ADVFN Morning London Market Report: Tuesday 2 August 2022

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London open: FTSE little changed amid China-US tensions; BP gushes higher

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London stocks were little changed in early trade on Tuesday amid tensions between the US and China, but BP was a bright spot after well-received second-quarter results.

At 0920 BST, the FTSE 100 was up just 0.1% at 7,416.90.

Neil Wilson, chief market analyst at Markets.com, said: “There’s plenty of disquiet about Nancy Pelosi’s rumoured visit to Taiwan. Asian markets fell around 1-2% overnight. It’s really quite hard to read too much into this mooted visit by the Speaker of the House of Representatives – the war of words between the US and China is likely to be spicy but unlikely to be material.

“Longer term, we simply don’t know how Beijing will respond; for today it’s a case of muscle flexing: buzzing the skies with jets, military drills and even firing the odd missile. Ultimately the worry is that tensions becoming inflamed enough for Beijing to use this as the pretext it seeks to invade? I’m not an Asian policy expert so I will leave that to those in the know; for traders I would simply urge you to play what’s in front of you.”

In equity markets, BP jumped to the top of the FTSE 100 after the oil giant said underlying cost replacement profit rose to $8.45bn in the second quarter from $6.25m in the first, coming in well ahead of analysts’ expectations of $6.8bn. This was driven by strong realised refining margins, a continuing “exceptional” oil trading performance and higher liquids realisations.

Elementis rallied as it said its full-year performance was set to be towards the top end of consensus expectations as it hailed good demand.

High Street bakery chain Greggs gained as it reported a 22.4% rise in like-for-like sales for the half-year as trading normalised after the lifting of Covid restrictions.

Biffa and Rotork were also trading higher after results.

On the downside, Fresnillo lost its shine after the precious metals miner posted a decline in interim profits mainly due to lower gold volumes sold and a drop in silver prices.

Synthomer lost ground after it reported a fall in interim pre-tax profit but struck a confident note on the outlook as it said all businesses had grown apart from the elastomers segment.

Travis Perkins was under the cosh after the DIY retailer said its Toolstation business swung to a loss in the first half as the pandemic boost faded.

Man Group and Domino’s were also in the red after half-year results.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Bp Plc +3.75% +14.70 407.05
2 British American Tobacco Plc +3.19% +103.00 3,333.00
3 Pearson Plc +2.65% +22.60 875.20
4 Bae Systems Plc +1.96% +15.40 802.40
5 Imperial Brands Plc +1.77% +32.00 1,844.00
6 Standard Chartered Plc +1.23% +7.00 575.20
7 Lloyds Banking Group Plc +1.19% +0.54 45.59
8 Mondi Plc +1.15% +18.00 1,581.00
9 Shell Plc +1.10% +23.50 2,159.50
10 United Utilities Group Plc +1.09% +12.00 1,109.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Fresnillo Plc -4.86% -35.40 692.80
2 Barratt Developments Plc -3.74% -18.90 486.70
3 Hargreaves Lansdown Plc -3.66% -31.00 815.60
4 Berkeley Group Holdings (the) Plc -3.56% -153.00 4,145.00
5 Taylor Wimpey Plc -3.55% -4.55 123.45
6 Tui Ag -3.01% -4.00 129.05
7 Persimmon Plc -2.81% -53.50 1,850.50
8 Kingfisher Plc -2.70% -7.00 252.00
9 International Consolidated Airlines Group S.a. -2.05% -2.38 113.76
10 Spirax-sarco Engineering Plc -2.05% -245.00 11,730.00

 

US close: Stocks turn weaker after mixed manufacturing data

Wall Street stocks closed weaker on the first day of August, with manufacturing data and comments from the Fed’s Neel Kashkari were in focus.

At the close, the Dow Jones Industrial Average was down 0.14% at 32,798.40, as the S&P 500 lost 0.28% to 4,118.63 and the Nasdaq Composite was off 0.18% to 12,368.98.

The Dow closed 46.73 points lower on Monday, taking a small bite out of the gains it recorded on Friday at the end of Wall Street’s best week since 2020.

“Nancy Pelosi’s plan to visit Taipei has caused some consternation amongst markets as the House Speaker raises the risk of a confrontation between the US and China,” said IG senior market analyst Joshua Mahony.

