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LONDON BRIEFING: Biffa backs cut-price takeover; SSP to top outlook

27th Sep 2022 07:53

(Alliance News) - European shares were called higher on Tuesday, after Asian markets shook off another tough day on Wall Street overnight.

US stocks fell for the fifth trading day on-the-trot, with markets there still reeling from last week's US Federal Reserve interest rate hike.

There was some relief for the pound, which had tumbled to a record low of USD1.0349 on Monday morning. It is trading above USD1.07 on Tuesday morning.

The UK government moved to calm tetchy currency markets, announcing it will now publish a "medium-term fiscal plan" in November. The Bank of England also said Monday it is not afraid to act, though it ruled out an emergency rate hike before its next meeting.

Some market participants believe the central bank may be left with no choice.

"If the sell-off on sterling continues, the BoE can't afford to wait until the next scheduled meeting to do something," Swissquote analyst Ipek Ozkardeskaya commented.

Here is what you need to know ahead of the London market open:

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MARKETS

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FTSE 100: called up 0.6% at 7,062.95

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Hang Seng: up 0.1% at 17,873.33

Nikkei 225: closed up 0.5% at 26,571.87

S&P/ASX 200: closed up 0.4% at 6,496.20

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DJIA: closed down 329.60 points, or 1.1%, at 29,260.81

S&P 500: closed down 38.19 points, or 1.0%, at 3,655.04

Nasdaq Composite: closed down 65.00 points, or 0.6%, at 10,802.92

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EUR: firm at USD0.9657 (USD0.9626)

GBP: higher at USD1.0804 (USD1.0655)

USD: soft at JPY144.28 (JPY144.41)

GOLD: lower at USD1,635.89 per ounce (USD1,639.00)

OIL (Brent): flat at USD85.36 a barrel (USD85.30)

(changes since previous London equities close)

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ECONOMICS

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Tuesday's key economic events still to come:

1300 BST US house price index

1330 BST US durable goods orders

1500 BST US consumer confidence index

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UK Chancellor Kwasi Kwarteng is contending with massive market turmoil sparked by his tax-cutting mini-budget, as a disastrous day for the pound saw Labour take its biggest poll lead over Tories for more than 20 years. Lenders were withdrawing some of their mortgages on Monday as uncertainty reigned in the wake of Kwarteng's GBP45 billion package of tax cuts set out on Friday. The tax cuts will be paid for with increased government borrowing. Meanwhile, the Bank of England said it "will not hesitate" to raise interest rates to prop up the value of sterling. The chancellor also said he would bring forward an announcement of a "medium-term fiscal plan" to start bringing down debt levels. The Treasury said it would now be published on November 23, having previously been slated for the new year.

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UK opposition leader Keir Starmer will be buoyed by promising polling for Labour as he accuses the Tories of losing control of the economy and vows to get the UK "out of this endless cycle of crisis". He will quote former UK prime minister Tony Blair to dub Labour the "political wing of the British people", as a new YouGov survey suggests the party has opened up a 17-point lead over the Conservatives – the greatest since the firm began polling in 2001. The Conservatives accused Labour of "another relaunch full of vacuous statements and empty promises, with no details", as they claimed "no one knows what Starmer stands for".

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Downing Street has confirmed it will employ UK Prime Minister Liz Truss's chief of staff Mark Fullbrook directly after it emerged he was being paid through his lobbying company. Fullbrook will be put on a special advisor contract to avoid "any ongoing speculation", a Number 10 spokesperson said early on Tuesday. The Cabinet Office had previously said it was "not unusual" for a special adviser to join government "on secondment" and that his salary was paid to a "seconding company". But the arrangement drew accusations of renewed "Tory sleaze" from opposition parties. Number 10 did not deny that Liz Truss's top aide received payments through Fullbrook Strategies, a private lobbying firm he set up in April, as The Sunday Times reported.

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BROKER RATING CHANGES

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Berenberg cuts Devolver Digital to 'hold' ('buy') - price target 80 pence

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Berenberg starts Inchcape with 'buy' - price target 1,035 pence

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COMPANIES - FTSE 100

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United Utilities warned that annual revenue will fall short of guidance as consumption was weaker than expected. The water and wastewater company expects revenue in the first half ending September 30 to be 1% lower year-on-year, due to "moderately lower than forecast consumption". It explained: "We expect this lower consumption to continue into the second half of the year and therefore full year group revenue is expected to be lower than the guidance that we gave in May." Back then, United Utilities said it expected annual revenue to grow 1%. Inflationary increases in input costs are expected to be higher than expected. United Utilities forecasts underlying operating costs to be GBP65 million higher in the first half. Interim underlying operating profit will be lower than the GBP332.8 million record a year earlier.

