2nd Nov 2016 08:25
LONDON (Alliance News) - Share prices opened lower in London Wednesday, with bank shares leading FTSE 100 decliners.
RBS was down 3.0%, followed by Standard Chartered and Barclays. Berenberg removed StanChart from its "Alpha List" but kept the emerging markets lender at Buy following its third-quarter results on Tuesday. The UK bank earnings season concludes with HSBC on Monday next week. HSBC was down 1.4%.
NIESR forecast UK economic growth will slow to 1.4% in 2017 from an upwardly revised 2.0% in 2016. However, the think tank said the weak pound will result in 4.0% inflation in late 2017 and no further rate cuts by the Bank of England.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.6% at 6,875.39
FTSE 250: down 0.6% at 17,423.97
AIM ALL-SHARE: down 0.1% at 820.63
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Hang Seng: down 1.5% at 22,810.50
Nikkei 225: closed down 1.8% at 17,134.68
DJIA: closed down 0.6% at 18,037.10
S&P 500: closed down 0.7% at 2,111.72
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GBP: up at USD1.2273 (USD1.2230)
EUR: up at USD1.1094 (USD1.1048)
GOLD: up at USD1,296.39 per ounce (USD1,290.50)
OIL (Brent): down at USD47.65 a barrel (USD48.14)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
(all times in GMT)
0845 Italy Markit manufacturing PMI
0850 France Markit manufacturing PMI
0855 Germany unemployment rate
0855 Germany Markit manufacturing PMI
0900 EU Markit manufacturing PMI
0930 UK construction PMI
1100 US MBA mortgage applications
1215 US ADP employment
1345 US ISM New York index
1430 US EIA crude oil stocks
1800 US Fed interest rate decision and monetary policy statement
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UK Chancellor of the Exchequer Philip Hammond is reported to be planning to adopt a new "flexible fiscal framework" to give him the ability to respond if the economy is hit by Brexit. The Financial Times said Hammond will unveil the new framework in his autumn statement on November 23, when he will formally abandon predecessor George Osborne's target to run a surplus by 2019/20. The Chancellor is expected to seek to shore up the economy with new infrastructure spending, but he told Cabinet colleagues on Tuesday to expect only a "modest" stimulus running into the low billions of pounds a year, said the paper.
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Chancellor Hammond should use this month's autumn statement to ditch plans he inherited from Osborne to take more workers out of income tax, a new report has said. Former prime minister David Cameron promised in 2014 that a Conservative government would raise the threshold for income tax to GBP12,500 by 2020, taking 1 million low-paid workers out of the tax altogether and cutting bills for 30 million more. At the same time, he said Tories would raise the level for the 40p upper rate to GBP50,000. But the Resolution Foundation urged Hammond to drop the plan as part of the "reset" of the government's approach to tax and spending policy he has promised in the November 23 statement.
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The National Institute of Economic & Social Research lifted its outlook for UK economic growth in 2016 following recent resilience in economic data, but maintained its view that the UK is a "slowing economy, confronted with significant risks". NIESR said third-quarter UK growth was better than its forecast and results in an increase to its estimate for 2016 GDP growth to 2.0% from 1.7%. However, it expects GDP growth to slow to 1.4% in 2017. NIESR expects the recent fall in sterling to translate into higher inflation, causing the UK consumer price index to post annual growth of 4% in late 2017 and only returning to the Bank of England's 2.0% target in 2020. This will keep the BoE from making any changes to its policy stance until the second half of 2019, when it will start tightening.
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UK house price inflation slowed more-than-expected to its lowest level in nine months during October, survey figures from the Nationwide Building Society showed. The house price index rose 4.6% year-on-year following 5.3% increase in September. Economists had forecast a score of 4.9%. The latest house price inflation figure was the lowest since January, when it was 4.4%.
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Shop prices in the UK were down 1.7% on year in October, the British Retail Consortium said. That follows the 1.8% decline in September. Individually, food prices were down 1.2% after slipping 1.3% in the previous month. Fresh food prices fell an annual 2.0%. Non-food prices were down 2.1%.
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Residents of central Italy want to know when the aftershocks will end, with more than 1,100 tremors recorded since a weekend earthquake and officials assessing the damage already inflicted. The entire region is struggling to cope after a 6.5-magnitude temblor - the strongest earthquake to hit the country since 1980 - struck Sunday, claiming no lives but wreaking massive damage at its epicentre, near the Umbrian town of Norcia. A powerful aftershock early Tuesday had a magnitude of 4.8 according to Italian seismic institute INGV. It was one of the almost 20 recent aftershocks which have measured over 4 on the Richter scale.
