ADVFN Morning London Market Report: Monday 19 April 2021

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London open: Stocks edge higher, geopolitics coming ‘back to the fore’

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Stocks were slightly higher on Monday as investors bid their time ahead of the release of a raft of key economic surveys at the end of the week and their potential impact on bond markets.

So while some analysts were talking of a lull in markets on Monday, others such as Interactive Investors‘ Richard Hunter were focused on the prospects for a strong economic rebound.

“Investors are feeling the sugar rush as the effects of major stimulus packages begin to translate into increasing evidence of a strong economic rebound,” Hunter said in a note sent to clients.

As of 0850 GMT, the FTSE 100 was edging up 0.18% to 7,032.19, alongside a 0.5% advance on the second-tier index to 22,633.76.

Bitcoin was also in the headlines, following a roughly 15% plunge on Sunday amid reported rumours that US authorities were set to “crack down” on the crypto-currency’s use for money laundering, with some analysts citing a focus on such activities by Cuba.

Geopolitics were also coming back “to the fore”, said analysts at Barclays Research in a research report sent to clients on 16 April, as the US tightened sanctions against Russia amid already tense relations with Beijing.

At the weekend, Washington warned Moscow of “consequences” if political activist Alexei Navalny died in prison. Nonetheless, on Sunday, Russia’s ambassador to the UK said that would not be allowed to happen and there was some hope in the background that a US-Russia summit might help to lower tensions on the Russia-Ukraine border.

German politics were also drawing a fair bit of attention at the start of the week, with the Green party set to announce their candidate for Chancellor in the autumn elections.

Current opinion polls indicated that the Green candidate had a decent chance of winning, UniCredit chief economist Erik Nielsen pointed out.

Meanwhile, new US regulations meant that American firms would need government permission to use Chinese IT equipment and services, analysts at Rabobank mused out loud.

The potential supply-side shortages that might result could affect as many as 4.5m companies worldwide and would come on top of the global shortfall in semiconductor output which had already hit the auto industry.

As an aside, the Netherlands’ De Volkskrant reported that Chinese telecoms outfit Huawei had free access to KPN‘s mobile network in the past and could therefore eavesdrop on all conversations – government’s included.

On the economic side of things, according to Rightmove, UK house prices jumped at a month-on-month pace of 2.1% in March to reach £327,797 – a new all-time high.

However, no major economic releases were scheduled for Monday in the UK or US, while Eurozone current account figures for February were due out at 0900 GMT, followed by a reading on March construction output at 1000 GMT.

Among the broker recommendations that were moving share prices in early trading, Berenberg reiterated its ‘buy’ recommendation and 10,000.0p target price on London Stock Exchange Group.

The same German broker trimmed its target on Tesco shares from 286.0p to 280.0p, but also remained at ‘buy’.

America’s Madison Industries swoops in on Nortek’s Air Management and Air Quality units

Melrose Industries has agreed to sell its Nortek Air Management business to Chicago-based Madison Industries, it announced on Monday, for £2.62bn in cash. The FTSE 100 company said it would use part of the proceeds to reduce debt and contribute around £100m to the GKN UK defined benefit pension schemes, which would mean that the funding deficit would be reduced to £200m. A portion of the net proceeds would also be returned to shareholders.

LondonMetric said 98% of March quarterly and monthly rents have been collected with a further 0.8% expected soon. Rent collection is high across all sectors with distribution at 99%, long income at 98%, offices at 99% and retail parks at 95%. For the year to March 2021, LondonMetric has demanded £114.1 million rent, of which 98.1% has been collected or is being collected, 1.1% was subject to asset management initiatives, 0.4% was forgiven and 0.4% remains unpaid.

ThreeArc Mining’s initial Ore Reserve estimate for the Tomtor niobium and rare-earth metals project in the northwestern Russian province of Yakutia has confirmed it as one of the top-three rare-earths projects in the world. FTSE 100 listed Polymetal owns a 9.1% stake in ThreeArc. The open pit mine envisaged is expected to provide enough ore for more than 67 years of processing at the Krasnokamensk Hydrometallurgical Facility which is to be built near the town of Krasnokamensk. A bankable feasibility study was already in progress.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Ocado Group Plc +3.30% +72.00 2,253.00
2 Fresnillo Plc +1.53% +14.20 940.00
3 Marks And Spencer Group Plc +1.50% +2.35 158.85
4 Tui Ag +1.46% +5.70 397.20
5 Rightmove Plc +1.44% +8.80 619.20
6 Sse Plc +1.34% +20.00 1,510.50
7 Hikma Pharmaceuticals Plc +1.31% +31.00 2,398.00
8 Sainsbury (j) Plc +1.29% +3.20 251.90
9 Antofagasta Plc +1.28% +24.00 1,896.50
10 Rolls-royce Holdings Plc +1.28% +1.34 105.90

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Evraz Plc -1.57% -10.00 626.40
2 Smith & Nephew Plc -1.00% -14.50 1,430.50
3 Aviva Plc -0.95% -3.90 407.50
4 Phoenix Group Holdings Plc -0.84% -6.40 753.40
5 Royal Dutch Shell Plc -0.76% -10.80 1,402.00
6 Royal Dutch Shell Plc -0.74% -10.00 1,340.20
7 Bp Plc -0.68% -2.05 300.90
8 Legal & General Group Plc -0.65% -1.80 277.20
9 Standard Life Aberdeen Plc -0.62% -1.80 287.80
10 Bhp Group Plc -0.54% -12.00 2,227.50

 

Europe open: Stocks edge ahead on earnings season optimism

European stock edged ahead on Monday and into record territory as a solid start to the US earnings season provided impetus for investors.

The pan-European STOXX 600 index rose 0.16% driven by travel stocks. All major regional bourses were higher.

