ADVFN Morning London Market Report: Thursday 1 July 2021

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London open: Stocks rally after upbeat corporate updates; UK manufacturing eyed

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London stocks rose in early trade on Thursday, helped along by well-received updates from the likes of AB Foods and Aveva, as investors eyed the latest UK manufacturing data and US jobless claims.

At 0850 BST, the FTSE 100 was up 1% at 7,109.20.

Neil Wilson, market analyst at Markets.com, said: “European stock markets have made a solid start to the second half of the year, making up for yesterday’s losses, whilst Asian shares got the session off to a soft start. Equity indices are looking positive this morning as the FTSE 100 rose 1% and popped above 7,100 again, with the Euro Stoxx 50 and DAX also both +1%, but continue to tread over well-worn ranges.

“European and global stock markets have enjoyed a strong run-up in the last six months as a combination of ultra-loose monetary policy, fiscal largesse and a vaccine-enabled reopening of economies allowed investors to look ahead to a brighter future for earnings and growth. Now there are risks on the horizon, but the market remains biased to the upside.”

Investors were digesting the latest manufacturing figures out of China. The Caixin purchasing managers’ index for the sector fell to 51.3 in June from 52.0 in May as new export orders fell, coming in slightly below expectations for reading of 51.9.

Capital Economics said: “The Caixin manufacturing index published today dropped back last month and adds to signs from the official PMI released yesterday that momentum in industry is waning. The surveys point to a levelling off in demand and easing of price pressures, even as supply shortages continue to constrain output.”

Coming up later in the day, Markit’s UK manufacturing PMI for June is due at 0930 BST, while US initial jobless claims are at 1330 BST.

In equity markets, industrial software firm Aveva rallied after saying it had a good start to FY22, achieving approximately 10% revenue growth in the first two months of the financial year on an organic constant currency basis.

Associated British Foods was also on the rise after saying it expected annual profit to be in line with the year before as sales at Primark outstripped forecasts in the third quarter.

JD Sports gained after it said it was on track to deliver annual profits of at least £550m as it pledged to split the roles of chief executive and chairman and would consider paying back government furlough cash.

On the downside, Micro Focus fell despite saying that its first-half revenue performance was ahead of expectations.

AO World lost ground even as the online electricals retailer reported a jump in full-year profits and revenue as it continues to benefit to a shit to online shopping since the pandemic.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Fresnillo Plc +4.51% +34.80 806.40
2 Associated British Foods Plc +4.20% +93.00 2,309.00
3 Easyjet Plc +3.44% +30.80 925.60
4 Compass Group Plc +3.42% +52.00 1,574.00
5 Melrose Industries Plc +2.77% +4.30 159.40
6 Taylor Wimpey Plc +2.71% +4.30 163.25
7 International Consolidated Airlines Group S.a. +2.65% +4.62 178.84
8 Evraz Plc +2.57% +15.20 607.20
9 Marks And Spencer Group Plc +2.46% +3.60 150.05
10 Hikma Pharmaceuticals Plc +2.41% +59.00 2,505.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Micro Focus International Plc -6.07% -33.20 513.80
2 Morrison (wm) Supermarkets Plc -1.74% -4.30 242.40
3 Admiral Group Plc -0.92% -29.00 3,115.00
4 Segro Plc -0.41% -4.50 1,090.00
5 Burberry Group Plc -0.39% -8.00 2,058.00
6 Spirax-sarco Engineering Plc -0.15% -20.00 13,595.00
7 Hargreaves Lansdown Plc -0.03% -0.50 1,588.50
8 Nmc Health Plc -0.00% -0.00 938.40
9 Just Eat Plc -0.00% -0.00 861.00
10 London Stock Exchange Group Plc +0.00% +0.00 8,620.00

 

Europe open: Shares rally on German retail sales data

European shares rallied on Thursday as a jump in German retail sales and positive corporate news boosted sentiment.

The pan-European Stoxx was up 0.97% with Germany’s DAX up 0.94% after official data revealed retail sales in the country rebounded in May as a gradual easing of Covid-19 restrictions supported consumer spending in Europe’s largest economy.

Retail sales rose 4.2% month on month in real terms after a downwardly revised decline of 6.8% in April, The Federal Statistics Office said.

“European and global stock markets have enjoyed a strong run-up in the last six months as a combination of ultra-loose monetary policy, fiscal largesse and a vaccine-enabled reopening of economies allowed investors to look ahead to a brighter future for earnings and growth,” said Markets.com analyst Neil Wilson.

“Now there are risks on the horizon, but the market remains biased to the upside. That’s been evidenced by fresh record highs on Wall Street as the S&P 500 notched its fifth-straight record closing high.”

In equity news, shares in Aveva rose as the industrial software group reported a good start to the year as the set itself a target of 10% annual revenue growth over five years.

Associated British Foods was higher as the company said it expected annual profit to be in line with the year before after sales at Primark outstripped forecasts in the third quarter.

