ADVFN Morning London Market Report: Wednesday 2 November 2022

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London open: Stocks flat ahead of Fed announcement; Next rallies

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London stocks were little changed in early trade on Wednesday as investors sifted through a raft of corporate news and eyed the latest policy announcement from the US Federal Reserve.

At 0835 GMT, the FTSE 100 was flat at 7,185.92, while the pound was up 0.2% against the dollar at 1.1508.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Investors are waiting for clues from the Federal Reserve about the path of rate rises, and in the meantime a slightly more wary mood has settled on the markets. The Fed is expected to bring in another super-size rate hike of 0.75%, but that has been priced in.

“Instead, it is the words that chair Jerome Powell chooses to use, about the economic outlook and what the future may hold, which are set to be market movers. There are high hopes that he will signal that there could be some softening in the US central bank’s aggressive approach to taming inflation, with the market pricing in a shallower 0.5% hike at the December meeting. That’s why equities have been largely in a more buoyant mood over the last few weeks, despite the decline of the S&P 500 in the last session.”

On home shores, the Bank of England’s latest rate announcement is due on Thursday.

Investors were also mulling over data from BRC and Nielsen, which showed that shop price inflation reached a fresh record high last month as the price of food continued to spike.

According to the latest BRC-Nielsen IQ Shop Price Index, shop price inflation reached 6.6% in October from 5.7% a month earlier. That was well above the three-month average of 5.5%, and the highest since the index began in 2005.

Within that, food inflation surged to 11.6% from 10.6% in September, the highest rate on record.

Fresh food saw the biggest prices hikes, with inflation at 13.3% against September’s 12.1%, while ambient food inflation rose to 9.4% from 8.6%.

Non-food inflation also hit a series high, however, rising to 4.1% from 3.3%.

Helen Dickinson, chief executive of the British Retail Consortium, said: “It has been a difficult month for consumers, who not only faced an increase in their energy bills, but also a more expensive shopping basket.

“Prices were pushed up by because of the significant input cost pressures faced by retailers due to rising commodity and energy prices and a tight labour market.”

Dickinson added that while “some” supply chain costs were now beginning to fall, it was being offset by the cost of energy.

In equity markets, Next was the top performer on the FTSE 100 after the retailer maintained its full-year guidance and posted a 0.4% rise in third-quarter full-price sales, slightly ahead of the company’s expectations.

GSK also gained as the pharma giant lifted full-year guidance after beating third-quarter expectations with an 18% rise in revenues driven by its Shingrix shingles vaccine.

On the downside, British American Tobacco slumped after a downgrade to ‘neutral’ at Goldman Sachs, while online supermarket Ocado was hit by a downgrade to ‘underweight’ at JPMorgan.

Hungary-based budget airline Wizz Air was sharply lower despite producing a better-than-expected second quarter, which helped interim profits to soar by a third.

Aston Martin Lagonda tumbled after the luxury car maker downgraded its delivery expectations as it pointed to supply chain issues, and posted a widening of its losses.

In an update for the nine months to 30 September, the company said it now expects total wholesales to be more in line with current consensus expectations at between 6,200 and 6,600, down from previous guidance of more than 6,600.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Hiscox Ltd +4.19% +37.60 936.00
2 Fresnillo Plc +2.10% +15.40 747.60
3 Next Plc +1.87% +93.00 5,056.00
4 Centrica Plc +1.67% +1.30 79.20
5 Prudential Plc +1.61% +13.60 857.60
6 Astrazeneca Plc +1.43% +148.00 10,494.00
7 Bhp Group Limited +1.39% +30.00 2,191.50
8 Rentokil Initial Plc +1.38% +7.20 528.20
9 Glencore Plc +1.32% +6.90 530.70
10 Flutter Entertainment Plc +1.16% +135.00 11,750.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Easyjet Plc -4.52% -16.00 338.00
2 Smurfit Kappa Group Plc -4.24% -123.00 2,776.00
3 British American Tobacco Plc -3.77% -130.50 3,334.50
4 Segro Plc -3.25% -25.80 768.40
5 Direct Line Insurance Group Plc -2.94% -6.00 198.10
6 International Consolidated Airlines Group S.a. -2.30% -2.84 120.60
7 Smith (ds) Plc -2.30% -6.70 285.20
8 Admiral Group Plc -1.97% -40.00 1,990.00
9 Informa Plc -1.94% -11.00 554.80
10 British Land Company Plc -1.83% -6.80 365.70

 

US close: Stocks extend losses ahead of FOMC decision

Wall Street stocks were in the red at the close of trading on Tuesday as the Federal Reserve kicked off its two-day policy meeting in Washington DC.

