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FTSE 100 gets out of reverse gear (but only just) as London traders bet on a positive start on Wall Street

Stock Markets Aug 03, 2022 14:14
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© Reuters. FTSE 100 gets out of reverse gear (but only just) as London traders bet on a positive start on Wall Street
 
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1.40 pm: Premarket demand for US gene silencing stocks

FTSE 100 reverses early downward trend - but on pitiful volumes

Fresnillo (LON:FRES) leads the losers

Bargain hunters in for Taylor Wimpey (LON:TW)

Looking at the pre-market action in the US, drug developer Alnylam Therapeutics stood out with a 53% advance.

The expected stampede for the stock has been prompted by the late-stage success of its heart drug, which uses a fairly new technique (well actually it’s been around in its nascent form for around a decade) called RNA interference.

The approach is more commonly known as gene silencing and the aptly named Silence Therapeutics has been at the vanguard of this technology for some time.

Alnylam’s success will have what is termed ‘read-across’ implications for UK-headquartered, NASDAQ-listed Silence, whose shares were marked 5% higher in the early session before trading proper.

The Brit drug and technology group, currently valued at US$521mln, has licensed out a lot of its technology to larger companies such as AstraZeneca (NASDAQ:AZN).

On the market, we are channelling the words and music of Icelandic songstress Bjork, beloved of a certain male vintage. Remember that classic: ‘It’s oh so quiet'. Well, it’s spinning around in our heads here in the airless Proactive basement/bondage chamber.

Still, we are seeing a little forward movement with the Footsie up 27 points at 7,436.26 after a listless late morning/early afternoon. Alnylam is expected to lead Wall Street higher, putting a pep in the step of London's formerly somnolent traders.

12.15: Fresnillo off 4.2%, here's why

FTSE 100 traders asleep at the screen

The Investors Chronicle in its write-up called it an unholy trinity: cost inflation, supply chain bottlenecks and a tight labour market. That was the summation of Tuesday’s interims from the Mexico-focused silver miner Fresnillo PLC (LSE:FRES).

Keeping with the biblical theme, Wednesday was judgement day with the Square (NYSE:SQ) Mile's analysts having had the best part of 24 hours to re-run the numbers.

The net effect was a further 4% decline in the share price. “Inflation could have been worse,” said UBS in a short post-results note.

There was little more context other than a reiteration of the ‘neutral’ recommendation from the Swiss house, which reckons the City is being a little optimistic on the cost pressures faced by Fresnillo.

A note from Jefferies summed up the American bank’s assessment of the results. It was, it said, a case of ‘one step forward, and one back'.

Like UBS, it is on the fence recommendation-wise, as is Barclays (LON:BARC), which was mildly perturbed about the stinginess of the dividend payment.

Turning to the wider market, it would appear the juniors left in charge of the trading desks during the high summer have actually been asleep at their screens.

We've moved from a 0.2-point dip to 1.68 points of 'slippage' on the Footise to 7,407.43 in the past hour. We are putting that down to a random finger movement between dribbles and bouts of snoring.

11.15 am: Taylor Wimpey shares in demand; Footsie flat as a pancake

FTSE 100 trades sideways

Taylor Wimpey in demand

There were some modest upgrades in the wake of interim from Taylor Wimpey PLC (LSE:TW.) earlier following a modest ‘beat’ from the builder.

UBS is going for a 2% tweak to its 2022 earnings forecast, while veteran Clyde Lewis at Peel Hunt restated his 160p price target and ‘buy’ recommendation.

The stock, changing hands for 125p (up 4%), is trading at a significant discount to Lewis’ valuation.

After a 32% sell-off in the year-to-date, TW may offer a value opportunity with the added fillip of a 9% dividend yield.

Turning to the wider market, the FTSE 100, after a post-breakfast dip, was on an even keel as it traded sideways at 7,408.91.

