ADVFN Morning London Market Report: Wednesday 27 October 2021

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London open: Stocks steady ahead of Budget; miners slump

London stocks were steady in early trade on Wednesday as investors eyed the autumn Budget.

At 0835 BST, the FTSE 100 was flat at 7,275.25.

CMC Markets analyst Michael Hewson said: “With all the briefings that have been taking place since the weekend there would appear to be little in the way of surprises when the Chancellor of the Exchequer gets up to speak later today. Most of the content appears to have already been pre-briefed much to the displeasure of the Speaker of the House of Commons.

“These include increases to public sector pay, a huge cash injection for the NHS, investment in regional transport, skills, housing, and education, along with a freeze to fuel duty, however the devil will be in the detail, in terms of how much it is all likely to cost.”

The Budget is due at 1230 BST, after PMQs.

Meanwhile, figures out earlier from the British Retail Consortium showed UK shoppers face rising prices in the run-up to Christmas after the cost of goods increased for the third month running.

Total food prices rose 0.4% in October from a month earlier compared with a 0.1% month-on-month increase in September, the BRC/NielsenIQ shop price index showed. Overall prices remained below the level of a year earlier but the annual rate of decline reduced.

Food prices rose 0.5% in October from the previous month and non-food prices increased by 0.3%. Food inflation rose sharply from 0.2% in September and non-food price growth accelerated from 0.1%.

Fresh food prices rose for the first time in 10 months and non-food prices were affected by rising costs caused by shortages and supply constraints that hit products such as furniture.

Price increases have been fuelled by the rising cost of commodities, component shortages, bottlenecks at ports and a shortage of lorry drivers. The BRC said 60% of retailers surveyed expected prices to increase as Christmas approaches.

Helen Dickinson, the BRC’s chief executive, said: “This is the third consecutive month of both food and non-food month-on-month rises. The increased costs from labour shortages, supply chain issues and rising commodity prices have started filtering through to the consumer. Tight margins mean retailers may not be able to absorb all of these new costs, so prices will continue to rise.”

In equity markets, cybersecurity firm Darktrace was the standout gainer on the top-flight index, having fallen sharply in the previous two sessions on the back of a ‘sell’ note by broker Peel Hunt.

Transport operator FirstGroup rallied to the top of the FTSE 250 after confirming it will return £500m to shareholders through a tender offer at 105p a share.

HomeServe gained after it announced the acquisition of CET Structures, a UK home emergency assistance business, for £53m, and said current trading was in line with guidance.

On the downside, miners retreated as copper and other base metals prices fell, with Anglo American, Glencore, Antofagasta, Rio and BHP all weaker.

Admiral slumped after Munich Re sold 12.1m shares in the insurer in a placing at 2,940p each.

Fresnillo lost its shine after the mining company reported lower silver and flat gold production in the third-quarter as it warned of the impact of labour shortages and inflationary pressures.

Wickes lost ground after it confirmed its full-year profit guidance despite inflationary headwinds, but reported a dip in third-quarter sales.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Compass Group Plc +2.48% +37.00 1,531.50
2 Bunzl Plc +1.34% +35.00 2,644.00
3 Smith (ds) Plc +1.19% +4.50 384.20
4 Johnson Matthey Plc +1.15% +31.00 2,723.00
5 Segro Plc +0.96% +12.50 1,311.00
6 Tui Ag +0.88% +2.10 241.00
7 National Grid Plc +0.88% +8.10 930.90
8 Easyjet Plc +0.85% +5.20 614.60
9 Rentokil Initial Plc +0.82% +4.80 592.00
10 Spirax-sarco Engineering Plc +0.78% +120.00 15,595.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Admiral Group Plc -4.43% -135.00 2,912.00
2 Fresnillo Plc -2.55% -22.60 863.40
3 Anglo American Plc -2.22% -62.50 2,756.00
4 Kingfisher Plc -2.06% -7.10 337.00
5 Glencore Plc -1.96% -7.25 362.65
6 Bt Group Plc -1.78% -2.55 140.70
7 Antofagasta Plc -1.43% -20.50 1,417.00
8 Rio Tinto Plc -1.24% -58.50 4,666.50
9 Barclays Plc -1.11% -2.25 200.55
10 Scottish Mortgage Investment Trust Plc -1.11% -16.50 1,476.50


Europe open: Shares lower on Asia weakness as Kindred slumps

European stocks opened lower on Wednesday as Wall Street closed flat and Asian markets came under pressure.

