23rd Jul 2024 07:47
(Alliance News) - London's FTSE 100 is set for a tepid start on Tuesday, despite stocks in New York ending higher, with tech shares shining ahead of another batch of earnings.
Google owner Alphabet and electric carmaker Tesla report after the closing bell in New York on Tuesday.
"Their results – or the reaction to their results – could shift the wind in either direction. Despite almost doubling its stock price between April and July, Tesla sees appetite for its cars and its market share under pressure, and the company's operating profit is expected to shrink in the Q2 for the 6th straight quarter.
"What keeps optimism alive for Tesla is the robotaxi plan. But robotaxis will cost to the company before it can generate profit," Swissquote analyst Ipek Ozkardeskaya commented.
"For Google, investors will be closely watching the cloud revenue and whether the AI spending is making a difference for the ad revenue."
Political developments in the US are also in focus, with Kamala Harris closing in on the Democratic presidential nomination, after Joe Biden pulled his re-election bid over the weekend.
In early UK corporate news, Compass raised its guidance, while Beazley announced no change to its outlook due to feeling no hit from Friday's global IT glitch.
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 0.4% at 8,163.78
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Hang Seng: down 0.8% at 17,496.18
Nikkei 225: flat at 39,594.39
S&P/ASX 200: up 0.5% at 7,971.10
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DJIA: closed up 127.91 points, 0.3%, at 40,415.44
S&P 500: closed up 1.1% at 5,564.41
Nasdaq Composite: closed up 1.6% at 18,007.57
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EUR: higher at USD1.0885 (USD1.0881)
GBP: higher at USD1.2921 (USD1.2913)
USD: lower at JPY156.51 (JPY156.88)
GOLD: down at USD2,389.54 per ounce (USD2,397.10)
(Brent): up at USD82.41 a barrel (USD82.15)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
15:00 BST eurozone flash consumer confidence
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US Vice President Kamala Harris appeared poised to clinch her party's presidential nomination after receiving support from more than enough Democratic delegates Monday, as she launched a blistering campaign against Donald Trump. The formal nomination process for a US presidential candidate occurs when delegates from across the US gather to officially anoint a nominee chosen by voters during the primaries. But when President Joe Biden dropped out of the race on Sunday, the fate of those delegates, who had been slated to vote for him, came into question. With the support of a slew of Democratic heavyweights, including Biden himself, and massive voter donations, Harris quickly closed in as the Democratic party's heir apparent, and delegates began falling in line to pledge their support.
"Tonight, I am proud to have secured the broad support needed to become our party's nominee," Harris wrote in a statement, after US media reported she had sailed past the number of delegates needed – 1,976 out of nearly 4,000 – in order to decisively secure the Democratic presidential nomination during voting in the coming weeks. Early on Tuesday, Reuters reported that her majority had grown to 2,214 delegates, well beyond a simple majority.
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The UK opposition Conservative Party will appoint a new leader on November 2 to replace Rishi Sunak. The 1922 Committee of backbenchers has agreed the rules and timeline for the leadership contest. Nominations will kick off on Wednesday evening and close in the afternoon on July 29. Each candidate will need a proposer, seconder and eight nominations to qualify. The parliamentary party will then narrow the field down to four, who will make their case at the Conservative Party Conference, which runs from September 29 to October 2. The final two, picked by the parliamentary party, will then be voted on by Conservative Party members in an online ballot that will close on October 31. After the general election saw the Tories reduced to just 121 MPs, the party faces a battle to see off the threat from Reform UK on the right and the loss of traditional Conservative heartlands to the Liberal Democrats. Potential leadership contenders include former work & pensions secretary Mel Stride, former home secretaries Suella Braverman and Priti Patel, shadow home secretary James Cleverly, shadow security minister Tom Tugendhat, shadow communities secretary Kemi Badenoch and former immigration minister Robert Jenrick.
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BROKER RATING CHANGES
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TD Cowen starts Unilever with 'buy' - price target 5,200 pence
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HSBC raises Rio Tinto to 'buy' - price target 5,750 pence
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COMPANIES - FTSE 100
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Contract caterer Compass Group said "industry trends remain strong" as it reported an increase in revenue and raised growth guidance. In the third quarter ended June 30, organic revenue rose 10%. "As expected, net new business growth accelerated in Q3, whilst pricing moderated in line with inflation. Volumes continued to benefit from the quality of our offer and the value gap compared to the high street," Compass said. In North America, organic revenue rose 9.9%, while in Europe, it increased 12%. In the Rest of the World segment, organic revenue climbed 8.5%. Compass added: "We are pleased with our third quarter performance. The group delivered good growth across all regions and benefited from improved net new business in line with our expectations. For the full year we now expect underlying operating profit growth to be above 15% on a constant-currency basis with organic revenue growth above 10%." It had previously expected underlying operating profit growth "towards 15%" and an organic revenue rise "towards 10%".