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The Bank of Japan will make policy adjustments as appropriate with a view to maintain the momentum toward achieving the price stability target, Governor Haruhiko Kuroda told lawmakers. At the meeting held on November 1, the bank decided to maintain the guideline for market operations in which the short-term policy interest rate is set at minus 0.1% and the target level of 10-year JGB yields is set at around 0%. The bank pushed back the time period to achieve the 2% inflation further. Inflation is forecast to rise to 1.7% in the fiscal 2018 instead of 1.9% estimated in July.
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Japan's consumer confidence weakened more-than-expected in October, after improving in the previous two months, survey figures from Cabinet Office showed. The seasonally adjusted consumer confidence index fell to 42.3 in October from 43.0 in September, which was the highest reading in three years. Economists had expected the index to drop to 42.6.
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Embattled South Korean president Park Geun Hye nominated a new prime minister amid continuing controversy over accusations that a friend with no official post has influence over policy decisions. Kim Byong Joon, a senior presidential policy secretary is to take over from Hwang Kyo Ahn, the president's office said.
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All 33 coal miners trapped after a gas explosion earlier this week have now been found dead, the official Xinhua news agency said. The miners were working at the privately-owned Jinshangou mine near the south-western city of Chongqing, in the town of Laisu, when the blast occurred.
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Bashar al-Assad expects to rule Syria until 2021 despite the ongoing civil war raging in the country, the Syrian president told a gathering of Western journalists in Damascus. In an interview published by the New York Times, Assad ruled out any political changes prior to a military conclusion to the conflict and said he would stay in office at least until the end of his third seven-year term in 2021.
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Iraqi Prime Minister Haider al-Abadi said he feared a "reckless step" from Ankara after Turkish media reported that Turkey was deploying tanks and armoured vehicles from a key infantry brigade to the border between the two countries. Al-Abadi reiterated his government's rejection of any Turkish involvement in the campaign to recapture the northern Iraqi city of Mosul from Islamic State jihadists.
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BROKER RATING CHANGES
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BERENBERG REMOVES STANDARD CHARTERED FROM 'ALPHA LIST' - 'BUY', TARGET 750 PENCE
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HSBC RAISES EASYJET TO 'BUY' ('REDUCE') - TARGET 1150 (800) PENCE
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HSBC RAISES SMITHS GROUP TO 'BUY' ('HOLD')
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GOLDMAN CUTS SEGRO TO 'NEUTRAL' ('BUY') - TARGET 510 (505) PENCE
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COMPANIES - FTSE 100
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Housebuilder Persimmon said customer activity has strengthened in line with traditional seasonality, as its reported encouraging trading during the summer months. Persimmon said the number of customer visiting its sites in the weeks immediately following the European Union referendum at the end of June was well ahead of the prior year. Its private sales rate in the period between August 23 and November 1 was 19% ahead of the same period a prior year, the group said, representing a continuation of the stronger sales Persimmon experienced through the summer weeks.
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Next revised its guidance for full-year sales and profit as it reported lower full-price sales in the third quarter of its financial year. The clothing and homeware retailer said full-price sales in the third quarter to the end of October fell by 3.5% year-on-year, as retail sales dropped by 5.9% and sales from the directory business remained flat. Next narrowed its sales guidance for the full year to the end of January to between a fall of 1.75% and growth of 1.25%. Its previous guidance was for between a fall of 2.5% and growth of 2.5%. Next noted that the mid-point of its new sales range - a fall of 0.25% - is "marginally lower" than the previous guidance - which would have been flat.
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British engineer Rolls-Royce Holdings appointed Andreas Schell as the chief executive of its Power Systems division. Schell will take up the role on January 1, replacing Ulrich Dohle when he retires. He joins Rolls-Royce from UTC Aerospace Systems, the aerospace unit of US group United Technologies.
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The threat of strikes by easyJet pilots over concerns about fatigue has ended after they accepted new proposals from the airline, a union has said. The British Airline Pilots' Association said its members voted by 68% to 32% to accept the Luton-based carrier's offer. In September, a majority voted in favour of industrial action, but talks were held to resolve the row.
