ADVFN Morning London Market Report: Monday 4 October 2021

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London open: Stocks fall amid Evergrande worries

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London stocks fell in early trade on Monday following a weak Asian session, amid growing worries about Chinese property developer Evergrande.

At 0850 BST, the FTSE 100 was down 0.3% at 7,005.48.

Richard Hunter, head of markets at Interactive Investor, said: “Concerns around the property sector in China generally depressed Asian markets overnight, as Evergrande missed an interest repayment, exacerbating fears about contagion in the region.

“Further news is expected on a potential ‘major transaction’ regarding the company which could potentially ease some fears, although stalling economic growth in the region and a tightening of regulatory restrictions has not helped sentiment.

“UK investors have also been spooked by the myriad of current concerns. In addition to the globally pervasive issues of supply chain blockages and elevated inflation, there are also a number of downward earnings revisions which could threaten to derail some of the progress already made. The higher volatility and constant rotation between value and growth stocks is likely to persist in the near term, which clouds visibility for the FTSE 100’s generally cyclical constituents.”

In equity marketsBT was under the cosh after a Telegraph article suggested that Sky is closing in on a deal with Virgin Media O2 to become an investor in the telecoms operator’s full-fibre broadband rollout.

Morrisons was in the red after US private equity group Clayton, Dubilier & Rice won an auction for the supermarket chain with a £7bn bid. The win was revealed by the Takeover Panel on Saturday. CD&R offered 287p a share, against a rival bid from Fortress, for 286p per share.

Mike Ashley’s Frasers Group was knocked lower by a double-downgrade to ‘underperform’ at Bank of America Merrill Lynch.

On the upside, online trading platform Plus500 rallied as it said it now expects 2021 revenue and core earnings to be ahead of analyst forecasts after delivering “further positive momentum” in the third quarter.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. +1.96% +3.68 191.70
2 Sainsbury (j) Plc +1.30% +3.70 288.20
3 Rolls-royce Holdings Plc +1.15% +1.64 144.52
4 Informa Plc +1.14% +6.40 567.20
5 Diageo Plc +1.06% +37.50 3,568.50
6 Astrazeneca Plc +0.92% +81.00 8,854.00
7 Centrica Plc +0.90% +0.52 58.24
8 Royal Dutch Shell Plc +0.90% +14.80 1,660.40
9 Sage Group Plc +0.86% +6.00 706.40
10 Royal Dutch Shell Plc +0.84% +13.80 1,661.60

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Bt Group Plc -5.41% -8.60 150.25
2 Morrison (wm) Supermarkets Plc -3.74% -11.10 285.90
3 Johnson Matthey Plc -1.62% -43.00 2,607.00
4 Prudential Plc -1.55% -22.50 1,428.00
5 Hsbc Holdings Plc -1.33% -5.15 383.50
6 Segro Plc -1.12% -13.50 1,193.50
7 Flutter Entertainment Plc -1.08% -160.00 14,660.00
8 Antofagasta Plc -0.96% -13.00 1,340.50
9 Sse Plc -0.95% -15.00 1,569.00
10 Burberry Group Plc -0.94% -17.50 1,842.50

 

Europe open: Markets downbeat as Evergrande woes worsen

European stocks opened in downbeat mood on Monday after a pummelling last week, with investors further weighed down by the suspension of China Evergrande shares in Hong Kong overnight.

The pan-European STOXX 600 index was down 0.56% in early deals with all major regional bourses lower.

“Investors remain on edge as broader economic concerns prevail. The imminent third quarter reporting season, set against an extremely buoyant set of results in the second quarter, will face tough comparatives and may well prove likely to have been adversely affected by general inflationary pressures,” said interactive investor head of markets Richard Hunter.

“Concerns around the property sector in China generally depressed Asian markets overnight, as Evergrande missed an interest repayment, exacerbating fears about contagion in the region.”

Investors were also concerned about stalling economic growth in the region, hitting French luxury stocks Kering and LVMH, which draw a major portion of their revenue from China, fell 1.9% and 1.5% respectively.

In equity news, shares in UK supermarket chain Morrisons fell 3.77% after US private equity firm Clayton, Dubilier & Rice won an auction for the group with a £7bn bid. Rivals Tesco and Sainsbury inched up.

