ADVFN Morning London Market Report: Thursday 18 February 2021

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London open:London open: Stocks steady as investors await fresh catalysts; Barclays in focus


London stocks were little changed in early trade on Thursday as investors awaited fresh catalysts, with Barclays in the red despite better-than-expected results.

At 0830 GMT, the FTSE 100 was flat at 6,708.91, while sterling was 0.2% higher against the dollar at 1.3889.

Spreadex analyst Connor Campbell said it seems the Dow Jones is becoming divorced from European indices, with the US index’s “record high-hitting run failing to inspire the same energy in its continental peers”.

“Without much data on the agenda – it’s all saved for tomorrow, with UK retail sales and the flash PMIs for February – the European indices snoozed through their alarms,” he said.

Campbell noted that since Monday’s “over-eager gains”, the FTSE has spent the week chipping away at that growth, though at present the bulk of its surge is still intact.

“Though tomorrow will be indicative of how the UK economy has held up under this latest set of restrictions, and therefore will impact the performance of the FTSE and pound, the next big moment for the pair is Monday, when the government reveals its road out of Lockdown 3.0. Until then, the FTSE may continue to drift,” he said.

In equity markets, miners were the standout gainers, with Rio TintoGlencoreAntofagasta and Anglo American all higher as metals prices advanced.

Hochschild Mining surged despite reporting a decline in full-year earnings as Covid-related stoppages dented production and offset higher gold and silver prices.

Smith & Nephew lost ground after the medical technology business posted a fall in full-year profits as the pandemic forced the cancellation of elective procedures.

Barclays was in the red even after it reinstated its dividend and said it would buy back up to £700m of shares as the bank reported annual profit ahead of forecasts. The bank said it would pay an annual dividend of 1p per share and that including the buyback the shareholder payout would be 5p per share. Analysts had on average forecast a dividend of 3.5p per share.

Pre-tax profit for the year to the end of December fell 30% to £3.1bn from a year earlier as income rose 1% to £21.8bn. Analysts had on average expected £2.8bn annual profit.

Elsewhere, Imperial Brands and GlaxoSmithKline were both weaker as their stock went ex-dividend, while Lancashire Holdings was knocked lower by a downgrade to ‘add’ at Numis.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Rio Tinto Plc +3.72% +232.00 6,467.00
2 Glencore Plc +2.98% +8.60 296.80
3 Fresnillo Plc +2.93% +28.50 1,001.50
4 Antofagasta Plc +2.83% +48.50 1,763.00
5 Evraz Plc +2.68% +14.20 543.40
6 Ashtead Group Plc +2.48% +96.00 3,968.00
7 Bhp Group Plc +2.45% +55.00 2,299.50
8 Anglo American Plc +2.27% +63.00 2,842.50
9 Dcc Plc +2.05% +122.00 6,076.00
10 Kingfisher Plc +1.45% +4.00 279.40


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Smith & Nephew Plc -5.61% -88.00 1,479.50
2 Imperial Brands Plc -4.35% -65.50 1,439.50
3 Glaxosmithkline Plc -2.13% -27.20 1,249.20
4 Lloyds Banking Group Plc -1.55% -0.60 38.32
5 Rolls-royce Holdings Plc -1.32% -1.35 100.95
6 Melrose Industries Plc -1.25% -2.15 169.25
7 Prudential Plc -1.11% -15.50 1,383.50
8 Barclays Plc -1.04% -1.60 152.76
9 Compass Group Plc -0.97% -14.00 1,434.00
10 Hikma Pharmaceuticals Plc -0.88% -21.00 2,371.00


Europe open: Miners outshine weak corporate results

European shares opened higher on Thursday despite poor earnings results from aviation heavyweight Airbus and a mixed session overnight on Wall Street as miners lifted the gloom.

he pan-European STOXX 600 was up 0.05%. Major regional bourses were mixed, with Germany’s DAX flat, the UK’s FTSE 100 down 0.17% and France’s CAC 40 0.08% lower.

“It seems that the Dow Jones is becoming divorced from the European indices, the US index’s record high-hitting run failing to inspire the same energy in its continental peers,” said Spreadex analyst Connor Campbell.

“Without much data on the agenda – it’s all saved for tomorrow, with UK retail sales and the flash PMIs for February – the European indices snoozed through their alarms.”

In equity news, miners were the standout gainers, with Rio TintoGlencoreAntofagasta and Anglo American all higher as metals prices advanced.

Shares in Airbus fell 3.16% as it posted an annual loss and withheld a dividend due to the Covid-19 pandemic.

UK medical equipment maker Smith & Nephew shares fell 7% after warning the Covid-19 pandemic’s impact would continue into the first half with uncertainty around the timing of any recovery.

French telecoms firm Orange was 4.22% lower after reporting a drop in core operating profit in the fourth quarter.

Barclays was in the red even after it reinstated its dividend and said it would buy back up to £700m of shares as the bank reported annual profit ahead of forecasts.