“While talks between Biden and Xi raised hope that the two countries could find common ground to help steady the boat at a time of economic difficulty, we are instead faced with a potential military standoff as the US seeks to establish their position to avoid a repeat of the Russia-Ukraine conflict.

“For markets, this fear is reflected in a strengthening dollar-offshore renminbi, which hit a two-month high despite the wider dollar selloff.”

On the economic front, S&P Global‘s manufacturing reading was revised slightly lower to 52.2 in July, down from a preliminary reading of 52.3, pointing to the lowest factory growth since July 2020.

Output dropped for the first time since June 2020 amid weaker demand conditions, difficulties finding candidates to fill vacancies and raw material shortages

Elsewhere, the Institute for Supply Management‘s manufacturing PMI dipped to 52.8 in July, down from 53 in June and beating market forecasts for a print of 52.

Finally on US data, construction spending fell by 1.1% month-on-month to a seasonally adjusted annual rate of $1.76trn in June, according to the Census Bureau, up from a revised 0.1% increase in May.

Private construction spending contracted 1.3%, while public construction spending shrank 0.5%.

Market participants were also digesting comments from the Federal Reserve’s Neel Kashkari over the weekend, with the central banker stating the Fed – which hiked rates by 75 basis points last week – was committed to bringing inflation down to 2%.

That would require US interest rates to reach double-digit territory, Kashkari said, adding that the process of front loading had not come to an end just yet.

Further afield, data out of China was attracting investor attention at the open, with the nation’s recent rebound beginning to stall.

The Caixin/Markit manufacturing PMI dropped into contraction territory to print at 49 – down from its previous reading of 50.2.

In equities, American chipmakers were in the green on the back of the better-than-expected manufacturing PMI, with Advanced Micro Devices up 2.45% and Nvidia ahead 1.53%.

Weaker oil prices pushed energy plays to the downside, meanwhile, with Chevron down 2%, Diamondback Energy off 1.64%, and ExxonMobil losing 2.53%.

 

Tuesday newspaper round-up: Gazprom, JCB, taxes, HSBC

The daily gas production of Russia’s Gazprom dropped in July to its lowest level since 2008, figures suggest, amid continued fears that Moscow could cause an energy crisis in Europe by shutting off the supply. The state-owned energy firm pumped 774 million cubic metres a day last month – 14% less than in June – according to analysis by Bloomberg of data released on Monday. – Guardian

The heir to the digger company JCB has failed in an attempt to take control of a business run by his former best friend after a bitter US courtroom battle that included lurid allegations about personal conduct – and even revealed an apparent attempt to buy Michael Jackson’s Neverland ranch. Jo Bamford, a grandson of the JCB founder, sued Joseph Manheim last year in Delaware, claiming that his former friend had “surreptitiously” taken control of a company they set up to help wealthy, mainly Chinese, investors get residence in the US. Bamford, 44, a self-styled “green entrepreneur”, claimed Manheim secretly siphoned millions of dollars from the business and Bamford sought damages of $13.8m (£11.3m). – Guardian

The tax burden will remain at its highest level for 70 years if Rishi Sunak becomes Prime Minister despite his pledge to slash 4p off the basic rate of income tax, Britain’s top fiscal think tank has said. Tax would still account for the largest proportion of national income since the early 1950s if the ex-Chancellor pulls off his promised tax cut in the next Parliament, the Institute for Fiscal Studies said. – Telegraph

Energy companies are attempting to overcome planning restrictions on onshore wind farms with an upgrade programme that could make hundreds of existing turbines taller. Octopus Energy has set its sights on up to 1,000 turbines which it hopes to reconfigure or replace, providing electricity for up to half a million more homes than they currently supply. In many cases the refit would involve installing bigger blades or adding as much as 20 metres to existing turbines’ height. – Telegraph

The boss of HSBC has warned that breaking up the bank would destroy value for investors as the lender set out its defence against a push by its largest shareholder to split the group in two. Noel Quinn used the company’s half-year results yesterday to mount a rebuttal of a proposal from Ping An for the bank to spin off its Asian business into a separate company listed in Hong Kong. He said the FTSE 100 group had examined a number of options for the way it is structured but believed that “international connectivity is core to our entire value proposition”. – The Times

 

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