ADVFN Morning London Market Report: Tuesday 1 November 2022

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London open: Miners pace the gains as investors eye Fed meeting

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London stocks rallied in early trade on Tuesday, with miners and Ocado pacing the advance, as investors eyed the start of the Federal Reserve’s two-day policy meeting.

At 0840 GMT, the FTSE 100 was up 1.5% at 7,197.54, while sterling was 0.5% higher against the dollar at 1.1531.

Oanda market analyst Craig Erlam said: “While a 75-basis point hike looks locked in tomorrow, the messaging is what investors are interested in. Despite inflation remaining at eye-watering levels, there’s a growing belief that the central bank will signal a desire to ease off the brake over the following few meetings starting with a 50bps hike in December.

“It may come too late to avoid a recession but the Fed has been very clear from the start that while a soft landing is the desirable and attainable outcome, getting inflation under control is the primary focus. The question is whether the central bank believes its efforts will achieve that or if more needs to be done.

“With the economy weakening, earnings not impressing and yield curves inverting – signalling an incoming recession – many now believe the risks of aggressive tightening are greater than a more gradual approach. The economy has a lot of tightening to absorb once rates likely hit the 3.75-4% range this week.”

Erlam said a dovish signal could be an exciting moment for equity investors, “one they’ve craved all year, but that doesn’t mean it’ll be plain sailing from here”.

On home shores, the latest survey from Nationwide showed that house prices suffered their first monthly decline in October since July 2021.

Prices fell 0.9% on the month, having been flat in September, marking the largest monthly fall since June 2020.

On the year, meanwhile, house prices were up 7.2% in October, down from 9.5% growth a month earlier, with the average price standing at £268,282.

Nationwide chief economist Robert Gardner said: “The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates. Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.

“The market looks set to slow in the coming quarters. Inflation will remain high for some time yet and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.”

Gardner said the outlook was “extremely uncertain”, and much will depend on how the broader economy performs, “but a relatively soft landing is still possible”.

In equity markets, Ocado rocketed after the online supermarket said it had signed a partnership between Ocado Solutions and Lotte Shopping, one of the largest business conglomerates in South Korea, to develop Lotte’s online business with the Ocado Smart Platform.

Miners were also on the rise as the US dollar eased, with GlencoreRio TintoAntofagasta and Anglo American among the top performers on the FTSE 100.

On the downside, pest control and business services group Rentokil fell despite posting a jump in third-quarter profit.

BP was a touch weaker even as it reported a surge in quarterly profit, well ahead of City expectations, and announced a further $2.bn share buyback, after Russia’s invasion of Ukraine pushed oil and gas prices to historic highs.

BP said third-quarter underlying replacement cost profits had come in at $8.15bn, compared to $3.32bn a year earlier, while total revenues and other income soared to $57.81bn from $37.87bn in 2021. Analysts had been expecting pre-tax profits to be closer to $6.1bn.

Profits were down slightly on the third quarter, however, when they came in at $8.45bn, following an easing in the oil price.

IWG lost ground after the office space provider posted a rise in third-quarter revenues but said full-year profit was set to be at the lower end of market expectations.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Ocado Group Plc +35.01% +165.40 637.80
2 Glencore Plc +4.66% +23.30 522.80
3 Anglo American Plc +4.66% +121.50 2,730.00
4 Prudential Plc +4.42% +35.80 846.60
5 Marks And Spencer Group Plc +3.74% +3.95 109.45
6 Bhp Group Limited +3.71% +77.00 2,153.50
7 Carnival Plc +3.62% +25.20 721.40
8 Auto Trader Group Plc +3.14% +16.40 538.00
9 Kingfisher Plc +3.11% +6.80 225.70
10 Antofagasta Plc +3.02% +35.50 1,211.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Rentokil Initial Plc -2.68% -14.60 529.80
2 Bp Plc -0.84% -4.05 475.75
3 Smith & Nephew Plc -0.78% -8.00 1,022.00
4 Flutter Entertainment Plc -0.35% -40.00 11,540.00
5 Just Eat Plc -0.00% -0.00 861.00
6 Shell Plc -0.00% -0.00 1,894.60
7 Nmc Health Plc -0.00% -0.00 938.40
8 Standard Life Aberdeen Plc +0.00% +0.00 274.10
9 Royal Bank Of Scotland Group Plc +0.00% +0.00 120.90
10 Rsa Insurance Group Ld +0.00% +0.00 684.20

