12th Dec 2024 07:51
(Alliance News) - London's FTSE 100 is called to open higher on Thursday, ahead of an expected European Central Bank rate cut, while tech shares in New York enjoyed a rip-roaring rise overnight.
A US inflation reading for November, although hotter than the previous month, cemented expectations of a Federal Reserve rate cut next week.
Numbers showed the pace of US consumer price inflation picked up to 2.7% in November, from 2.6% in October.
"The report lacked surprises. This scenario has reinforced the perception that monetary policy could continue to normalize toward 2025, despite potential uncertainties linked to the new administration of Donald Trump, whose proposals, such as tariffs, could impact inflation dynamics," Pepperstone analyst Quasar Elizundia commented.
"Looking ahead, investors will turn their attention to the Fed meeting next week, seeking clues about the monetary policy path for 2025. While the possibility of further rate cuts remains high, Fed Chair Jay Powell has emphasized a relatively cautious approach."
Before the Fed decision next week, the ECB is expected to cut on Thursday afternoon.
Swissquote analyst Ipek Ozkardeskaya commented: "The ECB is expected to deliver another 25bp cut at today's meeting. Some have been expecting the ECB to do more than that. Since Donald Trump won the US presidential election, the increased risks on European economies due to tariff threats brought some investors and analysts to bet for a 50bp cut as an immediate reaction. Others, like me, think that the ECB would better deliver a cautious 25bp cut today AND shift its focus from inflation to growth, as doing so will open the way for a series of rate cuts instead of a jumbo cut that the zone doesn't need in a hurry."
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% at 8,315.42
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Hang Seng: up 1.3% at 20,424.48
Nikkei 225: up 1.2% at 39,849.14
S&P/ASX 200: down 0.3% at 8,330.30
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DJIA: closed down 99.27 points, 0.2%, at 44,148.56
S&P 500: closed up 0.8% at 6,084.19
Nasdaq Composite: closed up 1.8% at 20,034.90
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EUR: higher at USD1.0522 (USD1.0490)
GBP: higher at USD1.2777 (USD1.2746)
USD: lower at JPY152.44 (JPY152.49)
GOLD: higher at USD2,719.37 per ounce (USD2,716.47)
(Brent): higher at USD73.67 a barrel (USD73.05)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
13:15 GMT eurozone interest rate decision
11:00 GMT Ireland CPI
13:30 GMT US initial jobless claims
13:30 GMT US PPI
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Prime Minister Keir Starmer will meet European Council President Antonio Costa as he continues efforts to "reset" the UK's relationship with the EU. The prime minister's meeting with Costa comes just days after Chancellor Rachel Reeves joined European finance ministers in Brussels. Starmer and Costa are expected to meet in Downing Street on Thursday afternoon to discuss the prime minister's hopes for a closer relationship with the EU after the acrimony of the Brexit battles. Details of Costa's trip to London were published on the European Council's website. On Monday, Reeves told her eurozone counterparts she wanted to "rebuild those bonds of trust that have been fractured in the last few years under the previous government and to show our friends, neighbours and allies in the EU that we want a reset of those relationships". As well as the post-Brexit relationship, the talks between Starmer and Costa could cover wider global issues including the situation in Syria.
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UK house prices will register an increase next year, property portal Rightmove predicted, with London set for a bumper year of growth too amid a boost from rate cuts. Rightmove said 2025 is set to be a "buyers market" as the firm revealed five housing market predictions for next year. According to the FTSE 100-listed property portal, national average asking prices will rise by 4% in 2025 - the firm's largest price growth prediction since 2021 - with around 1.15 million transactions expected. However, with the average number of homes available per estate agent branch at its highest for 10 years, buyers are "often spoilt for choice", the firm added. This feeds into its expectation of strong competition remaining for sellers, which will likely contribute towards preventing higher price growth, with it noting that "2025 is set to be a buyers market". Rightmove also anticipates that next year will mark the start of a turning point for house prices in London, which it notes have been lagging, with asking prices in the capital up 12% compared with 21% in Great Britain as a whole compared with 5 years ago. It expects London price growth to either match or be marginally ahead of national price rises. Four base rate cuts in 2025 are expected to drive a decline in average mortgage rates to around 4.0% from the current five-year and two-year fixed rates of 4.83% and 5.08% respectively.
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House price growth in the UK has been gaining momentum but mortgage rates may curtail the recovery in housing market activity "before long", according to surveyors. A net balance of 25% of property professionals reported house prices rising in November, increasing from a balance of 16% observing a rise in October, the Royal Institution of Chartered Surveyors said. The findings mark the fourth consecutive month of rising prices. Professionals expect house prices to continue rising over the next three and 12 months, the report said. New buyer inquiries and new instructions to sell properties also increased in November, although the volume of sales being agreed remained broadly unchanged, Rics said. A net balance of 19% of professionals predict an increase in sales activity over the next three months. But market appraisals in November were on par with levels one year ago, which could signal a potential slowdown in the pipeline of new listings moving into 2025, the report added.
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BROKER RATING CHANGES
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UBS raises Diageo to 'buy' (sell) - price target 2,920 (2,300) - pence
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Barclays raises Pennon to 'overweight' (equal-weight) - price target 800 (690) - pence
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COMPANIES - FTSE 100
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London Stock Exchange Group said it has sealed a deal to sell its stake in Euroclear. LSEG will net EUR455 million from the sale of a 4.9% stake in the clearing and settlement services provider. The stake is being sold to TCorp, "the financial services partner to the New South Wales government".