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The UK's antitrust watchdog said it is probing whether National Grid's sale of a shareholding in its gas transmission and gas metering business may lessen competition. National Grid, which manages the UK's power infrastructure, in March agreed to sell a 60% interest in its gas transmission and metering business in the UK to a consortium of "long-term infrastructure investors" for GBP2.2 billion in cash. The consortium includes Sydney-based asset manager Macquarie Asset Management and Victoria, Canada-based investment management firm British Columbia Investment Management. The Competition & Markets Authority is examining whether the deal well lead to a "substantial lessening of competition" in the UK. The watchdog has set a November 22 deadline for an initial decision.

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COMPANIES - FTSE 250

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Upper Crust and Camden Food owner SSP expects annual sales and profit to be ahead of guidance, as business for its travel food and beverage outlets get closer to pre-virus levels. For the year ending September 30, SSP expects sales of GBP2.17 billion and pre-IFRS 16 earnings before interest, tax, depreciation and amortisation of GBP140 million. Both will be "slightly ahead of our previous full year guidance". Revenue will be nearly tripled from the GBP834.2 million recorded in the Covid-19 hit prior year. In the fourth quarter alone, revenue is expected be at roughly 91% of 2019 levels. "Travel demand has recovered strongly through the year. As we look ahead to the 2023 financial year, whilst there remains considerable uncertainty in the macroeconomic environment, we are confident that our flexible and resilient business model will enable us to continue to offset cost inflation, manage supply chain and labour volatility, and optimise profitability and returns," SSP said.

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Balfour Beatty has been named as the sole contractor for a UK civil engineering frameworks worth GBP4 billion in total. It has been named on the Scape civil engineering framework, worth GBP3.25 billion, which covers England, Wales and Northern Ireland. It has also been selected as sole contractor for the Scape Scotland Civil Engineering framework, which is worth GBP750 million. "Both frameworks - which enable local authorities and other public sector bodies to commission works through a procurement process that provides a quick route to market - cover a period of four years, with an option for a two year extension," the company said.

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Redde Northgate said it has made an "encouraging" start to its financial year, with the commercial vehicle hire firm weathering inflationary pressures. "As expected the [UK & Ireland] market for new van supply remains tight, while new car availability is showing early signs of improvement," Redde said. In Spain, new van supply is better than expected. Redde said its margins "have remained strong" and inflation is being "actively managed".

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Biffa backed a GBP1.3 billion takeover from Energy Capital Partners. ECP will pay 410 pence cash for each share in the waste management firm, a 27% premium to its 323.90p closing price on Monday. "ECP is an experienced investor in environmental infrastructure and sustainability assets and offers a supportive environment to accelerate the group's further development and growth as a leading enabler of the circular economy," Biffa Chair Ken Lever said. The acquisition sum is, however, 7.9% lower than an initial 445p per share proposal made back in June. Lever explained: "It is the Biffa board's view that this offer represents a compelling opportunity, particularly in a weakening economic environment, for shareholders to realise, in cash and with certainty, the potential for future value creation."

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OTHER COMPANIES

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Card Factory reported a swing to half-year profit, with the greeting cards seller leaving its annual outlook unchanged. Revenue in the six months to July 31 surged 69% to GBP198.0 million from GBP116.9 million a year earlier. It swung to a GBP14.3 million pretax profit, from a GBP6.5 million loss. The company said its "value proposition" can help it cope with inflation, though it said it will raise price. "We expect to be able to continue to manage the known inflationary pressures through a combination of targeted price increases and efficiency measures," the company explained. "Considering the combination of good trading momentum in everyday product, alongside market uncertainty around consumer behaviour through the Christmas season due to the cost-of-living impact and based on the current inflationary outlook, our expectations for the remainder of FY23 are unchanged."

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AG Barr's half-year performance improved. The drinks maker's revenue in the six months to July 31 rose 17% annually to GBP157.9 million from GBP135.3 million. Pretax profit rose 1.2% to GBP24.7 million from GBP24.4 million a year earlier. AG Barr lifted its payout by 25% to 2.50p per share from 2.00p. The Irn-Bru maker said trading boosted by warm summer weather. "We anticipate in the coming months that the current economic environment will impact consumer purchasing behaviour, however we currently remain confident that our strategy and actions will allow us to deliver a full-year profit performance ahead of the prior year," Chief Executive Roger White said.

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By Eric Cunha; [email protected]

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