2021

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London open: Stocks dip after reports of US tax hike plans hit Wall Street


Stocks have started lower at the end of the week, tracking profit-taking on Wall Street overnight, after Bloomberg reported that Democrats in Congress wanted to double the capital gains tax to nearly 39.6%.

“Of course, what President Biden wants, and what he will get, could be two totally different things, especially when it comes to tax rates,” Jeffrey Halley, Senior Market Analyst, Asia Pacific, at Oanda pointed out.

“Goldman Sachs suggests the tax hike will be watered down to 28% from above 40%, an entirely reasonable conclusion.”

Another key consideration was whether it would be applied retroactively to 2021.

Against that backdrop, as of 0828 BST the FTSE 100 was trading lower by 0.27% or 18.86 points to 6,919.38, while the second-tier index was down by 0.32% or 71.22 points at 22,293.43.

In parallel, futures tracking the S&P 500 were bouncing back by 7.0 points to 4,134.75.

As an aside, Bitcoin was down 11.41% to 48,030.58.

There was some very good news on the economic front.

According to the Office for National Statistics, UK retail sales surged at a month-on-month pace of 5.4% in March (consensus: 1.5%).

In turn, the year-on-year rate of increase was driven from -3.7% to 7.2% (consensus: 3.5%).

Consultancy GfK meanwhile reported an improvement in its UK consumer confidence index from March’s reading of -16 to -15 in April.

Public sector net borrowing data for March also came in better than expected, at £28.0bn (consensus: £22.0bn).

All told, ONS estimated that public sector borrowing for the 2020/21 fiscal year totalled £303.1bn or 14.5% of GDP, the most since WWII.

It was however well beneath the OBR’s projection for £354.6bn in the March budget.

Still ahead, IHS Markit is scheduled to release UK Purchasing Managers Indices for UK manufacturing and services at 0930 BST.

First Group sells US assets to lower debt pile

FirstGroup has agreed to sell its First Student and First Transit US bus businesses to EQT Infrastructure for an enterprise value of £3.3bn. The UK transport group said it would use £2.19bn of initial net proceeds to cut debt, pay into its pension schemes and return £365m, or 30p a share, to shareholders during 2021.

GlaxoSmithKline said the US Food and Drug Administration (FDA) has approved ‘Jemperli’, or dostarlimab-gxly, based on its Biologics License Application. The AIM-traded firm said dostarlimab, a programmed death receptor-1 (PD-1) blocking antibody, is indicated for the treatment of adult patients with mismatch repair-deficient recurrent or advanced endometrial cancer, as determined by an FDA-approved test, that have progressed on or following prior treatment with a platinum-containing regimen. It said the indication was given accelerated approval based on tumour response rate and durability of response.

LondonMetric Property has sold two long income assets let to Marks & Spencer and Wickes in Derby for a combined £11.1m to unnamed buyers. The sale represents a blended net initial yield of 6% and a 7% surplus to the last reported book value. One property is a M&S Foodhall, sold by way of a forward commitment to an overseas private investor for £6.2m and the other a Wickes store, sold to an overseas property company for £4.9m.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Intertek Group Plc +1.66% +102.00 6,240.00
2 Glencore Plc +1.16% +3.40 295.90
3 Ashtead Group Plc +1.06% +50.00 4,762.00
4 Antofagasta Plc +1.05% +19.00 1,824.00
5 Ocado Group Plc +1.04% +23.00 2,240.00
6 Evraz Plc +0.86% +5.40 635.60
7 Rio Tinto Plc +0.80% +48.00 6,053.00
8 Taylor Wimpey Plc +0.70% +1.30 186.10
9 Kingfisher Plc +0.64% +2.30 362.90
10 Itv Plc +0.60% +0.70 116.90


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Carnival Plc -3.93% -65.80 1,609.60
2 Easyjet Plc -2.74% -27.70 983.80
3 International Consolidated Airlines Group S.a. -2.33% -4.68 195.82
4 Rolls-royce Holdings Plc -1.73% -1.78 101.04
5 Micro Focus International Plc -1.72% -9.00 515.40
6 Next Plc -1.61% -130.00 7,920.00
7 Land Securities Group Plc -1.50% -10.80 708.80
8 Bae Systems Plc -1.48% -7.40 492.50
9 Informa Plc -1.45% -8.00 544.60
10 Smith & Nephew Plc -1.17% -17.50 1,474.50


Europe open: India Covid surge, US tax hike reports mute sentiment

European markets were muted on Friday as investors kept a wary eye on the Covid-19 surge in India and reports of broader US tax rises.

The pan-European Stoxx 600 index was down 0.2%. The UK’s FTSE 100 was off 0.36% after public sector borrowing figures revealed the extent of government support measures to protect the economy from the pandemic.

“The escalation of the pandemic in India and reports of planned tax hikes in the US are keeping the lid on market exuberance,” said interactive investor head of markets Richard Hunter.

“With the situation also worsening in the likes of Brazil and Japan amid the discovery of new variants, and quite apart from the human cost, sentiment has been dented by the possible impact on demand for and supply of commodities in particular.”

