ADVFN Morning London Market Report: Wednesday 10 June 2020

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London open: Stocks rise ahead of Fed policy announcement

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London stocks rose in early trade on Wednesday following heavy losses in the previous session, as investors eyed the latest policy announcement from the Federal Reserve.

At 0840 BST, the FTSE 100 was up 0.6% at 6,371.53.

Danske Bank said it does not expect the Fed to make any significant changes to its policy stance despite the very positive jobs report surprise on Friday, although markets have priced out negative rates.

“However, we are looking for two things: whether the Fed changes its forward guidance and whether it puts a number on its monthly QE buying. We think it is too early for the Fed to change its forward guidance at this point just because of one economic data release although we cannot completely rule out the Fed will make it more clear what the conditions for rate hikes are (i.e. announcing a temporary asymmetric operational inflation targeting as discussed in January and February or a revival of the old Evans rule (linking rates to unemployment).

“We think the Fed is satisfied with its unlimited, open-ended and flexible QE programme and does not think it will gain much by announcing a monthly purchasing target. We do not expect the Fed to implement yield curve control.”

The Fed rate announcement is at 1900 BST, followed by the press conference half an hour later.

In equity markets, cruise operator Carnival was the top performer on the FTSE 100.

Banks were also on the rise, with LloydsBarclays and RBS all up after a Reuters report that European Central Bank officials are drawing up a scheme to cope with potentially hundreds of billions of euros of unpaid loans due to the coronavirus pandemic.

Lancashire Holdings rallied after saying it has raised around £277m in a placing to take advance of rate rise across the majority of its business lines. The company placed just under 39.6 million new common shares at 700p each, which is a 3.6% discount to the closing share price on Tuesday.

Shaftesbury ticked higher despite warning that at least half its rent could go uncollected in the second half as the London West End property company reported a near-8% drop in the value of its portfolio.

Property manager LondonMetric rose after it paid a fourth-quarter dividend, reported a slight fall in full-year net asset value and maintained a “can pay, should pay” rent payment policy with tenants during the coronavirus lockdown.

Paragon Banking Group was trading higher even as it posted a drop in interim profit after booking a £27.7m charge due to the Covid-19 pandemic.

Segro was a little weaker after it increased the size of its fundraising by £30m because of strong demand for new shares issued to finance its expansion plans. The commercial property investor and developer had said on Tuesday evening that it would raise £650m to take advantage of development and acquisition opportunities in the UK and Europe.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Ocado Group Plc +4.46% +88.50 2,072.00
2 Fresnillo Plc +3.83% +28.00 758.40
3 Bae Systems Plc +1.30% +6.80 530.60
4 Hiscox Ltd +1.20% +9.80 828.00
5 Marks And Spencer Group Plc +1.13% +1.35 120.50
6 Reckitt Benckiser Group Plc +0.59% +40.00 6,870.00
7 Experian Plc +0.54% +15.00 2,768.00
8 Astrazeneca Plc +0.54% +44.00 8,244.00
9 Severn Trent Plc +0.44% +11.00 2,521.00
10 Crh Plc +0.21% +6.00 2,823.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc -7.13% -28.40 370.00
2 Royal Bank Of Scotland Group Plc -6.41% -9.00 131.35
3 Informa Plc -6.29% -32.70 487.30
4 International Consolidated Airlines Group S.a. -6.15% -20.40 311.20
5 Land Securities Group Plc -6.10% -42.60 656.20
6 Barratt Developments Plc -5.87% -34.00 545.20
7 British Land Company Plc -5.52% -25.60 437.90
8 Royal Dutch Shell Plc -5.36% -78.40 1,384.40
9 Itv Plc -5.35% -4.86 86.00
10 Standard Life Aberdeen Plc -5.16% -14.50 266.60

 

US close: Markets mixed as Dow pumps brakes

Wall Street closed in a mixed state on Tuesday, as the Dow Jones Industrials looked set to pump the breaks on its comeback rally amid heightened concerns around another spike in Covid-19 cases and trade tensions between the US and the EU.

The Dow Jones Industrial Average ended the session down 1.09% at 27,272.30 and the S&P 500 was off 0.78% at 3,207.18, while the Nasdaq Composite added 0.29% to 9,953.75.

At the open, the Dow had lost 295.92 points, all but reversing the previous session’s sharp gains, which saw the S&P 500 return to positive territory for the year and the Nasdaq Composite register its first record close since 19 February.

