ADVFN Morning London Market Report: Thursday 11 June 2020

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London open: Stocks slide on Fed outlook, second wave fears

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London stocks slid in early trade on Thursday following a downbeat outlook from the US Federal Reserve and amid concerns about a second wave of Covid-19.

At 0840 BST, the FTSE 100 was down 2.5% at 6,168.26.

CMC Markets analyst Michael Hewson said: “Last night’s Fed meeting turned out to be every bit as dovish as was expected, with the US central bank painting a fairly subdued outlook for the US economy. While the main focus was on the downgrades to its economic predictions, and the length of the recovery what was particularly notable was his comments on the jobs market, inequality and financial markets.”

Hewson also pointed to a rise in new cases of the coronavirus in some US states.

“An increase in cases in Florida, Texas and California have caused some alarm that while economies elsewhere appear to be getting on top of the virus, there are some pockets in the US economy which may take a lot longer.

“A combination of these two factors appears to have infected sentiment in Asia markets with sharp the cosh falls there today, and this also translated into sharp falls today for markets in Europe.”

In equity markets, travel stocks were under the cosh again, with cruise operator Carnival, British Airways parent IAGInterContinental Hotels and travel company TUI all lower.

Ocado was also on the back foot after the online supermarket retailer said it had successfully raised just over £1bn to exploit the rapid change in internet grocery shopping habits sparked by the coronavirus crisis. Investors handed Ocado £657m through a placing and £350m via a debt issue of unsecured bonds due to mature in 2027.

Comparison website Moneysupermarket was weaker after it said forward guidance for 2020 remains suspended as it is still too early to gauge when and how the consumer and provider sides of its marketplace will be back to normal.

On the upside, PolymetalFresnilloCentamin and Hochschild all gained as gold prices rallied after the Fed comments.

Unilever was also up after saying it plans to unify its legal structure as a UK Plc to become a simpler company more able to make acquisitions and disposals in the wake of the Covid-19 crisis.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 British American Tobacco Plc +3.24% +98.00 3,124.00
2 Rentokil Initial Plc +3.13% +14.80 488.20
3 Hikma Pharmaceuticals Plc +3.02% +69.00 2,353.00
4 Hargreaves Lansdown Plc +3.02% +49.50 1,691.00
5 London Stock Exchange Group Plc +2.91% +228.00 8,066.00
6 Intertek Group Plc +2.36% +126.00 5,464.00
7 Imperial Brands Plc +2.06% +31.00 1,539.50
8 Admiral Group Plc +1.94% +44.00 2,309.00
9 Astrazeneca Plc +1.94% +160.00 8,404.00
10 Sainsbury (j) Plc +1.73% +3.40 200.20

 

Top 10 FTSE 100 Fallers

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76.4% of retail CFD accounts lose money.

 

# Name Change Pct Change Cur Price
1 Carnival Plc -9.79% -147.00 1,354.50
2 Tui Ag -7.69% -40.50 486.30
3 International Consolidated Airlines Group S.a. -7.36% -22.90 288.30
4 Melrose Industries Plc -7.27% -9.70 123.80
5 Marks And Spencer Group Plc -6.93% -8.35 112.15
6 Whitbread Plc -5.73% -152.00 2,501.00
7 Micro Focus International Plc -5.61% -28.50 479.30
8 Land Securities Group Plc -4.57% -30.00 626.20
9 British Land Company Plc -4.54% -19.90 418.00
10 Rolls-royce Holdings Plc -4.51% -16.70 353.30

 

US close: Dow closes lower following FOMC update

US stocks turned in a mixed performance on Wednesday following an update on the state of the nation’s economy from the Federal Reserve.

At the close, the Dow Jones Industrial Average was down 1.04% at 26,899.99 and the S&P 500 was 0.53% weaker at 3,190.14, while the Nasdaq Composite saw out the session 0.67% firmer at 10,020.35.

The Dow Jones closed 282.31 points weaker on Wednesday, continuing on with the blue-chip index’s losses in the previous session that halted its milt-day rally amid heightened concerns around another spike in Covid-19 cases and trade tensions between the US and the EU.

