ADVFN Morning London Market Report: Thursday 4 November 2021

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London open: Stocks edge up ahead of BoE announcement

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London stocks edged higher in early trade on Thursday as investors waded through earnings news ahead of the latest policy announcement from the Bank of England.

At 0845 GMT, the FTSE 100 was up 0.2% at 7,265.13 amid expectations the BoE will raises rates in the face of rising inflation.

CMC Markets analyst Michael Hewson said: “It is true a rate rise now would be a sharp change in policy from the last meeting in September, but it wouldn’t be the end of the world either.

“A rate increase of 0.15% to 0.25% could be argued as being entirely consistent with the recovery in the UK economy seen since the emergency measures were implemented back in March 2020, and while any decision is unlikely to be unanimous, we know of only two who would be more than likely to vote against a rise in rates, Tenreyro and Mann, given their recent comments on policy.

“One thing is certain it will probably be a split decision and likely to be decided by the odd vote, but more than anything if the UK economy can’t withstand a 0.15% rise in base rate, then we are in a very sorry state indeed.”

In corporate newsBT rallied as it reported a fall in interim profits due to higher finance costs and partially offset by a rise in adjusted core earnings, but reaffirmed its outlook for 2022 and resumed dividend payments.

JD Sports also gained even as the Competition and Markets Authority ordered it to sell Footasylum after an in-depth investigation identified competition concerns.

Currys pushed higher after the electrical retailer announced a £75m share buyback as group organic sales jumped 15% from pre-pandemic 2019 levels on the back of continued demand for products such as laptops and video games during lockdowns.

Tate & Lyle was up after it reported a rise in first-half profit and revenue following a particularly strong performance in the food & beverage solutions business.

Luxury car maker Aston Martin advanced after it backed its full-year guidance and reported a jump in revenue and a narrowing of its losses amid strong demand for cars such as its DBX.

On the downside, Sainsbury’s fell even as it stuck to its full-year guidance and reported a 23% increase in first-half profit, boosted by higher grocery sales and cost cuts.

TI Fluid Systems lost ground as it posted a drop in third-quarter revenues amid chip shortages and supply chain issues.

Ashmore was also in the red as it traded without entitlement to the dividend.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Bt Group Plc +5.70% +8.10 150.25
2 Easyjet Plc +3.52% +21.60 635.40
3 Smith & Nephew Plc +2.59% +33.50 1,326.00
4 British Land Company Plc +2.53% +12.50 506.00
5 International Consolidated Airlines Group S.a. +2.49% +4.16 171.32
6 Land Securities Group Plc +2.48% +16.80 695.40
7 Tui Ag +2.41% +5.60 238.20
8 Marks And Spencer Group Plc +2.39% +4.50 193.15
9 Rolls-royce Holdings Plc +2.29% +3.04 135.64
10 Kingfisher Plc +2.03% +6.80 341.50

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Sainsbury (j) Plc -3.98% -11.50 277.40
2 Flutter Entertainment Plc -1.44% -185.00 12,690.00
3 Persimmon Plc -1.20% -32.00 2,633.00
4 Schroders Plc -1.08% -40.00 3,660.00
5 Croda International Plc -1.04% -100.00 9,514.00
6 Barratt Developments Plc -0.80% -5.20 648.40
7 Hargreaves Lansdown Plc -0.75% -12.00 1,586.00
8 Wpp Plc -0.70% -7.50 1,059.50
9 Hikma Pharmaceuticals Plc -0.69% -17.00 2,447.00
10 Unilever Plc -0.57% -22.50 3,922.00

 

US close: Markets pop higher as Fed confirms tapering plans

Stocks closed in positive territory on Wall Street on Wednesday, with the main indices popping above the waterline following the Fed’s decision to begin tapering bond purchases.

At the close, the Dow Jones Industrial Average was up 0.29% at 36,157.58, as the S&P 500 added 0.65% to 4,660.57 and the Nasdaq Composite climbed 1.04% to 15,811.58.

The Federal Open Market Committee (FOMC) sated traders’ expectations late in the day, confirming that it would begin tapering back its asset purchase programme later in the month.

It said that it would initially reduce Treasury note purchases by $10bn per month, and mortgage-backed securities by $5bn.

The Fed also adjusted its rhetoric on inflation, maintaining that recent runaway price increases were “transitory”, but added that was only an expectation at this stage.

Jerome Powell, chair of the central bank, said he was expecting inflationary pressures to linger “well into next year” in his post-meeting press conference.

