FTSE firm as BoA analysts warn US partying like it’s 1999

UPDATE: The UK stock market held on to its early gain despite a surge in Covid infections in Europe, fears of tighter US interest policy and forecasts of volatile markets next year.

The UK stock market shied away from giving away its early gain (see below) as a surge in Covid infections in Europe and fears of tighter US interest policy weighed on investors.

In the last hour of trading the FTSE 100 traded 20 points  or 0.3% higher at 7,287 having been just five points up at 7,270 after Wall Street opened lower.

The US S&P 500 slipped 0.6% to 4,665 in early trading as the underlying strength of the US economy was highlighted by figures showing new claims for unemployment benefits dropped to their lowest level since 1969 last week.

In Europe, Germany’s DAX 30 index dropped 1% after the Ifo institute’s German climate index fell to 96.5 from 97.7 in October, its fifth successive monthly fall as supply bottlenecks in manufacturing and a spike in coronavirus infections clouded the growth outlook for Europe’s largest economy.

The European Centre for Disease Prevention and Control (ECDC), the EU public health agency, recommended vaccine boosters for all adults, with priority for those over 40, in a major shift of policy, Reuters reported.

In London wealth manager Brewin Dolphin (BRW) tumbled 6.3%, or 23.5p, to 352p after posting a 16.7% leap in full-year profits on record inflows from clients, but warned of market turbulence next year.

‘After such a strong year, we anticipate markets to be more volatile in 2022, with governments reducing fiscal stimulus and consumer demand normalising,’ it said.

BofA Global Research darkened the mood, setting a 4,600 target for the S&P 500 for the end of next year in a US forecast comparing this year’s febrile retail stock trading mania and hectic flotations to the dotcom bubble in 2000.

‘There are too many similarities between today and 1999/2000 to ignore,’ wrote a group of strategists led by Savita Subramanian. 

9.34: Shell and BP boost FTSE as oil price climbs

The FTSE 100 rose on Wednesday, led by Royal Dutch Shell (RDSA) and BP (BP) after an oil price jump.

The blue-chip index rose 37 points, or 0.5%, to 7,303, against the backdrop of a broader rebound in European markets after Covid-19 concerns led to a difficult trading session yesterday.

Shell advanced 1.6% to £16.65, while BP firmed 2.1% to 346p.

Despite the US announcing the release of oil supplies from strategic reserves yesterday, as US president Joe Biden seeks to cap rising petrol prices, Brent Crude was up about 0.5% on the day to $82.69 per barrel, following a 3.3% rise on Tuesday.

‘Oil prices continued to be under the spotlight as a US-led release of oil from strategic reserves failed to dampen commodity price inflation,’ said Russ Mould, an analyst at AJ Bell.

‘The move might suggest that governments are prepared to release more reserves, which could send a message to the oil market that extra supplies could be available at the click of a finger. This could cap any large increases in the oil price temporarily.’

Bookmakers were poor performers, with Entain (ENT) slipping 2% to £18.48 and Flutter Entertainment (FLTR) trading down 1.7% to £108.50.

Travel stocks were also broadly weak as renewed lockdown measures creep across Europe, with British Airways owner International Consolidated Airlines (IAG) weakening 1.4% to 149p.

The mid-cap FTSE 250 index inched 9 points higher to 23,231, with commodity stocks in the driving seat. Wood Group (WG) rose 2.3% to 212p, while Hochschild Mining (HOC) staged something of a rebound after being hit by uncertainty over its key Peruvian operations. The group’s shares gained 4.1% to trade at 119p.

LXI brings in the rent

LXI Reit (LXI ), the highly-rated inflation-linked, long-lease property trust, lurched 5.2%, or 7.6p, higher to 155p after reporting a 9% half-year investment return that leaves the shares standing on a 16% premium to their new net asset value of 134p. 

Liberum analyst Conor Finn commented: ‘LXI has continued its strong operational performance, which remained resilient even during the toughest months of the pandemic. Rent collection has now recovered back to 100% for Q4 and the board has reaffirmed the increased dividend target of 6p for FY 2022, which is expected to be fully covered from received rental income.’  

BMO Real Estate (BREI ) was also in favour, rallying 5.5%, or 4.6p, to 88.6p from a 24% discount. The Peter Lowe managed trust is up over 43% this year. 

Utilico Emerging Markets (UEM ) firmed 1p, or 0.5%, to 213p after appointing two deputies to assist fund manager Charles Jillings. Half-year results showed an 11% investment return in the six months to 30 September beat the 1% fall in the MSCI Emerging Markets index. 

Foresight Sustainable Forestry (FSF) fell 3.7p to 96.3p on its first day of trading after raising £130m to invest in UK forestry. 

Hansa Investment Company (HAN , HANA ) slipped 2.2% to 213p from a wide 36% discount after the Salomon family-backed defensive global trust reported a total 8.8% investment return for the six months to 30 September, just behind the MSCI AC World index 8.9% return. 

Nippon Active Value (NAVF ) softened 1%, or 1.5p, to 139p from a 2% premium after the £145m Japan activist raised £14m in a share placing at 139.7p. 

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