ADVFN Morning London Market Report: Friday 7 May 2021

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London open: FTSE hits fresh post-pandemic high amid deal news

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London stocks rose in early trade on Friday, with the top-flight index hitting a new post-pandemic high as deal news and strong commodity prices provided a boost ahead of the latest US non-farm payrolls report.

At 0900 BST, the FTSE 100 was up 0.4% at 7,101.95.

Neil Wilson, chief market analyst at Markets.com said: “The overriding market themes remain pretty well unabused: A monster commodity rally continues as the global economy heats up, and massive but messy rotation out of the tech/growth/momentum plays into more cyclical/value parts of the market.

“Copper rallied to an all-time high, aluminium is extending gains. Palm oil 13-year high, iron ore and steel at all-time highs. There is yet room to run higher in the commodity space.”

On the data front, the payrolls report is due at 1330 BST, along with the unemployment rate and average earnings. On home shores, meanwhile, UK construction PMI is at 0930 BST.

Wilson said that after Wednesday’s “good” ADP numbers, the outlook is good and expectations are high for the non-farm payrolls. “Something like 1m jobs are expected to have been created by US employers last month, topping the total for March,” he said.

“The question really is how fast the labour market can make up the still roughly 8m jobs lost since the pandemic, at which point the Fed will, by its own policy stance, considering tightening monetary policy.”

In equity markets, deal news was helping the lift the mood.

St Modwen Properties surged after US private equity firm Blackstone made a possible cash offer for the group at 542p a share.

Meggitt also jumped following a report that US-based Woodward could be looking to buy the London-listed aerospace engineer. According to Dealreporter, Woodward is working with an investment bank as it considers potential deals and Meggitt is in the frame.

Engine maker Rolls-Royce and GKN owner Melrose Industries also rose.

Wickes Group gained as Citi initiated coverage of the shares at ‘buy’ following the demerger from Travis Perkins.

British Airways owner IAG was a touch weaker after it reported a first-quarter operating loss of €1.06bn and pulled full-year guidance as the Covid pandemic continued to batter the airline industry.

InterContinental Hotels was little changed as it said trading improved in the first quarter and that a pickup in March continued into April, particularly in the US and China.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Melrose Industries Plc +3.09% +5.10 170.05
2 Rolls-royce Holdings Plc +2.13% +2.20 105.60
3 Barclays Plc +2.11% +3.74 180.84
4 Anglo American Plc +1.88% +61.50 3,327.00
5 Hiscox Ltd +1.84% +15.20 841.00
6 Pearson Plc +1.60% +13.20 839.60
7 Sainsbury (j) Plc +1.42% +3.50 249.80
8 Imperial Brands Plc +1.42% +22.50 1,607.00
9 Royal Dutch Shell Plc +1.33% +18.00 1,374.40
10 British American Tobacco Plc +1.30% +36.50 2,839.50

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Antofagasta Plc -1.43% -27.50 1,897.50
2 Berkeley Group Holdings (the) Plc -1.09% -52.00 4,700.00
3 Unilever Plc -0.98% -42.00 4,262.50
4 United Utilities Group Plc -0.83% -8.20 977.00
5 Bt Group Plc -0.76% -1.30 169.90
6 Croda International Plc -0.68% -46.00 6,700.00
7 Flutter Entertainment Plc -0.62% -90.00 14,465.00
8 Severn Trent Plc -0.56% -14.00 2,479.00
9 Standard Chartered Plc -0.46% -2.40 517.60
10 National Grid Plc -0.45% -4.20 929.60

 

Europe open: Shares hit record highs on Meggitt takeover talk

European shares hit record levels at the opening on Friday, boosted by strong US markets, an upbeat outlook from sportswear maker Adidas and reports that UK aerospace engineer Meggitt could be a takeover target.

The pan-European Stoxx 600 index rose 0.36% to 442.65 points by 0753 GMT, briefly passing its April record high of 443.61 in early trades.

Wall Street stocks finished in positive territory, as the Dow Jones recorded a new record high as weekly jobless claims dropped sharply in the week ended May 1, with first-time claims hitting a new Covid-19-era low.

Initial claims came to 498,000 last week, according to the Labor Department, better than estimates for a reading of 527,000 and down from the previous week’s print of 590,000, which was upwardly revised from the initially reported 553,000.

