ADVFN Morning London Market Report: Monday 12 September 2022

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London open: FTSE gains as miners rally; GDP disappoints

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London stocks rose in early trade on Monday thanks to a strong showing in the mining sector, as investors mulled weaker-than-expected UK GDP data.

At 0845 BST, the FTSE 100 was up 0.7% at 7,400.52, while sterling was 0.9% firmer against the dollar at 1.1690.

Figures released earlier by the Office for National Statistics showed that GDP rose 0.2% in July following a 0.6% decline in June, coming in below economists’ expectations of 0.5% growth.

The services sector was the main driver of the rise in GDP, with growth of 0.4% in July, up from 0.5% the month before.

Meanwhile, production contracted by 0.3% following a 0.9% decline in June, mainly due to a fall of 3.4% in electricity, gas, steam, and air conditioning supply. Construction fell 0.8% in July following a 1.4% contraction the month before. This came solely from repair and maintenance, which fell 2.6%.

This marked the second consecutive contraction for production and construction.

The ONS said monthly GDP is now estimated to be 1.1% above its pre-Covid level in February 2020.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Looking ahead, the extra public holiday for the Queen’s funeral on September 19 has the potential to be more damaging for the economy than the extra day off for the Jubilee in June, as the hospitality and tourism sector likely won’t benefit, but many businesses still will shut. That said, many businesses will be able to catch up work, as most of them did in June. Similar events in the past also had minimal impact on consumers’ confidence and their spending decisions.

“For now, then, we’re pencilling in a 0.2% hit to the level of GDP in September from the funeral. That suggests that a technical recession – widely defined as two quarters of declining GDP- is hanging in the balance, given that business surveys have weakened since July and are consistent with GDP merely holding steady in Q3. Nonetheless, households’ real disposable incomes likely will recover over the coming quarters, now that the government has capped energy prices, maintained previously announced grants, and likely will reverse April’s National Insurance hike soon.”

In equity markets, miners were the standout gainers as metals prices rose, with Anglo AmericanGlencore and Rio Tinto all higher.

Residential property business Grainger rose as it said rents had grown 4.5% year-to-date on a like-for-like basis amid “strong” rental market conditions in the second half of the trading year.

On the downside, government contractor Serco fell as it said chief executive Rupert Soames would retire in September 2023 and step down both from the board at the end of this December 2022. He will be succeeded by Mark Irwin, who is currently the CEO of Serco’s UK & Europe Division.

Tate & Lyle was knocked lower by a downgrade to ‘hold’ at Jefferies.

Ladbrokes owner Entain was in focus Australia’s financial crimes regulator said it would be investigating the company’s compliance with anti-money laundering and counter-terrorism financing laws.

 

Top 10 FTSE 100 Risers

1 Marks And Spencer Group Plc +5.40% +6.35 124.00
2 Tui Ag +4.34% +6.00 144.20
3 Kingfisher Plc +4.01% +9.70 251.80
4 Tesco Plc +3.71% +8.90 248.80
5 Anglo American Plc +3.54% +103.50 3,030.00
6 Sainsbury (j) Plc +3.50% +7.10 209.70
7 Ocado Group Plc +3.49% +26.40 783.20
8 Itv Plc +3.25% +2.10 66.74
9 Smurfit Kappa Group Plc +3.14% +91.00 2,988.00
10 Berkeley Group Holdings (the) Plc +3.11% +110.00 3,652.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Centrica Plc -1.75% -1.52 85.38
2 Melrose Industries Plc -0.47% -0.60 126.75
3 Imperial Brands Plc -0.03% -0.50 1,952.00
4 Just Eat Plc -0.00% -0.00 861.00
5 Nmc Health Plc -0.00% -0.00 938.40
6 Shell Plc -0.00% -0.00 1,894.60
7 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90
8 Standard Life Aberdeen Plc +0.00% +0.00 274.10
9 London Stock Exchange Group Plc +0.00% +0.00 8,620.00
10 Rsa Insurance Group Ld +0.00% +0.00 684.20

 

US close: Stocks higher after Fed chair Powell comments

Wall Street stocks finished above the waterline on Thursday, having dipped earlier following comments from Fed chairman Jerome Powell.

