ADVFN Morning London Market Report: Tuesday 5 October 2021

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London open: Stocks rise despite US, Asian losses; Greggs rallies after update

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London stocks rose in early trade on Tuesday despite weak sessions in the US and Asia, with a strong showing from bakery chain Greggs after it lifted its outlook.

At 0840 BST, the FTSE 100 was up 0.6% at 7,049.77.

Oanda market analyst Jeffrey Halley said: “I am expecting global stock markets to wildly chase their tails this week, lost on the noise and swings of market sentiment until, hopefully, the US non-farm payrolls restores some directional order on Friday.

“The game of blink surrounding the mid-month debt ceiling legislation deadline is introducing a heightened uncertainty. Although if a cliff is driven off, the Fed will surely be there to open the spigots once again, never bad for stock markets. I’m not sure when both major parties in the US decided their job was to deliberately sabotage each other’s efforts on every level, instead of being reasoned opponents, but there we have it.”

In equity marketsGreggs – famous for its sausage rolls – was a high riser after it said the full-year outcome was set to be ahead of its previous expectations following a strong sales performance in the third quarter, although it also warned over inflationary pressures.

The company said two-year like-for-like sales were up 3.5% in the third quarter despite staffing and supply chain disruption.

Richard Hunter, head of markets at Interactive Investor, said: “Greggs’ no-nonsense, value approach has succeeded where others have struggled, despite broader pressures outside of its control.

“Strategically, the company’s imaginative marketing ploys have also been successful, particularly the more recent vegan-friendly food and drink ranges, with themed offerings such as Halloween to follow. Greggs will also be outlining its plans for new stores at an upcoming Capital Markets Day, offering the fact in advance that pre-pandemic company-managed stores returned 42% on capital and franchised stores 33%.”

On the downside, aerospace and motoring engineer Melrose fell after saying it expected the global shortage of semi-conductors to hit its automotive division following a rise in customer cancellations in the first quarter.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Ocado Group Plc +2.87% +47.50 1,703.00
2 Smiths Group Plc +2.05% +29.50 1,466.00
3 Flutter Entertainment Plc +2.00% +290.00 14,790.00
4 Lloyds Banking Group Plc +1.90% +0.85 45.65
5 Informa Plc +1.82% +10.40 581.00
6 Smith & Nephew Plc +1.82% +23.00 1,288.00
7 Sainsbury (j) Plc +1.73% +5.10 299.20
8 Standard Chartered Plc +1.70% +7.30 436.00
9 Ashtead Group Plc +1.60% +88.00 5,592.00
10 Bp Plc +1.52% +5.25 349.70

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Melrose Industries Plc -2.37% -4.05 166.85
2 Easyjet Plc -1.03% -7.20 691.80
3 International Consolidated Airlines Group S.a. -0.87% -1.64 186.26
4 Rio Tinto Plc -0.79% -38.00 4,774.50
5 Crh Plc -0.73% -25.00 3,385.00
6 Unilever Plc -0.65% -25.50 3,923.00
7 Dcc Plc -0.52% -32.00 6,098.00
8 Hikma Pharmaceuticals Plc -0.50% -12.00 2,372.00
9 Tui Ag -0.48% -1.60 331.60
10 Johnson Matthey Plc -0.46% -12.00 2,598.00

 

Europe open: Shares buck trend to post gains with Greggs on the menu

European stocks bucked overnight losses on Wall Street and Asia to open higher on Tuesday, with a positive update from UK baker Greggs giving investors some appetite.

The pan-European Stoxx 600 index gained 0.27% after losses on Monday. All major regional bourses were higher.

Tech stocks were sold off overnight as investors got jittery over rising Treasury yields. Asian stocks fell on persistent worries about slowing growth in China.

Tech heavyweights AppleAlphabetAmazon and Microsoft all fell at least 2% while shares in Facebook slipped 4.9% after the social media platform and its WhatsApp and Instagram affiliates crashed for several hours due to technical issues.

“We’re at a point where the pessimism over the supply chain problems is probably nearing a peak, and expectations for growth have washed out,” said Neil Wilson at Markets.com.

“Likewise we may be at peak inflation/stagflation fears – the reopening is apace. Cyclicals/value are not doing enough to compensate for what amounts to a pretty sizeable pullback for the tech sector now, but there could be room for this area of the market to rally again as the economic situation starts to feel like it could pick up.”