At the close, the Dow Jones Industrial Average was down 0.24% at 32,653.20, while the S&P 500 lost 0.41% to 3,856.10 and the Nasdaq Composite saw out the session 0.89% weaker at 10,890.85.

The Dow closed 79.75 points lower on Tuesday, extending losses recorded in the previous session.

Tuesday’s losses came as market participants held out hope that the central bank will offer some kind of sign that it will begin to ease its tightening stance in the coming months.

However, data out early on Tuesday dented hopes that the Fed will begin to make gentler rate hikes. The Federal Reserve is widely expected to reveal that it will hike interest rates by another 75 basis points at the conclusion of its meeting tomorrow.

On the macro front, the Institute for Supply Management‘s manufacturing purchasing managers’ index fell from 50.9 in September to 50.2 in October for the slowest growth in factory activity seen since mid-2020’s contraction.

Elsewhere, the S&P Global manufacturing PMI was revised higher to 50.4 in October from a preliminary of 49.9, but was again the slowest growth in factory activity since the sector contracted in the second quarter of 2020.

Still on data, September’s JOLTs job opening report revealed that the number of vacancies in the US unexpectedly rose by 437,000 to 10.72m last month, according to the Bureau of Labor Statistics, easily beating market expectations of 10.0m.

Finally, construction spending unexpectedly increased 0.2% month-on-month in September, according to the Census Bureau, bouncing back from a downwardly revised drop of 0.6% in August to beat market forecasts for 0.5% drop.

In the corporate space, third-quarter revenues came in ahead of expectations at Uber on Tuesday after a surge in demand post-pandemic. Uber reported revenues of $8.3bn in the three months ended 30 September, ahead of forecasts of around $8.1bn and a 72% jump on the same period a year previously.

Drugmaker Pfizer raised full-year guidance on Tuesday after beating earnings and revenue expectations for the third quarter. Pfizer, which posted Q3 revenues of $22.6bn and adjusted earnings per share of $1.78, now expects earnings per share of $6.40-$6.50 for the year, up from its previous forecast of $6.30-$6.45.

Outside of earnings, Johnson & Johnson said on Tuesday that it has agreed to buy heart recovery specialist Abiomed in a $16.6bn deal. Under the terms of the transaction, J&J will make an upfront payment of $380.00 per share. Abiomed shareholders will also receive a non-tradeable contingent value right entitling the holder to receive up to $35.00 per share in cash if certain commercial and clinical milestones are achieved.

 

Wednesday newspaper round-up: Twitter, Bulb Energy, Frasers

Elon Musk has indicated that a verified account on Twitter in the future could cost $8 a month, despite facing a user backlash over proposals to charge for the feature. The new owner of Twitter described the current system for allocating blue check marks – which verify a user as a trustworthy source – as “bullshit” in a Twitter post to his more than 110 million followers on Tuesday. – Guardian

The founder of Octopus Energy has said taxpayers need to benefit from the “upside” of emergency government bailout deals, after snapping up stricken former rival Bulb. Greg Jackson’s Octopus bought Bulb out of government-handled special administration last weekend and is set to take control of the company later this month, a year after it collapsed. – Guardian

Britain’s work from home boom has passed its peak, according to new data that reveals bosses are ditching remote job adverts and hauling employees back into the office. The jobs site LinkedIn said that remote adverts declined for a fifth straight month in September as power shifts back to employers, mirroring trends in Europe and the US. – Telegraph

Frasers is at the heart of a scrum for ownership of the Wasps rugby stadium in Coventry, as part of Mike Ashley’s plan to make the city his new stronghold. Insiders said last night that Frasers is intensifying efforts to acquire the 32,609-seater Coventry Building Society Arena (CBS), which filed notice of its intention to appoint administrators two weeks ago. – Telegraph

A quarter of over-50s who suffered from ill health were forced to leave their jobs as a result, research shows. Twenty-four per cent of people whose work had been affected by a health condition went into early retirement and a further 19 per cent reduced their working hours, according to a nationally representative poll of 2,035 over-50s by YouGov. – The Times

 

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