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COMPANIES - FTSE 250
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Currys left its yearly guidance unchanged but the electricals retailer hit out at "unwelcome headwinds from UK government policy". Currys predicted that measures announced in the UK government budget are "likely to add around GBP32 million of annual cost to our business". "We will seek to mitigate as much of this as possible through cost saving measures including process improvement, automation, offshoring, outsourcing and other overhead efficiencies. Some price rises are also inevitable. We will further update on this in due course," it added. Currys said its trading performance "continues to strengthen, with profits and cashflow growing significantly". Its pretax loss in the half-year to October 26 narrowed to GBP10 million from GBP44 million. Revenue improved 1.3% to GBP3.92 billion from GBP3.87 billion a year prior. Chief Executive Alex Baldock said: "In the UK&I, we made big improvements to both Online and Stores channels, customers continued to take more of the solutions and services that are valuable to them and to us, and such growth drivers as B2B and iD Mobile performed well. All this showed in growing sales, market share, gross margins and profits. In the Nordics, we gained market share, increased gross margins, tightly controlled costs and grew profits in a still-tough consumer environment." Currys still expects to see growth in profit and free cash flow this year, with the firm leaving annual guidance unmoved. Baldock added: "This is despite new and unwelcome headwinds from UK government policy. These will add cost quickly and materially, depress investment and hiring, boost automation and offshoring, and make some price rises inevitable. Still, there's plenty we can control, including mitigating much of this headwind. We'll keep colleague engagement world class, customer satisfaction increasing, cashflow growing for shareholders, and playing an ever-bigger role in society. We have growing momentum at Currys."
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SThree warned tough market conditions are expected to continue in its new financial year, but the recruiting company announced a GBP20 million share buyback. SThree, focused on the science, technology, engineering and mathematics fields, said net fees declined 12% in the year to November 30 to GBP369.1 million from GBP418.8 million. At constant currency, net fees fell 9%. "As has been widely reported across our industry, the past year has been characterised by protracted challenging market conditions which have impacted new business activity," CEO Timo Lehne said. "It is our specialism in STEM and Contract, combined with careful cost management, that has delivered a resilient performance, with FY24 expected to be in line with market consensus." It puts market consensus for pretax profit at GBP67.4 million, which would represent a 13% fall from the GBP77.9 million achieved in financial 2023. Looking to the new year, it is making the "prudent assumption" that tough market conditions will persist, hurting net fees. It now expects pretax profit of GBP25 million for financial 2025, down more than 60% from what it expects for the year just gone. SThree announced it plans to launch a new buyback of GBP20 million to be completed over the next six months. "In light of SThree's cash generation and strong balance sheet, the board considers it prudent to launch the buyback, in line with its stated capital allocation policy," SThree added.
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Drinks company C&C Group said it has named the former boss of Irn-Bru maker AG Barr as its new chief executive, with effect next month. Roger White joins C&C as CEO from January 20. Ralph Findlay will return to his position of non-executive chair "following a short period of transition" after White joins. Back in June, C&C said Patrick McMahon would step down as chief executive, to take responsibility for accounting errors made during his tenure as chief financial officer. The company, behind brands including Bulmers, noted White was CEO of AG Barr from 2002 until May 2024.
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Auction Technology Group shareholder TA Associates will sell its entire stake in the company. Through various sub-funds, TA will sell 15.3 million shares in the auction market operator at GBP5.50 each, netting some GBP84.4 million. The shares represent all of TA's near-13% holding in Auction Techhnology. Auction Technology will receive no proceeds from the sale. In addition, TA representative Non-Executive Director Morgan Seigler will step down from the Auction Technology board following the sale. Seigler, co-head of TA's EMEA Technology board, joined the Auction Tech board when the company was acquired by TA in 2019. The sale is expected to take place next week Friday. TA had sold a 5% stake in Auction Technology back in June, netting some GBP32 million.
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OTHER COMPANIES
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Gas, oil and renewable energy projects firm Parkmead Group will sell its UK offshore oil licences and Dutch onshore gas licences to Serica Energy for up to GBP134 million. North Sea-focused oil and gas firm Serica will pay an initial GBP5 million, with a further GBP9 million in deferred payments to be paid in stages over the next three years. In addition, there will be contingent payments related to development milestones relating to the the Skerryvore prospect and the Fynn Beauly oil discovery. Including the initial payment, the deferred sum and the contingent considerations, the deal could be worth GBP134 million in total. Parkmead is selling its subsidiary Parkmead (E&P), which houses its UK offshore oil licences together with Netherlands onshore gas licences. Parkmead (E&P) includes a 50% working interest in Skerryvore and 50% of Fynn Beauly. Serica believes the deal "provides optionality regarding future projects, simplifies decision making, and provides strategic flexibility" in regard to its position in Skerryvore. It will be the operator of the asset with a 70% stake when the deal concludes. It had already owned a 20% interest.
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Parkmead Group will "continue to hold all its other energy assets". "These include its revenue generating portfolio of onshore gas fields in the Netherlands and, in the UK, its operated Kempstone Hill Wind Farm and its potential solar and wind energy development projects at Pitreadie," it added. The firm added: "Parkmead has been carefully considering the outlook for its UK North Sea oil licences, and the potential capital requirements needed were they to be progressed through appraisal and development. The offshore sector is facing continuing challenges in the form of the current political environment towards UK oil & gas, and the focus of the UK government on its net zero strategy. In this context, Parkmead believes that the opportunity to progress these UK North Sea oil licences would be best served within the portfolio of a larger, North Sea focused company, enabling Parkmead to apply its expertise and the company's resources on growing its Netherlands gas assets and its projects in renewable energies."
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By Eric Cunha, Alliance News news editor
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