ADVFN Morning London Market Report: Wednesday 6 October 2021

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London open: Stocks slide amid inflation concerns


London stocks slid in early trade on Wednesday as concerns about inflation dented sentiment amid surging oil and gas prices, with all eyes on the US ADP employment report.

At 0905 BST, the FTSE 100 was down 1.3% at 6,985.57.

Ipek Ozkardeskaya, senior analyst at Swissquote, said the US ADP report, due at 1315 BST, will give the first hint on how well the labour market did in September.

“The US economy is expected to have added near 430,000 private jobs in September. We are now talking about numbers far below the 800,000 or a million job additions of the post pandemic recovery.

“Any weakness in the jobs figure could dampen the market mood again, as soft economic data could no longer revive the central bank doves, as the spike in energy prices continue fueling expectations of higher inflation for longer.

“Therefore, central banks will be forced to cool down the overheating in inflation rather than trying to boost recovery. As a result, any softness in data could send the US equities back below their 100-DMA levels.”

On home shores, Markit’s construction PMI for September is scheduled for release at 0930 BST.

In equity marketsImperial Brands was trading lower despite saying it was track to meet full-year expectations as the business continues to perform well.

Homeserve was knocked lower by a downgrade to ‘underperform’ from ‘outperform’ at Exane.

On the upside, supermarket chain Tesco rallied as it lifted full-year earnings guidance after strong first-half sales helped interim profits to more than double against a backdrop of labour shortages and cost pressures. The company also said it was starting an ongoing share buyback with the first tranche of £500m to be bought within a year.

Recruiter PageGroup was a high riser after it lifted its guidance for full-year operating profit to around £155m from between £125m and £135m, as it reported a jump in third-quarter gross profit. Peer Hays also gained.

Elsewhere, HSBC was lifted by an upgrade to ‘buy’ at UBS.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Tesco Plc +4.29% +10.85 263.85
2 Hsbc Holdings Plc +2.29% +9.00 402.00
3 Pearson Plc +0.44% +3.20 723.40
4 Standard Chartered Plc +0.43% +1.90 443.70
5 Sainsbury (j) Plc +0.40% +1.20 300.60
6 Fresnillo Plc +0.21% +1.60 779.60
7 London Stock Exchange Group Plc +0.00% +0.00 8,620.00
8 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90
9 Morrison (wm) Supermarkets Plc +0.00% +0.00 285.60
10 Reckitt Benckiser Group Plc +0.00% +0.00 6,498.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Next Plc -3.66% -294.00 7,748.00
2 Whitbread Plc -3.45% -116.00 3,244.00
3 Melrose Industries Plc -3.37% -5.70 163.35
4 Informa Plc -3.29% -19.20 563.60
5 Centrica Plc -3.20% -1.88 56.88
6 Easyjet Plc -3.06% -21.20 672.20
7 Taylor Wimpey Plc -3.04% -4.65 148.45
8 Persimmon Plc -2.99% -77.00 2,497.00
9 Evraz Plc -2.97% -17.20 561.20
10 Anglo American Plc -2.79% -72.50 2,529.00


Europe open: Shares slide as bond yields, oil prices surge

European stocks opened sharply lower on Wednesday on the back of surging bond yields and oil prices as investors fretted about inflation.

The pan-European Stoxx 600 index fell 1.28% with all major regional bourses lower. US and German bond yields rose to their highest in more than three months leading investors to dump tech stocks and move towards banks as higher rates make future profit valuations less attractive.

Nasdaq futures were down 1.13% ahead of the US opening in a sign the tech selloff would continue this afternoon. Investors were also eyeing the US ADP private payrolls report for September set to be released later Wednesday.

In equity news, shares in banks HSBC and Commerzbank both gained more than 2%.

Danish medical device company Ambu slumped 8.6% after warning that revenue growth and earnings will fall below previous guidance.

Deutsche Telekom fell 4.1% after Goldman Sachs sold shares worth €1.58bn in a SoftBank- structured finance deal.

Bayer rose after the German agricultural and pharmaceuticals firm won its first trial over claims its Roundup weedkiller causes cancer.