The key event on Wednesday agenda was an update from the Federal Open Market Committee, which started its two-day policy meeting on Tuesday.

The FOMC said it expects the US economy to shrink by 6.5% this year, leading it to keep interest rates close to zero into 2022.

The central bank’s move came amid a struggling economy as a result of the Covid-19 pandemic. However, the Fed anticipates that the US economy will return to growth in 2021, with unemployment falling to 9.3% and GDP increasing 5%.

“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” it said on Wednesday.

Following the statement, the benchmark 10-year Treasury note was nine basis points lower at 0.744% and the yield on the 30-year Treasury bond down 6.9 points at 1.516%.

Also in macro news, mortgage rates held near record lows last week, leading to a wave of refinancing and purchasing applications.

The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $510,400 ticked up 1 basis point higher to 3.38% for the week ending 5 June, just off last week’s all-time low and a whole 1% softer year-on-year. The MBA’s refinancing index rose 11.4% to 3,529.0 points, recording its first weekly gain in two months.

Elsewhere, US consumer prices fell for a third straight month in May as underlying inflation remained weak and demand continued to be subdued amid the coronavirus-fuelled recession. The Consumer Price Index fell 0.1% in May accordion to the Labor Department, after decreasing 0.8%.

In the corporate space, FacebookAppleAmazon and Microsoft all closed at all-time highs in the previous session and were also helping the Nasdaq stay in the green on Wednesday.

Uber shares were down 4.81% after reports broke that merger talks with rival Grubhub had broken down after European delivery giant Just Eat threw its hat into the ring, while Tesla shares closed nearly 9% higher after a report said it would speed up production of its semi-trucks.

BoeingExxon MobilChevronAmerican Express and JPMorgan Chase shares were all down on Wednesday, weighing on major indices.

 

Thursday newspaper round-up: Housing market, British Airways, Wizz Air

Britain’s housing market remains depressed despite a pick-up in enquiries from people looking to buy, but estate agents are expecting a sharp increase in demand for homes with gardens over the next two years because of the Covid-19 pandemic. Despite estate agents being allowed to reopen in England on 13 May following an eight-week shutdown, sales and house prices continued to fall across the UK in May, according to a monthly survey of surveyors and estate agents from the Royal Institution of Chartered Surveyors (Rics). – Guardian

British Airways is to put some of its renowned art collection up for sale in an attempt to raise cash as it prepares to lay off thousands of staff. The airline has called in art valuers and is planning to auction off at least 10 major pieces, some valued at more than £1m. BA’s art collection includes works by British artists including Damien Hirst, Peter Doig, Anish Kapoor, Chris Ofili and Tracey Emin. Some have been displayed at the firm’s Waterside headquarters near Heathrow, but many of the 1,500 artworks in the collection have been on the walls of its executive lounges. – Guardian

Manufacturer Johnson Matthey is cutting 2,500 jobs and halving its dividend as it reels from the impact of coronavirus. The redundancies announced alongside its annual results represent more than a sixth of the FTSE 100 company’s workforce going over the coming three years. The industrials business produces catalytic convertors that are used in about one in three cars worldwide. – Telegraph

The failure of a shopping centre in Berkshire could become a blueprint for regenerating town centres. A developer has submitted a planning application for a £400 million scheme to demolish and rebuild the Nicholsons shopping centre in Maidenhead. The centre fell into receivership in 2018 and was bought for around £25 million a year ago by Areli Real Estate, run by Rob Tincknell – who spent a decade overseeing the redevelopment of Battersea Power Station in south London -with backing from Tikehau Capital, a French investment firm. – The Times

Wizz Air has handed its management share bonuses potentially worth millions of pounds, despite making a thousand staff redundant, using the government’s furlough scheme and borrowing hundreds of millions from the Bank of England’s emergency funding line. The airline allotted almost 200,000 share options to bosses as part of their long-term incentive plans. The final number of shares they will be able to cash in depends on the company’s performance over the next three years. – The Times

 

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