London midday: Stocks maintain gains as public borrowing rises
By Josh White
Date: Tuesday 26 Apr 2022
(Sharecast News) - London stocks were still positive at lunchtime on Tuesday, after Wall Street indices turned around a global sell-off overnight to close in positive territory.
At midday, the FTSE 100 was up 0.92% at 7,448.19, and the FTSE 250 was 0.81% firmer at 20,765.20.
"The FTSE 100 recovered some of Monday's losses on Tuesday morning despite a substantial fall for one of its real heavyweight stocks, HSBC," said AJ Bell investment director Russ Mould.
"The bank's share price fell despite beating expectations as investors focused on slowing growth in Hong Kong and a hike in expected losses associated with bad debts linked to the war in Ukraine and mounting inflation.
"This represents a reversal from the situation a year ago, when the promise of a Covid recovery meant the banking sector was able to release some of the cash buffers built up to withstand the pandemic."
Mould noted that HSBC was also affected by the slowdown in investment banking, pointing out that a year ago, buoyant markets and surging mergers and acquisitions generated plenty of commission.
"Investors' interest in HSBC is heavily linked to increased penetration of banking in less mature markets in Asia.
"With the impact of increased restrictions that growth outlook is clouded which negatively impacts sentiment towards the stock.
"Its decision to maintain operations in Russia may come under increasing scrutiny despite a robust defence alongside today's update."
Fears over the current Covid-19 situation in China continued to weigh on sentiment, but a rally in technology plays stateside helped to turn things around in New York.
Also in focus was the news that Twitter's board would accept a $44bn offer from Elon Musk to take over the social network.
On the economic front, public borrowing was almost a fifth higher than forecast, according to data from the Office for National Statistics.
UK public sector net borrowing totalled £151.8bn for the 2021-2022 financial year - comfortably topping the £127.8bn pencilled in by the Office for Budget Responsibility just last month.
The total for the year was more than £165bn less than in the prior financial period, when the government spent huge sums to support the economy during the worst of the Covid-19 lockdowns.
It was, however, still the third-highest figure since records began in 1947.
Borrowing was below expectations in March itself, coming in at £18.1bn, compared to the £19.25bn expected in a Reuters poll.
Samuel Tombs, UK specialist at Pantheon Macroeconomics, predicted the estimate of borrowing would be revised down to be closer to the Office for Budget Responsibility's forecast.
But he added that the UK faced slowing economic growth caused by rising inflation, which could affect tax receipts and welfare spending, putting pressure on Chancellor Rishi Sunak.
"The latest public finance figures are unlikely to make the Treasury anxious," Tombs said.
"Weaker-than-expected growth will increase the pressure on the chancellor to ease the further fiscal consolidation planned for the next couple of years.
"The political pressure to support the economy also will increase as the May 2024 general election nears."
Elsewhere, research released earlier showed grocery price inflation continuing to mount in April, reaching levels not seen in over a decade.
According to retail consultancy Kantar, like-for-like grocery inflation was 5.9% in April, the highest rate since December 2011.
The surging prices prompted shoppers to seek out cheaper retailers, with discounter Aldi the fastest growing grocer during the period, with sales up 4.2% in the 12 weeks to 17 April.
Rival discounter Lidl saw sales rise 4.0%.
Aldi's and Lidl's market shares were now 8.8% and 6.6% respectively, their highest yet, after more than one million extra shoppers visited respectively over the past 12 weeks.
"The average household will be exposed to a potential price increase of £271 per year," said Fraser McKevitt, head of retail and consumer insight at Kantar.
"A lot of this is going on non-discretionary, everyday essentials which will prove difficult to cut back on as budgets are squeezed."
In equities, Taylor Wimpey was in positive territory after saying it was trading in line with full-year expectations, and that it remained on track to deliver against guidance set out at the time of its 2021 annual results.
The housebuilder said its net private sales rate for the year ended 17 April was "strong" at 0.96, down only slightly from 1.00 in the equivalent period a year earlier, with cancellation rates flat year-on-year at 14%.
National Express was surging more than 10% after saying first-quarter group revenues were back to 2019 levels, with the group actually trading ahead of the same time two years earlier during March.
The coach operator said it delivered its seventh consecutive quarterly improvement, with revenue up 30% year-on-year in constant currency, driven by a "particularly strong recovery" in its UK and ALSA coach businesses, demonstrating strong pent-up demand for travel.
On the downside, workspace operator IWG was tumbling after it reported solid improvements in first quarter revenue on Tuesday, but warned of higher costs going forward amid inflationary pressures.
HSBC was also lower after it reported a 28% fall in first-quarter profits due to higher-than-expected credit losses, the Ukraine war and a slowdown in China as it also warned on the outlook for share buybacks.
Associated British Foods was in the red, after reporting soaring first-half profits, but warning of increasing prices at its Primark clothing business due to inflation.
Market Movers
FTSE 100 (UKX) 7,442.99 0.85%
FTSE 250 (MCX) 20,767.17 0.82%
techMARK (TASX) 4,364.97 0.42%
FTSE 100 - Risers
Glencore (GLEN) 463.50p 3.15%
Anglo American (AAL) 3,325.00p 3.15%
Fresnillo (FRES) 770.60p 3.10%
Lloyds Banking Group (LLOY) 46.76p 3.00%
Taylor Wimpey (TW.) 131.80p 2.93%
Intermediate Capital Group (ICP) 1,619.50p 2.66%
NATWEST GROUP PLC ORD 100P (NWG) 223.50p 2.43%
Endeavour Mining (EDV) 1,992.00p 2.42%
Antofagasta (ANTO) 1,478.50p 2.32%
Airtel Africa (AAF) 147.30p 2.29%
FTSE 100 - Fallers
Associated British Foods (ABF) 1,544.00p -5.28%
Ocado Group (OCDO) 990.60p -4.38%
HSBC Holdings (HSBA) 486.15p -3.08%
Dechra Pharmaceuticals (DPH) 3,688.00p -2.02%
Royal Mail (RMG) 345.00p -1.91%
Sainsbury (J) (SBRY) 239.00p -1.81%
Schroders (SDR) 2,916.00p -1.69%
Hargreaves Lansdown (HL.) 964.20p -1.49%
Aveva Group (AVV) 2,358.00p -0.97%
Standard Chartered (STAN) 492.50p -0.97%
FTSE 250 - Risers
National Express Group (NEX) 248.80p 10.58%
Abrdn Private Equity Opportunities Trust (APEO) 536.00p 6.77%
NB Private Equity Partners Ltd. (NBPE) 1,625.00p 5.18%
Pantheon International (PIN) 306.00p 3.38%
BlackRock World Mining Trust (BRWM) 677.00p 3.36%
Hammerson (HMSO) 29.93p 3.28%
IMI (IMI) 1,325.00p 3.19%
Virgin Money UK (VMUK) 180.35p 3.06%
Syncona Limited NPV (SYNC) 178.00p 3.01%
Impax Environmental Markets (IEM) 446.00p 3.00%
FTSE 250 - Fallers
IWG (IWG) 240.20p -5.32%
Jupiter Fund Management (JUP) 185.60p -4.72%
Trustpilot Group (TRST) 116.70p -2.91%
Dr. Martens (DOCS) 217.60p -2.51%
Polymetal International (POLY) 257.40p -2.50%
Marks & Spencer Group (MKS) 149.30p -2.42%
AJ Bell (AJB) 260.60p -2.10%
Petershill Partners (PHLL) 271.00p -1.99%
Convatec Group (CTEC) 215.60p -1.55%
Diploma (DPLM) 2,774.00p -1.42%
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