ADVFN Morning London Market Report: Thursday 8 April 2021

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London open: Stocks rise after Fed minutes; JMAT rallies on update

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London stocks rose in early trade on Thursday after the US Federal Reserve signalled it will keep monetary policy loose.

At 0835 BST, the FTSE 100 was up 0.6% at 6,926.01.

Spreadex analyst Connor Campbell said: “A dovish set of meeting minutes from the Federal Reserve has further reassured investors that Jay Powell and the gang won’t be turning off the stimulus taps any time soon.”

He noted that the “calming words” from the Fed had allowed the FTSE to open in the green for the third day running.

“Putting the UK index at 6,920, the FTSE is now at its best price since the end of February 2020. That’s right, pre-pandemic levels!”, said Campbell.

“Much of this is down to selective hearing on behalf of the FTSE, indulging in things like the IMF’s revised global growth forecasts, and a general sense of optimism surrounding the UK’s post-covid comeback, while ignoring warnings about a vaccine rollout slowdown and the blood clot concerns surrounding the use of the Oxford jab on under-30s.”

In equity marketsJohnson Matthey was sitting pretty at the top of the FTSE 100 index after the specialty chemicals business said its annual performance would be around the top end of market expectations as it announced a strategic review of its health business.

Homewares group Dunelm also gained as it reported a 16.8% fall in third-quarter sales, reflecting the impact of the latest national Covid lockdown, but said it is set to finish the year “modestly ahead” of expectations.

Anglo American was higher as it announced the demerger of its thermal coal operations in South Africa.

OSB was also trading up after it announced a dividend worth 25% of earnings as the bank reported a 9% drop in underlying annual profit as bad debts rose and margins shrank.

On the downside, AvivaSmurfit KappaMondiDS SmithDirect LineGraftonMoneysupermarketUltra Electronics and Quilter were all weaker as their stock went ex-dividend.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Johnson Matthey Plc +5.52% +171.00 3,270.00
2 Anglo American Plc +3.15% +94.00 3,082.00
3 Evraz Plc +3.05% +18.00 607.60
4 Spirax-sarco Engineering Plc +2.74% +320.00 11,985.00
5 Intertek Group Plc +2.63% +154.00 6,000.00
6 Sage Group Plc +2.00% +12.60 641.80
7 Halma Plc +1.82% +45.00 2,520.00
8 Croda International Plc +1.79% +114.00 6,500.00
9 Experian Plc +1.77% +45.00 2,581.00
10 3i Group Plc +1.57% +19.00 1,230.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Direct Line Insurance Group Plc -4.41% -14.20 308.10
2 Carnival Plc -3.95% -71.00 1,728.00
3 Aviva Plc -3.71% -15.60 404.80
4 International Consolidated Airlines Group S.a. -2.36% -5.15 212.70
5 Hiscox Ltd -1.82% -16.20 872.60
6 Smurfit Kappa Group Plc -1.70% -61.00 3,526.00
7 Mondi Plc -1.58% -30.50 1,896.50
8 Smith (ds) Plc -1.53% -6.50 417.90
9 Intercontinental Hotels Group Plc -1.20% -62.00 5,118.00
10 British Land Company Plc -1.04% -5.40 512.80

 

Europe open: Stoxx hits new record on Fed’s dovish tone

European stock markets rose to new record levels at the opening bell on Thursday after the US Federal Reserve said it expected to keep loose monetary policy for “some time” until economic conditions improve sufficiently from the Covid pandemic.

The benchmark pan-European Stoxx 600 index rose 0.44% in early trade. All major continental bourses were higher, with France’s CAC up 0.56% after the publication of the central bank’s latest meeting minutes.

Federal Reserve governor Lael Brainard said policymakers expect “considerably better outcomes on growth, and employment and inflation” in coming months.

“But that is an outlook,” she told CNBC. “We are going to have to actually see that in the data – we have some distance to go” Brainard said, referring to job losses during the crisis.

Investors shrugged off news that several European countries had announced restrictions on the use of the AstraZeneca Covid-19 vaccine in younger people, after a link was found to very rare blood clots.

The Fed meeting notes “has further reassured investors that (Fed Chairman) Jay Powell and the gang won’t be turning off the stimulus taps any time soon” said Spreadex analyst Connor Campbell.

“Despite the Fed’s dovishness, it is looking like another quiet one from the Dow Jones. The 0.1% increase forecast by the futures still leaves the Dow short of 33,500, the index unable to return to its all-time highs since Europe returned from its Easter break.”

In equity news, shares in Johnson Matthey topped the gainers as the company said annual performance would be around the top end of market expectations as the company announced a strategic review of its health business.

Anglo American stock was up 3% as the mining giant announced the demerger of its thermal coal operations in South Africa.

