13th Nov 2024 08:41
(Corrects Babcock's half-year revenue from a year ago to GBP2.18 billion from GBP1.18 billion.)
(Alliance News) - The FTSE 100 was in the green on Wednesday morning, while eurozone and Asian markets prepare themselves for tariffs from the hawkish incoming US government.
"The real question now is where Trump's policy playbook takes us from here," commented SPI's Stephen Innes. "With the likelihood of a Republican-controlled Congress, Trump has a clear path to pushing aggressive moves without much opposition. His cabinet choices—especially the consideration of China hawks like Marco Rubio for secretary of state—hint at a tough stance on trade, likely leading with tariffs. Given China's large and growing trade surplus, tariffs might even be a straightforward call for this administration."
In corporate news, SSE's chief executive officer is set to depart after 11 years at the helm, and Just Eat is selling GrubHub to Wonder Group for USD650 million.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.2% at 8,039.00
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Hang Seng: down 0.6% at 19,732.13
Nikkei 225: down 1.7% at 38,721.66
S&P/ASX 200: down 0.8% at 8,193.40
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DJIA: closed down 382.15 points, 0.9%, to 43,910.98
S&P 500: closed down 0.3% at 5,983.99
Nasdaq Composite: closed down 0.1% at 19,281.40
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EUR: up at USD1.0605 (USD1.0600)
GBP: down at USD1.2735 (USD1.2739)
USD: up at JPY154.96 (JPY154.69)
Gold: up at USD2,606.55 per ounce (USD2,600.40)
(Brent): down at USD71.96 a barrel (USD72.02)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
09:45 GMT UK Bank of England Monetary Policy Committee member Catherine Mann speaks
08:30 EST US CPI
14:00 EST US monthly budget statement
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Producer prices in Japan grew at a more robust annual pace than expected. According to the Bank of Japan, producer prices climbed 3.4% on-year in October, picking up speed from a 3.1% rise in September. Annual growth in prices had been expected to slow to 3.0%, however, according to market consensus cited by FXStreet. On-month, price growth eased to 0.2% in October, beating expectations of no change. Producer prices had risen 0.3% in September from August. The annual reading showed the strongest growth in Japan's producer prices since August 2023, when they climbed 3.5% on-year. Growth steadily slowed since then, but began picking up in February after hitting a trough of 0.3% in each of December and January.
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Donald Trump announced that Tesla head Elon Musk and another stalwart ally, businessman Vivek Ramaswamy, will lead a new US "Department of Government Efficiency" tasked with cutting so-called federal waste, as the Republican president-elect added a series of seasoned figures and hardliners to his incoming administration. Tesla CEO Musk became a key ally to Trump during his campaign, reportedly spending over USD100 million to help the Republican win. Trump also named military veteran and Fox News host Pete Hegseth as his incoming defence secretary. Meanwhile, US media reported that Florida Senator Marco Rubio would be nominated to the key position of secretary of state. Trump separately named congressman Mike Waltz, a former special forces officer, as his incoming national security advisor. Waltz has hawkish views on China, like Rubio, but is not considered isolationist, despite desire in some Trump circles for the US to retreat from foreign engagements and cut obligations to allies like Nato. Trump also announced he was choosing his former director of national intelligence John Ratcliffe to lead the Central Intelligence Agency.
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US top diplomat Antony Blinken will meet with Nato and EU officials Wednesday to urgently discuss ramping up support for Ukraine before Trump reclaims the White House – potentially jeopardising future aid. The emergency trip comes as Trump's election victory, coupled with a political crisis in Germany, heightens fears about the future of assistance for Ukraine at a key point in the fight against Russia's invasion. Meanwhile political tensions within the European Parliament bubbled up, causing lawmakers to push back a vote on confirming top members of the EU's new executive team. The EU's designated foreign policy chief, Kaja Kallas, made her pitch calling for the 27-member union to pull its weight with a united front on the global stage. Her approval for the post is in little doubt since she was tapped directly by EU leaders in June. But lawmakers who have to greenlight it postponed a decision, bundling her together with other more controversial nominees.
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Chinese leader Xi Jinping headed to Peru, bound for a meeting of Asia-Pacific Economic Cooperation organisation leaders overshadowed by fears of renewed global trade tensions under Trump. Xi will join leaders from the US and other Asia-Pacific nations in the Peruvian capital Lima for the APEC gathering, after which he will go to Brazil for a G20 summit. China – the world's second-largest economy – is grappling with a prolonged housing crisis and sluggish consumption that could worsen under Trump, who has promised to slap 60% tariffs on Chinese imports.
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German Chancellor Olaf Scholz plans to address lawmakers in the lower house of parliament, or Bundestag, on Wednesday following the collapse of his three-party coalition a week ago. The political upheaval means Europe's biggest economy is now to hold an early election on February 23 instead of September as originally planned. Scholz's address in parliament at 1200 GMT also effectively serves as the launch of his unpopular centre-left Social Democratic Party's election campaign.
