ADVFN Morning London Market Report: Thursday 4 August 2022

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London open: Stocks flat ahead of BoE rate announcement

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London stocks were steady in early trade on Thursday as investors refrained from making any big bets either way ahead of the latest policy announcement from the Bank of England.

At 0850 BST, the FTSE 100 was flat at 7,446.00.

Neil Wilson, chief market analyst at Markets.com, said: “The Bank of England is expected to raise rates by 50bps today, but in a dovish fashion with big cautionary remarks about the outlook. Inflation expectations are likely to move up for this year, but the BoE won’t want the market to think it’s going super-hawkish.

“If it does deliver a more hawkish tone, GBP can get a lift but the base case for a ‘dovish’ 50bps hike could see sterling sold on the fact. Couple of things to consider: this would be the biggest hike since 1995. But inflation hit 9.4% in June and forecast to rise further this year. It’s not got nothing left to do if it wants any credibility.

“The BoE has been dripping rate hikes in a piecemeal fashion that has done nothing for inflation nor sterling because it’s been worried about the economic outlook (because, get this, of inflation!) – it requires a much more forceful message but we won’t get it today from Andrew Bailey, who remains out of his depth in terms of communicating policy.”

In equity markets, Hikma Pharmaceuticals was under the cosh after it cut its revenue guidance for the Generics business to between $650m and $675m from between $710m and $750m.

Rolls-Royce was also in the red after the engine maker reported a drop in first-half underlying but backed its full-year guidance amid expectations of an improvement in the civil aerospace division.

Mondi fell even as the paper and packaging group reported a sharp rise in interim profits on the back of higher prices due to reduced timber supplies.

Commodity trading and mining company Glencore was also weaker even as it posted a massive $10.3bn rise in interim core profits on the back of record prices for coal and gas and said it would return $4.5bn to shareholders.

On the upside, Phoenix Group gained after saying it was buying closed book UK life insurance company Sun Life for £248m.

Next was on the front foot after the retailer lifted its full-year profit guidance by £10m to £860m.

Outsourcer Serco rallied after upping its full-year guidance slightly to reflect trading in May and June, as it said strong growth across the business was offsetting the wind-down of the Test & Trace business.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Ocado Group Plc +6.91% +63.00 975.20
2 Tui Ag +4.59% +6.25 142.45
3 Direct Line Insurance Group Plc +3.32% +6.70 208.50
4 Marks And Spencer Group Plc +2.62% +3.60 140.90
5 Smith & Nephew Plc +2.52% +26.50 1,076.50
6 Hiscox Ltd +2.51% +21.80 891.80
7 Admiral Group Plc +2.44% +47.00 1,975.00
8 Carnival Plc +2.38% +16.80 723.20
9 Phoenix Group Holdings Plc +2.05% +13.40 666.20
10 Micro Focus International Plc +2.05% +5.90 293.60

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Rolls-royce Holdings Plc -9.73% -8.83 81.96
2 Hikma Pharmaceuticals Plc -9.00% -158.50 1,603.50
3 Mondi Plc -5.09% -82.00 1,528.00
4 Bt Group Plc -4.46% -7.20 154.30
5 Informa Plc -4.09% -24.60 576.40
6 British American Tobacco Plc -1.57% -51.50 3,228.50
7 Relx Plc -1.40% -34.00 2,398.00
8 Compass Group Plc -1.26% -24.50 1,917.50
9 Gsk Plc -1.24% -20.80 1,656.00
10 Taylor Wimpey Plc -1.22% -1.55 125.10

 

US close: Stocks higher following better-than-expected data

Wall Street stocks closed higher on Wednesday as better-than-expected macro data and comments from a top Fed official boosted sentiment.

At the close, the Dow Jones Industrial Average was up 1.29% at 32,812.50, while the S&P 500 was 1.56% firmer at 4,155.17 and the Nasdaq Composite saw out the session 2.59% stronger at 12,668.16.

The Dow closed 416.33 points higher on Wednesday, reversing losses recorded in the previous session amid heightened US-China tensions amid House Speaker Nancy Pelosi’s arrival in Taiwan.

One of the session’s primary focusses was news that activity in the US services sector accelerated unexpectedly in July, the results of a closely-followed survey revealed. The Institute for Supply Management’s services sector Purchasing Managers’ Index improved from a reading of 55.3 for June to 56.7 in July. Economists had pencilled-in a decline to 53.9 for the headline index.

Remarks from St Louis Fed chief James Bullard also boosted sentiment after he said, thanks to the credibility won by central banks since the 1970s, that the central bank may be able to lower inflation in an orderly fashion while achieving a relatively soft landing.

Bullard emphasised that the Fed was committed to its price stability mandate, noting how it had raised official interest rates “sharply” and started down the road on quantitative tightening.

Also on the macro front, US mortgage applications rose 1.2% in the final week of July, according to the Mortgage Bankers Association, the first increase in five weeks, with the refinance and purchase index advancing 1.5% and 1.0%, respectively.

Elsewhere, services sector activity in the US slumped during the previous month with output falling at its fastest pace since May 2020, revised data for a survey of sector conditions revealed. S&P Global‘s services sector Purchasing Managers’ Index slipped from a reading of 52.7 for June to 47.3 in July (Preliminary 47.0). New orders on the other hand returned to growth, after a marginal fall in June, but at a much slower pace than seen earlier in the year.,

Finally, the Institute for Supply Management‘s non-manufacturing PMI increased unexpectedly to 56.7 in July, up from 55.3 in June, while factory orders jumped 2% month-on-month in June, according to the Census Bureau, extending an upwardly revised 1.8% rise in May and well above market forecasts for a 1.1% increase.

 

Thursday newspaper round-up: Telecoms bills, Dyson, Ocado, Elon Musk

Almost 6 million UK households are struggling to pay their mobile, landline and broadband bills, with the cost of living squeeze forcing many to cut back on essentials such as food and clothes, cancel or change a service, or miss payments to stay connected. A report from the consumer group Which? estimates that 5.7 million households have experienced at least one “affordability issue” in April, as cash-strapped homes struggle to cope with soaring bills and other costs. – Guardian

The technology company Dyson has been fined more than £1m after one of its employees was injured when a giant milling machine fell on top of him. Dyson was ordered to pay £1.2m at Swindon magistrates court for failing to properly train its staff in handling the kit. The firm pleaded guilty to breaching health and safety laws. – Guardian

A senior City lawyer who told a client to “burn” chat logs to prevent evidence reaching Ocado could face prison for contempt of court. Raymond McKeeve, a former partner at Jones Day, was found by a High Court judge to have intentionally destroyed documents to stop data being searched at a company created by Jonathan Faiman, Ocado’s co-founder. A search order had been issued after Ocado accused Mr Faiman’s company of stealing corporate intelligence. – Telegraph

The Serious Fraud Office has convicted a fraudster of encouraging thousands of people to invest in properties in the Caribbean that were never built. David Ames has been found guilty on two counts of fraud by abuse of position for his role in the seven-year scheme as head of Harlequin Group. Mr Ames convinced 8,000 investors to pay a 30pc deposit on an unbuilt villa or hotel room and took half of the money as fees for the company and salesmen. – Telegraph

Elon Musk is seeking details from Goldman Sachs and JP Morgan Chase about how the two banks advised Twitter when the Tesla boss was pursuing his $44 billion takeover of the social media company. Twitter is attempting to force Musk to complete the buyout, which the billionaire said in July he was backing out of over claims that the business had breached the terms of an agreement. – The Times

 

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