ADVFN Morning London Market Report: Tuesday 22 June 2021

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London open: Stocks in the black as Fed concerns recede


London stocks edged higher in early trade on Tuesday, taking their cue from a positive session on Wall Street after reassuring comments from New York Federal Reserve Bank President John Williams.

At 0905 BST, the FTSE 100 was up 0.3% at 7,080.98.

Neil Wilson, chief market analyst at, said: “John Williams reiterated that the US central bank is not moving quickly, despite what most saw as a hawkish statement last week.”

Williams said on Monday: “It’s clear that the economy is improving at a rapid rate, and the medium-term outlook is very good. But the data and conditions have not progressed enough for the FOMC to shift its monetary policy stance of strong support for the economic recovery.”

Wilson said: “Meanwhile in prepared remarks ahead of his Congressional testimony today, Fed chair Jay Powell reiterated that the Fed is not unduly concerned that hot inflation readings are here to stay.

“His testimony from 7pm (BST) is likely to be market-moving – particularly if he says anything considered as hawkish. We will want to see whether he seeks to row back on the messaging the market took from last Wednesday.”

On home shores, figures released earlier by the Office for National Statistics showed government borrowing was lower than expected in May as the reopening of the economy supported government receipts and the state spent less than forecast.

Public sector net borrowing, excluding public sector banks, was £24.3bn. Borrowing was £19.4bn less than a year earlier and better than the £28.5bn forecast by the Office for Budget Responsibility. Analysts had on average expected borrowing of £25.5bn.

The ONS estimated central government receipts were £56.9bn in May, £7.2bn more than a year earlier as VAT and income tax outstripped forecasts. Central government spent £81.8bn – lower than a year earlier and less than the OBR’s £84.9bn forecast as support for businesses and households eased.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Public borrowing is continuing to decline more rapidly than the OBR expected, with the main measure of borrowing in May undershooting its £28.5bn forecast by £4.2bn.”

In equity markets, commercial landlords British Land and Land Securities rallied after an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan, which argued that UK retail was turning a corner.

GKN owner Melrose Industries rose as it said it will return around £730m in cash to shareholders after completing the sale of its Nortek Air Management business.

Building materials distributor and DIY retailer Grafton gained after saying it had bought Finland’s family-owned IKH for €199.3m in cash.

National Express was on the rise after it said current trading was slightly ahead of expectations and announced the €13m acquisition of Spanish urban bus operator Transportes Rober.

On the downside, packaging company DS Smith fell as it said the current financial year had started well but reported a sharp drop in annual profit caused mainly by higher costs and lower prices during the pandemic.

Aston Martin also lost ground after saying it is suing Swiss car dealer Nebula Project and its board members for failing to pay some customer deposits for orders of the £2.5m Valkyrie sports car and that this will dent full-year profits by up to £15m.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Land Securities Group Plc +4.57% +31.00 708.60
2 British Land Company Plc +4.44% +21.90 515.40
3 Carnival Plc +2.94% +50.60 1,773.40
4 Melrose Industries Plc +2.84% +4.50 162.90
5 Easyjet Plc +2.78% +27.10 1,000.50
6 Royal Dutch Shell Plc +2.36% +32.20 1,394.60
7 Rolls-royce Holdings Plc +2.14% +2.34 111.60
8 International Consolidated Airlines Group S.a. +2.05% +4.05 201.85
9 Royal Dutch Shell Plc +1.98% +28.20 1,452.20
10 Bt Group Plc +1.79% +3.60 205.20


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Hargreaves Lansdown Plc -1.72% -28.00 1,603.00
2 Astrazeneca Plc -1.37% -115.00 8,293.00
3 United Utilities Group Plc -1.07% -11.00 1,016.50
4 Smith (ds) Plc -1.06% -4.60 427.80
5 Morrison (wm) Supermarkets Plc -0.96% -2.30 237.90
6 Glaxosmithkline Plc -0.90% -12.80 1,402.20
7 Halma Plc -0.77% -21.00 2,692.00
8 Kingfisher Plc -0.68% -2.40 351.20
9 Experian Plc -0.64% -18.00 2,782.00
10 Smiths Group Plc -0.60% -9.50 1,585.50


Europe open: Shares lower despite Wall St rally, Lagarde remarks

European shares were slightly lower at the opening on Tuesday as investors looked for direction, despite positive comments from the European Central Bank chief on rising inflation and a rally on Wall Street overnight.

The pan-European Stoxx 600 was down 0.27%, continuing recent losses sparked by a more hawkish tone from the US Federal Reserve over the pace of inflation rises and timing of possible interest rate rises.