 

US close: Dow Jones wraps up best month since 1976 with losses

Wall Street stocks closed lower on the final day of trading for October but the blue-chip Dow Jones still managed to deliver its best monthly performance in almost half a century.

At the close, the Dow Jones Industrial Average was down 0.39% at 32,732.95, while the S&P 500 shed 0.75% to 3,871.98 and the Nasdaq Composite saw out the session 1.03% weaker at 10,988.15.

The Dow closed 128.85 points lower on Monday, taking a bite out of gains recorded in the previous session.

However, despite the loss and a somewhat mixed Q3 earnings season, the Dow carved out its best month since 1976.

In terms of Monday’s earnings, Loews reported a drop in third-quarter profits from $220.0m to $130.0m despite a 2.7% rise in revenues to $3.46bn, while shares Goodyear Tire & Rubber slumped in extended trading after the group posted disappointing Q3 results due to inflation and a stronger greenback.

Earnings will continue to be in focus over the next five days, with UberPfizerFoxAirbnb, and AMD all set to report throughout the course of the week.

On the macro front, the Chicago purchasing managers’ index dropped to 45.20 in October, according to the Institute for Supply Management, down from 45.70 points in September and the lowest reading seen since June 2020. Economists had pencilled-in a reading of 47.

Elsewhere, the Dallas Federal Reserve‘s manufacturing index fell from 17.2 in September to 19.4 in October, with the production index edging down three points to 6.0 and the new orders index slipping to -8.8, its fifth month in a row in negative territory.

Market participants also held out for the latest Federal Reserve meeting, set to kick off on Tuesday, with the central bank widely expected to hike rates by three-quarters of a percentage yet again. Traders will also look for any signs that the Fed may halt its interest rate rises in the near future.

 

Tuesday newspaper round-up: Energy bills, Twitter, GSK

The chief executive of National Grid has warned of an “exponential increase” in customers seeking help with their energy bills as the company created a £50m emergency support fund. John Pettigrew said the UK electricity network operator’s fund will be used this winter and next to make donations to bodies providing support for vulnerable households and advice on energy efficiency measures to lower bills long term. – Guardian

Elon Musk has appointed himself CEO of Twitter and dissolved its board of directors, it was revealed in a company filing on Monday, as Twitter employees brace for extensive layoffs under a new restructuring that could target up to a quarter of staff. The Washington Post reported on Monday that Musk’s team has been discussing letting go of 25% of the company’s workforce in a first round of layoffs. – Guardian

Rishi Sunak is drawing up plans for years of tax rises for everyone in the country, as a Treasury source warned: “It’s going to be rough.” On Monday, the Prime Minister and the Chancellor decided to bring in “stealth” increases in income tax and National Insurance over the coming years by freezing the thresholds at which people start to pay different rates. – Telegraph

More than 50 company directors who have been disqualified have faced no disciplinary action from the Financial Conduct Authority and seven remain approved by the regulator, a Times investigation has found. The findings underscore the failings of the watchdog’s register, which keeps track of firms and individuals approved for regulated activities. The Times has uncovered at least 55 directors who were banned for offences ranging from pension fraud to tax evasion, while carrying out a role regulated by the authority. – The Times

About £40 million is likely to be set aside by GSK for legal costs relating to the Zantac litigation that has overshadowed the demerger of Haleon, its consumer healthcare wing, and has taken billions of pounds off the two companies’ market values. The drugs group is expected to make a provision when it announces third-quarter figures tomorrow, covering its likely maximum defence costs in any legal action over the heartburn drug. GSK is being represented by Dechert, the law firm. – The Times

 

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