London close: Stocks finish firmer as Fed fears fall away

by | Sep 6, 2021

London stocks finished in positive territory on Monday, as investors digested the latest reading on the UK construction sector, with last week’s non-farm payrolls miss helping to alleviate concerns about Fed tapering.

The FTSE 100 ended the session up 0.68% at 7,187.18, and the FTSE 250 was ahead 0.22% at 24,248.35.

Sterling was weaker, meanwhile, last trading 0.3% lower on the dollar at $1.3829, and losing 0.13% against the euro to 1.1653.

“Stock markets in Europe are showing solid gains today as traders are less fearful of the Federal Reserve tapering its bond buying scheme in light of last week’s disappointing non-farm payrolls report,” said Equiti Capital market analyst David Madden.

“At the Jackson Hole symposium, Jerome Powell, the Fed chief, didn’t map out a timeline to start reining in the asset purchase scheme.

“The update gave equities a boost as it seemed the central banker was not in a hurry to alter the current policy.”

Madden noted that last Friday’s employment report stateside showed that 235,000 jobs were added in August, seriously undershooting the 750,000 forecast.

“Equity traders are taking the view that the Fed is now less likely to scale back their bond buying scheme in the months ahead.

“In late August, Powell cautioned the labour market had a long way to go before it hit full employment and when you take a look at the latest non-farm payrolls reading, he was right to be a little guarded with his language.

“US stocks markets have remained closed today as the US celebrates Labor Day, but the FTSE 100, the DAX 30 and CAC 40 are driving higher.”

In data, growth in the UK construction sector eased in August amid supply constraints, with the IHS/Markit CIPS construction purchasing managers’ index fell to 55.2 in August from 58.7 in July, missing expectations for a reading of 56.0 and signalling the slowest expansion rate since February.

A reading above 50.0 indicates expansion, while a reading below signals contraction.

Companies widely noted sustained, and severe, supply chain disruption in August, which contributed to an accelerated rise in input prices, and one that was the second sharpest in the history of the survey.

“Formidable supply chain pressures restrained purchasing activity and building projects across the board in August as 68% of construction companies reported even longer delivery times for materials compared to July,” said Duncan Brock, group director at the Chartered Institute of Procurement and Supply.

“A combination of ongoing covid restrictions, Brexit delays and shipping hold-ups were responsible as builders were unable to complete some of the pipelines of work knocking on their door.”

Brock said material and staff costs went “through the roof” as job hiring accelerated to fill the gaps in capacity left behind by employee moves, overseas worker availability and brought on by skills shortages.

“Paying higher wages for experienced staff along with low stocks of materials at suppliers meant inflationary pressure rose at a rate almost on a par with June’s survey record.

“84% of supply chain managers reported paying more for their purchases.”

Electrified vehicle demand, meanwhile, surged across the UK in August, although the data showed that supply chain constraints were still undermining the overall market.

New car registrations fell 22.0% to 68,033 in August, a traditionally quiet month leading up to September’s high-volume plate change period, according to the Society of Motor Manufacturers and Traders.

August’s performance was the market’s worst since 2013 and was also 7.6% lower than the monthly average recorded over the last decade as constrained supply due to the global shortage of semiconductors continued to undermine production volumes.

However, demand for the latest battery-electric, hybrid and plug-in hybrid vehicles surged 32.2%, 45.7% and 72.1%, respectively, leading to demand for PHEVs outpacing BEVs in five of the last six months on the back of changes to the plug-in car grant.

In equity markets, broadcaster ITV gained 2.54%, while JD Sports Fashion added 1.6% and Burberry was 2.27% stronger.

Housebuilder Berkeley Group rocketed 9.59%, having spent time below the waterline earlier in the session as it went ex-dividend.

London Stock Exchange Group was up 1.66% after Berenberg said the company’s near-term operating outlook has become more assured.

“Following a substantial loss of investor confidence earlier this year, LSE has now largely met the three milestones that we set out previously to enable sentiment to improve,” it said.

