28th Feb 2023 07:58
(Alliance News) - Stocks are likely to open flat on Tuesday in London, as investors wait to hear of progress in the breakthrough EU-UK deal on the Northern Irish border.
Sentiment was boosted on Monday following the announcement of a deal between the UK and the EU over post-Brexit trading arrangements for Northern Ireland.
"The deal requires a lot of extra work and resources, but it's the best it could get. So yesterday was a remarkably successful day for Rishi Sunak, even though the Democratic Unionist Party expressed some concerns," said Swissquote Bank's Ipek Ozkardeskaya.
UK Prime Minister Rishi Sunak is expected to travel to Northern Ireland later to sell the deal to the DUP.
In early corporate news, Ocado said annual revenue was flat due to a decline in retail revenue as customer basket values fell, while Croda reported a strong set of annual results.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 9.6 points, 0.1%, at 7,925.51
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Hang Seng: down 0.1% at 19,931.37
Nikkei 225: closed up 0.1% at 27,445.56
S&P/ASX 200: closed up 0.5% at 7,258.40
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DJIA: closed up 72.17 points, 0.2%, at 32,889.09
S&P 500: closed up 0.3% at 3,982.24
Nasdaq Composite: closed up 0.6% at 11,466.98
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EUR: down at USD1.0589 (USD1.0591)
GBP: up at USD1.2047 (USD1.2019)
USD: up at JPY136.30 (JPY136.24)
Gold: down at USD1,815.44 per ounce (USD1,816.96)
Oil (Brent): up at USD82.68 a barrel (USD82.28)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
11:00 GMT Ireland retail sales
12:30 GMT UK BOE MPC Member Catherine Mann speaks
12:30 GMT UK BOE Chief Economist Huw Pill speaks
09:00 EST US house price index
10:00 EST US Richmond Fed business activity survey
10:00 EST US consumer confidence index
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UK Prime Minister Rishi Sunak is expected to travel to Northern Ireland later, after securing a deal with the EU that he promised would be a "turning point" for the region after years of post-Brexit tensions. The new deal, dubbed the Windsor Framework, removes barriers on trade across the Irish Sea and hands a "veto" to politicians in Stormont on EU law – a set of concessions from Brussels that went further than some expected. But it still includes a role for the European Court of Justice, with the Democratic Unionist Party and Tory backbenchers now set to study closely the details of the complex set of arrangements in the coming days.
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Tax hikes or spending cuts would be needed for the government to end public sector pay disputes and crippling strike action despite the UK being on course to borrow more than GBP30 billion less than forecast this year, according to a report. The Institute for Fiscal Studies think tank has warned that short-term savings from the energy support scheme looking less costly than first feared, together with an improved economic outlook, are not set to pave the way for the government to hike public sector pay to match inflation. But the IFS said Chancellor Jeremy Hunt may look to extend the current energy support scheme in the upcoming budget, which would allow households to benefit from the current GBP2,500 cap for longer before it increases to GBP3,000 a year.
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Three energy companies are due to bring a UK High Court challenge over the sale of collapsed energy company Bulb to Octopus Energy. Rival suppliers Scottish Power, British Gas and E.ON have launched a legal bid over the sale, questioning the lawfulness of the government's decision-making process over the transaction. British Gas is owned by Centrica, while Madrid-listed Iberdrola owns Scottish Power. They are seeking to challenge two decisions of the Department for Business, Energy & Industrial Strategy made in October – to approve the takeover and to increase a government loan facility to help with the transfer from GBP1.68 billion to GBP3.9 billion. In court documents, lawyers representing the energy firms previously argued there were "serious public interest issues" surrounding the Bulb deal.
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BROKER RATING CHANGES
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JPMorgan cuts Mondi to 'neutral' (overweight) - price target 1,606 (1,823) pence
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Goldman Sachs raises AB Foods price target to 2,200 (2,040) pence - 'equal-weight'
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Barclays raises RHI Magnesita price target to 2,950 (2,750) pence - 'overweight'
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COMPANIES - FTSE 100
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abrdn said its annual results were hit by "difficult" market conditions. In "one of the toughest investing years in living memory". The investment company and asset manager said net outflows stretched to GBP37.9 billion from GBP6.2 billion a year before, as assets under management and administration fell 7.8% to GBP500.0 billion. Net operating revenue declined 3.9% to GBP1.46 billion, and abrdn swung to a pretax loss of GBP615 million from GBP1.12 billion profit. It left its dividend unchanged at 14.6p, however. The firm noted an uncertain outlook for markets, and expects short term headwinds from changing client demand and preferences. Separately, it announced the disposal of abrdn Capital, its discretionary fund management business to LGT for GBP140 million. The business has AuM of GBP6.1 billion. abrdn said it returned GBP600 million shareholders through dividends and buybacks last year. it expects to return a similar level in 2023. "We are committed to returning a significant proportion of capital generated from further stake sales by way of share buybacks," it said.
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Croda International reported strong annual sales and profit growth. The chemicals maker said sales rose 11% year-on-year to GBP2.09 billion from GBP1.89 billion. Pretax profit surged 90% to GBP780.0 million from GBP411.5 million. Adjusted pretax profit was up 11% to GBP496.1 million. In Consumer Care, the firm noted lower second-half volumes and margins, due to destocking and supply constraints. In Life Sciences, there was a strong performance from Crop Protection, with its "extensive" pipeline of non-Covid delivery systems driving Pharma growth, helping to offset a fall in lipid systems for Covid-19 applications. Looking to 2023, it is trading in line with expectations, and expects destocking to end during the first half. It expects its performance to be weighted towards the second half. Croda lifted its annual dividend by 8.0% to 108.0p.
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Online grocer and warehouse technology firm Ocado said group revenue edged up 0.6% to GBP2.51 billion in the year ended November 27. All segments saw growth, except for retail - its joint venture with Marks & Spencer - which fell 3.8%. "Robust" customer growth in retail was offset by lower value baskets, the firm said. Its pretax loss widened to GBP500.8 million from GBP176.9 million. No dividend was declared, unchanged from a year before. Looking ahead, Ocado expects Retail growth in the mid-single digits for 2023, with Technology to see around 40% Ocado Smart Platform fee revenue growth, and UK Logistics to be "broadly stable".
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COMPANIES - FTSE 250
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Outsourcer Serco said annual revenue ticked up 2.5% year-on-year to GBP4.53 billion in 2022 from GBP4.42 billion, but fell 1% in constant currency. It saw a drop in Covid-related revenue of GBP480 million. Excluding Covid and currency, revenue was up 11%. Pretax profit edged up to GBP196.8 million from GBP192.2 million. It announced a new GBP90 million share buyback for 2023, and increased its dividend in 2022 by 19% to 1.92p. It left revenue and profit guidance for 2023 unchanged, with underlying trading profit guidance to be similar to 2022 at GBP235 million.
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OTHER COMPANIES
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AO World raised annual earnings guidance for the year to March, with the online electricals retailer saying its measures to reduce costs and improve margins have seen traction. It also noted a "continued resilient underlying customer base" which drove higher retail gross margins than anticipated, which it expects to continue for the remaining weeks of its financial year. It expects adjusted earnings before interest, tax, depreciation and amortisation to be in a range of GBP37.5 million to GBP45 million, which is up from the previous guidance range of GBP30 million to GBP40 million.
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By Elizabeth Winter, Alliance News senior markets reporter
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