Weekly review
By Josh White
Date: Friday 23 Jul 2021
(Sharecast News) - The FTSE 100 ended the week 19.49 points higher, closing at 7,027.58 on Friday.
Equity view
Premium chocolatier Hotel Chocolat said on Friday that it has raised £40m in a share placing as it looks to become a "digital-led" chocolate brand. The company placed just over 11.1m new ordinary shares at 355p each. The placing was conducted by way of an accelerated bookbuild process with Liberum and Peel Hunt acting as joint bookrunners.
Beazley reported a first-half profit before tax of $167.3m (£121.81m) on Friday, swinging from a loss before tax of $13.8m in the first half of the prior year. The FTSE 250 insurer said its annualised return on equity was 15% as at 30 June, compared to a negative 1% return a year ago, while cross premiums written grew by 22% to $2.04bn.
Brewin Dolphin reported record gross discretionary fund inflows in its third quarter on Friday, at £1.3bn, rising from the £1.0bn it recorded for the second quarter. The FTSE 250 wealth manager said that was driven by continued growth across both its direct and indirect businesses.
Mr Kipling owner Premier Foods said on Friday that full-year adjusted pre-tax profit was set to be at the top end of its expectations after "a very encouraging start to the year". The company - which also owns the Bisto brand, among others - said group sales in the first quarter were up 6.3% versus two years ago, at the top end of its expected range of 5% to 6%, with branded sales 9.3% higher.
SSE said it was making good progress on disposals, construction was progressing on major projects and its was on track to submit proposals to the regulator for transmission upgrades. In a trading update the electricity group said it was committed to its five-year dividend plan but did not give guidance on annual earnings.
Diploma said on Thursday that it was on track to meet expectations for the full year after a "strong" third quarter, as it announced the departure of chairman John Nicholas. In an update for the nine months to 30 June, the company said its third-quarter performance continued to be strong and in line with expectations. In the nine-month period, underlying revenues rose 11%, with "very good" trading trends in all three sectors.
3i said it made a strong start to the financial year as its Action retail business recovered from the impact of the pandemic. The private equity group said its net asset value per share rose to £10.63 at the end of June from 947p three months earlier, generating a total return of 12.2%.
Countryside Properties backed its full-year expectations on Thursday as it reported a jump in third-quarter revenues and completions. In the period from 1 April to 30 June, total completions were up 144% from the third quarter of last year - which was hit hard by the first national lockdown - to 1,096 homes.
Wickes confirmed its half-year profit guidance on Wednesday as it reported a jump in like-for-like sales, driven by DIY and local trade, while its full-year outlook remains in line with expectations. In the 26 weeks to 26 June, LFL sales rose by 33.1% year-on-year, and 22.4% on a two-year basis. Wickes, which was demerged from Travis Perkins earlier this year, said the "strong" performance continued through the second quarter, with LFL sales growth ahead by 47.6%, and 19.7% on a two-year basis.
Global miner Rio Tinto has promised to pay for an independent assessment of environmental damage caused by its Panguna mine in Bougainville 32 years after it fled the island as it descended into civil war. The move is in response to a claim from 156 residents of villages near the mine alleging that Rio Tinto is accountable for more than one billion tonnes of mine waste dumped into the Kawerong-Jaba river delta which continues to cause catastrophic environmental damage and is putting their lives and livelihoods at risk.
Mining giant Antofagasta maintained full-year guidance on Wednesday despite posting a fall in interim production as a result of lower grades. Antofagasta stated second-quarter Copper production fell 2.5% year-on-year to 178,400 tonnes, principally due to "lower recoveries at Centinela Cathodes" and "expected lower grades" at its Zaldivar asset.
Merchant banking group Close Brothers said on Wednesday that its trading performance had been strong during the 11 months ended 30 June, with high levels of activity in its banking unit, good net inflows in the firm's asset management division and strong trading income in its Winterflood subsidiary. Close Brothers stated that in its banking wing, loan books increased 9.6% to £8.3bn, with the group continuing to see "significant business volumes" following its third-quarter trading update. Annualised net interest margins remained broadly stable year-on-year at around 7.5%, while its annualised bad debt ratio was "reduced slightly" from 2020's figure of 1.3% during the first half of the trading year.
