ADVFN Morning London Market Report: Tuesday 20 April 2021

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London open: Tobacco stocks pace losses on threat of US regulations

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Stocks were being weighed down by heavy losses in tobacco makers’ shares following a Wall Street Journal report that the US administration was mulling capping the level of nicotine in cigarettes.

Also dampening investor sentiment ahead of those was data showing an unexpected 56,000 drop in UK payrolls for March – the first decline in four months.

As of 0830 GMT, the FTSE 100 was down by 0.19% or 12.29 points at 6,987.63, while cable was edging up by 0.06% to 1.3995, having earlier briefly hit 1.4237.

In the background, investors were waiting on the release of key corporate results in the States which were due out after the market close in New York, including from media giant and stock market darling Netflix.

Shares finished modestly lower overnight on Wall Street, driven by weakness in technology stocks including Tesla and chip-maker Nvidia.

The latter fell after the UK government said it would look into the national security implications of its acquisition of ARM Holdings.

Swissquote analyst, Ipek Ozkardeskaya, sounded a bearish note on the outlook for stocks.

Ozkardeskaya told clients: “Stocks are poised to extend gains through uncharted territories, even with the valuations that do no longer make sense as stock prices trade on average near 40 times this year’s earnings and some 23 times the next year’s earnings according to Bloomberg.

“Suppressing shorts is now adding a perilous asymmetry to the market valuation and increases the risk of seeing a bigger bubble built as we inevitably move toward tighter financial conditions on the back of improved economic data.”

Across the Channel meanwhile, the spotlight was expected to be on the European Central Bank’s Bank Lending Survey for the first quarter of 2021.

The European Union’s General Affairs Council was also due to meet, via video conference, to analyse the state of relations with the UK, among other matters.

No major economic releases were scheduled in the US.

Journal report hits Tobacco stocks

Stock in British American Tobacco and Imperial Brands was pummeled after the Wall Street Journal reported that the Biden administration is mulling whether to set a legal limit on the nicotine content of cigarettes. A deadline for declaring a ban on menthol cigarettes was also reportedly looming close on the horizon.

Associated British Foods saw its bottom line more than halve over the half-year ended on 27 February. However, citing its “success” in a number of new markets, ranging from Poland to Florida, the board announced that the food ingredients maker would repay the monies received from the government’s job retention scheme during the present financial year and declared an interim dividend of 6.2p.

Rio Tinto reported a 7% improvement in Pilbara iron ore shipments year-on-year to 77.8 million tonnes for the first quarter on Tuesday, with production down 2% to 76.4 million tonnes. The FTSE 100 mining giant said bauxite production slipped 2% to 13.6 million tonnes, while aluminium production grew 3% to 0.8 million tonnes. Mined copper production of 120,500 tonnes was 9% lower than in 2020, while titanium dioxide slag production was 5% lower year-on-year at 279,000 tonnes and production of pellets and concentrate at the Iron Ore Company of Canada (IOC) was 8% lower than in 2020.

Cybersecurity software company Avast said first quarter revenue rose 10.4% to $237.1m on an organic basis, with its Consumer Direct business continuing to deliver good growth, while the SMB business also sustained positive momentum. The FTSE 100 company said adjusted EBITDA was 10.3% for the period at $133.7m, resulting in an adjusted EBITDA margin of 56.4%.

Shopping centre owner Hammerson on Tuesday appointed a new finance director and reported an encouraging rebound in footfall at its English malls after a partial easing of Covid-19 curbs this month. “Initial footfall recovery in England is encouraging, and around 90% of operators are currently able to trade,” Hammerson said in a trading update.

First quarter revenue at price comparison platform Moneysupermarket fell by a fifth as consumers reined in their spending during the latest Covid lockdown. Revenue for the three months to March 31 fell to £85.5m, down from £107.3m a year ago. Nevertheless, the online service-switching service said it expected its full-year results to be in line with market expectations.

Jupiter Fund Management posted a 0.1% increase in its assets under management for the three months ending on 31 March to reach £58.79bn. However, positive market returns of £837m accounted for all of the increase versus the year earlier period, offset by £776m of net outflows due to continued lower client demand for UK and European equity strategies.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Antofagasta Plc +1.04% +19.50 1,887.00
2 Astrazeneca Plc +1.01% +75.00 7,493.00
3 Kingfisher Plc +1.00% +3.60 364.30
4 Bhp Group Plc +0.81% +18.00 2,235.50
5 Bae Systems Plc +0.80% +4.20 527.20
6 Bp Plc +0.70% +2.10 302.95
7 Fresnillo Plc +0.67% +6.20 925.80
8 Royal Dutch Shell Plc +0.56% +7.80 1,404.60
9 Evraz Plc +0.55% +3.40 624.00
10 Royal Dutch Shell Plc +0.49% +6.60 1,343.60

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 British American Tobacco Plc -5.58% -162.50 2,751.50
2 Imperial Brands Plc -5.47% -86.50 1,494.50
3 Melrose Industries Plc -3.28% -5.60 165.00
4 Associated British Foods Plc -2.32% -57.00 2,403.00
5 Next Plc -2.22% -180.00 7,932.00
6 International Consolidated Airlines Group S.a. -1.83% -3.85 206.30
7 Easyjet Plc -1.44% -14.20 973.20
8 Sainsbury (j) Plc -1.37% -3.50 251.20
9 Standard Chartered Plc -1.37% -6.80 488.40
10 Carnival Plc -1.33% -21.80 1,613.40

 

Europe open: Shares run out of puff on US nicotine cut report

European shares made a subdued start on Tuesday after record highs a day earlier, as tobacco companies fell on reports of plans to cut nicotine levels in cigarettes sold in the US.

