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FTSE 100 Live 20 January: Nasdaq in correction territory, China cuts lending rate,


Stock management boosts Primark recovery

The diversified business of Associated British Foods offered a safety net during the pandemic, but now all eyes are on Primark for a comeback.

Today’s figures show the retail chain has yet to return to pre-pandemic levels of trading, not helped by Omicron keeping shoppers at home and its lack of a significant digital presence.

However, Hargreaves Lansdown equity analyst Laura Hoy notes Primark’s impressive stock management performance.

She said: “Last year’s autumn and winter stock made it to the shelves this year with very little discounting, which should be a welcome tailwind for cashflow.”

Hoy adds: “Inflationary headwinds are an unavoidable storm cloud hanging over just about everyone right now, but we think ABF is well-placed to ride it out.

“The group’s low-cost retail business will appeal to shoppers tightening the purse strings, and improved efficiency across all areas of the business together with price hikes in the grocery business look likely to offset the bulk of the pain for now.

“But if costs continue to balloon, it could become a problem for Primark as the group has very little space to increase costs due to its position as a discount retailer.”


Asia-focused stocks lead FTSE 100 higher

The FTSE 100 index has risen after more support for China’s economy helped shares in luxury goods group Burberry to lift 3% and boosted a number of mining stocks.

Other risers included Asia-focused Prudential as the People’s Bank of China cut a key lending rate for corporate and household loans.

The FTSE 100 index gained 22.68 points to 7612.34, keeping the top flight at its highest level in almost two years.

Unilever’s decision not to raise its £50 billion offer for GlaxoSmithKline’s consumer healthcare arm sent shares 2% higher to 3733p, but the stock is still below where it was prior to its interest being disclosed at the weekend.

Retail-to-sugar conglomerate Associated British Foods fell 8p to 2123p, despite a 16% rise in revenues from continuing operations in the 16 weeks to 8 January. The figure included a 32% rise for Primark as it recovers from Covid disruption the previous year.


Support for Barclays after Investec upgrade

Jes Staley quit Barclays in November but his six years as chief executive have left a “rich legacy”, according to Investec banking analyst Ian Gordon today.

Barclays shares are up 17% to 207p in the past month but Gordon believes there’s more to go for after upgrading his target price to 235p.

Next month’s annual results are expected to show the benefit of revenues growth in investment banking, leading to a 164% rise in profits to £8.1 billion. This figure is then expected to normalise at around £7 billion in the following three years.

Gordon says the shares trade at a “meaningful discount” versus NatWest, HSBC and Lloyds Banking Group, believing that the market has failed to appreciate its revenues diversity.


China rates cut aids Asia markets

European markets are set for a positive start, despite the tech-heavy Nasdaq now being in correction territory after closing more than 1% lower last night.

A rise in bond yields caused by expectations for US interest rates to rise as soon as March has depressed appetite for high-growth stocks and left the Nasdaq more than 10% off its record level in November.

However, London’s reliance on resource and financial stocks meant the FTSE 100 index closed 26 points higher yesterday and is set to gain another 29 points at 7618 today.

This follows a strong rebound for Asia markets after China cut another two key lending rates to protect the wider economy against continued Covid-19 headwinds.

The Hang Seng in Hong Kong rallied almost 3% and Japan’s Nikkei 225 was up more than 1% after falling sharply to a five-month low in the previous session.

US futures are pointing to a flat start for the Nasdaq and the S&P 500, aided by a slight easing in the 10-year bond yield from the 1.9% seen earlier this week. The US earnings season also picks up pace, with results from Netflix and American Airlines.

Brent crude oil futures held firm, despite US president Joe Biden’s pledge to continue with his efforts to lower prices. Brent remained above $88 a barrel amid supply constraints and the surge in fuel demand as the global economy begins to recover from the impact of Omicron.

Read More: FTSE 100 Live 20 January: Nasdaq in correction territory, China cuts lending rate,

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