The German DAX rose 0.8%, closer to record highs, as data showed German companies increased exports for the eleventh month in a row in March, with growth coming in at 1.2%, twice the rate forecast by economists.

In equity news Meggitt shares surged 12% following a report that US-based Woodward could be looking to buy the London-listed aerospace engineer.

According to Dealreporter, Woodward is working with an investment bank as it considers potential deals and Meggitt is in the frame.

Shares in German sportswear company Adidas soared as the company raised its 2021 sales outlook, saying it expects strong demand for new products despite ongoing lockdowns in Europe, supply chain challenges and political tensions.

Adidas said it now expects sales to grow at a high-teens percentage rate in 2021, compared to the forecast it gave in March for growth of a mid to high teens rate, with a jump of around 50% expected in the second quarter.

 

US close: Stocks finish higher as jobless claims drop sharply

Wall Street stocks finished in positive territory on Thursday, as the Dow Jones tacked on a new fresh record following its same achievement in the previous session.

At the close, the Dow Jones Industrial Average was up 0.93% at 34,548.53, as the S&P 500 added 0.82% to 4,201.62 and the Nasdaq Composite was 0.37% firmer at 13,632.84.

The Dow closed 318.19 points higher on Thursday, piling on to the gains recorded on Wednesday as corporate earnings and comments from Treasury Secretary Janet Yellen were both in focus.

On investors’ minds on Thursday, weekly jobless claims dropped sharply in the week ended 1 May, with first-time claims hitting a new Covid-19-era low.

Initial claims came to 498,000 last week, according to the Labor Department, better than estimates for a reading of 527,000 and down from the previous week’s print of 590,000, which was upwardly revised from the initially reported 553,000.

On the other hand, continuing claims actually ticked higher, rising 37,000 to just below 3.7m, while the four-week moving average for claims edged down to 3.68m, the lowest since late March 2020.

Elsewhere on the macro front, labour market strength was reinforced by a report from Challenger, Gray & Christmas, which showed job cuts announced by US employers had fallen 25% in April to 22,913, the lowest figure seen since June 2000.

In the corporate space, PayPal reversed earlier losses to close up 1.87% after the payments processor posted a 31% quarterly jump in revenues, leading technology stocks higher in the process.

Online marketplace Etsy, meanwhile, slumped 14.57% after cautioning that sales would likely slow as the Covid-19 pandemic boost began to fade away.

Anheuser-Busch jumped 6.2% after the brewing giant reported first-quarter earnings that topped Wall Street estimates, and named North American head Michel Doukeris as its next chief executive.

Cereal and snack foods peddler Kellogg rose 7.07% after it hiked its full-year sales forecast on the back of a ‘strong’ first-quarter performance.

 

Friday newspaper round-up: Ad scams, Liberty Steel, GKN

A coalition of organisations including City of London police and the consumer body Which? is demanding the government make tech giants such as Google and Facebook legally responsible for fake and fraudulent adverts. In a joint letter to the home secretary, Priti Patel, the 17 organisations have urged ministers to force search engines and social media sites to vet all adverts they publish to protect the public from an “avalanche” of scams involving investments and other financial offers. – Guardian

A Brussels plot to lock the City out of European markets has backfired and harmed the finances of banks on the Continent, the boss of the UK’s finance watchdog has said. Nikhil Rathi, head of the Financial Conduct Authority (FCA), said in a first major intervention that European Union lenders have lost market share because of resistance to a so-called equivalence deal that would have preserved ties with Britain. – Telegraph

Sanjeev Gupta is seeking a £200m lifeline that will allow his UK steelmaking operations to get back to full production. Liberty Steel is thrashing out details of a new working capital facility with US-based White Oak Global Advisors, a company which specialises in funding struggling businesses. The agreement is subject to due diligence checks by White Oak and would guarantee that the money is ring-fenced for Liberty’s UK operations, not funnelled into parent company GFG. – Telegraph

The global semiconductor shortage, which is hobbling some of the world’s leading carmakers, is trickling down into the supply chain as GKN warned that is being hit by the knock-on impact. Its warning came as Volkswagen, Europe’s largest carmaker, said that it is in “crisis mode” over the microchip shortages. VW warned that production could be significantly affected in the second half. – The Times

 

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