ADVFN Morning London Market Report: Tuesday 11 May 2021

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London open: Stocks slide on US inflation fears

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London stocks slid in early trade on Tuesday, taking their cue from a US tech selloff overnight as US inflation fears rattled markets.

At 0840 BST, the FTSE 100 was down 1.8% at 6,997.99.

Spreadex analyst Connor Campbell said: “A late collapse from the Nasdaq led to a nasty session for the Nikkei led to a really rough start for Europe on Tuesday.

“The tech slide not only gave the Nasdaq its worst day since March but prevented the Dow Jones from closing above 35,000 for the first time in its history.

“Ahead of Wednesday’s US CPI reading, it appears that investors’ inflationary fears have been reignited by surging commodity prices (something that won’t necessarily be reflected in tomorrow’s figures). It’ll be interesting to see how much the markets are reassured if Wednesday’s number does fall from 0.6% to 0.2% month-on-month as forecast.

“The impact on Europe was swift, undoing much of the growth managed this May. For example, after tickling a fresh 14-month peak on Monday, the FTSE found itself desperately paddling to stay above 7,000 as it plunged 1.9%. This was accompanied-slash-prompted by a stark reversal from its previously buoyant mining sector.”

In equity markets, engineer Renishaw – which put itself up for sale last month – was under the cosh following a report the company is struggling to attract takeover interest due to a hefty price tag and list of ownership demands. According to Bloomberg, rival engineering firms HexagonSchneider Electric and Siemens all decided against pursuing Renishaw.

NatWest was also sharply lower after the government kicked off the sale of a further stake in the bank.

UK supermarket Morrisons bucked the trend as it reported a rise in first-quarter sales and reiterated guidance for higher full-year profits and reduced debt as the economy rebounded from the Covid-19 pandemic.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Morrison (wm) Supermarkets Plc +0.71% +1.30 184.35
2 London Stock Exchange Group Plc +0.00% +0.00 8,620.00
3 Reckitt Benckiser Group Plc +0.00% +0.00 6,498.00
4 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. -4.98% -10.45 199.40
2 Scottish Mortgage Investment Trust Plc -4.17% -47.50 1,092.00
3 Rightmove Plc -3.77% -22.20 566.00
4 Next Plc -3.73% -310.00 8,010.00
5 Easyjet Plc -3.50% -37.50 1,032.50
6 Prudential Plc -3.47% -55.00 1,530.50
7 Melrose Industries Plc -3.45% -5.75 160.75
8 Mondi Plc -3.39% -66.50 1,893.50
9 Relx Plc -3.34% -62.50 1,810.00
10 Rolls-royce Holdings Plc -3.30% -3.62 106.06

 

Europe open: Shares tumble after tech sell-off on Wall Street

European shares fell from record highs as a sharp sell-off in tech stocks on Wall Street and weaker Asian markets spooked investors amid fears of rising inflation.

The pan-European Stoxx 600 index fell 1.7% at the opening with all regional bourses lower. The UK FTSE 100 was down almost 2% at 0851BST.

“Ahead of Wednesday’s US CPI reading, it appears that investors’ inflationary fears have been reignited by surging commodity prices (something that won’t necessarily be reflected in tomorrow’s figures). It’ll be interesting to see how much the markets are reassured if Wednesday’s number does fall from 0.6% to 0.2% month-on-month as forecast,” said Spreadex analyst Connor Campbell.

“At present the Dow Jones is expected to avoid the same level of losses as Europe, with the futures indicating a 0.4%, or 145-point, decline. That would leave the Dow around 20 points above 34,600.”

In equity news, Sweden’s Evolution Gaming Group plunged 10% after the bookrunner announced the pricing of block trades.

UK bank NatWest was also sharply lower after the government kicked off the sale of a further stake in the bank.

British supermarket Morrisons bucked the trend as it reported a rise in first-quarter sales and reiterated guidance for higher full-year profits and reduced debt as the economy rebounded from the Covid-19 pandemic.

