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ADVFN Morning London Market Report: Friday 3 February 2023

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London open: FTSE little changed after US tech results, ahead of payrolls


London stocks were steady in early trade on Friday following disappointing US tech results and as investors erred on the side of caution ahead of the latest non-farm payrolls report.

At 0820 GMT, the FTSE 100 was flat at 7,820.16.

Sentiment took a hit after earnings from AmazonAlphabet and Apple all disappointed.

Richard Hunter, head of markets at Interactive Investor, said: “After a generally strong showing from US markets, sentiment soured slightly after the closing bell.

“The next piece of the economic jigsaw will follow this afternoon with the release of the latest non-farm payrolls data. The current consensus is that 185,000 jobs will have been added in January, as compared to 223,000 the previous month, in what would be the lowest reading for two years.

“At the same time, unemployment is expected to tick up slightly to 3.6%, with hourly wage inflation remaining flat. Such a reading would add fuel to the fire that the end of the Federal Reserve aggression is nearing, although any sharp positive deviations would unsettle investors and prompt a rethink around the central bank’s next move.”

The payrolls report is due out at 1330 GMT, along with the unemployment rate and average earnings. On home shores, the S&P Global/CIPS services PMI for January is scheduled for release at 0930 GMT.

In the meantime, investors were mulling over the latest retail industry data, which showed that footfall strengthened last month as shoppers sought out a bargain in the January sales and employees headed back to the office.

The latest BRC-Sensormatic IQ Footfall Monitor showed total footfall jumped 12.5% year-on-year in January, down 2.6 percentage points on a strong December but comfortably ahead of the three-month average of 10.3%.

Within that, high streets saw footfall increase 20.2%, a 0.5 percentage point improvement on December, and shopping centres reported a 12.4% jump year-on-year. Retail parks, however, saw footfall decline 3.5%.

Total footfall also remains below pre-pandemic levels, falling 6.5% against January 2019.

Helen Dickinson, chief executive of the British Retail Consortium, said: “Footfall saw strong growth as employees made more trips to the office and international tourism improved, compared to last year when some Covid restrictions were in place.

“Growth was most pronounced in high streets and shopping centres, as many shoppers sought out a bargain in the January sales. Retail parks faltered as the cost-of-living crisis put many shoppers off buying big ticket home products often located there.”

On the corporate front, there was no FTSE 350 news of note but retailers were on the move after Deutsche Bank put out a note on the sector.

B&M European Value Retail was the standout gainer on the FTSE 100 after DB upgraded the shares to ‘buy’ from ‘hold’. Marks & Spencer rose on the back of the same upgrade.

On the downside, however, B&Q owner Kingfisher was the worst performer on the top-flight index after Deutsche cut its rating to ‘hold’ from ‘buy’. It applied the same rating downgrade to Pets at HomeWickes and Asos.

Also in broker note action, Direct Line was cut to ‘underweight’ at Barclays, while IWG was downgraded to ‘equalweight’.

Standard Chartered was lifted to ‘buy’ at Investec, while Provident Financial was cut to ‘hold’ at Peel Hunt.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Smith & Nephew Plc +1.26% +14.50 1,164.00
2 Astrazeneca Plc +1.25% +128.00 10,378.00
3 Glencore Plc +1.19% +6.50 552.10
4 Rio Tinto Plc +0.99% +60.00 6,124.00
5 Bp Plc +0.93% +4.45 483.25
6 Fresnillo Plc +0.87% +7.00 816.20
7 Bhp Group Limited +0.85% +23.50 2,775.00
8 Compass Group Plc +0.77% +14.50 1,900.00
9 Marks And Spencer Group Plc +0.75% +1.20 162.25
10 Diageo Plc +0.65% +23.00 3,569.50


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 Persimmon Plc -2.97% -45.50 1,485.50
2 Centrica Plc -2.71% -2.66 95.52
3 Taylor Wimpey Plc -1.86% -2.35 124.15
4 Berkeley Group Holdings (the) Plc -1.85% -82.00 4,360.00
5 National Grid Plc -1.77% -18.50 1,024.00
6 Scottish Mortgage Investment Trust Plc -1.69% -13.60 791.80
7 Barratt Developments Plc -1.59% -7.70 476.40
8 Kingfisher Plc -1.37% -4.00 287.50
9 Direct Line Insurance Group Plc -1.33% -2.50 184.85
10 Tui Ag -1.29% -2.35 179.75


US close: Stocks mixed following earnings onslaught

Wall Street stocks turned in a mixed performance on Thursday as digested a slew of corporate earnings and some key data points.

