21st Aug 2023 07:43
(Alliance News) - Stocks in London are called flat on Monday, with little in the way of economic data or company updates to reignite risk appetite.
There was some bad news for the UK property market, as Rightmove data pointed to the steepest monthly fall in house prices since 2018 in August. Further, FTSE 250-listed housebuilder Crest Nicholson warned that annual profit would be lower than its previous guidance, describing how high inflation and elevated mortgage rates are deterring prospective home movers.
In other company news, Redx Pharma said it won orphan drug designation for zelasudil in the US. Ferro-Alloy Resources said it has seen further delays which are likely to hit its third-quarter results, but it still expected its annual results to be an improvement from the prior year.
The week gets off to a quiet start on the economic calendar. Investors will be focused on the Jackson Hole Symposium later in the week, where Federal Reserve Chair Jerome Powell is expected to speak on Friday.
"When Powell spoke last year, he made it plain that there was more pain ahead for US households and that this wouldn’t deter the central bank in acting to bring down inflation, even if it meant pushing unemployment up. His tone this week is unlikely to be anywhere near as hawkish, although he will also be reluctant to declare inflation victory either," said CMC Markets' Michael Hewson.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.2 of a point at 7,262.63
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Hang Seng: down 1.8% at 17,632.53
Nikkei 225: closed up 0.4% at 31,565.64
S&P/ASX 200: closed down 0.5% at 7,115.50
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DJIA: closed up 25.83 points, 0.1%, at 34,500.66
S&P 500: closed little changed at 4,369.71
Nasdaq Composite: closed down 0.2% at 13,290.78
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EUR: up at USD1.0883 (USD1.0876)
GBP: flat at USD1.2737 (USD1.2736)
USD: up at JPY145.39 (JPY145.20)
Gold: down at USD1,889.52 per ounce (USD1,892.45)
Oil (Brent): up at USD85.38 a barrel (USD84.21)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
US Jeffrey Schmid becomes Federal Reserve Bank of Kansas City president
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UK house prices declined at the fastest pace for the month of August since 2018, while year-on-year, they declined for the first time since prior to the pandemic, according to numbers from Rightmove. The property portal's latest findings showed house prices fell 1.9% on-month to GBP364,895 in August. It is the chunkiest August price fall since 2018. Prices had declined by 0.2% in July from June. Would-be buyers were "preoccupied by holidays, inflation, and the highest base rate since 2008", Rightmove said. The Bank of England earlier in August lifted bank rate by 25 basis points to 5.25%. On an annual basis, prices fell 0.1% in August, the first year-on-year decline in house prices since 2019.
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German producer prices fell by more than expected in July, according to official data. Destatis said prices fell 1.1% on a monthly basis last month, compared to the 0.3% decline in June. FXStreet-cited market consensus had been expected a 0.2% fall for July. Annually, prices dropped 6.0% in July, having risen 0.1% in July. Market forecasts had predicted a 5.1% decline. The decline is largely due to a base effect, Destatis explained, after producer prices had soared following the outbreak of war in Ukraine. "The main reason for the year-on-year decline in producer prices were lower energy prices, but also decreases in the prices of intermediate goods. The prices of consumer and capital goods did not increase as sharply as in the previous months," it said.
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BROKER RATING CHANGES
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Jefferies raises HSBC price target to 1,000 (930) pence - 'buy'
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Jefferies cuts Spirax-Sarco Engineering price target to 8,805 (9,145) pence - 'underperform'
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COMPANIES - FTSE 250
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Crest Nicholson cut its annual profit forecast, citing worsening trading conditions in the housing market this summer. It now expects adjusted pretax profit to be just GBP50.0 million in the financial year ending October 31. In June, it had said it expected it to be in line with the consensus of GBP73.7 million. "Against a backdrop of persistently high inflation and rising interest rates, trading conditions for the housing market have worsened during the summer of this year. While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers," it explained. Given the market backdrop, the housebuilder said it is negotiating "several" bulk deals on "appropriate commercial terms" with existing partners, in the hopes of supporting volume delivery in future years. As well as the challenging trade conditions, it recorded further costs of around GBP4.0 million in the second half at Brightwells Yard in Farnham. However, Crest said it remains committed to keeping its annual dividend in line with the prior year, at 17.0p as announced in June.
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Direct Line Insurance has approached an executive of larger peer Aviva to be its next chief executive officer, Sky News reported late Saturday. The Bromley, England-based motor and home insurer has approached Adam Winslow to take over as CEO. Winslow currently is the CEO of Aviva UK & Ireland General Insurance, having joined the London-based insurer in January 2021 to be CEO of International. Citing "insurance industry sources", Sky News said it was not yet clear whether Winslow will take the job. Penny James stepped down suddenly as Direct Line CEO in January, after Direct Line said wouldn't pay a final dividend for 2022 due to a big increase in weather related claims that pushed it into a loss on underwriting. Chief Commercial Officer Jonathan Greenwood was appointed as acting CEO.
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OTHER COMPANIES
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Ferro-Alloy Resources warned it has experienced further unanticipated supplier and transport delays, which has hit output in the first two months of the third quarter. The Kazakhstan-focused vanadium producer and developer said it expects the concentrate supply delays and the continuing low vanadium prices to have a "material impact" on its third-quarter financial results. "The company believes that both the production and financial results for 2023 are still likely to be significantly better than those achieved during 2022 notwithstanding the concentrate supply issues incurred to date," it added. Its main activity for the rest of the year will be to complete the feasibility study for Balasausqandiq. It expects this to be complete by the end of the year, but warned possible delays could extend the delivery into the first quarter of 2024.
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Redx Pharma said that its drug zelasudil has receivedorphan drug designation from the US Food & Drug Administration for the potential treatment of idiopathic pulmonary fibrosis. "The designation provides Redx with various development and commercial incentives, including market exclusivity, in order to address this unmet need for patients suffering from IPF," the pharma company explained. Zelasudil is currently in a phase 2a clinical study for IPF, and topline data is expected in the first quarter of 2024.
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By Elizabeth Winter, Alliance News senior markets reporter
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