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LONDON BRIEFING: BHP says China to be "stabilising force" on demand

19th Jan 2023 07:53

(Alliance News) - As market optimism faded that aggressive interest rate hikes by the world's central banks may soon come to an end, stocks in London were called to open lower on Thursday.

A report from the Office for National Statistics on Wednesday showed the UK consumer price index rose by 10.5% in December from a year before, the annual pace of inflation easing from 10.7% in November.

The print suggested that price inflation in the UK is proving to be stubborn, leaving intact expectations that the Bank of England will lift interest rates again by 50 basis points in February.

In the US, hopes of slower rate hikes were knocked by a speech from St Louis Fed President James Bullard, who said monetary policymakers should get the key US interest rate to above 5% as quickly as possible. Balancing these remarks were a weak set of US retail sales figures, suggesting flagging consumer demand.

"Global and US-specific dynamics continue to suggest a bearish bias on the dollar in the near term," commented ING.

"Today, markets will watch the size of the increase in initial jobs claims, as well as housing data and the Philadelphia Fed survey. The Fed's Susan Collins, Lael Brainard and John Williams are scheduled to speak."

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 45.7 points, or 0.6%, at 7,785.00

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Hang Seng: down 0.4% at 21,582.72

Nikkei 225: closed down 1.4% at 26,405.23

S&P/ASX 200: closed up 0.6% at 7,435.30

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DJIA: closed down 613.89 points, 1.8%, at 33,296.96

S&P 500: closed down 1.6% at 3,928.86

Nasdaq Composite: closed down 1.2% at 10,957.01

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EUR: lower at USD1.0796 (USD1.0820)

GBP: lower at USD1.2322 (USD1.2366)

USD: lower at JPY128.11 (JPY128.49)

Gold: higher at USD1,909.37 per ounce (USD1,908.93)

(Brent): lower at USD84.35 a barrel (USD87.16)

(changes since previous London equities close)

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ECONOMICS

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Thursday's key economic events still to come:

10:00 CET EU balance of payments

09:30 GMT UK BOE credit conditions and bank liabilities surveys

08:30 EST US housing starts and building permits

08:30 EST US Philadelphia Fed business outlook survey

08:30 EST US unemployment insurance weekly claims report

09:00 EST US Fed Boston President Susan Collins speaks

16:30 EST US federal discount window borrowings

16:30 EST US foreign central bank holdings

18:35 EST US Fed New York President John Williams speaks

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The UK has taken another step towards decarbonising its energy grid as four companies signed deals to build six new wind farms in British waters. The deals between the Crown Estate and companies - including BP, TotalEnergies and RWE - will lead to enough wind turbines to power around seven million homes when the wind blows. The Crown Estate was given the thumbs-up to sign the agreements by then business secretary Kwasi Kwarteng in July last year. The leases have now been signed for the six wind farms, which have a generation capacity of eight gigawatts. Three of the projects are off the coast of North Wales, Cumbria and Lancashire and the other three are in the North Sea, off Yorkshire and Lincolnshire.

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BROKER RATING CHANGES

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Goldman Sachs raises WPP to 'buy' ('neutral') - price target 1,158 (920) pence

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Goldman Sachs cuts Relx to 'neutral' ('buy') - price target 2,863 (2,869) pence

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JPMorgan places Shell on 'positive catalyst watch'

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COMPANIES - FTSE 100

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Business software firm Sage said it has made a strong start to its new financial year as it reported a double-digit percentage rise in revenue. For the three months that ended December 31, Sage reported GBP540 million in revenue, up 10% from GBP493 million the previous year. This was thanks to 31% revenue growth in its Sage Business Cloud division, it said, and despite a 29% decline in 'other' revenue. As a result of the performance, which Sage said was in line with its expectations, the company reiterated its guidance for the full-year.

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Business publisher and events organiser Informa said it has entered 2023 with continuing momentum thanks to a strong finish to 2022. Chief Executive Stephen Carter pointed to strong performances in both Academic Markets and B2B markets and a strengthened balance sheet as evidence for the firm to deliver underlying growth in 2022. Informa now expects to post revenue of more than GBP2.38 billion in the year, with adjusted operating profit anticipated at GBP530 million.

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BHP kept its production guidance for financial year 2023 unchanged. Looking at demand, the miner said: "BHP believes China will be a stabilising force when it comes to commodity demand in the 2023 calendar year, with OECD nations experiencing economic headwinds. China's pro-growth policies, including in the property sector, and an easing of COVID-19 restrictions are expected to support progressive improvement from the difficult economic conditions of the first half. China is expected to achieve its fifth straight year of over 1 billion tonnes of steel production."

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COMPANIES - FTSE 250

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Boot maker Dr Martens said demand for its products remained resilient through "challenging" conditions during its peak third-quarter period. Nonetheless, the company lowered its full-year outlook due to "significant" operational issues. In the three months ended December 31, Dr Martens reported revenue of GBP335.9 million, up 9% against the year prior and up 3% on a constant currency basis. This was below its expectations due to slower-than-anticipated direct-to-consumer growth in the US and the impact of operational issues at its new LA distribution centre. This bottleneck at the LA site is expected to reduce wholesale revenue by between GBP15 million and GBP25 million and earnings before interest, tax, depreciation and amortisation by between GBP16 million and GBP25 million. As a result, Dr Martens now expects financial 2023 revenue growth between 11% to 13% on an actual currency basis. It also estimates full-year Ebitda between GBP250 million and GBP260 million.

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Premier Foods said it remains on track to deliver on expectations for the full year after a strong third-quarter performance. The owner of brand such as Mr Kipling and Bisto reported sales in the 13 weeks to December 31 were up 12% against the prior year. Premier Foods noted a particularly strong performance in Grocery sales, which grew 17% against the previous year. It explained this growth was also broad based, with all of the firm's major brands performing strongly. "Input cost inflation remains at elevated levels, and we continue to take action to offset this inflation through a range of measures. With strong trading momentum as we enter our final quarter of the year, and with more brand investment and new product launches to come, we are well on track to deliver on expectations for the full year," said Chief Executive Alex Whitehouse.

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OTHER COMPANIES

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Food delivery service Deliveroo said it has delivered "significant" improvements in profitability during 2022, despite a difficult consumer environment. For the full year, gross transaction value increased to GBP7.08 billion for all operations, including results from Australia and the Netherlands until operations there ended in November 2022. This represents year-on-year growth of 7% in reported currency and 5% in constant currency. For continuing operations, full year GTV was GBP6.85 billion, an increase of 9% in reported currency and 7% in constant currency. As a result, Deliveroo now expects to report an adjusted Ebitda margin of negative 1.0%. This is better than previous guidance of between negative 1.2% to negative 1.5%. Deliveroo expects adjusted Ebitda to continue to improve in 2023.

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By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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