ADVFN Morning London Market Report: Friday 19 February 2021

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London open: Stocks nudge lower as retail sales disappoint

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London stocks nudged lower in early trade on Friday as investors mulled disappointing retail sales data, and full-year results from NatWest.

At 0840 GMT, the FTSE 100 was down 0.2% at 6,607.24, while sterling was 0.1% firmer against the dollar at 1.3983.

Figures released earlier by the Office for National Statistics showed UK retail sales slumped in January as tighter nationwide coronavirus restrictions hammered department and clothing stores.

Sales volumes fell 8.2% compared with December, the biggest fall since April, and far more than the 2.5% forecast by economists. The ONS said the figures reflected the impact of the third national lockdown imposed at the start of the month. Sales were down 5.5% year on year.

ING economist James Smith said: “Assuming the spring reopening proves sustainable, and the vaccines succeed in keeping transmission and hospitalisations contained, then consumer spending is likely to rise strongly from spring onwards. However we think it’s more likely to favour services for obvious reasons, and it’s therefore likely that retailers won’t feel the full benefit (though clothing may be a possible exception)

“The abrupt switch to online retail during the pandemic is also unlikely to fully reset, having only accelerated a trend that was already there. It’s therefore likely that we’ll see further signs of consolidation on the high street this year, and that may unfortunately contribute to a rise in unemployment in the sector.”

Separate figures from the ONS showed the UK government borrowed another £8.8bn in January, less than the £24.5bn forecast by economists.

Borrowing since the start of the financial year in April now stands at £270.6bn, reflecting the surge in spending and tax cuts introduced by Finance Minister Rishi Sunak to counter the impact of the Covid-19 pandemic.

Britain’s national debt has now hit £2.1trn, and the ONS said debt as a percentage of GDP was at its highest since the 1960s, currently at 97.9%. The government is on track to borrow £400bn by the end of the current financial year in April.

Investors will also be looking out for the release of Markit’s services and manufacturing PMIs for February at 0930 GMT.

In equity marketsNatWest was in the red after the bank said it was pulling out of the Republic of Ireland, reported a smaller-than-expected annual loss and restored its dividend

The lender swung to a £351m operating pre-tax loss for the year to the end of December from a £4.2bn profit a year earlier as income fell and it set aside more for bad debts during the pandemic. Analysts had on average expected a £418m annual loss.

NatWest, formerly known as Royal Bank of Scotland, said it would pay a final dividend of 3p a share, restoring the payout after the Bank of England blocked banks from paying dividends early in the Covid-19 crisis.

TBC Bank fell after the Georgian lender said fourth-quarter profit declined 38% as its bad debt charge surged during the pandemic.

On the upside, Future shares surged after the media company said full-year profitability was set to be “materially ahead” of current market expectations after a positive start to the year.

Real estate investment trust Segro was also trading up after it posted a 10.8% jump in adjusted full-year pre-tax profit.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Evraz Plc +3.01% +16.00 548.00
2 Rolls-royce Holdings Plc +2.70% +2.52 95.86
3 Easyjet Plc +2.38% +19.00 816.80
4 Intercontinental Hotels Group Plc +2.35% +117.00 5,102.00
5 Antofagasta Plc +2.24% +38.50 1,753.50
6 Smith & Nephew Plc +2.24% +33.00 1,508.00
7 Auto Trader Group Plc +2.05% +12.40 616.20
8 Glencore Plc +1.96% +5.65 294.00
9 Tui Ag +1.95% +6.80 355.50
10 Anglo American Plc +1.63% +45.00 2,810.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Astrazeneca Plc -1.60% -119.00 7,335.00
2 Berkeley Group Holdings (the) Plc -1.40% -61.00 4,282.00
3 Bp Plc -1.15% -3.10 266.30
4 Glaxosmithkline Plc -1.05% -13.00 1,226.00
5 Hiscox Ltd -0.93% -8.80 934.40
6 Persimmon Plc -0.90% -25.00 2,747.00
7 Unilever Plc -0.81% -32.00 3,937.00
8 Reckitt Benckiser Group Plc -0.80% -50.00 6,228.00
9 Relx Plc -0.69% -12.50 1,795.50
10 Royal Dutch Shell Plc -0.69% -9.60 1,381.00

 

Europe open: Shares edge ahead as Hermes results please investors

European shares inched higher on Friday as investors digested more corporate earnings reports across the region and economic indicators as inflationary fears kept a lid on sentiment.

The pan-European index was up 0.7% by 0850 GMT, with shares in luxury goods maker Hermes up 5.9% on a recovery in fourth quarter sales. Other bourses were mixed, with the UK’s FTSE 100 down 0.2% after official data showed an 8.2% slump in retail sales as tighter nationwide coronavirus restrictions hammered department and clothing stores.

Separate figures showed the UK government borrowed another £8.8bn in January, less than the £24.5bn forecast by economists.