UK telecoms group BT Group slumped to the bottom of the Stoxx, down 6% on news Sky was ready to join forces with newly merged group Virgin Media O2 to invest in fibre broadband infrastructure.

British media company Future fell, despite reporting that it expected full-year profit at the top end of market expectations, driven by a pandemic-led boost in digital marketing at its publications.

 

US close: Markets end weak month in the red

Wall Street stocks were in the red at the close on Thursday, as major indices wrapped up a losing month in negative territory.

At the close, the Dow Jones Industrial Average was down 1.59% at 33,843.92, as the S&P 500 lost 1.19% at 4,307.54, and the Nasdaq Composite was 0.44% weaker at 14,448.58.

The Dow closed 546.8 points lower on Thursday, wiping out the gains it made on Wednesday.

Sentiment got a boost after a majority of the US House of Representatives voted to approve a measure put forward by the Senate, to prevent a partial government shutdown as the new fiscal year begins on Friday.

Senate Majority Leader Chuck Schumer said earlier the chamber had struck a deal to bypass a government shutdown, stating he would organise a vote on a stopgap measure to keep the government running into early December.

Also in focus, the yield on the benchmark 10-year Treasury note fell to 1.487% by the close, while the 30-year note was also a touch weaker at 2.045%.

On the macro front, economic growth in the US accelerated in the second quarter as pandemic relief money underpinned consumer spending.

According to the Commerce Department, gross domestic product rose at an annualised pace of 6.7% in the April to June quarter, up from a previous estimate of 6.6% growth, and 0.9% higher than pre-pandemic levels.

Elsewhere, the number of Americans filing for unemployment benefits unexpectedly rose in the week ended 25 September, up 11,000 from the previous week’s unrevised level to 362,000, driven by a surge in claims in California, according to the Labor Department.

The four-week moving average increased 4,250 from the previous week’s unrevised level to 340,000, while continuing claims, which are a week behind the headline number, rose 131,000 to 2.84m.

Lastly, the Chicago purchasing managers index dropped to 64.7 in September from 66.8 a month earlier, worse than consensus estimates of 65 and indicating a further deterioration in business conditions.

In the corporate space, Bed Bath & Beyond tanked 22.18% after the retailer downgraded its full-year earnings and sales outlook and reported second-quarter revenues had slumped 26% year-on-year to $1.99bn, missing expectations of $2.06bn.

 

Monday newspaper round-up: Staff shortages, Evergrande, British Airways

Staff shortages are rippling out from the haulage, farming and hospitality sectors to almost all parts of the economy, putting “severe pressure” on medium-sized business across the UK, a new survey has warned. More than a quarter of the 500 firms polled said the lack of staff was putting pressure on their ability to operate at normal levels, with reduced stock – due to the resulting supply chain disruption – hurting their business. – Guardian

Trading in shares of debt-laden China Evergrande was suspended by the Hong Kong exchange on Monday after the enormous Chinese developer missed a key bond interest payment last week, its second offshore debt obligation in a week. Evergrande said trade was suspended “pending the release by the company of an announcement containing inside information about a major transaction,” sparking speculation it could sell its profitable property management unit. – Guardian

British Airways is close to reversing its decision to scrap short-haul flights from Gatwick airport, the Telegraph has learnt. Bosses at trade union Balpa will take a new pay deal to pilots after re-opening talks last week in the hope that they will support sweeping changes at Britain’s second-busiest airport. – Telegraph

The paralysing impact of staffing and supply chain shortages on British businesses has been laid bare by research showing a third of mid-size firms were forced to scale back their offering to customers even before the fuel crisis hit. More than 34 per cent of businesses said they had already reduced their product lines or services to manage staff or stock shortages by mid-September, according to a survey for BDO, the accountancy firm. A further 31 per cent of companies said that they would have to do so “unless the situation changes within the month”. – The Times

Swiss police have seized documents from Credit Suisse relating to the collapsed finance house Greensill Capital after raiding the offices of the bank. The operation was carried out at the request of Zurich’s public prosecutor, which has launched a criminal investigation into Greensill’s activities and the management of the British investment firm’s lending schemes using the Swiss bank’s funds. – The Times

 

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