27th Jan 2025 07:47
(Alliance News) - London's FTSE 100 is called to open lower on Monday, ahead of a slew of interest rate decisions this week, and as investors continue to track any policy giveaways from the new Donald Trump US administration.
"In the week ahead, the European Central Bank, the Bank of Canada, and probably Sweden's Riksbank will cut interest rates by 25 bp. The Federal Reserve, on the other hand, is on hold," Bannockburn Global Forex analyst Marc Chandler commented.
"Meanwhile, the US PCE deflator may pose some headline risk, but the CPI and PPI have already generated the signal of a small gain in the headline and flat core reading."
A spat between the US and Colombia was in focus over the weekend.
Colombia on Sunday backed down and agreed to accept deported citizens sent on US military aircraft, hours after President Trump threatened painful tariffs to punish the defiance to his mass deportation plans.
Colombia's leftist president, Gustavo Petro, had earlier said he would only take back citizens "with dignity," such as on civilian planes, and had turned back two US military aircraft with repatriated Colombians.
Trump, less than a week back in office, responded furiously and threatened sanctions of 25% that would quickly scale up to 50% against Latin America's fourth largest economy.
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 8,470.55
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Hang Seng: up 0.5% at 20,167.42
Nikkei 225: down 0.9% at 39,565.80
Financial markets in Sydney closed for Australia Day
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DJIA: closed down 140.82 points, 0.3%, at 44,424.25
S&P 500: closed down 0.3% at 6,101.24
Nasdaq Composite: closed down 0.5% at 19,954.30
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EUR: lower at USD1.0469 (USD1.0510)
GBP: lower at USD1.2442 (USD1.2490)
USD: higher at JPY155.79 (JPY155.70)
GOLD: lower at USD2,750.24 per ounce (USD2,774.82)
(Brent): lower at USD77.17 a barrel (USD77.35)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
09:00 GMT Germany Ifo business climate
13:30 GMT US Chicago Fed national activity index
15:00 GMT US new home sales
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Keir Starmer and Donald Trump discussed the importance of "close and warm ties" between Britain and the US and agreed to meet "soon" in their first call since the inauguration, Downing Street said. The talks, which lasted 45 minutes, come hours after the US president heaped praise on the prime minister for having done what he described as "a very good job thus far." In a readout of the conversation, Number 10 said Trump had opened by sending his condolences to Starmer after the death of his brother Nick, who had cancer and died on Boxing Day. Starmer thanked him for his kind words and "congratulated him on his inauguration", Downing Street said. "The prime minister paid tribute to President Trump's role in securing the landmark ceasefire and hostages deal in Gaza. "The president welcomed the release of Emily Damari and sent his best wishes to her family. "They discussed the importance of working together for security in the Middle East." The call, which was characterised as "warm and personal" by government sources, comes amid concerns about the prospect of global tariffs and a changed US policy on Ukraine under the new administration. Downing Street said the two leaders also discussed trade and the economy, "with the prime minister setting out how we are deregulating to boost growth".
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Rachel Reeves has said the UK is "absolutely happy" to look at joining a tariff-free trading scheme with Europe after the EU left the door open to British membership. The UK chancellor indicated the government would consider the prospect of signing up to the Pan-Euro-Mediterranean Convention, PEM, as it would any "constructive ideas" consistent with its "red lines" about not returning to the EU.
Labour has ruled out rejoining the customs union or single market but committed to seeking closer economic co-operation with Brussels as part of a reset in UK-EU relations. EU Trade Commissioner Maros Sefcovic this week suggested Britain could join the PEM, which allows for tariff-free trade of goods across Europe, as well as some North African and Levantine nations. Speaking to Sunday broadcasters, Reeves said she was "happy to look" at the prospect of the UK joining the scheme with Europe. Asked if Britain would enter the PEM, the Chancellor told Sky News' Sunday Morning With Trevor Phillips: "It was really interesting to see Maros Sefcovic this week suggest the UK might be welcome in that pan-European and Mediterranean customs framework. "We are absolutely happy to look at these different proposals because we know that the deal that the previous government secured is not working well enough. "It's not working well enough for small businesses trying to export, it's not working well enough for larger businesses either.
