ADVFN Morning London Market Report: Tuesday 24 November 2020

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London open: Stocks rise on vaccine optimism, US politics

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London equity markets rose in early trade on Tuesday, with travel and leisure stocks underpinned by vaccine optimism and news of a shortened travel quarantine from next month.

At 0900 GMT, the FTSE 100 was up 0.6% at 6,373.47.

Sentiment was also lifted by news that the Donald Trump administration has accepted President-elect Joe Biden’s transition into office.

CMC Markets analyst Michael Hewson said: “This renewed push appears to have come about as a result of events in the US, where Joe Biden appears to be starting the slow transition process to a new US administration next year, as President Trump somewhat begrudgingly makes life easier by slowly removing the various obstacles to a smooth process.

“Reports that Joe Biden has asked former Fed chairman Janet Yellen to be the next US Treasury Secretary have also boosted sentiment, raising the hope of a much more consensual approach between the central bank and US administration over the next four years.

“It has also raised the prospect that Lael Brainard, who was in line to fill the US Treasury Secretary role, and who currently sits on the Fed board, could well become the next Fed chair when current incumbent Jerome Powell’s term comes up for renewal in February 2022, in what some investors have construed as the ultimate golden ticket for markets.”

In equity markets, British Airways and Iberia parent IAG and engine maker Rolls-Royce were on the front foot again, boosted by recent vaccine updates and news that from next month, travellers who arrive in England will be able to cut their quarantine to five days from 14 if they test negative for coronavirus on the fifth day. Passengers will have to pay for the tests privately.

Other travel and leisure stocks also gained, with InterContinental Hotels, Premier Inn owner WhitbreadTUICarnivalCineworldeasyJet and Upper Crust owner SSP all higher.

On the downside, Phoenix Group lost ground as it confirmed press speculation regarding the possible sale of its European businesses.

Online electricals retailer AO World fell sharply despite saying it swung to a profit in the first half as strong demand amid the pandemic boosted revenues. In the six months to 30 September, the company swung to a pre-tax profit of £18.3m from a loss of £5.9m in the same period a year ago, with revenue up 53.2% to £717m.

Richard Hunter, head of markets at Interactive Investor said: “It remains to be seen whether the meteoric rise can be continued, but for the moment an increase in the share price of 382% over the last year, as compared to a dip of 4.4% for the wider FTSE250, has rewarded shareholders handsomely. Even though this can partially explain an inevitable bout of strong profit-taking on these numbers, the market consensus of the shares as a buy remains in place despite the blistering outperformance overall.”

Pets at Home – classed as an essential retailer during lockdown – was also firmly in the red even as it reported higher interim profits and maintained its dividend after a strong second quarter as it forecast full-year results to be in line with expectations.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Tui Ag +11.53% +54.40 526.20
2 Carnival Plc +8.25% +99.50 1,305.00
3 Rolls-royce Holdings Plc +7.99% +8.55 115.55
4 Easyjet Plc +6.39% +49.80 829.20
5 International Consolidated Airlines Group S.a. +5.56% +9.25 175.75
6 Bp Plc +5.13% +13.00 266.45
7 Whitbread Plc +4.77% +147.00 3,228.00
8 Micro Focus International Plc +4.45% +14.70 345.00
9 Intercontinental Hotels Group Plc +3.99% +182.00 4,749.00
10 Compass Group Plc +3.98% +53.50 1,397.00

 

Top 10 FTSE 100 Fallers

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76.4% of retail CFD accounts lose money.

 

# Name Change Pct Change Cur Price
1 Intertek Group Plc -6.13% -372.00 5,700.00
2 Fresnillo Plc -4.56% -49.50 1,035.50
3 Ocado Group Plc -3.57% -80.00 2,164.00
4 Spirax-sarco Engineering Plc -3.56% -410.00 11,105.00
5 Experian Plc -3.46% -99.00 2,763.00
6 Croda International Plc -2.41% -148.00 5,992.00
7 Bunzl Plc -2.01% -48.00 2,342.00
8 Admiral Group Plc -1.95% -56.00 2,820.00
9 Flutter Entertainment Plc -1.75% -220.00 12,325.00
10 Rentokil Initial Plc -1.70% -8.60 496.00

 

Europe open

Surging travel stocks helped push European markets higher at the opening on Tuesday, spurred on by fresh Covid-19 vaccine hopes and news that US President-elect Joe Biden can officially start his transition to power.

The pan-European Stoxx 600 index was up 0.66%, with all bourses higher. US futures showed the Dow Jones index up 258 points.