Apollo Global Management is in talks with Fortress Investment Group to join its bid for Morrisons and said it would not make an offer for the supermarket group on its own. The US private equity group said on 5 July it was considering a bid after Morrisons' board recommended a £6.3bn offer from Fortress, a group of investors led by Softbank. Bidding was triggered by a £5.5bn proposal from rival US buyout firm Clayton, Dubilier & Rice.
Irn-Bru maker AG Barr lifted its full-year profit expectations following better-than-expected trading since its results in March. At the full-year results earlier in the year, the drinks company said it was in strong financial health, with its brands and business poised for growth on a like-for-like basis.
BHP said it was in "great shape" after the miner achieved record production at iron ore, coal, and copper and gold assets during the last financial year. The FTSE 100 company achieved its guidance for copper, iron ore, metallurgical coal and nickel and revised guidance for energy coal in the year to the end of June. Petroleum guidance was slightly above guidance, BHP said in an update.
Anglo American reported a 20% rise in second quarter production, driven by strong output in diamonds and platinum, despite operations running at 95% of normal capacity because of Covid-19 disruptions. The mining giant on Tuesday said rough diamond production rose by 134% in the three months to June 30 compared to the lockdown-impacted period a year ago as consumer demand recovered.
Chemicals company Synthomer lifted its full-year earnings guidance on Monday as it said trading across the business has remained strong. It now expects first-half earnings before interest, tax, depreciation and amortisation to be around £320m and FY EBITDA to be in excess of £500m, up from previous guidance of in excess of £450m. The company said that since its last update in April, volumes and unit margins have been ahead of the prior year in all divisions.
Strong demand from defence markets helped Ultra Electronics deliver better-than-expected first-half profits on Monday as it lifted its dividend by 5%. The company said pre-tax profits for the six months to March 31 rose 18% to £56.5m. Its order book rose 8.3% to £1.2bn, offsetting a 2% decline in revenue to £404m.
Derwent London has agreed to sell its 126,200 sq ft freehold interest in Angel Square, Islington, to property developer Tishman Speyer for £86.5m before costs. Acquired in November 2014, Angel Square consists of three multi-let connected buildings around a central courtyard. Following a light touch refurbishment, the bulk of the property was let to Expedia and The Office Group.
Pharmaceutical company AstraZeneca said its drug to treat extensive-stage small cell lung cancer had been approved in China. The approval by China's National Medical Products Administration was based on positive results from the CASPIAN Phase 3 trial, which showed that Imfinzi plus chemotherapy "demonstrated a statistically significant and clinically meaningful improvement in overall survival versus chemotherapy alone".
Economic news
Business activity growth in the UK slowed in July, with private sector growth hitting a four-month low as shortages of staff and materials held back the recovery, according to a flash survey released on Friday. The flash IHS/Markit composite output index - which measures activity in the services and manufacturing sectors - fell to 57.7 from 62.2 in June. This marked the lowest level reading since the easing of lockdown restrictions began in March.
UK factory output rose at a joint-record pace in the past three months but worries about shortages of materials and labour were at their highest since the 1970s, a CBI survey showed. Manufacturing output increased in 16 of 17 subsectors and volumes rose at the joint-fastest pace on record in the three months to July as the economy returned to growth, the Confederation of British Industry said. Growth was led by carmakers and transport equipment and food, drink and tobacco.
UK consumer confidence edged above pre-pandemic levels in July for the first time, research showed on Friday. According to the latest GfK Consumer Confidence Barometer, the overall index score improved two points in July to -7, beating the -9 recorded in March 2020 prior to the first national lockdown. It was also an improvement on the -9 noted in June and in May 2021.
Rising inflation is likely to be temporary, a Bank of England rate setter said in remarks that reined in expectations of imminent policy tightening. In a speech, Ben Broadbent said he thought rising prices in shops were unlikely to persist over the timeframe the Bank uses to decide on interest rates and other measures.
UK public sector net borrowing fell in June as the economy opened up again, according to figures released on Wednesday by the Office for National Statistics. Net borrowing came in at £22.8bn last month, down £5.5bn from June 2020 and undershooting the Office for Budget Responsibility's forecast of £25.2bn. Still, the figure was above consensus expectations of £20bn and marked the second-highest level for June on record.
