ADVFN Morning London Market Report: Friday 23 July 2021

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London open: Stocks rise as investors digest retail sales

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London stocks rose in early trade on Friday as investors mulled the latest UK retail sales data.

At 0825 BST, the FTSE 100 was 0.5% higher at 7,006.14.

Figures released earlier by the Office for National Statistics showed retail sales rose between May and June, helped along by the Euros. Sales were up 0.5%, coming in a touch above consensus expectations for 0.4% growth. Compared with their pre-pandemic February 2020 levels, sales were 9.5% higher.

The largest contribution came from food stores, which saw sales volumes rise 4.2%. The ONS said anecdotal evidence suggested the increase was linked to the start of the Euro 2020 football championship.

On the other hand, non-food stores saw sales volumes drop 1.7%, which was their first fall on the month since January 2021.

Meanwhile, fuel sales increased 2.3% from May as people travelled more thanks to easing restrictions, but remained 2.1% below their pre-pandemic levels.

ONS director of Economic Statistics Darren Morgan said: “June’s retail sales have picked up again following the dip seen last month, with the main driver coming from food and drink sales, boosted by football fans across Britain enjoying the Euros.

“Although not quite back to their pre-pandemic level, fuel sales rose again this month, as people increased the amount they travel so are spending more at the pump.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the temporary boost to food spending from the Euros will fade, while higher confidence does not appear to be translating to higher levels of economic activity, due to the recent rise in Covid-19 cases.

“Indeed, footfall at retail locations has trended down recently and last week was 75% of its level two years ago, down from the peak of 86% in the first week of June, according to Springboard. Similarly, credit and debit card payments settled through the CHAPS system were 4.2% below their February 2020 level in the first 15 days of July, worse than the 2.3% shortfall seen in the first 15 days of June.

“Meanwhile, the combination of a further rise in CPI inflation, a decline in the value of Universal Credit payments at the end of September and a fall in employment in Q4 after the furlough scheme has been wound down will weigh on confidence and real disposable incomes. With consumers also likely to rotate back towards spending on services, it remains difficult to see how retail sales could sustainably exceed June’s level in the second half of 2021.”

In equity marketsUltra Electronics surged 33% after the defence company said it was minded to recommend a £2.58bn takeover bid from Cobham to shareholders. Cobham, owned by US private-equity firm Advent International, has offered £35 a share, a 42% premium to Ultra’s share price of £24.70 on Thursday.

Telecoms operator Vodafone rallied after it reported a rise in first-quarter revenue as European and African services returned to growth.

Beazley was a high riser after the insurer said it swung to a profit in the first half of the year as premium rates improved across its divisions, while wealth manager Brewin Dolphin traded up as it reported an increase in quarterly net inflows.

Mr Kipling and Bisto owner Premier Foods also advanced as it said full-year adjusted pre-tax profit was set to be at the top end of its expectations after “a very encouraging start to the year”.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Marks And Spencer Group Plc +2.90% +4.00 142.10
2 Rolls-royce Holdings Plc +2.58% +2.46 97.74
3 Vodafone Group Plc +2.34% +2.72 118.76
4 Melrose Industries Plc +2.04% +3.15 157.75
5 Evraz Plc +2.00% +12.00 612.60
6 Anglo American Plc +1.65% +48.00 2,958.00
7 Next Plc +1.55% +124.00 8,144.00
8 Easyjet Plc +1.46% +11.80 822.40
9 Bt Group Plc +1.43% +2.60 184.70
10 3i Group Plc +1.39% +17.50 1,280.50

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Centrica Plc -1.28% -0.63 48.67
2 Aviva Plc -0.75% -2.90 384.40
3 Wpp Plc -0.59% -5.60 945.60
4 Flutter Entertainment Plc -0.50% -65.00 12,920.00
5 Phoenix Group Holdings Plc -0.44% -3.00 681.20
6 Kingfisher Plc -0.40% -1.50 373.10
7 Intertek Group Plc -0.32% -18.00 5,528.00
8 Relx Plc -0.24% -5.00 2,056.00
9 Sainsbury (j) Plc -0.21% -0.60 280.10
10 Ashtead Group Plc -0.14% -8.00 5,674.00

 

Europe open: Corporate news, ECB pledge help maintain share rally

European shares started the final session of the week higher, boosted by more upbeat corporate news and the European Central Bank promise to continue stimulus.

The pan-European Stoxx 600 index rose 0.55% in early trade with all major regional bourses in the green.

Investors were digesting official UK data that showed a rise in retail sales rose between May and June, helped along by the European football tournament. Sales were up 0.5%, coming in a touch above consensus expectations for 0.4% growth. Compared with their pre-pandemic February 2020 levels, sales were 9.5% higher.

In equity markets, Ultra Electronics surged 33% after the defence company said it was minded to recommend a £2.58bn takeover bid from Cobham to shareholders. Cobham, owned by US private-equity firm Advent International, has offered £35 a share, a 42% premium to Ultra’s share price of £24.70 on Thursday.

Telecoms operator Vodafone rallied after it reported a rise in first-quarter revenue as European and African services returned to growth.