In equity news, Greggs – renowned for its range of sausage rolls – gained after lifting full-year guidance after a strong sales performance in the third quarter, although it also warned over inflationary pressures.

The company said two-year like-for-like sales were up 3.5% in the third quarter despite staffing and supply chain disruption.

Infineon Technologies gained 1.9% after it confirmed its 2021 revenue and said it expects results to rise further next year as demand for power chips for cars, datacenters and renewable power generation soars.

Aerospace and motoring engineer Melrose fell after saying it expected the global shortage of semi-conductors to hit its automotive division following a sharp rise in customer cancellations in the first quarter.

 

US close: Stocks record heavy losses as bond yields rise

Wall Street stocks lost ground on Monday as the first full week of Q4 trading started off with losses amid a rotation out of tech stocks and rising bond yields.

At the close, the Dow Jones Industrial Average was down 0.94% at 34,002.92, while the S&P 500 was 1.30% weaker at 4,300.46 and the Nasdaq Composite saw out the session 2.14% softer at 14,255.48.

The Dow Jones closed 323.54 points lower on Monday, taking a bite out of solid gains recorded on the first day of trading for the final quarter of 2021.

Heading into the fourth and final quarter, concerns regarding central bank tightening, the US debt ceiling, Chinese real estate developer Evergrande and the ongoing Covid-19 pandemic were all still firmly on investors’ minds.

US-China tariffs were also back in the spotlight after Beijing failed to live up to promises made as part of the pair’s phase one trade deal, while OPEC was also in focus amid fears that a spike in energy prices would pressure the cartel into driving output higher.

On the macro front, new orders for US-made goods picked up during August, indicating sustained strength in the manufacturing sector despite economic growth appearing to have decelerated in the third quarter due to shortages of raw materials and labour. According to the Commerce Department, factory orders grew 1.2% in August after rising 0.7% in July, ahead of forecasts for a 1.0% uptick in factory orders.

In the corporate space, pharmaceutical company Merck published promising data around a drug candidate that holds the potential to be administered orally and reduce patients’ chances of contracting the coronavirus.

Tech stocks such as AppleNvidiaAmazon and Microsoft traded lower as the yield on the benchmark 10-year Treasury note traded at around 1.482%, while social media behemoth Facebook was down as much as 4.89% after a whistleblower accused it of a “betrayal of democracy” over the weekend and server errors saw Facebook, Instagram and WhatsApp all fail to work.

Tesla bucked the trend, closing 0.81% higher after reporting that it had delivered 241,300 electric vehicles during the third quarter, far and above analysts’ estimates.

 

Tuesday newspaper round-up: Channel 4, fuel crisis, Monzo

The UK fuel crisis could run another week, fuel retailers have warned, as military tanker drivers took to the roads to relieve pressure on petrol stations. One in five forecourts in London and the south-east of England were still out of fuel on Monday, according to the Petrol Retailers Association, compared with just 8% across the rest of the country, where the shortage appears to be almost over. – Guardian

More than 40 small TV and film production companies behind shows such as Derry Girls and Say Yes to the Dress have come together to warn that the government’s proposed privatisation of Channel 4 could put them out of business. The 44 companies, dotted across Northern Ireland, Scotland, Wales and Yorkshire, have taken out a full-page advertisement in Tuesday’s edition of the Daily Telegraph – apparently timed to hit readers during the Conservative party conference in Manchester. – Guardian

Households would be forced to spend almost £700 a year more on their food bills if supermarket supply chains were broken up, data suggest, after a Tory MP declared war on the grocers. Analysis of Kantar figures by The Telegraph suggests a shift away from supermarkets would have drastic consequences for consumers, who typically pay a premium for staple products when they shop at smaller stores. – Telegraph

Britain may have to build more polluting gas-fired power stations to help keep the lights on in coming winters, the boss of one of the country’s biggest energy groups has suggested. Alistair Phillips-Davies, chief executive of SSE, said it was not “beyond the realms of possibility” that more such plants would be needed because of the “issues” the energy system was facing. – The Times

Monzo has suffered a blow to its transatlantic expansion ambitions after withdrawing its US banking licence application before it was rejected by regulators. The fintech company, known for its distinctive coral-coloured cards, applied in April last year and had hoped that its experience of gaining a full UK banking licence would have helped it succeed where many of its peers have failed. However, in recent talks with the Office of the Comptroller of the Currency (OCC) it is understood it had been made clear to Monzo that its application was unlikely to succeed. – The Times

 

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