10.30 am: Avast soars as Norton deal is cleared

The FTSE 100 remained lower mid-morning, after falls in the US overnight, and as the latest UK services PMI data showed that UK service sector activity growth eased to its slowest in the past seventeen months during July as inflationary pressures and the cost-of-living squeeze resulted in heightened economic uncertainty.

By 09.45 am, the FTSE 100 was trading 15.58 points lower at 7,393.53.

The S&P Global / CIPS services PMI index fell to 52.6 in July from 54.3 in the previous month with confidence about the future at a historically subdued level.

More positive news was the continued strength of the labour market, with jobs again added at a strong pace. That was despite continued challenges in the recruitment of suitably qualified staff.

Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey said: “UK service providers reported their worst month for business activity expansion since the national lockdown in February 2021.”

“Reduced levels of discretionary consumer spending and efforts by businesses to contain expenses due to escalating inflation have combined to squeeze demand across the service economy.”

“The near-term outlook also looks subdued, as new order growth held close to June's 16-month low and business optimism was the second weakest since May 2020.”

"The most encouraging development during July was a considerable slowdown in input cost inflation since the previous month, likely reflecting lower commodity prices and a gradual easing of global supply shortages.”

9.10am: FTSE 100 opens lower, PMI data awaited

The FTSE 100 slipped in early trading on Wednesday, following falls in the US overnight, and ahead of the latest UK services sector PMI.

At 9.10am the blue chip index was down 30.04 points at 7,379.07 with the broader FTSE 250 down 19.32 points at 19,854.75.

US markets closed lower after a succession of Fed Presidents pushed back on the idea that the Fed was about to go soft on further aggressive rate rises.

Avast PLC (LSE:AVST) saw its shares take off after Britain’s competition regulator said it has provisionally cleared cybersecurity firm NortonLifeLock’s US$8.6bn purchase of its rival, the final hurdle to the two firms creating a consumer security software giant.

Shares surged 42% on the news.

In London Taylor Wimpey PLC (LSE:TW.) pushed higher in early trading with shares rising 2.17% to 122.65p following strong first half results.

Peel Hunt analyst Sam Cullen said the group had delivered a good set of interims and is guiding full year operating profit estimates up by 2% to 3%.

“Slightly weaker volumes, a result of constrained site openings and build rate, are being offset by stronger pricing, and margins are progressing towards the target range (21%-22%).”

“The balance sheet remains in good shape and net cash is expected to be c.£600m at the year end.”

Peel Hunt reiterated its buy rating on the stock.

Ahead of its half-year results tomorrow, Rolls-Royce Holdings PLC (LSE:LON:RR.) gained after confirming the sale ITP Aero had been approved by the Spanish government with the EUR1.8bn deal expected to be completed in the coming weeks.

The group said the sale, announced last year, completes its disposal programme to raise at least £2bn with proceeds to be used to rebuild the Rolls-Royce balance sheet.

Shares rose 2.2% to 89.78p on the news.

8.30am: FTSE 100 opens lower, PMI data awaited

The FTSE 100 made a weak start to trading on Wednesday, following falls in the US overnight and as investors awaited the latest UK services sector PMI.

At 8.30am the blue chip index was down 24.67 points at 7,384.44 with the broader FTSE 250 down 49.67 points at 19,824.40.

Michael Hewson Chief Market Analyst at CMC Markets UK said he expects the PMI data to show that the UK economy has managed to hold up well, despite the challenges posed by rising prices, with July services activity set to slow modestly from 54.3 to 53.3.

US markets closed lower after a succession of Fed Presidents pushed back on the idea that the Fed was about to go soft on further aggressive rate rises.

In London Taylor Wimpey PLC (LSE:TW.) pushed higher in early trading with shares rising 1.46% to 122.03p following strong first half results.

Richard Hunter, Head of Markets at interactive investor, commented:

“The company has reported pre-tax profit which is comfortably ahead of expectations, and up by 16.3% on the previous year.”

“Group completions are ahead of guidance, the average selling price on those completions is ahead by 3.1% and the value of the order book has increased from £2.6 bn to £2.8 bn.”

