19th Jun 2024 07:56
(Alliance News) - London's FTSE 100 is called to open lower on Wednesday, returning some of Tuesday's gains, though data showed the UK inflation rate returned to target last month.
According to the Office for National Statistics, the rate of yearly consumer price growth faded to 2.0% in May, from 2.3% in April. The reading was in-line with the FXStreet cited consensus.
The rate of inflation stood as high as 11.1% in October 2022, but has faded, albeit in a bumpy fashion, since then. The rate of inflation last sat at the target range back in July 2021.
On a monthly basis, consumer prices grew 0.3% in May, as they did in April from March. They had been expected to rise 0.4% last month, however, so the latest reading fell short of the FXStreet cited consensus.
The yearly core inflation rate, which strips out energy, food, alcohol and tobacco, faded to 3.5% last month from 3.9% in April, as expected.
The numbers from the ONS showed annual services inflation, a gauge on which the BoE has been keeping a close eye, cooled to 5.7% from 5.9%.
The data will give the BoE some food for thought, ahead of Threadneedle Street's interest rate decision at midday on Thursday. No change to bank rate, currently at a 16-year high of 5.25%, is expected. However, the cooler inflation readings could open the door for a summer rate cut.
"Governor [Andrew] Bailey is likely to be the happiest man in the Square Mile this morning," Pepperstone analyst Michael Brown commented.
"The first 25bp cut still seems most likely to come in August, in conjunction with the Bank's updated economic forecasts, though such a cut may well prove to be a split decision among MPC members, with one or two of the external hawks likely still concerned about inflation persistence, by virtue of the still-tight labour market, and stubbornly high services inflation."
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 0.2% at 8,175.19
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Hang Seng: up 2.6% at 18,383.11
Nikkei 225: up 0.2% at 38,570.76
S&P/ASX 200: down 0.1% at 7,769.70
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DJIA: closed up 56.76 points, 0.2%, at 38,834.86.
S&P 500: closed up 0.3% at 5,487.03
Nasdaq Composite: closed up slightly at 17,862.23
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EUR: down at USD1.0731 (USD1.0736)
GBP: higher at USD1.2727 (USD1.2693)
USD: lower at JPY157.69 (JPY157.97)
GOLD: higher at USD2,329.12 per ounce (USD2,324.20)
(Brent): lower at USD84.94 a barrel (USD85.02)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
US Juneteenth holiday. Financial markets closed.
09:00 BST eurozone current account
10:00 BST eurozone construction output
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UK Prime Minister Rishi Sunak spoke of a "moral mission" to cut taxes, as campaigning continues in the general election. Sunak will continue his tax war on Labour as he claims inflation is "back under control" and it is his "moral mission" to slash taxes. The PM is banking on inflation falling back to the Bank of England's 2% target when official figures are released on Wednesday. The Tories also reiterated their demand that Keir Starmer rule out a series of potential tax measures which they claim would be needed to fill a "GBP38.5 billion black hole" in Labour's plans. Sunak's party republished a list of 17 tax hikes they say Labour could make, but the opposition has said they would refuse to be drawn into the trap of responding to each claim.
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A billionaire who previously donated GBP500,000 to the Conservatives in the 2019 UK election has said he will be voting for Labour, and encourages others to do the same. John Caudwell, founder of Phones4U, was one of the biggest donors to the Tories ahead of the 2019 general election, when he gave half a million pounds to Boris Johnson's campaign. Caudwell said he was "amazed by how Keir Starmer has transformed the Labour Party and brought it back from that Corbyn brink."
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Nigel Farage has said he is "confident" Reform UK will be second in the opinion polls by next week at a UK general election campaign event in Clacton. It came a day after the party leader said he wanted Reform to establish a "bridgehead" in Parliament with a view to a full assault at a 2029 general election and himself in No 10. Speaking on stage between two Union flags, the Reform UK leader said: "Something very exciting is going on. "We are even or just ahead of the Conservative Party in the opinion polls." He added: "We will, I'm quite confident, by early next week clearly be in second place in the opinion polls.