JD Sports Fashion shares gained after the company said it expected to make annual profits of at least £550m and would split the roles of chairman and chief executive before its 2022 annual general meeting.

Micro Focus International shares fell as the company reported adjusted first-half profit down 7.7% as the software group’s revenue fell.

Fashion retailer H&M fell despite reporting better-than-expected second quarter profit as many of the company’s stores reopened but earnings remained well below pre-pandemic levels.

 

US close: Stocks end solid second quarter in mixed state

Wall Street equities closed in a mixed state on Wednesday, as major indices looked set to close out a winning first half and second quarter on a mostly positive note.

At the close, the Dow Jones Industrial Average was up 0.61% at 34,502.51 and the S&P 500 added 0.13% to 4,297.50, while the Nasdaq Composite slipped 0.17% to 14,503.95.

The Dow closed 210.22 points higher on Wednesday, extending modest gains recorded in the previous session.

Wall Street stocks put a solid first half behind them on the final day of trading for the second quarter, with first half gains mostly being driven by a rapid reopening of the US economy as over 60% of adults had now received their Covid-19 vaccine.

On the macro front, mortgage applications fell 6.9% in the week ended 25 June, according to the Mortgage Bankers Association, making for the largest drop since early February as record-high home price appreciation sidelined many buyers.

Applications to refinance existing loans dropped 8.2% and applications to purchase a home slid 4.8% week-on-week, as the average contract interest rate for traditional 30-year mortgages increased to 3.20% from 3.18% the prior week.

Elsewhere, private sector employment increased by 692,000 jobs in June, according to ADP‘s national employment report, compared to analyst consensus estimates for a print of 600,000.

Still on data, June’s Chicago PMI revealed business conditions in the Chicago region rose at a slightly slower pace in June after reaching its highest level in 47 years a month earlier.

The index fell to 66.1 in June from 75.2 in the prior month, the lowest since February.

Lastly, contracts to purchase previously owned homes rose sharply last month to reach the highest level seen since May 2005, according to the National Association of Realtors.

The NAR‘s pending home sales index, based on contracts signed last month, rose 8.0% to 114.7, while economists had actually forecast pending home sales declining 0.8% month-on-month.

In the corporate space, Bed Bath & Beyond rocketed 11.3% after it raised its full-year revenues outlook, even though quarterly earnings were impacted by turnaround costs, while Constellation Brands was 1.26% firmer after raising its outlook on the back of strong beer sales.

General Mills added 1.5%, even after its quarterly net sales slid on weak at-home food demand.

 

Thursday newspaper round-up: Green finance plan, hospitality crisis, Reach, Gap

Rishi Sunak will announce plans to transform the City of London into a hub for green finance on Thursday as the government pushes to boost its competitiveness on the global stage after Brexit. The chancellor is expected to use his first speech to City financiers at the annual Mansion House address to announce details of a £15bn UK programme of government bond issuance, with the proceeds being spent on environmentally friendly projects. – Guardian

The hospitality industry is warning of a looming crisis sparked by the surge in Covid infections, with various businesses having to close as entire teams of workers are sent home to isolate after receiving notifications from the NHS app. Restaurants, pubs and bars are calling on ministers to urgently approve a “test and release” scheme so that they can continue to stay open and serve customers. The latest daily tally of infections topped 26,000 on Wednesday, and increasing numbers of businesses are coming under pressure because staff have to stay at home for 10 days if one tests positive for Covid-19. – Guardian

The former adult magazine tycoon Richard Desmond has cashed in his stake in the publisher of the Daily Mirror to help fund a long-running pursuit of the National Lottery licence. Mr Desmond, who once owned the Daily Express and Channel 5, revealed in accounts for his holding company Northern and Shell that he will spend up to £20m on his bid. – Telegraph

US fashion retailer Gap has confirmed it will close all of its stores in the UK and Ireland, and offload some outlets in Europe as it moves solely online. The chain plans to close its total of 81 stores in the UK and Ireland “in a phased manner” within the month from the end of August. The shuttering of all UK brick-and-mortar shops widens the scope from the 19 closures in Britain that were announced in June, when Gap decided not to extend some expiring store leases. – Telegraph

Britain is set to secure an exemption for the financial services industry from new global rules on taxing multinationals, ensuring that the City’s largest banks do not pay more tax on their profits made in other countries. Talks at the Paris-based Organisation for Economic Co-operation and Development, due to conclude today, have accepted the UK’s case that financial services be separated out from the new system, according to the Financial Times. – The Times

Apple is refusing to rethink its plan to get employees back in the office three days a week, despite a staff backlash. The iPhone maker told employees in June that they would be asked to work from the office on Mondays, Tuesdays and Thursdays from early September. However, a group of about 80 staff responded with a letter to Tim Cook, 60, Apple’s chief executive, urging him to allow fully flexible working. – The Times

 

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