Level 2

Weekly review

By Josh White

Date: Friday 22 Oct 2021

(Sharecast News) - The FTSE 100 ended the week 29.48 points lower, closing at 7,204.55 on Friday.
Equity view

JD Sports Fashion on Friday said it had bought 80% of family-owned Greek firm Cosmos Sport for an undisclosed sum. Cosmos operates 57 stores in Greece and three in Cyprus under a variety of retail banners and associated trading websites and is 70% owned by the Tsiknakis Family with EOS Capital Partners holding a 30% stake. EOS have disposed of their entire holding in this transaction.

UK supermarket chain Sainsbury's said it had ended talks over the sale of its banking operation, claiming the potential bid did not offer good value for shareholders. "We continue to make progress strengthening and simplifying our Financial Services business in line with our strategy and we remain comfortable with consensus profit forecasts for the division," the company said in a statement.

InterContinental Hotels Group reported a "significant" jump in third-quarter room revenue towards pre-Covid pandemic levels after a rebound in bookings during the summer as travel restrictions were eased. The company on Friday said its key room revenue indicator, known as RevPAR, rose 66% for the three months to September 30 year on year, but it was down 21% from 2019.

London Stock Exchange Group reported strong performance across all of its divisions in a trading update on Friday, driving 7.6% growth in third quarter total income, and gross profit growth of 7.3%. The FTSE 100 company said it made good progress on the integration of Refinitiv, and was "comfortably on target" for full year run-rate cost synergy delivery of £125m, ahead of original phasing.

Barclays reported a record £6.9bn of profit for the first nine months of 2021 as the bank released bad debt provisions made earlier in the pandemic. Pretax profit for the three months to the end of September rose to £1.96bn from £1.15bn a year earlier as revenue increased to £5.47bn from £5.2bn. For the first nine months of 2021 profit was £6.9bn compared with £2.4bn a year earlier.

Business information and analytics provider Relx reported underlying revenue growth of 6% in the first nine months of 2021 on Thursday, adding that it expected full-year underlying growth rates in revenue and adjusted operating profit, as well as constant currency growth in adjusted earnings per share, to be above historical trends. The FTSE 100 company said underlying revenue growth in its risk division was at 10%, and within that, in business services, demand for fraud prevention and identity solutions was driving double digit growth.

FirstGroup announced the sale of Greyhound Lines to a wholly-owned subsidiary of FlixMobility on Thursday, completing its stated strategy to focus on its UK public transport businesses. The FTSE 250 passenger transport operator said the transaction resulted in cash consideration of $172m (£124.63m), comprising $140m paid initially, with $32m in unconditional deferred consideration paid in instalments over 18 months.

Lancashire announced on Thursday that it has exposures to a number of recent natural catastrophe events, including hurricane Ida and the European storms Bernd, Volker and Xero. The FTSE 250 insurer estimated those events would lead to total net ultimate losses of between $165m (£119.59m) and $185m.

Cybersecurity firm Avast reported a rise in third quarter revenues and said it expected second-half billings growth of high-to-mid single digits. Revenue of $232.7m was up by 5.6% on an organic basis and 3.0% at actual exchange rates for the three months to September 30. Adjusted core earnings increased 0.8% to $127.0m.

Mining giant Rio Tinto said it planned to invest $7.5bn halving carbon emissions by 2030, more than tripling its previous target. The Anglo-Australian firm on Wednesday said the plan would apply to direct and indirect emissions. It added that it was also targeting a 15% cut to emissions by 2025, five years earlier than previously.

Food delivery company Deliveroo on Wednesday lifted annual growth forecasts after a strong rise in order gross value despite Covid curbs easing on restaurants during the year. Third quarter gross transaction (GTV) value rose 58% year-on-year. Deliveroo said it expected its gross transactional value to rise by 60-70% this year, up from a previous forecast of 50-60%.

Hammerson reported a "significant" improvement in rent collection for the fourth quarter on Wednesday. The property group noted that since its last update on 5 August, occupiers have been able to operate in all territories with minimal Covid restrictions.

Bellway increased its final dividend by almost two-thirds as the housebuilder reported a 72% increase in annual profit and a solid order book. Underlying pretax profit rose to £530.8m in the 12 months to the end of July from £309.3m a year earlier as revenue increased 40% to £3.12bn. Statutory pretax profit more than doubled to £479m from £236.7m.

UK aerospace and engineering firm Meggitt said it still expected its £6.3bn takeover by US rival Parker-Hannifin to complete next year despite a UK government intervention on national security grounds. Meggitt said it would comply with a probe by the Competition and Markets Authority (CMA) after the government issued a so-called "intervention notice" to review the impact of the takeover.

Online price comparison platform Moneysupermarket.com said it was buying consumer cashback website Quidco for up to £101m as it said third-quarter revenue fell 10% in the face of more competition for insurance visitors. Moneysupermarket on Tuesday said it would pay £87m in cash for Quidco with a further £14m deferred on a debt-free, cash-free basis.

Transact owner IntegraFin posted a rise in fourth-quarter funds under direction on Tuesday as inflows continued to outperform previous years. In the quarter to 30 September, FUD increased 3.6% from the previous quarter to £52.1bn. Over the same period, the FTSE All Share Index was up 1.1% and the MSCI World Index rose 2.1%.

Economic news

UK economic growth gathered pace in October, underpinned by the services sector, as supply shortages hit manufacturing and cost inflation reached a new record high, according to a survey released on Friday. The IHS Markit/CIPS flash composite output index, which measures activity in the manufacturing and services sectors, rose to a three-month high of 56.8 from 54.9 September. This was above consensus expectations for a reading of 54.0.