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Beazley said its guidance has not changed, as it the insurer updated the market following an IT outage which affected millions of devices worldwide. "Given the unprecedented nature of this event and Beazley's position as a leading cyber insurer, the company has elected to provide an update on its position in relation to the outage. Based on what is known at this point, the event will not change the current undiscounted combined ratio guidance of low-80s for the full year," it said. The firm will update on its first half performance on August 8.
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COMPANIES - FTSE 250
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SThree expects annual results in line with market expectations, though it cautioned that industry "conditions have remained challenging for longer than anticipated". The recruiter, focused on the science, technology, engineering, and mathematics fields, said revenue in the half-year to May 31 declined 7.5% annually to GBP763.4 million from GBP825.2 million. However, pretax profit increased 1.3% to GBP39.0 million from GBP38.5 million. Its bottom line was helped by "lower average headcount for the half, tight cost control and the benefit of higher interest income". SThree upped its interim dividend slightly to 5.1 pence from 5.0p. Chief Executive Officer Timo Lehne said: "Given the challenges faced across the sector, our resilient performance in the first six months of the financial year has been pleasing. Strong contract extensions have continued to underpin performance despite subdued new business activity. Our unique business model focused on specialist STEM skills and flexible talent solutions, continues to power our performance, supported by global megatrends driving long-term demand for the skills we place." SThree expects annual profit in line with consensus of GBP69.2 million. However, it added that "market conditions have remained challenging for longer than anticipated".
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Facilities management provider Mitie said revenue grew in its first-quarter, boosted by acquisitions as well as work and pricing. Revenue in the three months to June 30 increased 11% to GBP1.16 billion from GBP1.05 billion a year prior. "The good trading momentum from last year has continued into the first quarter of FY25, with double digit revenue growth from our Projects business, including the benefit from the previous year's acquisitions. Contract wins and renewals also remained high, following a record final quarter in FY24, reinforcing the strength of our market leading, technology and data-rich capabilities," CEO Phil Bentley said. "We have made a good start to our new programme of margin enhancement initiatives which will raise the operating margin over the medium-term, and we remain on track to deliver our high-single digit revenue growth expectations for the year."
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OTHER COMPANIES
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Fuller, Smith & Turner said inflation pressure is abating and its margins "are recovering". The pub company said like-for-like sales grew 5.3% in the 16 weeks to July 20. It was the first 16 weeks of its financial year. Fuller's said trading momentum has continued, "with inflationary pressures easing, our margins are recovering". Chief Executive Simon Emeny said: "I am delighted to see our sales growth momentum continue, particularly against the backdrop of easing inflation, which will help us to grow margins and profit, as well as revenue. You can feel the positivity across the business, with our team members working energetically to drive our continued success. We have had a strong start to the financial year, and we look forward to the opportunities the future will bring. We have a new UK government in place, and I urge Sir Keir Starmer to stand by his commitment to overhaul our archaic business rates system. The Labour Party has a clearly stated objective to grow the economy and the hospitality sector can be an excellent engine to help deliver that growth."
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Arbuthnot Banking Group predicted a fall in interest rates will continue to hurt profit in the "short-term". The firm, which is the holding company behind private banking, commercial banking and wealth management services provider Arbuthnot Latham, expects to report pretax profit of GBP20.8 million for the six months to June 30. It would represent a 21% decline on-year from GBP26.4 million. Arbuthnot said the profit outcome was "expected, as existing fixed rate deposits have continued to reprice onto higher terms as they are renewed". Funds under management and administration totalled GBP1.96 billion at June 30, a 15% increase from GBP1.71 billion in December. Chair and CEO Henry Angest said: "The group made good progress in the first half of the year, again delivering strong profits in an evolving interest rate environment. The balance sheet evolution and growth achieved in the period demonstrates the ongoing success of our 'future state 2' strategic plan, with its focus on diversifying the loan book whilst continuing to enhance our value proposition to relationship clients. While an expected fall in interest rates in the second half will have a short-term impact on profit growth, the group is well positioned to take advantage of the market opportunities we anticipate over the near, medium and long term."
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By Eric Cunha, Alliance News news editor
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