Markets also took heart from record highs in US markets with the Dow Jones and S&P500 ahead by 11.7% and 11.4% respectively in the year to date, while the Nasdaq is showing gains of 9% so far this year.

“Investors are feeling the sugar rush as the effects of major stimulus packages begin to translate into increasing evidence of a strong economic rebound,” said interactive investor head of markets Richard Hunter.

“In the US, the most recent data has reflected this impact, with robust showings from housing, retail sales and an improvement in the jobless claims number.”

“Meanwhile, the US banks have also reported significant profit hikes, reinforcing hopes that the recovery is firmly on track. Corporate earnings will continue to be a near term feature of investor scrutiny, with the likes of Netflix and IBM reporting this week.”

In equity news, French car parts maker Faurecia rose 1% after first-quarter sales beat market expectations, driven by strong growth in China.

Danske Bank shares were down 1.7% as Chief Executive Officer Chris Vogelzang resigned after the Dutch authorities named him as a suspect in a probe into violations of money-laundering regulations at Dutch lender ABN Amro.

ABN Amro rose 3.3% after it said it had reached a €480m settlement with prosecutors over the money laundering allegations.

Shares in Italy’s CNH Industrial fell 4.5% after ending discussions over the sale of its truckmaking business Iveco to Chinese company FAW.

 

US close: Stocks higher as jobless claims beat expectations

Wall Street stocks were in positive territory at the close on Thursday, thanks to some better-than-expected jobless claims data and corporate results.

At the end of the session, the Dow Jones Industrial Average was up 0.9% at 34,035.99, as the S&P 500 added 1.11% to 4,170.42 and the Nasdaq Composite advanced 1.31% to 14,038.76.

The Dow closed 305.1 points higher on Thursday, extending gains recorded in what turned out to be a mixed session for major indices on Wednesday as market participants rifled through some strong earnings from several of the nation’s largest banks.

Traders were digesting news that the number of Americans signing up for unemployment benefits fell to 576,000 in the week ended 10 April, the lowest number recorded since the beginning of the Covid-19 pandemic.

According to the Labor Department, applications crashed 193,000 from last week’s revised print of 769,000, with the weekly print now remaining sharply below early January’s peak of 900,000.

Continuing jobless claims came in at 3.73m, broadly flat on the prior week’s print of 3.72m.

Elsewhere on the macro front, the Philadelphia Fed manufacturing current index rose from 44.5 to 50.2 in April to its highest level in nearly 50 years, while the Empire State Manufacturing Index of general business conditions rose to 26.3 in April.

That was up from 17.4 and well above expectations for a print of 18.2 to a multi-year high, well past levels seen prior to the Covid-19 pandemic.

Still on data, production at US factories jumped the most it has in eight months during March, with manufacturing returning to a path of solid growth following weather-related setbacks in February.

According to the Federal Reserve, the 2.7% increase in output followed a downwardly revised 3.7% decline in February, while total industrial production, which also includes mining and utility output, rose 1.4% in March after a revised 2.6% decrease in the previous month.

The NAHB‘s housing market index for April showed that sentiment amongst builders rose one point to 83, with builders facing strong demand from potential buyers due to the existing home market continuing to suffer from record low numbers of listings.

Corporate earnings were firmly in focus on Thursday, with Bank of America falling 2.86% even after it posted earnings that came in well ahead of expectations on the Street thanks to a solid performance from its trading and investment units and the release of loan-loss reserves.

PepsiCo shares were up 0.14% after the drinks and snacks maker posted a 7% jump in quarterly sales, topping estimates.

Dow constituent UnitedHealth advanced 3.83% after its quarterly results topped analysts’ expectations, and the insurer raised its full-year 2021 guidance.

 

Monday newspaper round-up: Leon, Netflix, property prices, home working

Leon has been sold for an estimated £100 million to the billionaire brothers who are buying AsdaEG Group, Mohsin and Zuber Issa’s petrol forecourt and convenience retail business, said that it planned to step up the pace of expansion of the self-styled “naturally fast food” chain by opening about 20 Leon outlets a year, including several drive-throughs. – The Times

A frenzy of activity has driven UK property prices to a record high this month, just as the government launches a mortgage guarantee scheme to help people with small deposits on to the housing ladder. Online property portal Rightmove said the average asking price jumped by 2.1% in April to a new all-time high of £327,797, an increase of £6,733 from March. – Guardian

Almost one in four workers hope never to set foot in the office again, with 7.5m people keen to permanently work from home every day of the week. At the same time slightly more (28pc) are desperate to get back and hope never to have to turn their kitchen or spare bedroom into a home office, according to a new survey by Deloitte. – Telegraph

Netflix is expected this week to report the lowest number of new subscribers in the first quarter for four years, perhaps signalling the end of the home entertainment pandemic boom. For Netflix, which passed 200 million subscribers last year as record numbers signed up to beat lockdown boredom, the first quarter is traditionally its strongest for new sign-ups, with families in key markets including North America and Europe looking to be entertained while stuck at home during winter weather. – Guardian

Several large audit firms will be blacklisted in this year’s annual shareholder meetings by Pirc, an advisory service that believes they are not doing enough to tackle corporate fraud. Pirc is recommending that investors vote against the reappointment of PwCKPMGEY and Grant Thornton at any British company where they are the auditor. It has adopted the position – which is likely to cause a stir during the annual meetings season and to be unpopular with companies – because it believes the firms have not made strong enough undertakings to improve processes to detect fraud. – Guardian

Private Covid tests for summer holidaymakers could fall below £50 under plans being considered by the Treasury to exempt them from VAT. In a partial climbdown, HMRC has already ruled that the gold standard PCR tests will be exempt from VAT when they are administered or overseen by a registered nurse. – Telegraph

 

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