Dutch-based technology investment company Prosus was also higher after news it was selling a 2% stake in software group Tencent, worth about $15bn, in the biggest block trade on record.

 

US close: Stocks mixed as Fed signals shift in policy approach

Wall Street finished mixed on Wednesday, as market participants sifted through the minutes of the Federal Reserve’s latest policy meeting, which signalled a change in how the Fed would approach policy changes.

At the close, the Dow Jones Industrial Average was up 0.05% at 33,446.26 and the S&P 500 gained 0.15% to 4,079.95, while the Nasdaq Composite was 0.07% weaker at 13,688.84.

The Dow Jones closed 16.02 points higher on Wednesday, clawing back some of the losses recorded in the previous session.

Minutes from the Federal Open Market Committee’s most recent meeting were released late in the day, with officials signalling that the central bank’s easy policy would remain until stronger inflation and employment numbers were evident.

The FOMC noted that the Fed’s $120bn in monthly bond purchasing was providing the American economy with “substantial support”, and indicated that while the economy was heading in the right direction, there was still much progress to be made.

“Participants noted that it would likely be some time until substantial further progress toward the committee’s maximum-employment and price-stability goals would be realised and that, consistent with the committee’s outcome-based guidance, asset purchases would continue at least at the current pace until then,” the minutes read.

The inclusion of the term “outcome-based guidance” signalled a shift in policy for the Fed, which had previously indicated that it would move its policy based on inflation expectations.

FOMC members agreed that any change to the bank’s policy “should be based primarily on observed outcomes, rather than forecasts,” according to the minutes.

In focus earlier was news that the International Monetary Fund had raised its 2021 growth outlook for the global economy to 6%, up from January’s forecast of 5.5%, giving sentiment a slight boost.

The IMF said that “a way out of this health and economic crisis is increasingly visible,” but did warn of “daunting challenges” given the varied pace of vaccine rollouts around the globe.

On the macro front, weekly mortgage applications decreased 5.1% week-on-week, according to the Mortgage Bankers Association, with an increase in the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances to 3.36% from 3.33% causing homeowners and potential homebuyers to hold off on borrowing for the time being.

Elsewhere, the US goods trade balance slipped from -$88.0bn to -$86.7bn in February, according to the Census Bureau and the Bureau of Economic Analysis, while the prior month was revised to -$68.2bn from $67.8bn.

In the corporate space, stocks reliant on an economic reopening were among the winners, with cruise operators Carnival up 1.4%, Royal Caribbean gaining 0.31% and Norwegian Cruise Line ahead 0.74%.

Closer to the atmosphere, air operators were mixed, with low-cost stalwart Southwest Airlines down 0.9% and legacy carrier American Airlines off 0.54%, while United Airlines managed to climb 0.15%.

 

Thursday newspaper round-up: Retailers, airports, wealth taxes

Prof Sarah Gilbert, the scientist who lead the team that created the Oxford/AstraZeneca coronavirus vaccine, is set for a payday of more than £20m as the biotech firm she co-founded prepares to float on the stock market in the US. Gilbert, who became a household name as a result of her work creating Oxford’s Covid-19 vaccine, owns 5.2% of Vaccitech, a Oxford University spin-out company that owns the biotechnology behind the AstraZeneca vaccine and others for Mers, hepatitis B, the virus that causes shingles, and a range of cancers. – Guardian

Retailers have joined pubs and clubs in rejecting Covid status certificates, as the prime minister’s plan faced growing opposition from business and parliament. As fashion boutiques, toy shops and other “nonessential” retailers prepare to reopen on high streets next week, the British Retail Consortium (BRC), which represents thousands of retailers including major chains such as John Lewis and Marks & Spencer, and the New West End Company, which speaks for 600 businesses in central London’s main shopping district, have warned that checking documents at the door would not work. – Guardian

London airports will not need to expand until at least the 2030s after the industry was hammered by Covid, according to bosses at Gatwick – casting fresh doubt over the future of a third runway at rival Heathrow. In a filing for bond investors, Gatwick said that extra capacity will not be needed for many years following a near-total collapse in passenger travel triggered by Covid restrictions. – Telegraph

Wealth taxes, income tax surcharges and solidarity business levies should be considered to support those hit hardest by the pandemic and to tackle rapidly rising public debt, the International Monetary Fund (IMF) has said. It urged advanced nations such as Britain to consider temporary tax increases to provide targeted support for vulnerable households, including minorities, women and the low-paid. – The Times

A sustainable fund manager has sold its stake in Kingspan in response to failings at the company’s British insulation business that emerged at the Grenfell inquiry. WHEB said it believed that the culture within Kingspan’s UK business had “enabled” or “even encouraged” an attitude that “prioritised commercial advantage over product safety”. – The Times

 

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