ADVFN Morning London Market Report: Wednesday 20 October 2021

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London open: Stocks tread water as investors mull inflation data


London stocks were little changed in early trade on Wednesday as investors mulled the latest UK inflation figures.

At 0830 BST, the FTSE 100 was down 0.1% at 7,212.96, while sterling was 0.1% weaker against the dollar at 1.3784.

Data released earlier by the Office for National Statistics showed consumer price inflation unexpectedly dipped in September despite the rising cost of fuel and transport.

CPI fell to 3.1% from 3.2% in August, versus expectations for it to remain unchanged. Still, it remains well above the Bank of England’s target of 2%, meaning it’s unlikely to do anything to reduce expectations the Bank will raise interest rates before the end of the year.

The decline was due mainly to the impact of last summer’s ‘Eat Out to Help Out’ scheme. The biggest downward contribution came from restaurants/cafes inflation, which fell to 3.9% in September from 7.9% the month before.

Core inflation, which strips out volatile elements such as food and fuel, slipped to 2.9% from 3.1%.

ONS Head of Prices Mike Hardie said: “Annual inflation fell back a little in September due to the unwinding effect of last year’s ‘Eat Out to Help Out,’ which was a factor in pushing up the rate in August.

“However, this was partially offset by most other categories, including price rises for furniture and household goods and food prices falling more slowly than this time last year.

“The costs of goods produced by factories rose again, with metals and machinery showing a notable price rise.

“Road freight costs for UK businesses also continued to rise across the summer.”

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said inflation is expected to reach 4%, double the BoE’s target by the end of the year, and potentially 5% by next April.

“With prices staying stubbornly high and another surge expected, a gentle rise in interest rates before the end of the year still looks likely if there is any chance of keeping a Goldilocks economy within reach.

“Too much inflation in the mix risks the economy getting too hot, leading prices to spiral upwards. If rates are pushed up rapidly, there’s a risk it gets too cold, freezing off economic growth. A 2% inflation target is considered just right, as long as the economy also keeps growing.”

In equity markets, miners were under the cosh as metals prices fell, with AntofagastaRio TintoBHPAnglo American and Glencore all lower.

Online review website Trustpilot tumbled after shareholders placed around 41m shares, or a 10% stake, in the company. According to Bloomberg, holders Draper Esprit, Index Ventures, Northzone, Seed Capital, Sunley House Capital Management and Vitruvian Partners placed the shares.

Hammerson was also in the red even as the property group reported a “significant” improvement in rent collection for the fourth quarter.

On the upside, Crest Nicholson gained as the housebuilder outlined its growth strategy.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Centrica Plc +2.70% +1.58 60.08
2 Sse Plc +2.20% +35.00 1,623.00
3 Unilever Plc +1.29% +49.00 3,836.00
4 Halma Plc +1.19% +34.00 2,898.00
5 Burberry Group Plc +0.96% +17.50 1,847.50
6 British American Tobacco Plc +0.72% +18.50 2,598.50
7 Ocado Group Plc +0.69% +12.50 1,815.00
8 Imperial Brands Plc +0.61% +9.50 1,567.50
9 National Grid Plc +0.60% +5.40 909.20
10 Vodafone Group Plc +0.53% +0.58 109.98


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Antofagasta Plc -4.44% -65.50 1,410.50
2 Tui Ag -4.39% -10.70 233.00
3 International Consolidated Airlines Group S.a. -3.96% -6.56 159.00
4 Rio Tinto Plc -2.98% -150.50 4,899.50
5 Easyjet Plc -2.54% -15.60 597.60
6 Whitbread Plc -1.79% -59.00 3,231.00
7 Carnival Plc -1.71% -25.60 1,469.40
8 Rolls-royce Holdings Plc -1.71% -2.38 137.06
9 Land Securities Group Plc -1.69% -11.80 686.80
10 Bhp Group Plc -1.65% -33.10 1,975.40


Europe open: Shares higher as investors mull mixed earnings bag

European shares opened higher on Wednesday as investors digested a mixed bag of corporate earnings news.

The pan-European Stoxx 600 index was up 0.14% in early deals as Asian and US markets closed higher overnight. UK shares were flat as inflation fell unexpectedly in September, but traders were still factoring in an early rise in interest rates next month.

September inflation fell back to 3.1% from 3.2% in August September despite the rising cost of fuel and transport, according to official data and still well above the Bank of England’s target of 2%.

“The latest numbers don’t include the petrol pump crisis or the most recent surge in energy prices, or indeed the knock on effects across the economy, so inflation will still get worse before it gets better,” said AJ Bell analyst Laith Khalaf.