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A persistent slowdown in activity among private sector firms could weigh on UK economic growth over the coming months, with businesses set to cut staff and raise prices, according to a survey. The upcoming increase to national insurance contributions has prompted firms to assess their budgets urgently, the Confederation of British Industry said. Output across the private sector is expected to drop over the next three months, having fallen over the previous three-month period, the survey found. Activity has been flat or falling since the middle of 2022, reflecting a prolonged period of stagnation. The CBI, a membership organisation which represents large chains through to small businesses, surveyed 990 firms between December and January. The survey suggested that sentiment among businesses dipped in the aftermath of the government's autumn budget. Some respondents highlighted that the tax rises had resulted in them reviewing their budgets at short notice and taking steps to mitigate higher costs. Plans include raising prices to pass on additional costs to clients, trimming investment plans and cutting staff to reduce business expenses.
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BROKER RATING CHANGES
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Exane BNP cuts JD Sports Fashion to 'neutral' (outperform)
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HSBC raises Legal & General to 'buy' - price target 265 pence
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COMPANIES - FTSE 100
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Diageo ruled out a sale of the Guinness brand and its stake in Moet Hennessy. "We have no intention to sell either," the brewer said, after noting press speculation. Bloomberg News on Friday reported that Diageo was mulling a sale of Guinness, as well as its 34% stake in Moet Hennessy, the drinks division of luxury firm LVMH Moet Hennessy Louis Vuitton.
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Pharmaceutical firm GSK said the European Medicines Agency has accepted for review an application for a shingles shot. If approved, a prefilled syringe of its Shingrix treatment "removes the need to reconstitute separate vials prior to administration". It offers a "convenient option for physicians, pharmacists and other healthcare professionals". "The current presentation of the vaccine consists of a lyophilised (powder) antigen and a liquid adjuvant, which healthcare professionals combine prior to administering. The new presentation has the same composition as the reconstituted vaccine and the submission is based on data demonstrating comparability between the two," GSK added.
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BHP has put its plan to take over rival Anglo American on ice, the Financial Times reported Saturday. Citing people close to Melbourne-based BHP, a takeover of London-based Anglo American would be too expensive following a rise in the share price of the latter. Three people close to the situation are said to have noted that following the share price increase, a fresh takeover bid would be too expensive in the near term. Anglo's share price has grown 39% over the past year on the London Stock Exchange, while BHP's share price has fallen 17% on the same exchange over the same time. Anglo launched a restructuring plan in 2024, after BHP's unsuccessful GBP38.6 billion bid. That included plans to dispose of its coal, platinum and diamond businesses. Under London takeover rules, BHP is allowed to renew its bid for Anglo in late November.
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COMPANIES - FTSE 250
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Dr Martens left its annual outlook unchanged after a third-quarter period that went as expected. The boot maker hailed progress it has made in "turning around" its trading in the US and it added that it is managing costs. Revenue in the 13 weeks to December 29 slipped 3% on-year to GBP260 million. The decline eased from the 16% slide suffered in each of the second and first quarters. "One of our key objectives this year is to return Americas direct-to-consumer revenue to positive growth in the second half. We are on track, with Americas DTC revenue up 4% constant currency," Dr Martens added. The firm left guidance unchanged, as it did in a July trading statement and its November half-year results. Back in its May annual results, it predicted a double-digit percentage decline in US wholesale revenue for the current financial year, as well as new own store openings of 25 to 30. One of its "key targets" for the current year was for "positive US DTC growth in the second half".
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Johnson Matthey said it will no longer commit growth capital expenditure in its Hydrogen Technologies and announced a board committee on investment and capital allocation plans as the speciality chemicals firm set out "strategic objectives". The update follows shareholder Standard Investments last month calling for "decisive action" at the FTSE 250 listing. "Johnson Matthey is built upon strong and longstanding foundations including world-class technologies, cutting edge R&D and exceptionally talented people. These capabilities have delivered leading market positions, unique competitive advantages and a clear ability to win across all the businesses which the group operates," Johnson Matthey said. "Alongside the continued transformation of Johnson Matthey, the board is resolute in its focus on driving a step change in cash generation and higher returns on capital." Rising cash conversion levels are to "deliver attractive returns to shareholders", if metal prices stay stable, it added. The firm said it plans "no further growth capex" in the Hydrogen Technologies arm. "Capex in this business will be reduced to maintenance levels of no more than GBP5 million per annum from FY2025/26. This business remains on track to achieve operating profit break-even by the end of FY2025/26. In addition, the group is pursuing options to further de-risk this business," Johnson Matthey said. Standard Investments, which has an 11% stake in Johnson Matthey, had said the firm should "explore all opportunities to minimize further required investment in Hydrogen Technologies". Johnson Matthey said it has established an board committee which "will reinforce the company's investment strategies and capital allocation". "The board recognises the need for the company to remain agile in uncertain markets and adapt its investment strategy and capital allocation as needed, alongside identifying initiatives to accelerate and deliver cash generation and enhanced returns on capital," it added. In addition, the company is to review executive remuneration programmes "to increase the weighting on cash generation targets". Johnson Matthey said it is in the final stages of appointing a new chief financial officer. It is a position currently held by Stephen Oxley, though he is to join chemicals firm Croda International no later than the start of April.