At the close, the Dow Jones Industrial Average was up 0.61% at 31,774.52, as the S&P 500 added 0.66% to 4,006.18 and the Nasdaq Composite was ahead 0.6% at 11,862.13.

The Dow closed 193.24 points higher on Thursday, adding to the solid gains it recorded in Wednesday’s trading.

Both the New York Stock Exchange and the Nasdaq held a minute’s silence at 1500 EDT to honour the life of Queen Elizabeth II.

The UK’s monarch for the last 70 years died at Balmoral in Scotland on Thursday afternoon, after Buckingham Palace announced serious concerns for her health.

Thursday’s primary focus stateside was comments from Fed chairman Jerome Powell,, with the central bank head saying policymakers would have to “keep at it” until inflation came down.

In remarks at the Cato Institute in Washington DC, Powell said that it was key to understand if the world was shifting to structurally higher inflation and also said fiscal policy was not on a sustainable path and needed to be fixed “sooner rather than later”.

Market participants also looked across the pond, with the European Central Bank lifted interest rates by an unprecedented 75 basis points as it looks to tackle surging inflation.

The ECB lifted its key interest rate to 1.25%, as widely expected, and the deposit rate to 0.75% from zero.

It also said it now expects inflation to average 8.1% this year, 5.5% in 2023, and 2.3% in 2024.

In the year to August, eurozone inflation rose to a record high of 9.1% from 8.9% a month earlier, with energy prices up a whopping 38.3% year over year.

On the macro front, Americans filed new jobless claims at a decelerated pace in the week ended 3 September, according to the Department of Labor.

Initial unemployment claims fell by 6,000 last week, falling to 222,000 from a downwardly revised print of 228,000 in the previous week and well below consensus expectations for a reading of 240,000.

In the corporate space, Apple was down 0.96% after the tech behemoth announced a slate of new products including its new flagship iPhone late on Wednesday.

On the upside, GameStop was ahead 7.45% after it announced a tie-up with digital asset marketplace FTX.

 

Monday newspaper round-up: Housebuilders, Ryanair, John Lewis

Britain’s biggest housebuilders privately lobbied for the government to ditch rules requiring electric car chargers to be installed in every new home in England, documents have revealed. The FTSE 100 construction firms Barratt Developments, Berkeley Group and Taylor Wimpey were among the companies who argued against the policy in responses to an official consultation seen by the Guardian. The “blatant lobbying efforts” were criticised by Transport & Environment, a campaign group. – Guardian

Ryanair’s investors have been urged to vote down “excessive” bonus payouts and block eight senior bosses from re-election in the run-up to the airline’s annual shareholder meeting this week. Calling for a shareholder revolt at Europe’s biggest airline, the London-based Pirc advisory group highlighted concerns over the independence of the board and potential undue financial rewards for its top executives. – Guardian

John Lewis’s drive to build more than 10,000 homes is facing opposition from locals near a key site earmarked for development, amid fears the department store will build a tower block. Residents in West Ealing, London, said the prospect of John Lewis building a large high-rise on top of a Waitrose store was a “major upset”. Justine Sullivan, co-chairman of local campaign group Stop The Towers, said the retailer had refused to rule out building “a ginormous tower block, and that will deeply upset people”. – Telegraph

A National Grid scheme to avoid blackouts this winter by paying households to use less electricity at peak times is in danger of failing because the proposed payments are too low, leading energy suppliers have warned. The company responsible for keeping the lights on is trying to urgently establish a scheme whereby millions of consumers with smart meters could be rewarded for avoiding using energy-hungry appliances when electricity supplies are scarce. – The Times

Mike Ashley’s Frasers Group has emerged as a potential buyer of Gieves & Hawkes, the 250-year-old Savile Row tailor. Frasers, which owns Sports Direct, House of Fraser and Flannels, and other suitors are expected to place revised bids for the company this week, Sky News reported. – The Times

 

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