Tesco jumped 5% as the UK supermarket chain lifted its full-year outlook and launched a £500m share buyback.

Shares in recruiter PageGroup rose 7.59% after the company lifted its guidance for full-year operating profit on Wednesday as it reported a jump in third-quarter gross profit.


US close: Dow Jones almost reverses Monday’s losses

Wall Street stocks closed higher on Tuesday following heavy losses in the previous session.

At the close, the Dow Jones Industrial Average was up 0.92% at 34,314.67, while the S&P 500 was 1.05% firmer at 4,345.72 and the Nasdaq Composite saw out the session 1.25% stronger at 14,433.83.

The Dow closed 311.75 points higher on Tuesday, almost reversing losses recorded on Monday as investors rotated out of tech stocks amid rising bond yields.

Investors seemed to be buying the dip on Tuesday, as tech stocks traded higher despite the yield on the benchmark 10-year Treasury note trading higher at 1.534%.

Market participants were also focussed on Washington, with lawmakers still trying to agree on whether or not they should raise or suspend the US borrowing limit in order to avert a dangerous first-ever default on national debt. The Treasury Department cautioned lawmakers last week that they needed to address the debt ceiling before 18 October, when officials estimate that the US will have exhausted emergency efforts to honour bond payments.

On the macro front, the US international trade balance in August was -$73.3bn, according to the Census Bureau, a widening from the prior month’s print of -$70.3bn as imports rose 1.4% to $287.0bn and exports only increased 0.5% to $213.7bn.

Elsewhere, IHS Markit‘s September services PMI weakened modestly to 54.9 in September from 55.1 in August, while the composite PMI declined from 55.4 to 55.

Lastly, the ISM‘s services PMI ticked up just 0.2% in September to 61.7%, the index’s 16th consecutive monthly gain.

In the corporate space, Facebook shares closed higher after slumping almost 5% on Monday as a result of a mass outage caused by “configuration changes on the backbone routers” and whistleblower claims, while PepsiCo raised full-year revenue guidance after reporting an earnings beat despite slowing beverage sales.

Also in company headlines, Johnson & Johnson revealed it will seek regulatory approval in the US for a booster shot for its Covid-19 jab after a Phase III study found a booster given 56 days after the first dose provided 94% protection against moderate to severe/critical cases and 100% protection against severe/critical infection.


Wednesday newspaper round-up: Petrol prices, Amazon, DeepMind

Nearly two-thirds of UK manufacturers expect to raise their prices in the run-up to Christmas after being hit by mounting cost pressures, a leading employers’ group has said. The British Chambers of Commerce said inflation expectations had risen to their highest since its records began at the end of the 1980s, with 62% of industrial firms planning price hikes over the next three months. – Guardian

Petrol prices could reach all-time highs before Christmas, the RAC warned, signalling “misery” for motorists still reeling from the fuel shortage crisis. Amid signs that the number of petrol forecourts running dry was easing, the drivers’ organisation warned that anxiety about whether motorists could fill up their tanks was likely to be replaced by concern about how much it would cost. – Guardian

Vladimir Putin has blamed the shift to renewable energy for causing “hysteria and confusion” in European markets as gas prices surged to new record highs. The Russian president claimed that the power crisis gripping the West is being driven by an “unbalanced” and “drastic” move away from fossil fuels, amid efforts by the Kremlin to downplay suggestions that it has sent prices surging by restricting the supply of gas. – Telegraph

Amazon has opened a new bricks and mortar concept store selling electronics, books, toys and kitchenware in a fresh assault on physical rivals such as John Lewis and Curry’s. Called 4-star, the shop stocks about 2,000 of the company’s highest-rated and most popular products and is located in Bluewater, a shopping centre just outside of London. – Telegraph

Google’s London-based artificial intelligence lab has moved into the black for the first time after the Silicon Valley giant used more of its discoveries in its commercial products. DeepMind’s maiden annual profit draws a line under many years of heavy losses and suggests that its parent is starting to generate significant revenue from its intellectual property. – The Times


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