“Specifically, growth has recovered, improved disclosure has increased understanding of LSE’s new businesses, and the company is over-delivering on its synergy targets.

“Having fulfilled these prerequisites to regaining investor confidence, we believe focus can now return to LSE’s significant opportunities to grow recurring revenues in attractive, stable markets.”

Berenberg rated the shares at ‘buy’.

BT was in the black by 1.7% after Numis upgraded its stance on the shares to ‘reduce’ from ‘sell’.

Auction Technology was 4.53% firmer by the close, having tumbled last week after TA Associates and ECI Partners sold around 12.6m shares in the company in a placing.

The shares were sold to institutional investors by way of an accelerated bookbuild at a price of 1,500p each, raising around £189m.

On the downside, veterinary drug maker Dechra Pharmaceuticals slid 3.28% despite reporting a surge in profits and lifting its dividend as people spent more on pet welfare during Covid-19 lockdowns.

The company said underlying operating profit increased by 29.2% to £162.2m on the back of revenue growth of 21.0% to £608.0m, while its full-year dividend rose 18.1% to 40.50p a share.

Those losses came as Stifel cut its rating on Dechra to ‘hold’, noting little upside in the stock.

Market Movers

FTSE 100 (UKX) 7,187.18 0.68%
FTSE 250 (MCX) 24,248.35 0.22%
techMARK (TASX) 4,878.60 0.58%

FTSE 100 – Risers

ITV (ITV) 117.05p 2.54%
Burberry Group (BRBY) 1,926.50p 2.27%
Intermediate Capital Group (ICP) 2,299.00p 2.04%
Experian (EXPN) 3,313.00p 2.03%
Rentokil Initial (RTO) 592.00p 2.03%
Evraz (EVR) 603.40p 1.82%
Sage Group (SGE) 759.00p 1.75%
BT Group (BT.A) 164.70p 1.70%
London Stock Exchange Group (LSEG) 8,200.00p 1.66%
DCC (CDI) (DCC) 6,394.00p 1.62%

FTSE 100 – Fallers

Berkeley Group Holdings (The) (BKG) 4,788.50p -7.05%
Rio Tinto (RIO) 5,346.00p -1.31%
Compass Group (CPG) 1,485.00p -0.94%
British Land Company (BLND) 537.00p -0.89%
Pershing Square Holdings Ltd NPV (PSH) 2,570.00p -0.77%
SEGRO (SGRO) 1,294.50p -0.73%
SSE (SSE) 1,650.50p -0.69%
Whitbread (WTB) 3,184.00p -0.69%
National Grid (NG.) 936.40p -0.54%
Fresnillo (FRES) 858.80p -0.51%

FTSE 250 – Risers

Biffa (BIFF) 414.50p 4.79%
Bytes Technology Group (BYIT) 558.00p 4.58%
Auction Technology Group (ATG) 1,478.00p 4.53%
Diversified Energy Company (DEC) 113.00p 4.24%
Hays (HAS) 166.60p 3.53%
FDM Group (Holdings) (FDM) 1,344.00p 3.38%
Micro Focus International (MCRO) 433.30p 3.31%
Elementis (ELM) 156.70p 2.95%
Kainos Group (KNOS) 2,022.00p 2.90%
Vivo Energy (VVO) 113.80p 2.71%

FTSE 250 – Fallers

Discoverie Group (DSCV) 1,200.00p -4.32%
Hammerson (HMSO) 34.66p -3.96%
Syncona Limited NPV (SYNC) 185.20p -3.56%
Tullow Oil (TLW) 42.71p -3.46%
AO World (AO.) 227.80p -3.39%
Dechra Pharmaceuticals (DPH) 4,918.00p -3.28%
Petropavlovsk (POG) 21.32p -3.27%
Shaftesbury (SHB) 638.50p -3.26%
Morgan Sindall Group (MGNS) 2,610.00p -2.79%
Centrica (CNA) 52.12p -2.73%

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