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WH Smith is in talks to sell its high street arm. The Swindon, England-based retailer's high street operation is made up of about 500 stores, the first of which was opened 230 years ago. "WH Smith confirms that it is exploring potential strategic options for this profitable and cash generative part of the group, including a possible sale," a statement said. Over the past decade, the firm has focused on its more fruitful, travel retail business which operates from airports, train stations and hospitals. The high street business now accounts for only about 15% of annual group trading profit. "Over the past decade, WH Smith has become a focused global travel retailer," the statement continued. "The group's travel business has over 1,200 stores across 32 countries, and three-quarters of the group's revenue and 85% of its trading profit comes from the travel business. "There can be no certainty that any agreement will be reached, and further updates will be provided as and when appropriate."
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OTHER COMPANIES
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Good Energy Group said it has accepted a GBP99.4 million takeover from suitor Esyasoft, which sweetended its bid after an approach in October. The Chippenham, England-based renewable electricity supplier and energy services provider will be acquired by energy transition Esyasoft at 490 pence per share. It gives values Good Energy's issued and to be issued share capital at GBP99.4 million, and implies an enterprise value of GBP67.8 million. In October, it had made an approach at 412p per share. Good Energy said that tilt "was not a fair reflection of the future growth opportunities of the company". Esyasoft's new bid has recevied the backing of 30% of Good Energy's shareholders. "The Good Energy board believes the cash offer from Esyasoft would provide Good Energy shareholders with an immediate realisation of this future value potential in cash at an attractive premium," Good Energy added. The offer is a 66% premium to Good Energy's undisturbed share price of 295p before Esyasoft's approach in October.
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PensionBee Group said its assets under management have topped GBP6 billion for the first time. The online pension provider said the milestone "demonstrates the successful continued execution of the company's strategy". Chief Executive Officer Romi Savova said: "Reaching over GBP6 billion of Assets under Administration marks another step in our journey of creating a global leader in the consumer retirement market, helping our customers in the UK and the US to build pension confidence and enjoy a happy retirement. This success showcases our ability to consistently execute our company strategy. A combination of our commitment to delivering exceptional customer service, our scalable technology platform, and innovative products designed to meet the evolving needs of our customers, have driven robust customer retention and strong net inflows from new and existing customers."
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Construction and engineering firm Costain Group expects annual profit in line with market expectations. The firm said it finished 2024 "strongly", hailing pact awards in the water and rail sectors. Its "high-quality forward work position" stood at GBP5.4 billion at the conclusion of last year, up from GBP3.9 billion 12 months prior. "This, together with growth on existing frameworks and attractive levels of bidding activity, gives the group increasing confidence in its ability to deliver further growth in operating profits and margins," Costain said. It puts market expectations for 2024 adjusted operating profit between GBP41.9 million and GBP43.3 million. At best, this would represent an 8.0% rise from GBP40.1 million in 2023.
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Ryanair Holdings said its revenue grew in the third-quarter, while profit soared, helped by a strong close in festive period bookings. The Dublin-based budget airline said pretax profit jumped in the quarter to the end of December, to EUR143.7 million from EUR2.7 million year-on-year. Total operating revenue rose by 9.7% to EUR2.96 billion from EUR2.70 billion in the prior year. Net finance and other income of EUR90.2 million, rising from EUR15.8 million, helped boost its bottom line. Looking ahead, it expects annual traffic to reach almost 200 million passengers. "While Q3 fares were marginally stronger than the prior year, this year’s Q4 will not benefit from last year's early Easter," it added. This which makes for a "very challenging" fourth-quarter comparative. It is "cautiously" guiding for annual net profit in the range of EUR1.55 billion to EUR1.61 billion.
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By Eric Cunha, Alliance News news editor
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