ADVFN Morning London Market Report: Friday 22 October 2021

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London open: Stocks edge up as Evergrande worries ease; retail sales disappoint

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London stocks edged higher in early trade on Friday as worries about Chinese property group Evergrande eased, but gains were unspectacular following disappointing retail sales and a slump in consumer confidence.

At 0840 BST, the FTSE 100 was up 0.2% at 7,204.18.

Richard Hunter, head of markets at Interactive Investor, said: “Overnight news that Chinese property company Evergrande would be making an interest payment due on one of its bonds to avoid defaulting lifted sentiment, which has also fed through to the UK in opening exchanges.

“This in turn has resulted in some small relief for mining shares, which have been under pressure in recent sessions given the large exposure to China.”

On home shores, figures released earlier by the Office for National Statistics showed retail sales unexpectedly fell in September for the fifth month in a row. Sales were down 0.2% versus expectations for a 0.5% increase, driven by a drop in non-food sales. The ONS said this was longest run of monthly declines in a row since the survey began in 1996.

Nevertheless, they remained 4.2% above pre-pandemic levels.

Sales at non-food stores fell 1.4%, with household goods sales down 9.3%, while furniture and lighting stores saw a 14.8% drop in sales. Meanwhile, sales at food stores rose 0.6%, while fuel sales rose 2.9% amid panic at the pumps.

Bethany Beckett, UK economist at Capital Economics, said the fall in retail sales volumes in September offers more evidence that the economic recovery is fast running out of steam.

“Indeed, this fall came despite the panic-buying related 2.9% m/m rise in petrol sales last month; retail sales volumes excluding fuel fell by 0.6% m/m. Given the backdrop of continued shortages and rising Covid-19 infections, we suspect that retail sales growth will continue to be weak in the coming months.

“Overall, the data support our view that the economic recovery stalled in September. Our forecast is for GDP to return to its February 2020 peak in early 2022, but the risk is that the resurgence in Covid-19 cases and continued shortages means that GDP takes longer to reach that landmark.”

Separately, a survey from GfK showed that consumer sentiment dropped sharply in October amid economic turmoil including fuel shortages and rising prices.

The total measure of GfK’s consumer confidence barometer dropped to -17, as expected by most economists, from -13 in September, in the third month of decline.

All five aspects of the survey fell, led by respondents’ view of the economy over the next 12 months, which dropped 10 points to -26 from September and 20 points from August. Households were also less optimistic about their personal finances over the next year and less likely to make a major purchase.

In equity marketsJD Sports Fashion rallied after saying it had bought 80% of family-owned Greek firm Cosmos Sport for an undisclosed sum.

London Stock Exchange was on the back foot after it posted 7.6% growth in third-quarter income but cautioned that supply chain issues could delay some of its technology spending plans.

InterContinental Hotels also lost ground even as it reported a “significant” jump in third-quarter room revenue towards pre-Covid pandemic levels after a rebound in bookings during the summer as travel restrictions were eased.

Sainsbury’s was weaker after saying it had ended talks over the sale of its banking operation, claiming the potential bid did not offer good value for shareholders.

 

Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Antofagasta Plc +3.11% +44.50 1,475.00
2 Croda International Plc +2.19% +198.00 9,220.00
3 Evraz Plc +1.57% +9.80 632.80
4 Barclays Plc +1.26% +2.48 199.38
5 Bunzl Plc +1.25% +32.00 2,582.00
6 Burberry Group Plc +1.25% +23.50 1,897.50
7 Smurfit Kappa Group Plc +1.24% +45.00 3,676.00
8 Rio Tinto Plc +1.23% +57.00 4,706.00
9 Bae Systems Plc +1.09% +6.40 591.80
10 Johnson Matthey Plc +1.08% +29.00 2,712.00

 

Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Intercontinental Hotels Group Plc -1.94% -97.00 4,899.00
2 Micro Focus International Plc -1.92% -7.30 372.60
3 Whitbread Plc -1.26% -40.00 3,127.00
4 Barratt Developments Plc -1.23% -8.00 642.80
5 Taylor Wimpey Plc -1.18% -1.80 150.45
6 Itv Plc -1.14% -1.20 103.85
7 Sainsbury (j) Plc -1.01% -3.00 293.20
8 Associated British Foods Plc -0.91% -16.00 1,736.00
9 Carnival Plc -0.91% -13.60 1,477.40
10 International Consolidated Airlines Group S.a. -0.82% -1.32 158.84

 

Europe open: Shares rally on Evergrande payment news

European stocks opened higher on Friday with investors cheering news of an interest payment by debt-ridden China Evergrande Group.

The pan-European Stoxx 600 was up 0.42% in early deals. Asian shares rose on reports the world’s most indebted company had wired funds for a dollar bond interest payment, just before a deadline that would have seen the property developer go into formal default.

Britain’s FTSE 100 was up despite an unexpected 0.2% fall in retail sales.

Richard Hunter, head of markets at interactive investor, said consumers continued to snub the high street “in favour of an escalating trend of socialising which has become a factor since the easing of lockdown restrictions”.