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BROKER RATING CHANGES
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Jefferies cuts Hargreaves Lansdown to 'hold' (buy) - price target 1,140 (1,035) pence
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Jefferies cuts Segro to 'hold' (buy) - price target 950 (1,042) pence
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COMPANIES - FTSE 100
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Berkeley Group reported a slight decline in annual earnings but lifted its forecast for the new year as the housebuilder sees signs the "outlook is improving". Revenue in the year ended April 30 fell 3.4% to GBP2.46 billion from GBP2.55 billion. Pretax profit declined 7.7% to GBP557.3 million from GBP604.0 million. "This is a strong performance in a challenging and volatile operating environment, demonstrating the resilience of Berkeley's business model with its focus on the country's most undersupplied markets," Chief Executive Rob Perrins said. "We continue to see good levels of enquiry for well-located homes built to a high standard of design and quality but recognise that the current lack of urgency in the market is likely to remain until the long-anticipated reduction in interest rates commences. Berkeley continues to benefit from a strong order book and has already secured 80% of its sales for next year." The firm said it has upped its pretax profit guidance for the new financial year by 5% to GBP525 million. Its outlook for the following year was re-affirmed at GBP450 million. The firm added: "The last 12 months has seen a continuation of the volatile and uncertain operating environment for Berkeley. However, while interest rates have stayed at elevated levels for longer than the market had anticipated, there are signs that the outlook is improving with inflation greatly reduced, the first interest rate cut expected later this year and a return to growth." Its dividend per share for the year to the end of April was raised slightly to GBP0.92 from GBP0.91. Berkeley said it is on track to deliver GBP283 million, GBP2.67 per share, in shareholder returns by September. It explained GBP34.9 million of that will come through a 33.00 pence per share interim dividend and GBP184.0 million, 174p per share, will be through a special dividend accompanied by a share consolidation.
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Telecommunications firm Vodafone said it has sold an 18% stake in Indus Towers, a mobile phone tower operator in India. It sold 484.7 million shares through an accelerated bookbuild, raising EUR1.7 billion. Those funds will be used "substantially repay Vodafone's existing lenders in relation to the outstanding bank borrowings of EUR1.8 billion secured against Vodafone's Indian assets". Following the share sales, it owns 82.5 million Indus Towers shares, a 3.1% stake.
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COMPANIES - FTSE 250
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Spectris cautioned that its 2024 profit could fall marginally shy of consensus, as the supplier of high-tech instruments, test equipment and software noted weaker demand in China. In its Malvern Panalytical unit, the firm said the tepid China demand, a reduction in battery development, an easing of electric vehicle sales and "subdued" trading in pharmaceuticals will hurt first-half sales and operating profit by GBP15 million and GBP10 million. Spectris noted that is in addition to GBP15 million and GBP10 million hits to sales and profit for the first-half due to the firm rolling out a new ERP system earlier this year. Spectris, however, noted that system hit will have no impact on its full-year outturn, as the lost earnings will be retrieved in the second half. "As a result of our performance in the first half, and our revised expectations for the second half, we now expect adjusted operating profit to be at, or marginally below, the bottom end of the range of consensus analyst expectations for the full year," Spectris cautioned. Adjusted operating profit consensus stands at GBP232 million to GBP259 million, it noted. In addition, the firm noted Angela Noon will join as chief financial officer, with incumbent Derek Harding moving to the role of president of Spectris Scientific. The changes are with effect September 1. Noon is currently the CFO at Royal Mail and was formerly finance chief of Siemens UK & Ireland, Spectris noted.
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Two Helios Towers investors trimmed their stakes in the telecom tower company. Newlight Partners and RIT Capital partners sold 18.8 million shares each in Helios at GBP1.15 apiece, GBP43.2 million in total, Following the sales, Newlight will hold just over a 13% stake in the Helios Towers, while RIT will own 3.2%. Newlight and RIT had not sold any shares in Helios Towers since the company's initial public offer in 2019.
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OTHER COMPANIES
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Young & Co's Brewery reported annual revenue growth and lifted its dividend in what it labelled a "landmark year". The pub firm said revenue in the year to April 1 increased 5.4% to GBP388.8 million from GBP368.9 million. However, pretax profit fell 43% to GBP20.7 million from GBP36.2 million. It put the profit fall down to "transaction costs related to the City Pub Group acquisition and a small movement in our annual property revaluation". Adjusted pretax profit rose 9.3% to GBP49.4 million from GBP45.2 million. The firm lifted its final dividend by 6.0% to 10.88p from 10.26p. It gives a total dividend for the year of 21.76p, rising 6.0% from 20.52p. "In a landmark year for Young's, we have reported another excellent financial performance with industry leading profitability. This is once again testament to the excellent work and energy of our teams and our proven strategy of operating premium, individual, differentiated and well-invested pubs and bedrooms," CEO Simon Dodd said.
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By Eric Cunha, Alliance News news editor
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