At the close, the Dow Jones Industrial Average was down 0.11% at 34,053.94, while the S&P 500 advanced 1.47% to 4,179.76 and the Nasdaq Composite saw out the session 3.25% firmer at 12,200.82.

The Dow closed 39.02 points lower on Thursday, easily reversing the previous session’s small gain.

Corporate earnings were firmly in focus on Thursday, with Eli Lilly posting quarterly revenues that fell short of estimates, Stanley Black & Decker outlining an 11% full-year revenue growth, and Bristol-Myers Squibb reporting earnings and revenue that topped expectations.

Hershey delivered an earnings beat and issued an outlook that topped expectations, while Estée Lauder issued a disappointing sales outlook, Merck & Co topped quarterly earnings estimates, Harley-Davidson delivered a strong earnings beat, and Honeywell turned in earnings that topped estimates despite delivering revenues that missed.

After the close, tech giants Alphabet, Amazon, and Apple all posted disappointing results.

Investors also continued to digest news that the US central bank raised the range for its benchmark interest rate by 25 basis points to 4.5-4.75% and said it foresaw further hikes. In his press briefing following the Federal Open Market Committee‘s meeting, chairman Jerome Powell explained that with inflation running at multi-decade highs the job was “not yet fully done”. At one point during the question and answer session, he also said that it was “very difficult” to manage the risk of doing too little, to then only see inflation spring back a few quarters down the road.

On the macro front, Challenger Gray & Christmas revealed US employers announced 102,943 cuts in January, a marked 136% increase from the 43,651 cuts announced in December and 44% higher than the same time a year earlier.

Elsewhere, US unemployment claims continued to run below forecasts over the preceding week, defying expectations for a post-Christmas rebound. According to the Department of Labor, initial jobless claims fell 3,000 over the week ended 28 January to 183,000. Meanwhile, the four-week moving average, which aims to smooth out the volatility in the data from one week to the next, dropped by 5,750 to 191,750.

On another note, fourth-quarter labour productivity in the US was higher than expected, helping to limit unit labour cost growth. According to the Department of Labor, non-farm labor productivity increased at a quarterly annualised clip of 3.0% over the three months to December.

Finally, new orders for US-made goods increased 1.8% month-on-month in December, according to the Census Bureau, rebounding from an upwardly revised 1.9% fall in November but short of market forecasts of 2.2%.


Friday newspaper round-up: Netflix, Amazon, rental market

Netflix has mistakenly launched a set of guidelines for cracking down on password sharing to global users. The streaming service said the guidelines being trialled in Chile, Peru and Costa Rica had been posted accidentally across its help centre pages including in the US on Wednesday, but had since been taken down. – Guardian

The Bank of England has sounded the alarm over a worsening crisis in the rental market as high taxes and red tape forces landlords to sell up. In its Monetary Policy Report published on Thursday, the Bank said demand for rental properties has continued to outstrip supply as “the number of landlords choosing to exit the market increased”. – Telegraph

Amazon has fallen to its worst ever annual loss and Apple’s iPhone sales slumped over Christmas, fuelling fears of a painful correction in the tech sector. The online retail giant posted record festive revenues, but fell to a $2.7bn annual loss, its worst since it went public in 1997 and its first full-year loss since 2014. The online retailer posted revenues of $149.2bn, up 8.6pc, in the three months ending in December, buoyed by its internet services division. – Telegraph

The lack of a national strategy to secure supply chains for semiconductors is “an act of national self-harm”, the chairman of the Commons’ business select committee has warned. Darren Jones said the government had to act swiftly to keep up with the United States, the European Union and Japan, each of which is putting tens of billions of dollars into fostering homegrown supplies of the critical electronic components. – The Times

The chief executive of NatWest has bowed to pressure from MPs and will appear before the Treasury select committee to answer questions on savings rates, having initially refused to attend. Dame Alison Rose will attend with executives from Lloyds, Barclays and HSBC after she had turned down an invitation to explain why banks had been slow to pass on the Bank of England’s recent base rate rises to savers. – The Times


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