ADVFN Morning London Market Report: Thursday 7 October 2021

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London open: Stocks rally amid US debt ceiling hopes

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London stocks rose in early trade on Thursday as worries about gas prices eased and amid hopes for a deal on the US debt ceiling.

At 0840 BST, the FTSE 100 was up 1% at 7,064.05.

Richard Hunter, head of markets at Interactive Investor, said: “Risk appetite has briefly returned for investors, although sentiment remains delicately poised.

“Progress on debt ceiling talks in the US seems to suggest a temporary deal to avoid default, which gave markets a shot in the arm as the trading session progressed. At the same time, indications that Russia may be stepping up gas supplies also steadied energy prices, which have been the main culprit for the volatility which is currently being experienced.

“UK markets have also regained some ground, although as yet unable to recover the losses of the last few trading sessions.

“The spike in natural gas prices is seen as having a more profound impact in European economies and any resultant restriction on growth would negatively impact the largely cyclical constituents to be found within the premier index. At the same time, the perceived slowing of momentum in the UK economic recovery, particularly given the removal of various government support schemes, has had a notably damaging effect on the more domestically focused FTSE 250.”

In equity markets, mining stocks rallied, with Antofagasta and Anglo American both sharply higher.

Royal Dutch Shell was a touch firmer despite saying it expects third-quarter cash flow to be “significantly” impacted by surging gas and electricity prices. The company said it would take a $400m hit to earnings from Hurricane Ida which hit the Gulf of Mexico in August.

Paper and packaging group Mondi was also in the black after it reported a jump in third-quarter earnings as it benefitted from higher prices and strong demand.

Fund management services provider JTC rallied after it raised £78.9m in a placing to help fund the acquisition of US-based SALI for up to $236m.

On the downside, homeware retailer Dunelm was knocked lower by an initiation at ‘sell’ by Investec.

KingfisherTaylor WimpeyDS SmithMorgan SindallSynthomer and Vistry were all weaker as they traded without entitlement to the dividend.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Antofagasta Plc +3.24% +41.50 1,323.50
2 Anglo American Plc +2.89% +73.00 2,599.00
3 Fresnillo Plc +2.86% +22.80 818.80
4 Smurfit Kappa Group Plc +2.55% +96.00 3,858.00
5 Johnson Matthey Plc +2.46% +62.00 2,580.00
6 Crh Plc +2.43% +82.00 3,454.00
7 Experian Plc +2.17% +66.00 3,113.00
8 Informa Plc +2.13% +12.00 574.20
9 Mondi Plc +1.99% +35.50 1,823.50
10 Scottish Mortgage Investment Trust Plc +1.93% +26.00 1,373.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Kingfisher Plc -2.01% -6.50 316.10
2 Taylor Wimpey Plc -1.01% -1.50 146.50
3 Sainsbury (j) Plc -0.69% -2.00 288.70
4 Lloyds Banking Group Plc -0.65% -0.30 45.75
5 Smith (ds) Plc -0.61% -2.40 388.00
6 Hargreaves Lansdown Plc -0.46% -6.50 1,408.50
7 Hiscox Ltd -0.29% -2.40 827.60
8 Pearson Plc -0.16% -1.20 741.00
9 Direct Line Insurance Group Plc -0.11% -0.30 282.70
10 Morrison (wm) Supermarkets Plc -0.04% -0.10 285.30

 

Europe open: Stocks rally on US debt ceiling hopes, lower oil

European stocks rebounded strongly from Wednesday’s losses at the opening on Thursday as lower oil and gas prices gave some respite to investors.

The pan-European STOXX 600 index rose 1.07% in early deals with all regional bourses higher. Oil prices dropped fell again along with European gas futures.

Investors were also relieved over moves on the US debt ceiling front as US Senate Republican Leader Mitch McConnell announced plans to extend the borrowing limit into December.

Sentiment turned positive after the benchmark U.S. 10-year Treasury yield fell back d from more than three-month highs on Wednesday and US stocks rallied as investors bought the dip in tech stocks.

“Risk appetite has briefly returned for investors, although sentiment remains delicately poised,” said interactive investor Richard Hunter.

“Progress on debt ceiling talks in the US seems to suggest a temporary deal to avoid default, which gave markets a shot in the arm as the trading session progressed. At the same time, indications that Russia may be stepping up gas supplies also steadied energy prices, which have been the main culprit for the volatility which is currently being experienced.”