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COMPANIES - FTSE 250
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Irish corrugated packaging company Smurfit Kappa Group said its profit and revenue grew in the third quarter and it remains on track for the full year 2016. Smurfit said it made a pretax profit of EUR187.0 million in the quarter to the end of September, up 13% from EUR165.0 million a year earlier. For the nine months to the end of September, pretax profit grew 22% to EUR499.0 million from EUR408.0 million the year before.
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Online takeaway ordering and delivery service Just Eat increased its revenue and adjusted earnings guidance for 2016, despite a slowdown in growth in the third quarter. Just Eat said reported orders grew 34% in the quarter to the end of September, a slowdown on the 55% growth reported in the first half of the year. Just Eat increased its full-year constant currency revenue guidance to GBP371.0 million from GBP368.0 million previously and increased its guidance for adjusted earnings before interest, tax, depreciation and amortisation to between GBP109 million and GBP111 million, up from GBP106 million to GBP108 million previously.
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Security services company G4S said it delivered robust growth in the first nine months of the year and remains confident on its prospects. The company said it has won new contracts with annual revenue totalling GBP1.00 billion since the start of 2016, with those contracts worth a total of GBP2.00 billion across their terms. Revenue from the group's continuing operations in the first nine months of 2016, to the end of September, was GBP4.82 billion, up 5.7% year-on-year.
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JD Wetherspoon reported growth in sales in the first quarter of its financial year, but warned that forecasts for the full year are "tentative" as sales growth slowed in the latter part of the quarter. The pub chain said like-for-like sales in the 13 weeks ended October 23 grew by 3.5% year-on-year, while total sales rose by 2.3%. Like-for-like sales growth slowed to 2.3% in the last five weeks of the period. More positively, operating margin increased to 8.6% from 5.8%.
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COMPANIES - LONDON MAIN MARKET AND AIM
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Irish food and ingredients giant Kerry Group affirmed its expectations for 2016 after it delivered volume and margin improvements in the third quarter. The company - which owns Cheesestrings and Wall's sausages and operates a large food and nutrition business - said volumes for its Taste & Nutrition division grew 3.4% in the quarter to the end of September, while volumes in its Consumer Foods unit grew 2.2%.
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Glanbia reported a decline in revenue in the first nine months of 2016, hit by falling prices in the dairy market. The Irish nutrition group said total revenue fell by 0.4% in the nine months, but rose by 0.2% on a constant currency basis. Wholly-owned revenue, which excludes joint ventures and associates, rose by 2.0% on a reported basis and by 2.4% in constant currencies, which Glanbia said benefited from 3.9% volume growth and a contribution of recent acquisitions.
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Ryanair Holdings reported year-on-year growth in traffic and load factor in October. The Irish budget airline said the number of customers it carried grew by 13% in October to 10.9 million from 9.7 million a year earlier, as load factor rose by one percentage point to 95% from 94%.
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COMPANIES - INTERNATIONAL
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Microsoft said a computer-hacking group, which has previously targeted government agencies, attacked its Windows software and Adobe Systems's Flash program. The company will release a security patch for its operating system on November 8, Windows chief Terry Myerson said in a blog post on Microsoft's website. Users of Microsoft's Edge browser on the latest update to Windows 10 are protected from the flaw.
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Google is giving out USD50 in Play Store credit to Pixel buyers, who are yet to get the phone due to shipping delays. The company is having trouble meeting demand for the Pixel phone. The company has sold out the new smartphone's many versions at the Google Store since launch. However, customers who have ordered shortly after the launch are still waiting past their expected shipping date to get the phone.
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Financial data provider and news service Thomson Reuters is embarking on a major restructuring that will include the elimination of about 2,000 positions worldwide, the company announced. The layoffs correspond to roughly 4% of the company's entire workforce of about 48,000 employees. The company has already cut thousands of jobs in recent years. The restructuring will cost the company between USD200 million and USD250 million in the fourth quarter. In the third quarter, the company's net profit fell from USD293 to USD286 million.
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German airline Deutsche Lufthansa reported its third-quarter net profit climbed 79% to EUR1.42 billion from last year's EUR794 million. Total revenue declined 1.2% to EUR8.83 billion from EUR8.94 billion a year ago. The total number of passengers grew 1.9% to 32.69 million. Revenue seat kilometres grew 2.1% to 68.40 billion. Passenger load factor edged down 1.6 percentage points to 84.4%.
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Wednesday's Shareholder Meetings
Jupiter European Opportunities Trust
Schroder Japan Growth Fund
Abcam
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By Tom Waite; [email protected]; @thomaslwaite
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