“Online sales remain elevated in a post-pandemic switch in behaviour, and the widely reported fuel shortages which began in late September fed through to a 2.9% rise in sales. Attention will now begin to switch towards the festive season and whether the situation can be recovered, alongside the further pressures of supply chain blockages and labour shortages,” he said.

In equity news, French cosmetics giant L’Oreal saw its shares top the Stoxx with a 6% gain after posting strong revenue growth on demand for its luxury lines and growth in China, while tissue maker Essity gained 5.2% after setting a new target to ramp up sales.

Thule Group shares rose 5.4% as the company reported third quarter sales growth of 14%.

London Stock Exchange fell 3.53% as its computer systems suffered a technical outage preventing market data from being broadcast. In a separate statement the bourse reported a 2% rise in third quarter revenue.

French vehicle maker Renault slipped 1.2% after the company said production losses this year would be far larger than previously forecast owing to a global chip shortage.

Swedish mining firm Boliden dropped 4.8% as its third-quarter operating profit fell below market forecasts, pressured by higher costs and lower volumes.

 

US close: jobless claims surprise sees stocks finish higher

Wall Street stocks were mixed early on Thursday as weekly jobless claims surprised to the upside.

At the close, the Dow Jones Industrial Average was down 0.02% at 35,603.08, while the S&P 500 was up 0.3% at 4,549.78. and the Nasdaq Composite was ahead 0.62% at 15,215.70.

The Dow closed 6.26 points lower on Thursday, taking a small bite out of gains recorded in the previous session when the blue-chip index closed just shy of its all-time high.

Thursday’s primary focus, as always, was this week’s US jobless claims report from the Labor Department, which revealed that jobless claims had continued moving lower in the seven days ended 16 October.

According to the Department of Labor, initial weekly jobless claims fell by 6,000 to 290,000, defying forecasts for a rise to 300,000.

The four-week moving average for initial claims dropped by 15,250 to hit 319,750, its lowest level since 14 March 2020, while secondary claims slipped 122,000 to 2.481m.

Also drawing an amount of attention was news that the Food and Drug Administration had signed off on booster shots of both Johnson & Johnson and Moderna’s Covid-19 vaccines as it approved “mixing and matching” vaccines.

Elsewhere on the macro front, manufacturing conditions in the Philadelphia region deteriorated a little more than expected in October as the Philadelphia Federal Reserve’s current manufacturing index declined to 23.8 from 30.7 in September, missing expectations for a reading of 25.0.

The index for new orders rose from 15.9 to 30.8, while the shipments index printed at 30.0 in October, little changed on 29.9 the month before.

The employment gauge, meanwhile, rose to 30.7 from 26.3.

Still on data, existing homes sales surged to an eight-month high in September, up 7% to a seasonally adjusted rate of 6.29m, according to the National Association of Realtors.

The Conference Board’s leading index, meanwhile, rose just 0.2% to 117.5 in September, pointing to somewhat slower growth and suggesting the economy was growing at “more moderate” trajectory than it did in the first half.

In the corporate space, AT&T was down 0.08% beat expectations for third-quarter earnings as the US communications conglomerate posted adjusted earnings per share of $0.87, up from $0.76 a year earlier and well ahead of analysts’ average estimate of $0.78.

 

Friday newspaper round-up: Evergrande, furlough cost, digital lateral flow test

The troubled property company China Evergrande Group has come up with the money to pay a $83.5m bond interest payment that it missed in September, according to reports. The company, which has debts of around $305bn, wired the $83.5m payment and noteholders will receive it before Saturday, China’s state-backed newspaper Securities Times said on Friday, citing relevant channels, according to Bloomberg. – Guardian

Britain’s foremost business lobby group has warned Rishi Sunak that his tax and spending plans risk undercutting government ambitions for a green, high-wage economy by discouraging the necessary investment. Ahead of the chancellor’s budget next week, the Confederation of British Industry (CBI) said there were fundamental inconsistencies in the government’s economic strategy that needed urgent attention. – Guardian

A digital lateral flow test that sends results to health authorities via a smartphone app is the first to receive certification, its British backers have claimed. The test reads the result using artificial intelligence and sends the findings directly to a body such as Public Health England. The user is emailed a Covid certificate within minutes. – Telegraph

The furlough scheme cost taxpayers £69 billion over an 18-month period, making it the biggest intervention in the UK jobs market in peacetime. Official figures published by the Office for National Statistics yesterday revealed the final cost of the scheme, which finished at the end of September and was a key part of the government’s efforts to prop up the economy during the pandemic. The bill rises to £97 billion when grants to the self-employed are included in the calculation. – The Times

The City regulator wants to extend the reach of rules aimed at holding bosses to account by widening them to cover payments firms and credit rating agencies. The Financial Conduct Authority said yesterday that it was seeking to broaden the senior managers’ regime, a set of rules created after the 2008 banking crisis to impose accountability on individual executives. About 47,000 financial services firms, including banks, insurers and asset managers, are subject to the regime. – The Times

 

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