UK retailer Marks & Spencer warned that it would not supply some Christmas goods to Northern Ireland due to increased customs checks as part of the Brexit deal signed by Prime Minister Boris Johnson. Company chairman Archie Norman said M&S was concerned about delays to deliveries of fresh food under forthcoming arrangements about to take force. The government is expected to make a statement on the so-called Northern Ireland protocol.
UK grocery sales have fallen, industry research showed on Tuesday, as lockdown restrictions continued to ease and football fans went out to watch Euro 2020. According to retail consultancy Kantar, grocery sales declined 5.1% in the 12 weeks to 11 July, although shoppers still spent £3bn more than they did in the same period in 2019. Online sales also declined, for the first time ever.
Ministers risk being accused of making an "intergenerational raid" on taxpayers to fund the soaring cost of social care in the UK, according to financial analysts. Reports on Monday suggested the Treasury is considering a rise in national insurance to pay for reforms after Prime Minister Boris Johnson refused to recommit to the Tory manifesto promise not to raise taxes.
House prices have hit another fresh high, industry data showed on Monday, despite the stamp duty holiday coming to an end, as surging demand outstripped supply. According to the latest Rightmove House Price Index, the average asking price was £338,447 in July, a 0.7% improvement on June and 5.7% hike on July 2020.
Footfall across all retail destinations is expected to spike by nearly 20% following Monday's lifting of Covid restrictions, according to research published by Springboard. The retail consultancy expects footfall to rise 19.7% this week, after mandatory restrictions such as face coverings and social distancing were removed in England.
International events
Industrial conglomerate Honeywell beat analysts' estimates for second quarter profits and sales amid a recovering, but still challenging, global economy. It also raised its full-year forecasts for revenues, margins, earnings per share and free cash flow.
Semiconductor giant Intel posted better-than-expected quarterly profits overnight, but guidance for the following quarter fell short of forecasts. Some market watchers also voiced skepticism about the company's ability to regain market share in the especially lucrative segment for server processors.
Euro zone business activity in July expanded at its fastest monthly pace in more than 20 years as services were boosted by an easing of Covid curbs, although fears of another wave of infections hit confidence, according to a survey released Friday. The IHS Markit Flash Composite Purchasing Managers' Index climbed to 60.6 in July from 59.5, its highest reading since July 2000. A mark above 50 signifies growth.
Policymakers at the European Central Bank will keep its interest rates at their current low level until it sees inflation returning to its new target level "well ahead" of its projection horizon and in a "durable manner". The ECB's new 'guidance' after Thursday's governing council meeting followed the adoption, earlier in July, of a new symmetric inflation target of 2.0% over the medium-term.
First time unemployment claims in the US bounced back unexpectedly during the previous week, pushed higher by the annual retooling of automakers. According to the US Department of Labor, the seasonally adjusted number of initial jobless claims rose by 50,000 over the week ending on 17 July to reach 419,000.
Economists at Barclays Research think longer-term US Treasury note yields will head back higher in the back half of 2021, although they also thought that financial markets were right in judging inflationary risks to be 'transitory'. So too, they expressed sympathy for the notion that the terminal Fed funds rate would be lower than what policymakers at the Federal Reserve had penciled-in.
Analysts at Jefferies believe the so-called Delta variant may be less lethal, even if more transmissible, than earlier variants of the virus - although not everyone is onboard with that notion. Hence, the end of the health crisis might be closer than many believed, they said in a research note sent to clients the day before.
US homebuilding activity bounced back last month but forward-looking indicators pointed to weakness ahead. According to the US Department of Commerce, in seasonally adjusted terms, housing starts grew by 6.3% month-on-month in June to reach an annualised rate of 1.64m (consensus: 1.59m).
Shares of China's second-largest property developer by sales tumbled again on Tuesday after reports of an asset freeze. China Evergrande Group's Hong Kong-listed shares tumbled another 10.23% to see the session out from HKD 7.37, for a market capitalisation of approximately $12.68bn.
Crude oil futures slid at the start of the week after the Organisation of Petroleum Exporting Countries and its main allies clinched a deal at the weekend to increase their combined output. OPEC+, as the cartel of oil producing nations and allies including Russia and Kazakhstan are known, will add 400,000 barrels a day of production from August until all the output that was halted is brought back online.
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