Shares in French car parts maker Valeo jumped 7.5% after it posted higher first-half sales and profit, and said it expected the shortage of key technology chips to ease. Peers Faurecia and Continental rose 5.6% and 3% respectively.

Rafale jets maker Dassault Aviation climbed 7.1% on reporting higher sales and profits in the first half of the year.

Norwegian energy firm Scatec fell 13% despite a rise in second quarter earnings.

 

US close: Stocks close higher despite surprise uptick in jobless claims

Wall Street stocks closed higher on Thursday despite a surprise increase in weekly jobless claims.

At the close, the Dow Jones Industrial Average was up 0.07% at 34,823.35, while the S&P 500 was 0.20% firmer at 4,367.48 and the Nasdaq Composite saw out the session 0.36% stronger at 14,684.60.

The Dow closed 25.35 points higher on Thursday as strong second-quarter earnings continued to flow in.

The yield on the benchmark 10-year Treasury note was slightly higher on Thursday at 1.29%, up from the 1.17% seen earlier in the week that startled investors.

As always, market participants were digesting this week’s jobless claims report, this time revealing that first time unemployment claims in the US bounced back unexpectedly in the week ended 17 July, pushed higher by the annual retooling of automakers.

According to the Department of Labor, the seasonally adjusted number of initial jobless claims rose by 50,000 over the week ended 17 July to 419,000. Economists had pencilled-in a reading of 350,000. Data for the previous week was also upwardly revised by 8,000 to 368,000, while the four-week moving average of initial claims meanwhile was little changed, up 750 to 385,520, and secondary claims for the week ended 10 July dipped 29,000 to approximately 3.24m for their lowest reading since 21 March 2020.

Economic reopening plays were also in focus, with names like Royal Caribbean trading lower, while investors were also eyeing energy stocks after oil rebounded back above $70 a barrel and bank shares as a result of the more stable yields.

Also in the corporate space, second-quarter earnings from AT&T topped analysts estimates, while CSX shares advanced after the railroad operator said second-quarter profits more than doubled.

Going the other way, Texas Instruments was weighing on tech stocks after the chipmaker topped expectations but cautioned that third-quarter results would likely fall short of estimates.

On the macro front, the Chicago Fed‘s national activity index declined to 0.09 in June, down from 0.26 in May, with three broad categories of indicators used to construct the index making positive contributions in June, but with two categories deteriorating when compared to May.

Elsewhere, the Conference Board‘s leading index improved 0.7% to 115.1 in June, just shy of consensus estimates for a reading of 1.0% and last month’s revised print of 1.2%.

Still on data, US home sales bounced back in June following four consecutive monthly declines, however, the pace was moderate as higher prices and low inventory continued to weigh on the property market. Existing home sales increased 1.4% to a seasonally adjusted annual rate of 5.86m units last month, according to the National Association of Realtors, with sales rising in the Northeast, West and Midwest.

Lastly, the Kansas Fed‘s July manufacturing index came in at 41, up from a reading of the 30 a month earlier.

 

Friday newspaper round-up: Self-isolation, Blackstone, Starling

Workers from 16 key sectors including health, transport and energy will not have to isolate after being pinged by the NHS Covid app, as it was revealed that more than 600,000 people in England and Wales were sent self-isolation alerts last week The raft of changes, after days of frantic talks with industry leaders, came amid open Conservative revolt over the so-called “pingdemic” with the former health secretary Jeremy Hunt warning the government that it was facing a crisis of public trust in the system. – Guardian

Welcome to the world of private equity, also known as the “billionaire factory”, where already super-rich firms have used low interest rates and their considerable financial firepower to embark on a multi-billion dollar buying spree this year. Mere mortals were this week given a rare glimpse inside the money-spinning and highly secretive private equity industry – which buys up companies, often using more debt than stock market investors would tolerate, then floats or sells them on again – as the London firm Bridgepoint floated on the stock market. – Guardian

Britain and France are in talks to roll out a “wallet” travel app to ensure holidaymakers have all the necessary Covid documentation before heading to the airport. Grant Shapps, the Transport Secretary, met his French counterpart Jean-Baptiste Djebbari in Folkestone on Wednesday to discuss using an app developed by the owner of the Channel Tunnel to avoid chaos at the border. – Telegraph

The world’s largest private equity firm doubled its profits in the latest quarter. Blackstone benefited from a record increase in the value of its investments, bolstered by a string of initial public offerings. With its private equity portfolio value up by 13.8 per cent in the three months to June 30, well ahead of the S&P 500 share index, the American fund highlighted the recent listings of TaskUs, the outsourcer, and Sona Comstar, an Indian car components maker. Total net income attributable to Blackstone hit $1.31 billion, up from $568 million in the same quarter in 2020. – The Times

Starling said yesterday that its revenues were growing and that it had been profitable for ten months. Anne Boden, chief executive of the digital bank, said that the results put the financial technology group on track for a flotation either late next year or in 2023. “As soon as you get to profitability, you break free,” she said. – The Times

 

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