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A controversial trade deal between the EU and South America's Mercosur bloc is back in the spotlight with rekindled optimism that the two sides could conclude an agreement before the year is over. The blockbuster trade pact between the 27-country EU and Mercosur countries – Brazil, Argentina, Paraguay and Uruguay – has been 25 years in the making and would create the world's biggest free trade zone. The contours of a deal were agreed in 2019 but some EU states blocked its ratification over environmental concerns. Key opponent France is still trying to stop it in its tracks – with angry farmers planning protests from Wednesday in Paris and Brussels against an accord they fear will flood the bloc with cheaper agricultural goods.
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BROKER RATING CHANGES
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Barclays raises ConvaTec price target to 322 (320) pence - 'overweight'
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Citigroup raises Drax group price target to 445 (434) pence - 'sell'
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RBC cuts Conduit Holdings price target to 575 (675) pence - 'outperform'
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COMPANIES - FTSE 100
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SSE has increased its interim dividend to 21.2 pence, up from 20.0p the year before. The firm's pretax profit rose 38% to GBP845.9 million in the first half from GBP615.3 million. Revenue however decreased to GBP4.46 billion from GBP4.79 billion. SSE said the operating profit outlook is broadly unchanged from guidance released in May, but it expects capital expenditure to significantly increase to about GBP3 billion. Also, SSE's Chief Executive Officer Alistair Phillips-Davies will retire in 2025 after 11 years leading the firm. He will remain in post until a successor is appointed.
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Smiths Group has raised full-year guidance, now expecting organic revenue growth of 5% to 7% (up from 4% to 6%) and a 40 to 60 basis point expansion in its operating profit margin. First-quarter organic revenue growth has picked up to 16% from 3.5% the prior year, although the period had three extra trading days leaving growth at 13% on a comparative basis. The company said this performance "reflected particularly strong organic revenue growth in Smiths Detection, alongside strong growth in John Crane and Flex-Tek aerospace". Smiths also said it is initiating the second tranche of its previously announced buyback, and increasing the programme's maximum value to GBP150 million from the previous limit of GBP100 million.
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COMPANIES - FTSE 250
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Babcock International has said it is on track to achieve full-year expectations, including mid-single digit average annual revenue growth and underlying operating margins of at least 8%. The company reported first-half revenue of GBP2.41 billion, up from GBP2.18 billion last year. Pretax profit rose to GBP172.0 million from GBP136.1 million. Babcock also declared an interim dividend of 2.0p per share, up from 1.7p.
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Capital Gearing Trust reports a net asset value per share of 4,847.7p at September 30, up from 4,810.5p six months prior. Its NAV total return for the first half is positive 2.4%, outperforming the CPI return of 0.9%. It said its market capitalisation is now under GBP1 billion, having been reduced by a significant rise in buybacks. The trust also said the current environment is challenging, but that it will remain alert to market opportunities when they arise.
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OTHER COMPANIES
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Just Eat Takeaway.com revealed it has struck a deal to sell Grubhub Inc for USD650 million. The Amsterdam-based food delivery application said it has reached an agreement with food delivery startup, New York-based Wonder Group valued at USD650 million which will see the firm part ways with the US food delivery platform. According to the deal, Grubhub is to be transferred with its USD500 million of senior notes, with net proceeds post customary adjustments of up to USD50 million expected. Just Eat added that it will retain no material liabilities associated with Grubhub once the transaction is completed. The firm said the deal will increase Just Eat's ability to support investments in countries in which it has the greatest competitive advantage. The sale is expected to complete during the first-quarter of 2025.
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Flutter Entertainment has announced that revenue for the third quarter rose 27% on-year to USD3.2 billion from USD2.6 billion. Adjusted Ebitda jumped 74% to USD450 million from USD258 million. Flutter also said it is raising full-year group revenue and adjusted Ebitda guidance by 1%, and is narrowing US full-year revenue guidance to between USD6.05 billion and USD6.25 billion, compared to the previous range of up to USD6.35 billion.
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Seven & I confirmed it received a management buyout proposal, which the 7-Eleven owner's "outside directors" are now reviewing. The bid was tabled by Ito-Kogyo Co Ltd, a company linked with Seven & I Vice President & Representative Director Junro Ito. Ito joined Seven-Eleven Japan, a Seven & I predecessor, back in 1990. The retailer did not reveal the size of the Ito-led management buyout tilt. Japanese business daily Nikkei reported that it was worth JPY7 trillion, around USD45 billion. Bloomberg News also reported Wednesday that Seven & I was considering a management buyout but said it was worth up to JPY9 trillion. The 7-Eleven franchise began in the US, but it has been wholly owned by Seven & I since 2005. The Tokyo-based retailer last month confirmed it received a "revised" takeover offer from Quebec-based Couche-Tard, after it rejected a September bid worth around USD40 billion. Seven & I did not at the time specify the size of the October bid.
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By Emma Curzon, Alliance News reporter
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