In economic news, German industrial output slumped by more than expected in August as supply chain disruptions weighed on Europe’s largest economy. Output fell 4% month-on-month after a 1.3% rise in July and a severe drop from the 0.4% decline forecast.

In equity news, French luxury goods maker Hermes jumped 3.1% after HSBC upgraded the stock to ‘hold’, driving rises in sector peers LVMHRichemont and Kering.

Royal Dutch Shell inched ahead after reporting a $400m hit to earnings from soaring gas and electricity prices and Hurricane Ida, but noting that the same price rises would boost third quarter cash flow.

Swiss construction chemicals maker Sika gained after reporting it could overcome rising raw material costs and supply chain restrictions to increase its sales and profit margins this year.

TeamViewer shares fell 2.3% after a 25% slump on Wednesday, on the back of weak quarterly earnings and a cut to full-year guidance.

 

US close: Stocks finish firmer as jobs figures beat forecasts

Wall Street stocks reversed earlier losses for a positive finish on Wednesday, despite ongoing fears regarding rising rates, higher inflation, global reopening, and the debt limit.

At the close, the Dow Jones Industrial Average was up 0.3% at 34,416.99, the S&P 500 added 0.41% to 4,363.55, and the Nasdaq Composite was 0.47% firmer at 14,501.91.

The Dow closed 102.32 points higher on Wednesday, taking a huge bite out of gains recorded in the previous session.

Oil prices, which hit their highest level since 2014 on Tuesday, slipped on Wednesday, with West Texas Intermediate crude oil last down 2.42% at $77.02 per barrel.

Comments from Janet Yellen on Tuesday were also weighing on sentiment, with the Treasury Secretary warning that the US would fall into a recession if Congress did not raise the debt ceiling before the 18 October deadline.

On the macro front, mortgage applications fell 6.9% in the week ended 1 October as higher rates weighed on the market in the, according to the Mortgage Bankers Association, with activity in both purchases and refinancing sliding.

Elsewhere, ADP employment change figures revealed that private jobs rose by 568,000 in September, better than estimates for a print of 425,000 as the leisure and hospitality sector led job creation with 226,000 hires.

In terms of earnings, jeans giant Levi Strauss & Co was down 5.13% at the close ahead of its third-quarter results, but gained 3.14% in after-hours action.

Reopening plays were in the red at the closing bell, with American Airlines down 4.33% and JetBlue 2.67% lower, after downgrades from analysts at Goldman Sachs who cited higher fuel prices and slower near-term demand.

General Electric and Carnival were also in the red by 0.54% and 2.05%, respectively, due to fears regarding the global economic recovery.

 

Thursday newspaper round-up: Rail fares, Ocado, British Airways

Britain’s top-listed businesses have made further progress on gender targets but still have too few women in senior leadership positions, a report has found. The research, by Cranfield School of Management, found the proportion of women on FTSE 100 boards was at an all-time high, but concluded there still were not enough female chairs, chief executives and chief financial officers. – Guardian

Millions of commuters are facing a double-digit percentage rise in their rail fares over the next two years as financial markets predicted a jump in inflation lasting well into 2022. Investors are bracing for the Retail Price Index (RPI), which is used to calculate fare increases, to peak at 7pc by April next year and remain at 6.2pc in July – the month in which the figure is used to calculate increases in ticket prices and student loan interest costs. – Telegraph

Households face a £220 increase to their council tax bills over the next three years as local authorities plug a £3bn blackhole in their finances, a leading think tank has warned. The Institute for Fiscal Studies (IFS) said council taxes could need to rise by 5pc per year, with Boris Johnson’s recent social care reforms posing “major challenges” for local authority budgets. – Telegraph

Ocado is investing £10 million in the driverless car start-up Wayve as part of a year-long trial that could result in autonomous grocery deliveries. Ocado uses robots in its warehouse to pick customer orders from a grid-like system but the Wayve deal could pave the way for robots to deliver groceries to peoples’ homes. – The Times

British Airways plans to rehire some of the thousands of staff laid off last year. Unite, the union, says the airline is looking to rehire about 3,000 cabin crew after cutting roughly 10,000 jobs, a third of its workforce, last spring and summer when the Covid-19 crisis had grounded most of its aircraft. BA did not confirm how many staff would be taken back, but it has begun offering new cabin crew jobs from next summer, according to the Financial Times. – The Times

 

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