In the US, reports suggested the Biden administration was looking at capital gains and income tax rises, in addition to a possible hike in corporation tax.

Investors were also looking ahead to quarterly updates from the major FTSE100 sectors of banks, oils and pharmaceuticals.

In the UK, state annual borrowing hit a high not seen since the aftermath of the second world war the pandemic forced soaring government spending to prevent an economic meltdown, official figures showed.

Borrowing hit £303.1bn in the year to the end of March, the Office for National Statistics said in its first estimates for the public finances.

The figure was £246.1bn more than the previous year and was equal to 14.5% of national output. The last time borrowing as a share of GDP was higher was in 1946 when the figure was 15.2%.

In equity news, Daimler shares rose as the car maker upped its profit forecasts for 2021, but warned the global shortage of semiconductor chips may continue to weigh on second-quarter sales.

Swedish private bank SEB climbed 6.2% after a strong first-quarter earnings report, while Italian fashion company Moncler fell 6% after its results.


US close: Stocks weaker even after jobless claims beat

Wall Street stocks closed in negative territory on Thursday, despite a better-than-expected jobless claims report.

At the close, the Dow Jones Industrial Average was down 0.94% at 33,815.90, as the S&P 500 lost 0.92% to 4,134.98 and the Nasdaq Composite was off 0.94% at 13,818.41.

The Dow closed 321.41 points lower on Thursday, cutting into gains recorded in the previous session after reopening stocks led all three major indices higher.

On the data front, US jobless claims continued to slip lower, contrary to economists’ expectations, hitting a pandemic-era low.

According to the Department of Labor, initial unemployment claims for the week ending on 17 April dropped by 39,000 to reach 547,000.

Secondary unemployment claims, meanwhile, dipped by 34,000 to 3.67m.

Elsewhere, the Chicago Fed’s national activity index rose to 1.71 in March from -1.2 in February, better than market expectations for a print of -0.66.

Still on data, closed sales of existing homes fell 3.7% in March to 6.01m units, according to the National Association of Realtors, marking the slowest sales pace since August and a second straight month of declines.

In equity markets, AT&T closed up 4.15% after beating Wall Street forecasts, while DR Horton advanced 1.74% after raising its full-year outlook on the back of a quarterly profit beat.

Biogen lost 4.02% after reporting a 71% slump in quarterly profits, as its top-selling multiple sclerosis drug Tecfidera faced increased competition from cheaper generic versions.

Southwest Airlines descended 1.56% after saying it expected to see leisure bookings improve on the back of the US Covid-19 vaccine rollout, with the low-cost carrier expecting to break even in June.

Legacy carrier American Airlines, meanwhile, slid 4.47% after reporting a 53% year-on-year decline in quarterly revenues.


Friday newspaper round-up: Jaguar Land Rover, Greensill Capital, Alphawave, Foxtons, Irish border

Jaguar Land Rover has suspended production at two of its three car manufacturing sites as a worldwide shortage of computer chips forces the global automotive industry to slam on the brakes. Thousands of workers at the Halewood plant on Merseyside and the main Jaguar factory at Castle Bromwich in the West Midlands are to be stood down from Monday for an unknown amount of time. – The Times

David Cameron repeatedly pushed the Bank of England and the Treasury to risk up to £20bn in taxpayer cash to help Greensill Capital, just as the lender started to face “significant” financial pressure at the start of the pandemic. The UK’s central bank was urged to provide support to Greensill, including by setting up a fund that would buy loans made by the financial services company and its competitors, in a string of emails to senior officials. – Guardian

A cutting-edge microchip technology developer which aims to transform computing has picked London for a $4.5bn (£3.25bn) float that would make multimillionaires of dozens of its staff. Alphawave IP is planning to raise $500m from investors in one of the City’s biggest listings this year. Its team of 75 staff, including its three co-founders, will retain majority ownership of the company after it goes public. Their overall stakes are in line to be valued around $2.25bn. – Telegraph

Shareholders in Foxtons gave the London estate agent a bloody nose yesterday over its decision to award its chief executive almost £1 million in bonuses despite taking almost £7 million in government support. More than 39 per cent of investors who voted at its annual general meeting opposed its remuneration report, which awarded Nic Budden total pay of £1.6 million. Foxtons said it was “clear that a significant proportion of shareholders did not agree . . . on the basis that the company had benefited from government support”. – The Times

Dozens of former subpostmasters who were convicted of theft, fraud and false accounting because of the Post Office’s defective Horizon accounting system are expected to finally have their names cleared. Subpostmasters’ lives were “irreparably ruined”, as they lost their jobs, homes and marriages after they were prosecuted by the Post Office – which knew the Fujitsu-developed IT system had “faults and bugs from the earliest days of its operation”, the court of appeal heard last month. – Guardian

The Northern Ireland protocol is an “unexploded ordnance” for the level playing field that could force the UK to follow EU rules, a top Brexiteer lawyer has warned. James Webber, who advised the European Research Group of hardline pro-Brexit Tories, said the provisions of the as-yet unimplemented protocol were “genuinely extraordinary” in terms of what they meant for subsidy control. – Telegraph


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