Inflation in the UK could hit a "very uncomfortable" 5%, according to Huw Pill, the Bank of England's new chief economist. According to the Financial Times, Pill said the question of increasing interest rates would be raised at the Monetary Policy Committee's November meeting, stating: "I think November is live".

UK retail sales unexpectedly fell in September for the fifth month in a row, according to data released on Friday by the Office for National Statistics. Sales were down 0.2% versus expectations for a 0.5% increase, driven by a fall in non-food sales. The ONS said this was the longest run of monthly declines in a row since the survey began in 1996. Nevertheless, sales remained 4.2% above pre-pandemic levels.

Consumer sentiment has dropped sharply amid economic turmoil including fuel shortages and rising prices, a survey showed. The total measure of GfK's consumer confidence barometer dropped to -17 in October, as expected by most economists, from -13 a month earlier in the third month of decline.

The Financial Conduct Authority called for legislative changes on Thursday to protect consumers from online scams. The regulator said duties on internet companies in the government's planned Online Safety Bill should extend to paid-for advertising, as well as user-generated content. The government's proposed Bill currently covers only user-generated content.

The European Central Bank is pushing lenders to add hundreds of extra employees and billions of additional capital to their operations in continental Europe after Brexit failed to spark a big shift, the Financial Times reported. Relatively few banking jobs have left the City of London since Brexit, confounding predictions that tens of thousands would relocate. But the ECB is upping its demands that lenders shift more resources away from London, executives, lawyers and supervisors told the FT.

UK manufacturing output grew steadily in October but supply pressures continued to rise, a Confederation of British Industry survey showed. The net score for output was 15% in the three months to October, broadly in line with 16% a month earlier and well ahead of the 3% long-run average. Output increased in 11 of 17 subsectors led by chemicals, aerospace, and food drink and tobacco.

UK public borrowing fell by almost half in the first six months of the financial year as it continued to recover from the impact of the Covid-19 pandemic, according to official data released on Thursday. Public sector borrowing fell to £108.1bn, down by £101.2bn pounds in April-September 2020 but around three times its level before the pandemic, the Office for National Statistics said.

UK house prices jumped in August, official data showed on Wednesday, as buyers rushed to secure homes before the stamp duty holiday came to an end. According to the Office for National Statistics, UK average house prices rose 10.6% over the year to August 2021, against an 8.5% rise in July. Month-on-month, house prices rose 2.8% on a seasonally-adjusted basis.

UK consumer price inflation unexpectedly dipped in September despite the rising cost of fuel and transport, according to figures released on Wednesday by the Office for National Statistics. CPI fell to 3.1% from 3.2% in August, versus expectations for it to remain unchanged. Still, it remains well above the Bank of England's target of 2%, meaning it's unlikely to do anything to reduce expectations the Bank will raise interest rates before the end of the year.

International events

Economic activity in the single currency bloc got off to a slow start in the fourth quarter, amid increasing supply bottlenecks and ongoing Covid-19 worries, the results of a closely-followed survey revealed. The preliminary reading for IHS Markit's composite output index for euro area manufacturing and services came in at 54.3 in October - a six-month low - which was down from a reading of 56.2 for the previous month.

US jobless claims continued moving lower last week and appeared set to continue doing so, economists said. According to the US Department of Labor, in seasonally adjusted terms, initial weekly jobless claims fell by 6,000 over the week ending on 16 October to reach 290,000.

Manufacturing conditions in the Philadelphia region deteriorated a little more than expected in October, according to a survey released on Thursday. The Philadelphia Fed current manufacturing index declined to 23.8 from 30.7 in September, missing expectations for a reading of 25.0.

The European Central Bank is pushing lenders to add hundreds of extra employees and billions of additional capital to their operations in continental Europe after Brexit failed to spark a big shift, the Financial Times reported. Relatively few banking jobs have left the City of London since Brexit, confounding predictions that tens of thousands would relocate. But the ECB is upping its demands that lenders shift more resources away from London, executives, lawyers and supervisors told the FT.

Shares in real estate developer China Evergrande slumped in Hong Kong after the company said a potential sale of its property services unit had collapsed. A deal to sell 50.1% cent of Evergrande Property Services Group to rival developer Hopson Development Holdings for HK$20bn ($2.6bn) had been terminated last week, the group said late on Wednesday.

Eurozone inflation rose as expected in September, according to data released on Wednesday by Eurostat. Consumer price inflation increased to 3.4% from 3.0% in August, in line with the initial estimate. The headline number came in well above the European Central Bank's 2% target, mainly due to a 17.6% jump in energy prices on the year. The cost of food, alcohol and tobacco also contributed, up 2%.

Germany's Central Bank said on Wednesday that President Jens Weidmann will step down at the end of December. Weidmann is leaving the Bundesbank, which he has headed since May 2011, for personal reasons. He is stepping down five years before his term was due to end.

Eurozone construction output softened in August, official data showed on Tuesday, bringing five months of growth to an end. According to Eurostat, the European Union's statistics office, seasonally-adjusted production in the construction sector fell 1.3% in August, from a 0.1% rise in July. Across the wider bloc, production fell 1.8%.

US industrial production dropped unexpectedly last month, registering across-the-board declines by sectors. According to the Department of Commerce, in seasonally adjusted terms, total output shrank at a month-on-month pace of 1.3%.

China's economic growth slowed sharply in the third quarter amid power shortages and supply chain issues, according to figures released on Monday by the National Bureau of Statistics. Growth slowed to 4.9% in the three months to the end of September from 7.9% in the previous quarter and marking the weakest growth in a year. This was below economists' expectations for a 5.0% increase. Growth also slowed sharply in seasonally-adjusted quarter-on-quarter terms, from 1.2% in the second quarter to 0.2% in the third.

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