French mall owner Klepierre was down 2.7% on the back of reporting a 25% drop in 2020 net rental income on Wednesday, as on-and-off restrictions in its home market and the rest of Europe shuttered stores with a knock-on effect for landlords.

Moneysupermarket reported a drop in full-year profit on Thursday as revenues, in particular in the travel segments, were hit by the Covid-19 pandemic.


US close: Stocks mixed as investors pore through Fed minutes

Stocks on Wall Street closed in a mixed state on Wednesday, as the Dow added to the records it achieved in the previous session.

At the close, the Dow Jones Industrial Average was up 0.29% at 31.613.02, while the S&P 500 slipped 0.03% to 3,931.33, and the Nasdaq Composite was 0.58% weaker at 13,965.50.

The Dow closed 90.27 points lower on Wednesday, adding to the gains recorded in what was also a mixed session for major indices on Tuesday, following the President’s Day long weekend.

Late in the session, the Federal Open Market Committee released the minutes from its January meeting, which revealed that officials thought the US economy was “far from” where they wanted it to be.

That meant the central bank was likely to keep policy loose for the foreseeable future, with the short-term interest rate likely to remain near zero and asset purchases to be maintained at at least $120bn each month.

“Participants noted that economic conditions were currently far from the committee’s longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved,” the minutes read.

“Consequently, all participants supported maintaining the Committee’s current settings and outcome-based guidance for the federal funds rate and the pace of asset purchases.”

On the macro front, total mortgage application volume fell 5.1% week-on-week, according to the Mortgage Bankers Association, as another week of rising rates turned away both homeowners and buyers alike.

In other data news, retail sales volumes in the US shot higher last month with across the board strength in all categories.

According to the Department of Commerce, retail sales volumes surged at a month-on-month pace of 5.3% in January to reach $509.8bn in seasonally adjusted terms, markedly better than the 0.8% rise expected on the Street.

Elsewhere, wholesale inflation rose more quickly than expected at the start of 2021 on the back of a jump in energy and services prices.

According to the Department of Labor, in seasonally adjusted terms, so-called final demand prices increased at a month-on-month pace of 1.3% in January and 1.7% on the year, ahead of expectations for prints of 0.4% and 0.8%, respectively.

Moving on, US industry expanded for a fourth straight month in January, according to the Federal Reserve, but still had a way to go in order to fully return to levels seen before the Covid-19 pandemic.

Industrial production, which includes output factories, mines and utilities, rose 0.9% in January, greater than most economists had projected but still 1.8% below production in January 2020.

Still on data, US business inventories rose 0.6% in December, according to the Census Bureau, ahead of an expected reading of 0.5%, as sales rose 0.8% in the month.

Lastly, February’s homebuilder confidence index from the National Association of Housebuilders came in at a reading of 84, ahead of both the prior month’s reading and estimates of 83.

Also drawing an amount of investor attention was the 10-year Treasury yield topping 1.30% on Tuesday, a level not seen since February 2020, while the 30-year rate also hit its highest level in a year, leading many on the Street to believe that higher rates could lead to a rotation out of equities and into bonds.

That would put pressure on areas of the market that have previously benefited from the low-rate environment.

In equity markets, Hilton Worldwide was down 1.92% after it posted a surprise quarterly loss as a surge in new Covid-19 cases continued to weigh on bookings.

Telecoms giant Verizon was in the green by 5.24%, meanwhile, after Berkshire Hathaway took up a sizable $8.0bn stake.

Shopify lost 3.32% even after it doubled sales for a second consecutive quarter but warned of growth slowing in 2021.


Thursday newspaper round-up: HMRC, hospitality industry, flexible working

Almost 2 million people in Britain have not worked for more than six months during the coronavirus pandemic, amid growing risk to workers from long-term economic damage caused by the crisis. The Resolution Foundation said up to 1.9 million people in January had either been out of a job or on full furlough for more than six months, revealing the lasting impact on employment caused by Covid and multiple lockdowns. – Guardian

A group of MPs has accused HM Revenue & Customs of “misleading” a parliamentary committee, and possibly breaking the civil service code, by withholding “embarrassing” information about how it had engaged at least 15 contractors who used tax avoidance schemes while working for the tax agency. In a report on Wednesday, the all-party group of MPs and peers claimed that HMRC had put the management of its reputation “ahead of telling the truth”. – Guardian

All pubs, restaurants and hotels must be allowed to reopen from April with life for the hospitality industry returning to normal by June, the sector’s bosses have told the Prime Minister. Trade group UK Hospitality is calling for a radical overhaul of the tier system used before lockdown in a bid to prevent mass job losses and allow businesses to restart as soon as possible. – Telegraph

Half of employees say that they would look for a new job if their bosses do not allow flexible working after lockdown. A survey of 2,000 randomly selected workers found that 49 per cent would try to change jobs after the pandemic if they could not work in their preferred location. Two thirds of workers said that they wanted to switch to a combination of home and office working, when it was safe to do so. Many cited the time saved on commuting and an improved work-life balance. – Telegraph


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