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Lloyds Gets a Buy rating from Jefferies

Sterling has rallied to a 10-week high against the dollar, fuelled by growing expectations that the Bank of England will raise interest rates again.

The pound gained 0.3pc to $1.3620 – its highest level since early November, when it dropped 1.5pc after the Bank shocked markets by keeping rates unchanged. Against the euro, it edged up 0.1pc to 83.36p.

Alongside interest rate expectations, sterling’s progress has been boosted by a weakening dollar.

However, analysts warned the rally could run out of steam in the coming months due to tax rises and a strain on household finances.

Heathrow Airport urges UK government to drop COVID-19 testing after passenger numbers drop over 12% in 2021

https://www.proactiveinvestors.co.uk/companies/news/970844/heathrow-airport-urges-uk-government-to-drop-covid-19-testing-after-passenger-numbers-drop-over-12-in-2021-970844.html

The UK’s Covid-19 deaths has surpassed 175,000, according to the Officer for National Statistics (ONS), amid record high infection levels in the UK.

The figure dwarfs that of the government’s official count of 150,000, which requires patients to have had a positive coronavirus test within 28 days before their death.

While infection rates have been hitting record highs in the Omicron wave, the ONS assured that hospital admissions and deaths remain well below the second wave’s peak.

There are currently travel restrictions, such as testing, on all Heathrow routes – the aviation industry will only fully recover when these are all lifted and there is no risk that they will be reimposed at short notice, a situation which is likely to be years away. While this creates enormous uncertainty for the CAA in setting a new 5 year regulatory settlement, it means the regulator must focus on an outcome that improves service, incentivises growth and maintains affordable private financing

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London’s blue-chip index has been called at least 20 points higher or up to 35, by different spread-betting sources in the City

UK inflation will run at more than double the Bank of England’s two per cent target for a whole year, reveals fresh forecasts published today.

The rate of price increases will peak at 6.7 per cent this April, lifted higher by the energy bill cap being hoisted around 50 per cent, according to investment bank BNP Paribas.

October’s 2021 official inflation rate hit 4.2 per cent. BNP Paribas predict the rate will not fall below four per cent until November this year, meaning the cost of living will remain at least double the Bank’s target for an entire year.

https://www.cityam.com/uk-inflation-to-remain-more-than-double-boes-target-for-entire-year/

banks are also being boosted on the possibility of a rising interest rate environment. Equally, the sector has more recently come into vogue on valuation grounds, with investors considering the banks to be sitting on relatively cheap valuations, and with the currently preferred picks being Barclays and Lloyds. Further colour may also arise from the US banks later in the week on a read-across basis

BERNSTEIN CUTS IAG PRICE TARGET TO 170 (180) PENCE - 'MARKET-PERFORM'

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The FTSE 100 looks set to open modestly higher and above 7,500 with London mirroring the cautious positivity seen across Asia’s
main markets.
The UK blue-chip index is expected to open 19 points to the good at 7,504.28, according to the spread betting companies

https://www.markiteconomics.com/Public/Home/PressRelease/34be70762fa343e6925a83a093946c1c

Lloyds Bank
Tipped by Simon English, Senior City Correspondent

With interest rates now seemingly certain to rise (though we have been here before) there’s a strong case for buying shares in any mainstream lender (ditto).

Tipping shares in Lloyds Bank has proved to be folly for at least the past five years, but I’m going for it.

Losses from Covid loans will be less than the City once feared and Lloyds is good at cost management.

It throws off lots of cash which should turn into dividends or share buybacks.

Lloyds has always been a bet on the UK economy, so you have to think we are going to come out of Covid in reasonably strong shape this year. I do.

https://www.standard.co.uk/business/ftse-100-uk-share-tips-2022-b975452.html

Omicron is the “first ray of light” that COVID could eventually become less severe, scientists have suggested.

“The thing that might happen in the future is you may see the emergence of a new variant that is less severe, and ultimately, in the long term, what happens is COVID becomes endemic and you have a less severe version,” Dr Mike Tildesley, University of Warwick professor of infectious disease modelling and member of the Scientific Pandemic Influenza Modelling group

https://www.cityam.com/omicron-could-be-first-ray-of-light-towards-covid-becoming-an-endemic-says-scientist/

Lloyds Banking Group PLC (LSE:LLOY) and NatWest Group PLC (LSE:NWG) continue to offer upside despite the interest rate-driven rally in recent weeks, analysts at Barclays (which also happens to be a UK bank) said in a note on Friday.

Upside for UK banks is seen as being driven by "an underappreciated EPS tailwind from low deposit betas".

On Lloyds, the analysts said new boss Charlie Nunn's upcoming strategy day "could see higher cost guidance" but they believe rising market expectations "should limit downside".

The key issues are whether Lloyds can convince the market about higher OOI (other operating income) "and cap returns", the Barclays number crunchers added.

https://www.proactiveinvestors.co.uk/companies/news/970618/lloyds-and-other-uk-banks-still-offer-upside-says-barclays-970618.html

The U.S. Dollar looks set to lose further value to the Pound in the wake of a below-consensus U.S. jobs report according to an analyst we follow, although others say any weakness in the Dollar will prove short lived ahead of an expected Federal Reserve interest rate rise.

U.S. non-farm payrolls for December read at 199K, putting it well below the 400K the market was expecting and signified a sharp slowdown in the U.S. labour market at year-end.

""Seeing you could buy this 2018 for 51p, not sure what all the fuss is about""

2020 you could buy this for 25p ???

"GBP's bullish structure is supported by rate markets indicating a 74% chance for a full 25bp rate hike after the BoE's Feb. 3 meeting," says Paul Spirgel, a Reuters market analyst.

Economists at HSBC say they now see the Bank Rate at 1.0% by year-end.

"It seems that the furlough scheme has ended smoothly, with workers either returning to their old jobs or finding new ones," says HSBC in a note issued at the start of the year.

HSBC reduces its forecasts for the UK unemployment rate from 5.3% at end-2021 to 4.1%, they see this rate stabilising at just under 4% for 2022-23.

They have also raised their inflation forecasts and now see CPI inflation peaking at 6% in April and staying above 3% throughout 2022.

"Given these new labour market and inflation forecasts, and following the BoE’s rate rise in December, we now expect three more hikes of 25bps each: in February, May and August 2022, taking Bank Rate to 1.00%," says HSBC.

US jobs report out later today London traders sitting on the fence