Fears surrounding a second spike in Covid-19 cases as a result of the US economy’s reopening weighed on sentiment a little at the bell, with stocks that have benefited from increased optimism weaker.

With Monday’s rally coming in the face of the National Bureau of Economic Research’s declaration that the US had officially entered into a recession back in February, scuttling a 128-month expansion, AvaTrade‘s Naeem Aslam said the Dow was now set up for a correction.

“This indicates that the stock rally has gone a little too far,” he said.

“However, the upward momentum is still strong because the price is still above all the major, 50, 100, and 200-day smooth moving averages.”

Texas, one of the first US states to relax its stay-at-home orders, reported a record number of coronavirus hospitalisations on Monday, with 1,935 patients across the state, according to the Texas Department of State Health Services.

Covid-19 cases have also been slowly ticking up across the US since the Memorial Day holiday on 25 May, according to Johns Hopkins University School of Medicine.

Also in focus on Tuesday was news that European Union efforts to soothe transatlantic trade tensions had stalled, with the upcoming US election potentially causing any potential breakthrough to be delayed until December.

Washington has “stepped back” in recent weeks from talks aimed at defusing a longstanding dispute over aircraft subsidies, with a failure to reach an agreement possibly paving the way for Europe to impose tariffs on billions of dollars of American goods as early as July.

On the data front, small-business owners became more optimistic about an economic rebound throughout May and began to believe that a coronavirus-induced recession would be “short-lived”, according to the National Federation of Independent Business.

The NFIB’s small-business survey, which posted its sharpest decline in history in March, rose 4.5 points in May to 94.4 – double the increase expected on the Street.

Elsewhere, wholesale inventories in the United States stood at $650.4bn in April, sliding 0.3% month-on-month, according to the US Census Bureau.

Lastly, the number of job openings in the US fell to 5.04m at the end of April, according to the US Bureau of Labor Statistics, as the latest Job Openings and Labor Turnover Summary report came in slightly higher than expectations of 5.0m.

In the corporate space, Signet Jewelers lost 16.06% after it posted a softer-than-expected loss, while rival Tiffany gained 1.95% after reporting that store closures had hurt first-quarter sales.

Macy’s shares reversed earlier gains to close down 7.12% after raising $4.5bn of new financing, while Hertz lost 24.41% by the close.

 

Wednesday newspaper round-up: Selfridges, property sales, Aviva

Personal after-hours shopping trips, online beauty appointments and entertainment for those queuing outside will form part of Selfridges’ coronavirus-era shopping offer when the retailer reopens on 15 June. The luxury department store group, which operates four shops in the UK, including its London flagship on Oxford Street, will not be able to reopen services such as beauty makeovers, hairdressing or its cafes and cinema because of Covid-19 restrictions. It is hoping a mix of virtual experiences and live entertainments – such as DJs – will help shoppers feel no less pampered. – Guardian

Property sales in most of England have swiftly rebounded to the same levels they were just before the lockdown, although London lags behind the rest of the country and markets in Scotland and Wales remain closed, according to website Zoopla. Pent-up demand has also meant firmer prices, said Zoopla, with the average asking price of sales agreed in the last week 6% higher than the same week in June last year. Its figures are in sharp contrast with those from Nationwide, which last week said house prices across the UK were falling at the fastest rate since the financial crisis. – Guardian

One of Britain’s most powerful investors has hit out at HSBC and Standard Chartered for backing an authoritarian crackdown in Hong Kong. In a major intervention, Aviva Investors said it was deeply concerned that the London-listed banks have thrown their weight behind China’s Communist regime amid the push for a new law criminalising anti-government movements in the former British colony. – Telegraph

France is pumping €15bn (£13.4bn) into its aerospace industry to safeguard 100,000 aviation jobs at risk from the collapse in air travel caused by coronavirus, ramping up pressure on the Government to launch a similar bailout. Announcing the support package Bruno Le Maire, finance minister, said France was “declaring a state of emergency to save our aeronautics industry”. – Telegraph

Analysts at Peel Hunt have spent the past few weeks totting up the amount by which British listed companies have been rethinking their capital expenditure plans. They reckon that £23 billion has been slashed from capex budgets for this year. Charles Hall, head of research at the broker, says that the results are sobering and raise serious questions about the ability of the economy to bounce back any time soon. Capital spending accounts for almost a tenth of UK GDP. – The Times

 

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