 

US close: Stocks end session lower amid rotation out of growth stocks

Wall Street stocks closed lower on Monday, with last week’s ransomware attack on a major US fuel pipeline and a rotation out of growth stocks both dominating the session.

At the close, the Dow Jones Industrial Average was down 0.10% at 34,742.82, while the S&P 500 was 1.04% weaker at 4,188.43 and the Nasdaq Composite saw out the session 2.55% softer at 13,401.86.

The Dow closed 34.94 points lower on Monday, taking a bite out of gains recorded on Friday when the blue-chip index registered yet another fresh record high.

Energy stocks were in focus on Monday after a ransomware attack led to the closure of the Colonial Pipeline, a 5,500-mile system between the Gulf Coast and the New York metropolitan area and transports 45% of the East Coast’s fuel supply, on Friday in order to “contain the threat”. Colonial said on Sunday that several of its smaller lateral lines were once again online but stated that its main lines were still offline.

Cybersecurity stocks were also in focus as a result of the news, with shares in FireEye trading higher, while Fortinet and CrowdStrike moved lower throughout the session.

Multiple sources claimed the attack was undertaken by a Russian cybercriminal gang called DarkSide. The hackers, who infiltrated Colonial’s network on Thursday and took almost 100GB of data hostage, locked the data on computers and servers, vowing to leak said data onto the internet if a ransom is not paid.

Investors were also paying attention to gasoline futures, ending the day 0.31% higher at $2.13 per gallon after jumping as high as $2.21 overnight – a level not seen in three years.

Elsewhere in the corporate space, Tesla was in the red following Elon Musk’s appearance on Saturday Night Live over the weekend, Oracle slumped on the back of a downgrade by analysts at Barclays and both Facebook and Alphabet moved lower as a result of a downgrade over at Citigroup.

In addition to the downgrades, market participants also rotated out of growth stocks elsewhere, with Amazon and Netflix also closing lower.

On the macro front, Federal Reserve Bank of Chicago president Charles Evans said employment and inflation would have to pick up before he was willing to change his position on policy, adding he wouldn’t mind seeing inflation run around 2.5% for some time but also expressed optimism over the state of the jobs market, despite disappointing growth in April.

 

Tuesday newspaper round-up: Test-and-trace workers, The Hut Group, Hitachi

Many workers employed across the £37bn NHS test-and-trace service are being paid through networks of opaque small companies that experts fear could be defrauding the Treasury via a notorious tax scheme. The Guardian investigated after sources working at Covid-19 call centres, testing sites, mobile testing units and laboratories raised concerns about their payslips and employment terms. – Guardian

The millionaire CEOs of some of the American companies with the lowest-paid workers saw an average pay raise of 29% in 2020 while their workers saw a 2% decrease, according to a report released Tuesday. The Institute for Policy Studies calculated that the average CEO compensation in 2020 was $15.3m when looking at the 100 companies with the lowest median wage for workers in the S&P 500 index. – Guardian

The Japanese technology powerhouse Softbank has become a major shareholder in The Hut Group (THG), in a deal that catapults the Manchester make-up and protein shakes retailer onto the global stage. After the stock market closed on Monday, Softbank was unveiled as the cornerstone backer of a $1bn (£710m) fundraising intended to fuel THG’s growth. – Telegraph

Ministers are demanding that Hitachi picks up the multi million-pound bill for passenger compensation after some of Britain’s busiest rail lines were hit by mass cancellations due to faulty trains. Passengers endured a third day of significant disruption on intercity services to the north and west as investigators continued their probe into the threat of faults on Hitachi trains. Two InterCity 225 trains built in the early 1990s will be brought back into service later this week by LNER, the state-owned east coast main line, in response to the problems. – Telegraph

Landlords have lost a legal action to challenge the use of an insolvency procedure by New Look, the high street retailer. Land Securities and British Land were among landlords who opposed the use of a company voluntary arrangement, or CVA, by New Look as the fashion chain dropped rent arrears and created a new basis for its rent. Last September, New Look said that a CVA was an “absolute necessity” to safeguard 11,200 jobs, after the pandemic forced the closure of its stores. It was its second use of a CVA in only three years. – The Times

 

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