ADVFN Morning London Market Report: Friday 9 July 2021

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London open: Stocks rise as investors digest GDP figures

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London stocks rose in early trade on Friday following heavy losses in the previous session, as investors mulled the latest UK GDP figures.

At 0825 BST, the FTSE 100 was up 0.5% at 7,068.68, having slumped on Thursday amid a global selloff sparked by recovery concerns.

Data released earlier by the Office for National Statistics showed that economic growth slowed to 0.8% in May from a revised 2% in April, coming in well below expectations for 1.5% growth. April’s figure was revised down from 2.3%.

This marked the fourth consecutive month of growth and leaves the economy 3.1% below where it was in February 2020, before the Covid-19 pandemic hit.

The services sector was the biggest contributor, with growth of 0.9%, after indoor hospitality was allowed to reopen in May. Accommodation and food service activities grew by 37.1%.

The production sector saw growth of 0.8% in May, mainly because of adverse weather conditions boosting output in electricity, gas and air supply. Meanwhile, the construction sector contracted for the second month in a row, by 0.8%, but remains 0.3% above its pre-pandemic level.

The manufacturing of transport equipment fell by 16.5%, suffering its largest drop since April 2020 as microchip shortages disrupted car production.

ONS deputy national statistician for Economic Statistics Jonathan Athow said: “Pubs and restaurants, who were again able to welcome indoor guests, were responsible for the vast majority of the growth seen in May. Hotels also saw a marked recovery as restrictions lifted.”

Paul Dales, chief UK economist at Capital Economics, said: “The muted increase in GDP in May is especially disappointing at a time when some more timely indicators suggest that the economic recovery lost a bit more verve in June. This may mean that the recent rise in Covid-19 cases and the delay to the final easing in Covid-19 restrictions is hampering the recovery.

“Of course, the pace of the recovery was always going to slow as the economy climbed back towards its pre-crisis level. But we hadn’t expected it to slow so much so soon. As such, whereas we previously thought that GDP would return to its pre-crisis peak in August, October now looks a better bet.”

In equity marketsVectura shares surged more than 12% after tobacco giant Philip Morris swooped for the UK pharmaceuticals company group with a £1.045bn recommended offer. The 150p-a-share offer trumps a 136p offer from private equity group Carlyle in May that valued Vectura, which focuses on inhaled medicines, at £958m.

Outsourcer Bunzl was sitting pretty at the top of the FTSE 100, boosted by an upgrade to ‘buy’ at Berenberg, which said the stock’s recent relative underperformance has run its course and the shares are “attractively valued”.

British Airways and Iberia owner IAG, GKN owner MelroseeasyJetWizz Air and WH Smith were all higher after the government announced that fully-vaccinated Britons returning home from amber list countries will no longer have to self-isolate.

Broker Liberum said: “While this is arguably the biggest reduction in the UK’s international travel barriers, there remain obstacles from ongoing restrictions on UK residents entering many countries worldwide. Assuming the UK policy changes are not reversed, and are largely reciprocated by other countries, UK-exposed airlines are likely to have a reasonable opportunity to generate some cash for a short period this summer.”

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Evraz Plc +3.77% +22.00 605.40
2 Bunzl Plc +2.76% +68.00 2,535.00
3 Burberry Group Plc +2.72% +54.00 2,041.00
4 Micro Focus International Plc +2.22% +9.50 437.60
5 Land Securities Group Plc +1.95% +13.00 680.60
6 Ocado Group Plc +1.93% +36.50 1,926.50
7 British Land Company Plc +1.92% +9.60 509.60
8 Legal & General Group Plc +1.71% +4.40 261.50
9 Segro Plc +1.57% +18.00 1,162.50
10 Bae Systems Plc +1.50% +8.00 541.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Royal Dutch Shell Plc -0.93% -13.60 1,446.40
2 Royal Dutch Shell Plc -0.88% -12.60 1,412.20
3 Hsbc Holdings Plc -0.78% -3.20 407.40
4 Bp Plc -0.70% -2.15 305.55
5 Marks And Spencer Group Plc -0.51% -0.75 147.10
6 Sainsbury (j) Plc -0.46% -1.30 282.50
7 Itv Plc -0.25% -0.30 120.85
8 Halma Plc -0.11% -3.00 2,761.00
9 Standard Chartered Plc -0.04% -0.20 445.80
10 Hiscox Ltd -0.02% -0.20 848.80

 

Europe open: Stocks rally after Thursday selloff

European stocks rallied in the final session of the week after Thursday’s selloff that saw shares fall by almost 2%.

The pan-European Stoxx 600 index was up 0.61% despite falls in Asia overnight as fears persisted over the rising number of Covid cases.

“Investors looking for negatives will sometimes find them and the current lack of conviction is weighing on markets generally,” said Interactive Investor head of markets Richard Hunter.

“A move towards haven assets such as bonds has further depressed yields, suggesting that some believe that lower economic growth is on the horizon. This is largely driven by the dual concerns of the impact of the Covid-19 variant in some populous areas of the globe, alongside the inevitable Federal Reserve tapering of bond buying.”