Investors had started to digest the results of AstraZeneca and Oxford University’s joint contribution to the fight against the coronavirus. The market seemed unimpressed on Monday with the 70% efficacy rate compared with higher results from rivals Moderna and Pfizer.

“The headline figure of 70% effective is the average, and one of the regimens is 62% effective and the other is 90%. In terms of cost, the Astra-Oxford medication is reported to be a fraction of the price of Moderna’s and Pfizer-BioNTech’s possible vaccines,” said interactive investor analyst Richard Hunter.

“In addition to that, it can be stored at approximately -3 degrees, which makes it far easier to transport and more conducive to mass production.”

Reports that Biden has asked former Federal Reserve chairman Janet Yellen to be the next US Treasury Secretary also boosted sentiment, raising hopes of a more consensual approach between the central bank and US administration over the next four years.

In equity markets, British Airways and Iberia parent IAG and engine maker Rolls-Royce were on the front foot again, boosted by recent vaccine updates and news that from next month, travellers who arrive in England will be able to cut their quarantine to five days from 14 if they test negative for coronavirus on the fifth day. Passengers will have to pay for the tests privately.

Other travel and leisure stocks also gained, with TUI surging more than 11%, followed by Carnival, up 9.9%.

They were joined by InterContinental Hotels, Premier Inn owner Whitbread, Cineworld, easyJet and Upper Crust owner SSP.

Online electricals retailer AO World fell sharply despite saying it swung to a profit in the first half as strong demand amid the pandemic boosted revenues. In the six months to 30 September, the company swung to a pre-tax profit of £18.3m from a loss of £5.9m in the same period a year ago, with revenue up 53.2% to £717m.

Richard Hunter, head of markets at Interactive Investor said: “It remains to be seen whether the meteoric rise can be continued, but for the moment an increase in the share price of 382% over the last year, as compared to a dip of 4.4% for the wider FTSE250, has rewarded shareholders handsomely. Even though this can partially explain an inevitable bout of strong profit-taking on these numbers, the market consensus of the shares as a buy remains in place despite the blistering outperformance overall.”

Pets at Home – classed as an essential retailer during lockdown – was also firmly in the red even as it reported higher interim profits and maintained its dividend after a strong second quarter as it forecast full-year results to be in line with expectations.

The shares were hit by a note from Shore Capital, which put the stock under review from a ‘buy’ recommendation. The outlook statement suggests “the share price has already arrived at its destination”, said Shore analysts Greg Lawless and Clive Black.

 

Tuesday newspaper round-up: No-deal Brexit, Equiti Capital, Debenhams

The governor of the Bank of England, Andrew Bailey, has warned that the economic cost of a no-deal Brexit would be bigger in the long term than the damage caused by Covid-19. Bailey said failure to agree to a deal before the Brexit transition expires at the end of December would cause disruption to cross-border trade and damage the goodwill between London and Brussels needed to build a future economic partnership. – Guardian

A stricter system of tiers to be introduced at the end of England’s lockdown will “ruin Christmas” for struggling restaurants, hotels and pubs, the hospitality industry has warned. The retail industry expressed relief that all shops will reopen on 2 December during the crucial Christmas trading weeks, alongside gyms and personal care services such as hairdressers and barbers. However, the hospitality industry bore the brunt of toughened rules. – Guardian

A London foreign exchange broker is facing a multimillion pound legal claim over its alleged links to a suspected $125m (£93m) Ponzi-like fraud being investigated by the US Securities and Exchange Commission (SEC). Equiti Capital, which denies wrongdoing, is facing a demand from investors in the scheme to repay part of the $13m in commissions it received as prime broker for complex investment products offered by a firm controlled by Mediatrix Capital. – Telegraph

Debenhams is in exclusive talks with JD Sports about a rescue takeover of the department stores chain that could secure the futures of thousands of retail workers before Christmas. It is understood that JD Sports, the FTSE 100 sportswear business, is interested in acquiring the whole of Debenhams and yesterday it entered exclusive talks with Lazard, its adviser, and administrators at FRP. – The Times

A restaurant chain co-founded by the prime minister’s adviser on food issues is considering using a controversial insolvency procedure to cut its rent bill. Leon, the self-styled “naturally fast food” chain, was launched in 2004 by Henry Dimbleby, an adviser to Boris Johnson and former Bain & Company consultant, in partnership with John Vincent, who remains chief executive, and the chef Allegra McEvedy. – The Times

 

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