However, investors took some comfort from remarks by ECB President Christine Lagarde, who on Monday said the euro zone and the US were “clearly in a different situation”.

“Well that didn’t last too long. After getting into a lather about the accelerated timetable for potential interest rate hikes announced by the US Federal Reserve last week, markets seem to have regained their poise,” said AJ Bell investment director Russ Mould.

“The catalyst seemed to be messaging from Fed officials which softened the hawkish tone of last Wednesday’s meeting, plus also a realisation that any rate increases are still two years away.”

Oil prices rose on supply concerns, with BP and Royal Dutch Shell shares rising as a result.

In equity news, shares in Irish building materials group Kingspan topped the Stoxx, up 5.73%, after reporting that first-half profit and sales are set to be ahead of the previous year and 2019 as the momentum reported in April has continued into the second quarter.

Melrose Industries gained after the turnaround specialist said its signs of recovery were in sight for its GKN aerospace division and it was also returning £730m in cash to shareholders from the sale of the Nortek business in April, with further payouts on the way.

DS Smith fell after reporting that the current financial year had started well as the packaging company posted a sharp drop in annual profit caused mainly by higher costs and lower prices during the early stages of the Covid-19 pandemic.

UK commercial property landlords British Land and Land Securities were also higher on recovery hopes as the former confirmed plans to start construction on a new tower block in east London.

Shares in consumer internet company Prosus fell despite posting strong operating profit and revenues.


US close: Dow Jones reverses Friday’s losses

Wall Street stocks recorded solid gains on Monday as major indices bounced back from their worst week since October.

At the close, the Dow Jones Industrial Average was up 1.76% at 33,876.96 and the S&P 500 was 1.40% firmer at 4,224.79, while the Nasdaq Composite saw out the session 0.79% stronger at 14,141.48.

The Dow Jones closed 586.89 points higher on Monday, reversing losses recorded on Friday after news that the Federal Reserve had raised its inflation expectations and forecast rate hikes in 2023 earlier in the week continued to weigh on sentiment.

The effects of the Fed’s policy meeting last week were still being felt across global markets at the start of the new week, with stocks and bond yields having fallen as a result of the news amid a sharp repricing of risks due to the central bank raising rates.

Reopening plays such as Royal Caribbean and Boeing traded higher, while commodity stocks, which were hard hit during last week’s selloff, like Exxon and Chevron also ended the session in the green.

On the macro front, the Chicago Federal Reserve’s national activity index increased to 0.29 in May from -0.09 in April, with three of the four broad categories of indicators used to construct the index making a positive contribution last month. The index’s three-month moving average rose to 0.81 in May from 0.17 in April.

No major corporate earnings were released on Monday.


Tuesday newspaper round-up: Working from home, BT Sport, Morrisons

The industries most affected by the UK’s delayed reopening will need to find almost £50m to cover wages once the government’s furlough scheme is cut back on 1 July, according to analysis by the Labour party. Hospitality firms and cultural and arts businesses, which still have large numbers of workers on furlough, will need to cover the higher cost of keeping workers on the scheme even though they have no choice but to limit the number of customers they serve over the next month or are forced to remain shut. – Guardian

The heads of the UK’s largest business lobby group and two major City employers have warned against giving workers the legal right to demand remote working, claiming it would harm young employees and city centre economies. Lord Bilimoria, the president of the CBI, said that while employees should be able to request the option of working from home, flexible working arrangements must be allowed to evolve in their own way. – Guardian

Rupert Murdoch is exploring a tie-up with BT’s television arm, The Telegraph can reveal, as the nonagenarian attempts to reshape and secure his media legacy amid the decline of print newspapers. BT has held talks about a potential partnership with News UK, the publisher of the Sun and the Times, City sources said. – Telegraph

MPs are preparing to intervene in a potential takeover of Morrisons as investors brace for a feeding frenzy after the supermarket rejected a £5.5bn offer from private equity. The Business, Energy and Industrial Strategy Committee is understood to be preparing to write to the competition watchdog to seek assurances following the takeover offer from Clayton Dubilier & Rice (CD&R). The Competition and Markets Authority would be expected to look into a takeover of such a large UK business. – Telegraph

The accounting watchdog is seeking a joint-record £15 million fine against KPMG after a draft tribunal report found “many very serious” findings of misconduct relating to the company’s role in the sale of the mattress company Silentnight to the private equity firm HIG. The Financial Reporting Council (FRC) is also pushing for a fine of at least £500,000 against David Costley-Wood, the former restructuring partner involved, as well as a ban from his membership of the Institute of Chartered Accountants in England and Wales (ICAEW) for 15 years and from an insolvency licence for 15 years. – The Times


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