“Our baseline expectation is that supply chain bottlenecks and shortages will persist well into next year and elevated inflation as well,” Powell said.

“As the pandemic supplies, supply chain bottlenecks will abate and growth will move up and as that happens inflation will decline from today’s elevated levels.”

Analyst Yash Chauhan of Validus Risk Management said the Fed statement was “exactly in line” with market expectations, acknowledging that “substantial further progress” had been made towards maximum employment and price stability to warrant the start of tapering, though it did stop short of giving any timeline in terms of a hike in rates.

“One significant change in the statement was that the Fed now believes that factors contributing to elevated inflation are ‘expected’ to be transitory, supporting the market’s view that supply chain disruptions could persist well into next year,” Chauhan noted.

“Powell emphasised the dual mandate of price stability and maximum employment, and said that rate lift-off would only occur once the latter had been reached.

“As expected, Powell refrained from sharing any numerical anchor to measure maximum employment and said that the Fed measures it using a wide range of figures, effectively keeping some wiggle room to adjust policy as required.”

On the economic front, consultancy ADP reported a 571,000 jump in private sector jobs during the month of October, well ahead of consensus expectations for an increase of 400,000, which was seen by some traders as a good omen ahead of Friday’s non-farm payrolls.

The Institute for Supply Management‘s services sector purchasing managers’ index (PMI), meanwhile, surprised to the upside, posting a record reading of 66.7.

That was a decent jump from September’s print of 61.9, and well ahead of market forecasts for a reading of 61.8.

Finally, the latest data from the Mortgage Bankers’ Association revealed a 9.2% month-on-month drop in total mortgage applications in October, as the 30-year mortgage rate hit an eight-month high of 3.22%.

In equities, homeware retailer Bed Bath & Beyond jumped 15.22% after it announced a tie-up with America’s largest supermarket chain Kroger, and said it was ahead of schedule on share buybacks.

Kroger itself was 5% firmer by the closing bell.

Ride-hailing outfit Lyft was 8.19% higher after it posted a 73% rise in annual revenue after the close on Tuesday, while Humana managed gains of 0.51% after the insurer beat on both revenue and adjusted quarterly earnings.

On the downside, property marketing firm Zillow Group plunged 22.93% after it dropped the axe on its house-flipping operations, admitting it paid too much on a number of homes and expected to lose $550m on its misadventure in the second half.

Video games developer Activision Blizzard slid 14.06% after it delayed two releases and issued a lighter outlook than anticipated, while the New York Times publishing group fell 9.57% despite beating market expectations on earnings and reporting a positive outlook.

 

Thursday newspaper round-up: Phones4U, Aston Martin, LV

ExxonMobil and Chevron are the world’s most obstructive organisations when it comes to governments setting climate policies, according to research into the “prolific and highly sophisticated” lobbying ploys used by the fossil fuel industry. The biggest US oil companies, as well as American Petroleum Institute, a lobby group, were found to be the worst offenders in a global report by lobbying experts at the thinktank InfluenceMap. It concluded that companies were manipulating governments to take “incredibly dangerous paths” in their approach to climate action. – Guardian

A senior executive of France’s national telecoms operator sought to arrange a call with a rival on untraceable “burner” mobiles as part of an unlawful plot that led to the collapse of the retailer Phones 4U, according to a potentially explosive High Court claim. Benoit Scheen, who in 2014 oversaw European businesses outside France for Orange, including its 50pc stake in the British mobile network EE, allegedly approached Philipp Humm of Vodafone via text message. – Telegraph

Nestled in the Swiss countryside on the outskirts of St Gallen is a luxury car showroom that more closely resembles an elite members club. Visitors are invited to lounge in front of an open fireplace and enjoy food prepared by a resident chef as they decide whether to part with wads of cash. For years the space, run by businessmen Florian Kamelger and Andreas Baenziger, is where some of the world’s wealthiest individuals have chosen to splash millions of pounds on Aston Martin’s limited edition cars – the most expensive and prestigious on offer. – Telegraph

The board of LV= is facing mounting criticism over the decision to sell the mutual insurer to an American private equity firm after it emerged that most of its 1.2 million members stand to receive only £100 each from the £530 million deal. The customer-owned mutual formerly known as Liverpool Victoria yesterday revealed the details of its plan to sell itself to Bain Capital, after first agreeing the takeover last December. – The Times

The costs of green home heating systems will fall dramatically, the boss of Ofgem has predicted. Jonathan Brearley said that he expected costs to fall in the same way as they had for other green technologies, such as offshore wind and electric vehicles. – The Times

 

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