In equity news French luxury goods maker Kering fell 4.6% as sales growth at its fashion brand Gucci missed analysts’ expectations due to a sharp slowdown in the pace of its post-Covid recovery, particularly in Asia.

Shares in its French rival LVMH and Hermes also fell on the news.

ASML Holdings, which supplies computer chip, fell 1.73% despite posting slightly better-than-expected quarterly results.

Dutch paints and coatings maker Akzo Nobel fell 1.61% as quarterly earnings were hit by continued raw material inflation and supply chain disruptions, which it expects to continue through mid-2022.

Shares in Swiss food giant Nestle rose 3.6% after the company lifted its sales outlook after strong coffee sales and price hikes pushed organic sales 6.5% higher in the third quarter.

Roche shares fell, despite the Swiss drugmaker posting an 8% rise in nine-month revenues, powered by demand for Covid-19 tests, and lifted guidance.

Deliveroo shares rose as the online food delivery firm reported a 58% rise in order values for the third quarter.

Miners were weaker as metals prices fell, with AntofagastaRio TintoBHPAnglo American and Glencore all lower.


US close: Major indices easily reverse Monday’s losses as Q3 earnings season carries on

Wall Street stocks closed higher on Tuesday as more big-name US companies published their latest set of quarterly results.

At the close, the Dow Jones Industrial Average was up 0.56% at 35,457.31, while the S&P 500 was 0.74% firmer at 4,519.63 and the Nasdaq Composite saw out the session 0.71% stronger at 15,129.09.

The Dow closed 198.70 points higher on Tuesday, reversing losses registered in the previous session as elevated bond yields and a weaker-than-expected Chinese GDP print soured sentiment.

Earnings were again in focus throughout the session, with drugmaker Johnson & Johnson posting adjusted earnings per share of $2.60 in pre-market and also upped its full-year forecast on the back of strong adoption of its Covid-19 vaccine, while Procter & Gamble topped estimates on the back of price hikes that offset certain costs but cautioned of more inflation to come.

BNY Mellon beat on third-quarter estimates thanks to improved fee income throughout the period and Halliburton reported a profit as structural global commodity tightness drove increased demand for its services, both internationally and domestically.

Netflix reported after the close, publishing a solid beat on both earnings and new subscriber numbers.

On the macro front, US housing starts unexpectedly dropped in September, while permits fell to twelve month low amid serious shortages of raw materials and labour, indicating yet again that economic growth slowed sharply in the third quarter. According to the Census Bureau, housing starts declined 1.6% month-on-month after rising 1.2% in August, while building permits slumped 7.7% in September after rising 5.6% in the prior month.


Wednesday newspaper round-up: Evergrande, Credit Suisse, Halifax

The rescue of embattled Chinese property company Evergrande appears to have stalled, leaving the developer on the brink of default and threatening to unleash contagion through the country’s giant real estate sector, home prices and the economy. The problems enveloping Evergrande, which has eyewatering total debts of $305bn, have hung over global financial markets in recent weeks and helped curb China’s post-pandemic recovery. – Guardian

Credit Suisse has been fined nearly £350m by global regulators, pleaded guilty to wire fraud, and agreed to forgive hundreds of millions of dollars worth of debt owed by Mozambique in an attempt to draw a line under the long-running “tuna bonds” loan scandal. The Swiss banking company had been accused of “serious” failings in its financial crime controls by the UK’s Financial Conduct Authority (FCA), and has entered into a deferred prosecution agreement with the US Department of Justice that will put the bank under heavy monitoring for three years after having “defrauded US and international investors”. – Guardian

Halifax has relaxed mortgage borrowing rules for millions of wealthy homebuyers in a bet that the property market will remain resilient despite the threat of rising interest rates. Britain’s biggest housing lender will now hand borrowers who earn more than £75,000 a loan of up to five-and-a-half times their annual income, up from a previous limit of five times. – Telegraph

More than 140m have watched the South Korean drama Squid Game since its release last month, making it the most-watched show in Netflix’s history. Netflix said the success of the show in recent weeks helped buoy its results for the third quarter. It reported its strongest subscriber growth of the year in the three months to September 30, adding 4.4m more customers in the period and beating Wall Street estimates. – Telegraph

The two most senior Vectura executives offloaded shares worth more than £6 million as part of the contentious sale of the respiratory drugs firm to one of the world’s largest tobacco groups. Will Downie, Vectura’s chief executive since 2019 and a former executive at Catalent, the US drugs company, sold shares in Vectura worth £2.3 million, and Paul Fry, its chief financial officer, sold shares worth £3.8 million, stock market disclosures show. – The Times


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