The pan-European Stoxx 600 index was down 0.09% in early deals with regional bourses flat or lower. Britain’s FTSE 100 was down ahead of a government budget and spending review.

Shares in coal firms drove China equities down after Beijing’s latest move to address skyrocketing coal prices. Officials on Monday said they would investigate energy price index providers, urging industry participants to “strictly” meet contractual obligations.

In equity news, shares in gambling group Kindred slumped 14% at the opening bell after the company said gross winnings revenue in the first 24 days of October had been negatively impacted by the closure of services to Dutch residents and an “exceptionally weak sports betting margin”.

Deutsche Bank shares fell 3.2% after reporting a fall in revenues at its investment banking unit but still beating expectations to post its fifth consecutive quarter of profit.

Admiral stock fell after Munich Re sold 12.1m shares in the UK insurer in a placing.

Shares in Swiss banking software specialist Temenos soared 14% on reports that EQT is exploring a potential acquisition.

Homeserve shares were up after the home repairs company said it had bought insurance industry repairs outsourcer CET Structures for £53m.


US close: Major indices little changed at end of session

Wall Street stocks ended the session much the same as they started them on Tuesday.

At the close, the Dow Jones Industrial Average was up 0.04% at 35,756.88, while the S&P 500 was 0.18% firmer at 4,574.79 and the Nasdaq Composite saw out the session 0.06% stronger at 15,235.71.

The Dow closed 15.73 points higher on Tuesday, building on record-setting gains registered by the index in the previous session.

Facebook shares were in the red after the social media behemoth posting earnings that topped expectations on the Street but fell short on both revenue and monthly active users, while UPS traded higher on the back of strong beats on profit and revenue across all segments and 3M stock advanced after beating earnings on the top and bottom lines.

Hasbro reported strong revenue, operating profit and earnings growth, and Eli Lilly boosted full-year guidance despite reporting a drop in profits during the third quarter of its trading year.

After the close, Alphabet posted better-than-expected quarterly profit and revenue figures, Twitter said Apple privacy changes had made less of an impact on third-quarter earnings than initially expected, and Microsoft beat on revenues thanks to strong demand for its consumption-based cloud services.

On the macro front, S&P/Case-Shiller‘s house price index showed that prices increased 19.84% year-on-year in August, marginally ahead of July’s 19.75% clip for the biggest gain on record.

Elsewhere, new home sales surged in September, up 14% versus the 1.5% increase expected by economists, according to the Commerce Department.

Lastly, the Conference Board‘s consumer confidence index rose to 113.8 in October from an upwardly revised print of 109.8 for the previous month as concerns regarding the Covid-19 delta variant seemed to ease somewhat.


Wednesday newspaper round-up: Alphabet, China Telecom, Budget

Google parent Alphabet continued big tech’s profitable march through earnings season, reporting third-quarter results that exceeded Wall Street’s expectations and a near doubling in profits as advertisers chased the consumer shift to online. Alphabet’s revenue rose 41% to $65.12bn over the last three months, its largest revenue figure in 14 years. It posted a profit of over $21bn, nearly three times the figure it reported before the pandemic. – Guardian

The US communications regulator has voted to revoke China Telecom’s licence in America over national security concerns in the latest pushback by Washington against what it deems possible infiltration of key networks by Chinese companies. The decision by the US Federal Communications Commission (FCC) means China Telecom Americas must now discontinue US services within 60 days. China Telecom, the largest Chinese telecommunications company, has had authorisation to provide telecommunications services for nearly 20 years in the United States. – Guardian

Ministers will need to cut public spending by a further £5bn to fund the Chancellor’s planned savings drive as extra Covid costs threaten to hit budgets, economists have warned. Deutsche Bank said unprotected budgets for organisations such as universities and councils could be squeezed by Rishi Sunak in his Spending Review on Wednesday due to prolonged pandemic-related costs that risk ramping up funding pressures in the coming years. – Telegraph

The Bank of England is unlikely to raise interest rates despite mounting speculation that policymakers will attempt to rein in the recent spike in inflation, according to HSBC. The markets expect the Bank to lift rates by 15 basis points to 0.25 per cent at its meeting on November 4. However, analysts at HSBC suggested this may be an overreaction to comments made by ratesetters in recent weeks. – The Times

Monzo, one of the UK’s most prominent digital banks, is in talks to raise hundreds of millions of pounds at a sharply higher valuation despite a string of recent setbacks, including curtailing its expansion in the US. It is in discussions with investors about raising at least £300 million in new funding. Approximately £200 million is expected to be provided by new shareholders, the remainder from existing backers, according to Sky News. – The Times


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