ADVFN Morning London Market Report: Friday 20 May 2022

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London open: Stocks rise as retail sales beat expectations

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London stocks rose in early trade on Friday, taking their cue from an upbeat session in Asia, and following the release of better-than-expected retail sales data.

At 0825 BST, the FTSE 100 was up 1.1% at 7,384.19, having slumped a day earlier amid worries about inflation and slowing global growth.

Figures from the Office for National Statistics showed that retail sales unexpectedly rose in April, underpinned in part by an increase in food store sales.

Retail sales were up 1.4% following a 1.2% decline March, and versus expectations for a 0.2% drop. Compared with pre-Covid February 2020 levels, retail sales were up 4.1%.

Food store sales were up 2.8%, mostly due to higher spending on alcohol and tobacco in supermarkets, the ONS said. Meanwhile, fuel sales rose 1.4% in the month and sales at non-food stores were 0.6% lower.

ONS deputy director for surveys and economic indicators, Heather Bovill, said: “April’s rise was driven by an increase in supermarket sales, led by alcohol and tobacco and sweet treats, with off-licences also reporting a boost, possibly due to people staying in more to save money.”

In the three months to April, retail sales were down 0.3% following a 0.7% decline in March.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The impact of April’s increase in both National Insurance Contributions and energy bills hasn’t fully emerged in the retail sales data yet, because most people only get paid towards the end of the month, and bills will be paid progressively through the month.

“It won’t be until May’s data that we can assess how much of the resulting squeeze on households’ real disposable incomes has fed through to spending.”

He said the rise in food store sales “suggests that people are responding to the real income squeeze by spending less in pubs and bars”.

Separately, a survey from GfK showed that UK consumer confidence fell to its lowest in May since records began in 1974 amid the cost-of-living crisis. GfK’s consumer confidence index fell 2 percentage points to -40.

In corporate news, merchant banking group Close Brothers was in the black after saying it had performed well in the third quarter.

Croda rallied after it backed its full-year expectations and said trading in 2022 has been strong, with continued sales and profit growth across the group.

Gambling software development firm Playtech was in focus after it said talks with TTB Partner were still ongoing and “progress continues to be made” but added that it was “conscious that TTB has been considering a possible offer for Playtech for 15 weeks”.

Outside the FTSE 350, shares of THG surged after the online retailer said late on Thursday that it had rejected a £2.1bn takeover approach from Belerion Capital Group and King Street Capital Management and after property tycoon Nick Candy revealed that Candy Venture was weighing up a £1.4bn offer.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Prudential Plc +6.84% +66.80 1,044.00
2 Legal & General Group Plc +4.26% +10.50 257.20
3 Smurfit Kappa Group Plc +3.78% +115.00 3,155.00
4 Halma Plc +3.75% +78.00 2,158.00
5 Itv Plc +3.72% +2.58 71.92
6 Smith (ds) Plc +3.62% +10.60 303.70
7 St. James’s Place Plc +3.53% +42.00 1,230.50
8 Ashtead Group Plc +3.47% +131.00 3,907.00
9 Flutter Entertainment Plc +3.42% +304.00 9,190.00
10 Pearson Plc +3.25% +24.20 769.40

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Tui Ag -1.58% -3.30 205.90
2 Imperial Brands Plc -0.91% -16.50 1,802.50
3 Sainsbury (j) Plc -0.89% -2.10 234.90
4 Land Securities Group Plc -0.41% -3.00 733.60
5 Standard Chartered Plc -0.07% -0.40 590.20
6 Nmc Health Plc -0.00% -0.00 938.40
7 Shell Plc -0.00% -0.00 1,894.60
8 Just Eat Plc -0.00% -0.00 861.00
9 Standard Life Aberdeen Plc +0.00% +0.00 274.10
10 Rsa Insurance Group Ld +0.00% +0.00 684.20

 

US close: Stocks fall further as growth concerns linger

Equities on Wall Street closed lower again on Thursday, after both the Dow Jones and S&P 500 booked their biggest single-day losses in almost two years in Wednesday’s session.

At the close, the Dow Jones Industrial Average was down 0.75% at 31,253.13, as the S&P 500 lost 0.58% to 3,900.79 and the Nasdaq Composite was off 0.26% at 11,388.50.