In other equity news, shares in luxury puffer jacket maker Moncler rose 6% as the company reported a recovery in the final quarter of 2020, rising by 8% and beating expectations as soaring revenues in China helped offset a decline in Europe and fallout from the pandemic.

NatWest was in the red after the bank said it was pulling out of the Republic of Ireland, reported a smaller-than-expected annual loss and restored its dividend

The lender swung to a £351m operating pre-tax loss for the year to the end of December from a £4.2bn profit a year earlier as income fell and it set aside more for bad debts during the pandemic. Analysts had on average expected a £418m annual loss.

French carmaker Renault fell 4.7% after posting a record annual loss of €8bn.

 

US close: Stocks finish weaker as jobless claims miss forecasts

Stocks on Wall Street closed in negative territory on Thursday, as the Labor Department’s weekly jobless claims report fell short of estimates.

At the close, the Dow Jones Industrial Average was down 0.38% at 31,493.34, the S&P 500 lost 0.44% to 3,913.97, and the Nasdaq Composite was 0.72% weaker at 13,865.36.

The Dow closed 119.68 points lower on Thursday, reversing gains recorded in the previous session.

Thursday’s primary focus was the jobless claims report from the Labor Department, which revealed that weekly jobless claims data in the US had come in well ahead of economists’ forecasts.

In seasonally-adjusted terms the number of Americans filing for unemployment claims rose by 13,000 to 861,000 over the week finishing on 13 February.

Economists were expecting to see 773,000 new claims, a modest decrease week-on-week.

The previous week’s estimate was revised higher by 55,000 to 848,000, while the four-week moving average of initial claims slipped by 3,500 to 833,250, and secondary unemployment claims slipped by 64,000 to 4.49m.

Market participants were also closely watching Treasury yields, currently nearing one-year highs, as well as surging oil and gas prices amid a cold snap in the state of Texas.

On the macro front, import prices jumped past forecasts at the start of 2021, led by rising energy prices, according to the Department of Labor, which said US import prices increased at a month-on-month pace of 1.4% and a year-on-year print of 0.9%.

Energy prices drove the increase, rising at an 8.1% clip on the month, alongside a 0.4% rise in food inflation.

Elsewhere, homebuilders in the US broke ground on fewer homes than expected in January.

According to the Department of Commerce, in seasonally-adjusted terms, the annualised rate of housing starts fell at a month-on-month pace of 6.0% to reach 1.58m, short of consensus estimates for a reading of 1.65m.

Lastly, manufacturing activity in the US mid-Atlantic region continued to grow at a brisk pace in February, the results of a closely-watched survey revealed.

The Federal Reserve Bank of Philadelphia’s factory sector index, which is derived from a survey, slipped from a reading of 26.5 in January to 23.1 for February, short of consensus estimates for a reading of 19.8.

In the corporate space, Hormel Foods was 1.13% higher as it posted a 5% drop in quarterly pre-tax earnings despite reporting record net sales of $2.5bn.

Retail behemoth Walmart lost 6.67% after its earnings also missed expectations, although it did report a 69% increase in e-commerce sales amid the Covid-19 pandemic.

Blue Apron plunged 16.29% after it unveiled a fourth-quarter loss of $11.9m despite stating revenues were boosted by meal-kit demand.

 

Friday newspaper round-up: employment reforms, Arcadia, Woodford

The government has been accused of dragging its heels on promised reforms to zero-hours contracts and the gig economy as legislation to protect workers faces serious delays. New legislation intended to bolster protections for Britain’s most vulnerable workers will not be ready until the end of the year at the earliest, raising fresh questions about the government’s promise to protect workers’ rights after Brexit. – Guardian

Philip Green’s Arcadia Group had a pension deficit of £510m – about £150m more than expected – when the fashion retailer collapsed in November, according to documents seen by the Guardian. In all, Arcadia Group Ltd, the parent company of Topshop, Dorothy Perkins, Burton and Miss Selfridge, owed creditors £800m when it called in administrators, according to a statement of the group’s financial affairs prepared by Arcadia’s board and sent to creditors this week. – Guardian

Rishi Sunak is set to extend two crucial lifelines to companies battered by ongoing Covid restrictions by keeping the furlough scheme going until the summer and prolonging the business rates holiday for the retail, hospitality and leisure sectors. In next month’s Budget the Chancellor is expected to announce the continuation of business rates relief beyond the end of March, when it was due to expire. – Telegraph

MPs have increased the pressure on the City regulator over its investigation into the Neil Woodford affair and will consider calls for an independent inquiry into the debacle. Woodford said at the weekend that he planned to stage a comeback by starting a new investment business. However, that has led to criticism of the Financial Conduct Authority over the time it has taken to review the events that led to the implosion of the stockpicker’s £3.7 billion Woodford Equity Income Fund. The demise of the fund effectively began in June 2019, when its investors were blocked from making withdrawals, but the FCA has still to finish its investigation. – The Times

 

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