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LONDON BRIEFING: Diploma upgrades annual guidance amid good momentum

13th May 2024 07:48

(Alliance News) - Stocks in London are expected to pull back slightly at Monday's market open, after the FTSE 100 notched a new record high last week.

The main focal point for investors this week will be Wednesday's US inflation figures, which will likely inform market expectations of potential US interest rate cuts.

According to FXStreet-cited consensus, consumer prices are expected to have risen 3.4% annually in April, cooling slightly from 3.5% in March.

"If that's the case, investors could breathe a sigh of relief and enjoy the dovish news from other central banks. We would then see the euro and sterling extend gains against the dollar, the yields ease and stock markets surf on a fresh wave of optimism. But if the numbers surprise to the upside for the fourth straight month, it will be hard to keep the Fed hawks contained," commented Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Meanwhile, the prospect of a new wave of US tariffs on Chinese goods could hit sentiment in global markets this week. According to the Wall Street Journal on Friday, the US is planning to increase tariffs on Chinese clean energy goods, with levies on electric vehicles expected to roughly quadruple. A decision is expected to be announced on Tuesday.

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 13.5 points, 0.2%, at 8,420.26

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Hang Seng: up 0.4% at 19,047.30

Nikkei 225: closed down 0.1% at 38,179.46

S&P/ASX 200: closed marginally higher at 7,750.00

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DJIA: closed up 125.08 points, 0.3%, at 39,512.84.

S&P 500: closed up 0.2% at 5,222.68

Nasdaq Composite: closed marginally lower at 16,340.87

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EUR: up slightly at USD1.0773 (USD1.0769)

GBP: up at USD1.2529 (USD1.2513)

USD: down slightly at JPY155.80 (JPY155.87)

Gold: down at USD2,352.06 per ounce (USD2,362.94)

Oil (Brent): down at USD82.46 a barrel (USD83.66)

(changes since previous London equities close)

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ECONOMICS

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Monday's key economic events still to come:

14:45 CEST Germany current account

09:00 EDT US Federal Reserve Vice Chair Philip Jefferson speaks

09:00 EDT US Cleveland Fed President Loretta Mester speaks

11:00 EDT US consumer inflation expectations

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Workers in the UK are increasingly staying in their current jobs and more employers are holding steady on staffing levels as the labour market slows, new research suggests. A survey of more than 2,000 employers found that just over half were looking to maintain their current staffing, the highest level since winter 2016/17. The Chartered Institute of Personnel & Development said official data pointed to lower staff attrition in 2024 and trends returning to pre-pandemic levels. The CIPD called on employers to focus on upskilling opportunities to retain and develop their existing workforce.

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Halting arms exports to Israel is "not a wise path", the UK Foreign Secretary David Cameron has argued, as he said it would be wrong for Israel to launch a full-scale invasion of Rafah "without a plan to protect people". Israel has urged residents in more areas of Gaza's southern-most city to evacuate in a further sign its military is preparing for a ground incursion. The US has threatened to halt the supply of offensive weapons to Israel if it carries out an attack on Rafah Asked whether Britain would follow in America's footsteps, Cameron argued the two nations are "in a totally different situation".

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Rishi Sunak will portray himself as the best leader to take the UK through "some of the most dangerous yet most transformational" years ever, in a pre-election pitch to voters. The prime minister will say he has "bold ideas" that can "create a more secure future" for Britons and restore their "confidence and pride in our country". In a speech in central London on Monday, he will say voters face a stark choice in whom they choose to govern the nation at a time of unprecedented global volatility and technological advancements. He will on Monday tout his leadership in areas such as security, as he seeks to draw a dividing line with Labour over defence spending following his commitment to hike it to 2.5% of gross domestic product by 2030.

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UK Foreign Secretary Cameron said it would be "absolutely right" for the general election to be held in the second half of the year, while denying he was after Rishi Sunak's job. The foreign secretary argued voters should be given more time to see "the plan is working". Pressed on what advice he would give the prime minister in the wake of the Tories' mauling in local and regional contests, the Tory peer told Sky News's Sunday Morning With Trevor Phillips programme: "I'd say to him 'stick to the plan'. I think the prime minister is a good man doing a great job at a difficult time."

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BROKER RATING CHANGES

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Citigroup cuts Mondi to 'neutral' - price target 1,700 pence

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HSBC starts Johnson Service Group with 'buy' - price target 210 pence

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COMPANIES - FTSE 100

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Diploma upgraded its annual guidance as it reported a strong set of half-year results. The specialised technical products and services provider said revenue grew 10% annually to GBP638.3 million in the six months to March 31, from GBP582.8 million a year before. Pretax profit edged lower to GBP77.8 million from GBP78.7 million. Diploma declared an interim dividend of 17.3 pence, up around 5% from 16.5p a year before. For its full financial year, Diploma now expects constant currency revenue growth of 16% or so, with 6% organic growth and 10% to come from acquisitions. It also expects its operating margin to improve to 20.5%, having previously guided for it to be in line with financial 2023 at 19.7%. "We've delivered another strong first half with good volume-led organic growth in a more challenging market environment. Our momentum is encouraging going into the second half, underpinning our upgrade to full year guidance," said Chief Executive Johnny Thomson.

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COMPANIES - FTSE 250

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Victrex reported a weaker performance in its interim period to March 31. The high-performance polymer supplier said revenue fell 14% year-on-year to GBP139.3 million from GBP162.2 million, as sales volumes dropped 11% to 1,737 tonnes. Pretax profit plunged 92% to GBP3.3 million from GBP39.1 million, as margins took a hit from high inventory levels and recent industry destocking amongst medical device customers, and lower asset utilisation. "Although the first half remained soft for Victrex - in line with our guidance - and the wider Chemical sector, we saw tangible signs of improvement in some end markets during Q2. Q2 Group volumes were broadly flat compared to the prior year and up 31% vs Q1," said Chief Executive Jakob Sigurdsson. Dividends per share remained unchanged at 13.42p. For the whole year, current run-rates support low-to-mid single digit volume growth, Victrex said.

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OTHER COMPANIES

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Mission Group confirmed it received an unsolicited conditional takeover proposal from digital advertising and technology company from fellow AIM-listing Brave Bison Group. Mission said Brave Bison's potential offer was for an all-share offer at an exchange ratio of 11.5 Brave Bison shares for each share in Mission. Based on the closing market prices for each company's shares on April 29, the offer valued Mission shares at around 29 pence each. On Friday, Mission shares closed at 22.70p. Mission said its board unanimously rejected the possible offer last week, terming it "opportunistic" and as significantly undervaluing the company. Mission Group is a Devon, England-based owner of a group of digital marketing and communications agencies. Mission said it was "open to proposals" that would enhance shareholder value and deliver benefits to its shareholders. Meanwhile, Brave Bison confirmed it had approached Mission, with Executive Chair Oliver Green saying the combination of the companies "has the potential to deliver compelling value for both company's shareholders, clients and employees".

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By Elizabeth Winter, Alliance News senior correspondent

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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