The Dow closed 236.94 points lower on Thursday, extending the losses it recorded on Wednesday in the blue-chip index’s worst session since June 2020.

“The bounce of the first half of the week is a distant memory,” quipped IG chief market analyst Chris Beauchamp.

“Growth worries are back to the fore and investors are back to selling every bounce as they fret about a recession in the US and elsewhere.

“The broad nature of the slowdown was confirmed by Target’s numbers, while Cisco’s slashing of forecasts last night and Standard Chartered’s cut to its China GDP forecast overnight confirms the gloomy outlook.

“The end of earnings season might provide some brief respite from all the negativity, but with more high inflation readings and interest rate hikes to come stocks are going to suffer a lot more bad news.”

On the macro front, the US jobs market remained tight last week according to the latest figures for unemployment claims from the Department of Labor.

In seasonally adjusted terms, initial jobless claims jumped by 21,000 in the week ended 14 May to hit 218,000.

Economists had pencilled in a reading of 305,000.

Elsewhere, factory sector activity in the US mid-Atlantic region cooled significantly in May, with the Federal Reserve Bank of Philadelphia’s closely-followed manufacturing sector index declining to 2.6 from an April print of 17.6.

That was far lower than consensus estimates for a reading of 16.1.

Still on data, the Conference Board‘s leading economic index decreased by 0.3% in April to 119.2, following a 0.1% increase in March.

The index was still, however, up 0.9% over the six-month period from October 2021 to April 2022.

Finally, existing home sales decreased to 5.61 million in April, according to the National Association of Realtors, down from 5.75 million in March

In equities, Wednesday’s heavy losses were partly fuelled by quarterly earnings from retailers Target and Walmart, which revealed that higher fuel costs and softer consumer demand had hurt trading amid the hottest inflation seen in decades.

The two big-box discount retailers extended their losses on Thursday, falling 5.06% and 2.74%, respectively.

Elsewhere, Cisco Systems was down 13.73% after the networking technology firm missed market expectations for third quarter revenue, and lowered its guidance for fourth quarter and full-year turnover.

Ultra-low cost carrier Spirit Airlines descended 1.7% after its board unanimously agreed that JetBlue’s $30-per-share cash offer was not in the company’s or shareholders’ best interests.

The recommendation for shareholders to reject JetBlue’s recent render came after it reiterated its support for a competing offer from Frontier Airlines earlier in the month.

JetBlue Airways was up 3.33%, and Frontier Group was 0.42% firmer by the close.

Elsewhere on the upside, discount department store chain Kohl’s added 4.43% even after it cut full-year earnings estimates, with both group revenues and same-store sales falling short of consensus estimates.

Membership warehouse BJ’s Wholesale Club jumped 7.43% after it beat expectations with its quarterly profits, revenue and same-store sales.

 

Friday newspaper round-up: Nuclear power stations, THG, Klarna

The cost of decommissioning the UK’s seven ageing nuclear power stations has nearly doubled to £23.5bn and is likely to rise further, the public accounts committee has said. The soaring costs of safely decommissioning the advanced gas-cooled reactors (AGRs), including Dungeness B, Hunstanton B and Hinkley B, are being loaded on to the taxpayer, their report said. – Guardian

Canada says it will ban Huawei and ZTE from the country’s 5G network, a move that puts it in line with intelligence-sharing allies, but risks further chilling relations with China. The federal government made the announcement on Thursday afternoon after signalling for months it intended to block China’s flagship telecommunications companies from accessing 5G networks in Canada. – Guardian

Property mogul Nick Candy is considering a bid for struggling online retailer THG, which said on Thursday night that it has rejected a £2bn offer from a separate group of investors. Shares in THG had earlier closed at 116p, down more than 80pc since last September after Matt Moulding’s company failed to reassure City investors over the value of its IT platform Ingenuity. – Telegraph

Billions could be wiped off the valuation of Klarna, the “buy now, pay later” fintech business, amid regulatory scrutiny, increased competition and a broader sell-off of technology shares. One of Europe’s most valuable private technology companies, Klarna is thought to be seeking to raise up to $1 billion at a valuation of just over $30 billion — a drop of 30 per cent compared with its previous financing round. Klarna, which claims 16 million users in Britain, has been hit by concerns about a regulatory clampdown and more competition, including from traditional rivals such as banks. – The Times

 

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