The building group said it expects full year group operating profit to be around the top end of the current market consensus range.

Jennie Daly, CEO, described the figures as an:

"excellent financial and operational performance with completions in the first half slightly ahead of expectations ” adding “demand for our homes remains strong.”

Rolls Royce PLC gained after confirming the sale ITP Aero had been approved by the Spanish government with the EUR1.8bn deal expected to be completed in the coming weeks.

The group said the sale, announced last year, completes its disposal programme to raise at least £2bn with proceeds to be used to rebuild the Rolls-Royce balance sheet.

Shares rose 1% on the news.

AIM listed Keywords Studios PLC (AIM:KWS, OTC:KYYWF) rose after a strong first half trading update with robust demand for all of the group’s services.

Adjusted pre-tax profit is expected to be EUR54mln, a 35% increase against the same period last year, a margin of 17%.

The international technical and creative services provider to the global video games industry also announced the acquisition of Mighty Games Group.

Shore Capital analyst Katie Cousins reiterated her buy rating on the company commenting:

“We continue to see Keywords as well placed to benefit from favourable structural growth opportunities as demand for bigger and more content-rich games remains, and look forward to further progress in the second half.”

Shares rose 2% to 2,509p

7.35am: FTSE 100 seen lower after weak US showing

FTSE 100 is expected to open lower on Wednesday following falls in the US overnight although Asian markets recouped some of Tuesday’s losses.

Spread betting companies are calling the blue chip index 14 points lower at around 7,403.

In the US the Dow closed Tuesday down 402 points, 1.2%, at 32,369, the Nasdaq Composite lost 20 points, 0.2%, to 12,349 and the S&P 500 dropped 27 points, 0.7%, to 4,091.

But Asian markets were a brighter feature with sentiment boosted by US House Speaker Nancy Pelosi’s safe arrival in Taiwan, despite threats of action from China.

Taylor Wimpey PLC (LSE:TW.) said it expects full year group operating profit to be around the top end of the current market consensus range .

The news came as the building group reported first half results with group operating profit margin increased to 20.4% from 19.3% in the first half of 2021 including some benefit from planned land sales and a strong performance from joint ventures.

Jennie Daly, CEO, described the figures as an:

"excellent financial and operational performance with completions in the first half slightly ahead of expectations ” adding “demand for our homes remains strong.”

Rolls Royce confirmed that its sale of ITP Aero had been approved by the Spanish government with the EUR1.8bn deal expected to be .completed in the coming weeks.

The group said the sale, announced last year, completes its disposal programme to raise at least £2bn with proceeds to be used to rebuild the Rolls-Royce balance sheet.

ITP Aero will remain a key strategic supplier and partner for Rolls-Royce across both Civil Aerospace and Defence programmes.

Hill & Smith Holdings PLC (LSE:HILS) announced 16% growth in operating profits to £43.6mln in the six months to June 30th.

Alan Giddins, Executive Chair, said the group had had a good first half adding:

“While we are mindful of current macroeconomic uncertainty, the group is exposed to strong structural growth markets and, with a proven track record of resilience, is well positioned to deliver against our strategic goals."

7.00am: FTSE 100 expected to make a weak start to trading

FTSE 100 is expected to open slightly lower on Wednesday following falls in the US overnight with spread betting companies calling the lead index down 14 points.

In the US the Dow closed Tuesday down 402 points, 1.2%, at 32,369, the Nasdaq Composite lost 20 points, 0.2%, to 12,349 and the S&P 500 dropped 27 points, 0.7%, to 4,091.

Asian markets recouped some off Tuesday’s losses following US House Speaker Nancy Pelosi’s safe arrival in Taiwan, despite threats of action from China.

In London results are expected from building group, Taylor Wimpey.

Read more on Proactive Investors UK

Disclaimer

FTSE 100 gets out of reverse gear (but only just) as London traders bet on a positive start on Wall Street
 

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