The pan-European Stoxx 600 index was down 0.33% at 0751 GMT with all major regional bourses lower. The benchmark has been hitting records during April and is up 10.4% in the year to date.

Shares in British American Tobacco and Imperial Brands were both down more than 5% after a report the Biden administration was thinking about forcing tobacco companies to lower nicotine levels.

The UK FTSE 100 was down 0.21%, while Germany’s DAX was flat and France’s CAC 40 slipped 0.55%.

UK job figures for the three months to February were released, showing the unemployment rate fell to 4.9%, better than the steady 5% forecast by analysts.

“Though on the surface the numbers look broadly positive, the knowledge that furlough is acting as the final line of defence against a potential jobs disaster appears to have undermined faith in this morning’s figures,” said Spreadex analyst Connor Campbell.

In other equity news, shares in French food group Danone fell despite the company maintained guidance for returning to profitable growth in the second half of 2021.

Swedish medical gear maker Getinge jumped after it posted a rise in first-quarter core profit.

Shares in cybersecurity firm Avast rose as the company raised guidance for the year after posting an increase in first quarter profits.

The company confirmed revenue of $237m during the period, up 10% year on year, while core earnings were up 10.3% to $134m.

 

US close: Stocks slip from record highs as earnings season rolls on

Wall Street stocks closed lower on Monday as traders took profits in bank stocks and digested more earnings from big-name US firms.

At the close, the Dow Jones Industrial Average was down 0.36%% at 34,077.63, while the S&P 500 was 0.53% weaker at 4,163.26 and the Nasdaq Composite saw out the session 0.98% softer at 13,914.77.

The Dow closed 123.04 points lower on Monday, cutting into gains recorded in the previous session that saw the index close at a fresh record high.

Corporate earnings were again in focus on Monday, with a slew of major blue-chip firms slated to report throughout the week.

Coca-Cola shares were in the green after posting better-than-expected quarterly earnings and revenues and stating that demand had returned to pre-pandemic levels in March, while banks stocks like Bank of AmericaWells Fargo and Citigroup were under pressure Monday as market participants continued to take profits after some solid earnings from the nation’s largest lenders last week.

Also in focus were comments from White House chief medical advisor Dr Anthony Fauci, who stated he believes the US will resume administration of Johnson & Johnson‘s Covid-19 vaccine after the Food and Drug Administration requested states temporarily halt using the single-dose vaccine “out of an abundance of caution” following the development of a rare blood-clotting disorder in six people out of the millions who’ve received the shot.

“My estimate is that we will continue to use it in some form,” Fauci said. “I doubt very seriously if they just cancel it. I don’t think that’s going to happen. I do think that there will likely be some sort of warning or restriction or risk assessment.”

No major data points were released on Monday.

 

Tuesday newspaper round-up: Arm, Nvidia, Air France-KLM, ‘Britcoin’, Tesco

Ministers have ordered a formal investigation into the proposed $40 billion takeover of Arm by America’s Nvidia, citing concerns the deal could diminish Britain’s national security. Oliver Dowden, the culture secretary, has told the competition watchdog to begin a “phase one” investigation of the acquisition of the microchip designer, which is considered the most successful technology to have emerged from the UK in recent decades. – The Times

The French government has increased its stake in Air France-KLM to more than three times that of the Netherlands, strengthening its grip on the struggling airline. A share issue by the struggling airline more than doubled the French government’s holding to 28.6pc, according to a statement on Monday, followed by China Eastern Airlines which increased its stake from 8.8pc to 9.6pc to become the second biggest shareholder. – Telegraph

A stimulus programme focused on green and digital infrastructure, research and development, energy and care work could create more than 1.2m jobs within two years and more than 2.7m jobs during the next decade, according to research. Such a strategy alongside additional government investment could mean every job lost to the coronavirus pandemic would be replaced during vital upcoming recovery years, a report by Green New Deal UK non-profit group has found. – Guardian

Households are a step closer to paying for goods and services with digital pounds and pence after the Treasury and the Bank of England announced a task force to weigh up the idea. A central bank digital currency, or CBDC – dubbed Britcoin by Rishi Sunak – would give consumers and businesses a new way of making and receiving payments and would sit with physical cash and bank deposits. While possibly underpinned by the blockchain technology used by cryptocurrencies such as bitcoin and ethereum, the CBDC would be pegged to the pound and therefore much less volatile. – The Times

Jeff Fairburn, the former boss of Persimmon, has teamed up with an American hedge fund to buy one of the UK’s largest residential property developers. Yorkshire-based private property developer Berkeley DeVeer, headed by Mr Fairburn since early 2020, has partnered with funds advised by New York’s Elliott Advisors to take over Avant Homes Group. – Telegraph

Tesco has been fined £7.56m by a judge for selling out of date food at three of its Birmingham stores. The supermarket chain was handed the penalty by a judge at Birmingham magistrates court on Monday and ordered to pay prosecution costs of £95,500, Birmingham city council said. It was also ordered to pay a £170 victim surcharge. – Guardian

 

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