ADVFN Morning London Market Report: Wednesday 7 December 2022

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London open: Stocks rise on China Covid optimism; GSK surges


London stocks shrugged off opening losses to trade a little higher on Wednesday, as investors weighed up a further loosening of Covid restrictions in China against disappointing Chinese trade data and recession fears.

At 0835 GMT, the FTSE 100 was up 0.3% at 7,545.77.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Fears are growing that economies are in for a rough time ahead as feverish inflation and the bitter interest rate medicine being used to bring it down take effect.”

She said that despite today’s easing of restrictions, it’s clear China’s “Covid nightmare” is not over.

“The world’s second largest economy is being hit by a toxic combination of its strict pandemic policies which have crushed domestic sentiment and the severe inflationary headwinds overseas affecting its shipments to countries,” she said.

Data released earlier showed that Chinese imports slid by 10.6% year-on-year in November, compared with market estimates of a 6% fall, while exports plummeted by 8.7% last month, much worse than the forecast 3.5% drop.

“The easing of restrictions can’t come too soon in terms of trade but authorities are taking a softly-softly approach fearful of a wave of hospitalisations and high hopes of more significant relaxation of the rules have been dashed,” Streeter said.

“Travelers heading to other regions in China will now no longer need to show a negative test result and more of those who test positive with Covid can choose to isolate at home instead of in quarantine hotels, but the easing of restrictions appeared to underwhelm investors amid such bleak trade data, with the Shanghai Composite and Hang Seng dropping back sharply in a volatile session.”

On home shores, the latest survey from lender Halifax showed that house prices suffered their biggest monthly decline in November since the global financial crisis in October 2008, amid rising mortgage rates.

House prices fell 2.3% on the month following a 0.4% drop in October, with the average price of a house standing at £285,579, down from £292,406. On the year, prices rose 4.7% in November, down from 8.2% growth the month before.

Kim Kinnaird, Director of Halifax Mortgages, said: “The market may now be going through a process of normalisation. While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”

In equity markets, GSK surged after a US court ruled in the pharmaceutical company’s favour in a case claiming that its former Zantac heartburn drug caused cancer. Haleon, which was recently spun off from GSK, also jumped.

Smurfit Kappa gained after it announced the start of a buyback of up to 1.2m shares.

Mitchells & Butlers was trading up after the pub chain said it swung to a full-year profit despite a challenging backdrop.

Elsewhere, commercial vehicle rental provider Redde Northgate rallied after it said that full-year results would be “modestly above” market views, as it posted a rise in interim profit and revenue, underpinned by fleet growth and new contract wins.

On the downside, online greeting card and gift retailer Moonpig tumbled as it said that interim profits had halved and warned that trading conditions had become progressively more challenging through October and November as it cut its annual sales forecast.

In broker note action, Persimmon was weaker after a downgrade to ‘hold’ at Investec, while PageGroup was knocked lower by a downgrade to ‘underperform’ at Jefferies.

Johnson Matthey fell after a downgrade to ‘underweight’ at JPMorgan and Wood Group was down after Citi cut its rating to ‘neutral’.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Gsk Plc +11.02% +153.00 1,540.80
2 Ocado Group Plc +4.56% +30.20 692.40
3 Ferguson Plc +2.51% +246.00 10,030.00
4 Smurfit Kappa Group Plc +2.11% +63.00 3,043.00
5 Compass Group Plc +1.74% +33.00 1,931.50
6 Astrazeneca Plc +1.40% +156.00 11,306.00
7 Intercontinental Hotels Group Plc +1.39% +66.00 4,820.00
8 Hikma Pharmaceuticals Plc +1.32% +20.00 1,538.00
9 Marks And Spencer Group Plc +1.28% +1.55 123.00
10 Relx Plc +1.25% +29.00 2,346.00


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Glencore Plc -2.05% -11.40 544.70
2 Vodafone Group Plc -1.97% -1.76 87.51
3 Johnson Matthey Plc -1.92% -41.00 2,093.00
4 Shell Plc -1.55% -36.50 2,322.00
5 Ashtead Group Plc -1.48% -75.00 4,993.00
6 Persimmon Plc -1.46% -18.50 1,251.50
7 Prudential Plc -1.35% -14.50 1,062.00
8 Rolls-royce Holdings Plc -1.18% -1.10 92.39
9 Croda International Plc -1.13% -78.00 6,826.00
10 Bp Plc -1.00% -4.75 469.90


US close: Stocks lower as trade gap widens in November

Wall Street stocks were in the red at the close of trading on Tuesday after the Commerce Department revealed that the US trade deficit had widened in November.

At the close, the Dow Jones Industrial Average was down 1.03% at 33,596.34, while the S&P 500 lost 1.44% to 3,941.26 and the Nasdaq Composite saw out the session 2.0% weaker at 11,014.89.

The Dow closed 350.76 points lower on Tuesday, extending losses recorded in the previous session.

The US trade deficit was in focus throughout the session, with the gap widening to $78.2bn in October from $74.1bn in September, according to the Commerce Department, the second consecutive increase after contracting for the prior six months. Exports fell by $1.9bn, while imports rose by $2.2bn, as a decline in consumer goods imports was offset by a rebound in industrial supplies and other goods imports.

Also drawing an amount of investor attention was news that Beijing city will no longer require negative Covid tests to enter the majority of public spaces, malls, or residential areas.

Elsewhere, the spread on the two and ten-year treasuries notes was at its most inverted level in more than four decades, with the yield on the benchmark 10-year Treasury note and its two-year counterpart at 3.540% and 4.375%, respectively.

In the corporate space, gunmaker Smith & Wesson said sales had slumped 47% in the second quarter amid falling demand for firearms, while Stitch Fix lowered its full-year guidance on the back of falling sales and lower demand for its clothing.


Wednesday newspaper round-up: Mortgages, Twitter, Bulb, Glencore

The chancellor will urge the UK’s largest banks to do all they can to support those struggling to pay their mortgage during the cost-of-living crisis when he holds his first talks with chief executives on Wednesday. Jeremy Hunt will host a roundtable with heads of major mortgage lenders, including Debbie Crosbie of Nationwide, HSBC UK’s Ian Stuart and NatWest’s Alison Rose to discuss the impact of rising interest rates and living costs on customers. – Guardian

Joe Biden has agreed a deal to ramp up gas exports from the US to the UK as part of a joint effort to cut bills and limit Russia’s impact on western energy supplies. Sunak and Biden announced an “energy security and affordability partnership” and set up a joint action group, led by Westminster and White House officials, with the aim of reducing global dependence on Russian energy. – Guardian

Twitter is said to be under investigation by authorities in San Francisco following reports Elon Musk has built bedrooms in the company’s headquarters. Several offices and conference rooms in Twitter’s building have been converted into small sleeping quarters as Mr Musk attempts to stamp control on the social media company. – Telegraph

About 1.5 million households supplied by Bulb face months more uncertainty after a judge said a legal challenge against its sale to Octopus Energy could not be heard until next year. The deal is due to complete this year but is subject to a judicial review brought by British Gas, Scottish Power and E.on, who are unhappy at the opacity of the terms and the financial support to Octopus from the government. – The Times

Glencore has cut production guidance across all the commodities it mines a day after committing to pay millions to the Democratic Republic of Congo after admitting to years of corruption. The trading and mining group expects to produce 1,040 kilotonnes of copper next year, down from 1,060kt this year and below consensus guidance of 1,124kt, as its Katanga copper and cobalt mine in the democratic republic was affected by issues with slope movements, grid power instability and higher volumes of acid-consuming ore. – The Times


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