In the UK, official data showed May GDP grew by a lower-than-expected 0.8% from a revised 2% in April, coming in well below expectations for 1.5% growth. April’s figure was revised down from 2.3%.

This marked the fourth consecutive month of growth and leaves the economy 3.1% below where it was in February 2020, before the Covid-19 pandemic hit.

The services sector was the biggest contributor, with growth of 0.9%, after indoor hospitality was allowed to reopen in May. Accommodation and food service activities grew by 37.1%.

In equity news, British Airways-owner IAGeasyJet and Ryanair all rose as the UK planned to scrap quarantine for fully-vaccinated arrivals from other countries in the coming weeks.

French aircraft maker Airbus gained after it reported a 52% jump in deliveries in the first half of the year.

British luxury goods group Burberry rose 3% after Goldman Sachs upgraded the stock to “buy”, while Italian rival Salvatore Ferragamo slipped after the US bank downgraded it to “sell”.

 

US close: Stocks sharply lower amid reopening concerns

Wall Street stocks closed sharply lower on Thursday amid rising global Covid-19 cases and falling bond yields.

At the close, the Dow Jones Industrial Average was down 0.75% at 34,421.93, while the S&P 500 was 0.86% weaker at 4,320.82 and the Nasdaq Composite saw out the session 0.72% softer at 14,559.78.

The Dow Jones closed 259.86 points lower on Thursday, erasing gains recorded in the previous session.

Confidence regarding a global economic rebound from the Covid-19 pandemic appeared to be shaken on Thursday after Japan declared a state of emergency in Tokyo for the upcoming Olympics, with spectators set to be banned from the games.

News that the global Covid-19 death toll topped 4.0m on Wednesday was also in focus, with multiple countries around the world being confronted with rising cases due to variants of the coronavirus.

Stocks tied to an economic reopening traded lower, with CarnivalRoyal CaribbeanAmerican Airlines, Delta and Boeing all firmly in the red.

Retailers Macy’s and Kohl’s were also sharply lower, as were stocks in chipmakers MicronNVIDIAQualcommIntel and Applied Materials.

Market participants rotated into Treasuries yet again at the open, pushing the yield on the benchmark 10-year Treasury note to 1.298% after having hit its lowest point since February earlier in the day. The lower rates saw shares in Bank of AmericaWells FargoGoldman Sachs and other financial giants head south as the decline weighed on the firm’s profitability outlooks.

On the macro front, weekly US jobless claims data continued to point towards an improving jobs picture, with initial unemployment claims edging up by 2,000 to 373,000 in the week ended 3 July, according to the Department of Labor. Economists had forecast a drop to 350,000.

The four-week moving average was little changed, dipping by 250 to 394,500, while secondary unemployment claims, which more closely track trends in hiring as opposed to firings, fell by 145,000 to 3.33m in the week ended 26 June.

No major corporate earnings were slated for release on

 

Friday newspaper round-up: Crossrail, Ineos, HSBC

Airlines on Thursday reported a surge in flight bookings from the UK after the government announced that fully vaccinated passengers and their children could return from amber-listed countries without quarantine after 19 July. EasyJet said that bookings to destinations rated as amber for coronavirus rose by 400%, and holiday bookings increased by 440 week-on-week in the hours since the transport secretary, Grant Shapps, confirmed the change in policy on Thursday morning. – Guardian

Sadiq Khan is being urged to “get a grip” of the ballooning cost to finish Crossrail after a £218m funding hole opened up in the finances of London’s new tube line. Crossrail, also known as the Elizabeth Line, will now cost taxpayers £19bn, according to a report by the National Audit Office (NAO). The public spending scrutineer said that Crossrail is now “low value for money” for taxpayers as costs spiral and post-pandemic demand for public transport dwindles. – Telegraph

Sir Jim Ratcliffe’s chemicals empire is signing up to a major carbon capture project in Scotland in a boost to the emerging technology considered key to meeting the UK’s climate goals. Ineos aims to use the planned Acorn carbon capture and storage system to help get rid of emissions from its Grangemouth petrochemicals plant and oil refinery. – Telegraph

The chairman of HSBC has been accused of prioritising profit over upholding international law by a coalition of senior politicians after he refused to discuss calls for the bank to unfreeze the assets of Hong Kong activists. Mark Tucker, 63, is understood to have told the Inter-Parliamentary Alliance on China (IPAC), a cross-party group including Sir Iain Duncan Smith, the former Conservative leader, that he would meet them only if they agreed not to discuss actions that would break a security law imposed on Hong Kong by Beijing last year. – The Times

Britain is uniquely positioned to become a hub for a multibillion-dollar marketplace in carbon offsets, the City of London’s policy head has claimed. Catherine McGuinness, chairwoman of the policy and resources committee of the City of London Corporation, told the Institute of International Finance yesterday that the corporation had spent more than a year working with organisations to understand how carbon markets could be scaled. – The Times

 

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