29th Jan 2025 07:49
(Alliance News) - London's FTSE 100 is set open slightly lower on Wednesday morning, ahead of a Federal Reserve interest rate decision and major tech earnings across the Atlantic.
The rest of the week also features a slew of earnings in Europe, from oil majors to banking stocks, as well as a European Central Bank rate decision.
"Now, participants brace for a bumper 48 hours ahead," Pepperstone analyst Michael Brown commented.
"Naturally, today, attention will fall firstly on this evening's FOMC decision, Powell & Co's first of the year, where policymakers will likely vote unanimously in favour of holding the target range for the fed funds rate steady, at 4.25% - 4.50%."
Away from the Fed, major US tech stocks will take centre stage. Meta Platforms, Microsoft and Tesla report annual earnings on Wednesday.
Over in Paris, shares in LVMH will be in focus on Wednesday. After the closing bell on Tuesday, the Paris-based luxury goods firm reported net income of EUR12.6 billion, down 17% from EUR15.2 billion a year prior, as revenue fell 1.7% to EUR84.7 billion from EUR86.2 billion.
The wider CAC 40 in Paris is called down 0.3%. The DAX 40 in Frankfurt is to open 0.2% higher.
In early UK corporate news, water firms United Utilities and Pennon accepted Ofwat's final determinations for the new pricing period. Pennon also announced a GBP490 million fundraise. Dowlais agreed to a near GBP1.2 billion buyout, less than two years after its spin-off from Melrose.
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 0.1% at 8,523.47
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Hang Seng: financial markets in Hong Kong closed for Chinese New Year
Nikkei 225: up 1.0% at 39,414.78
S&P/ASX 200: up 0.6% at 8,447.00
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DJIA: closed up 136.77 points, 0.3%, at 44,850.35
S&P 500: closed up 0.9% at 6,067.70
Nasdaq Composite: closed up 2.0% at 19,733.59
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EUR: lower at USD1.0421 (USD1.0424)
GBP: higher at USD1.2450 (USD1.2432)
USD: lower at JPY155.36 (JPY155.63)
GOLD: higher at USD2,757.71 per ounce (USD2,755.79)
(Brent): lower at USD76.58 a barrel (USD77.21)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
14:45 GMT Canada interest rate decision
13:30 GMT US trade balance
13:30 GMT US wholesale inventories
19:00 GMT US interest rate decision
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Keir Starmer has vowed to "clear out the regulatory weeds" to encourage growth, as Rachel Reeves will say that Britain has been "held back" and "accepted stagnation" in a major economic speech. The UK prime minister invoked his New Labour predecessors and Margaret Thatcher, and said that for "too long regulation has stopped Britain building its future". It comes as the chancellor is due to set out policies on Wednesday to encourage economic growth, and hail the region around Oxford and Cambridge as having "the potential to be Europe's Silicon Valley". Writing in The Times, Starmer criticised the "morass of regulation that effectively bans billions of pounds" of investment, describing "thickets of red tape" that have "spread through the British economy like Japanese knotweed". He said ministers will "kick down the barriers to building, clear out the regulatory weeds and allow a new era of British growth to bloom". The prime minister later added: "A change in the economic weather can only ever come from a supply-side expansion of the nation's productive power. "In the 1980s, the Thatcher government deregulated finance capital. In the New Labour era, globalisation increased the opportunities for trade. This is our equivalent."
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Reeves will pledge to "fight" for "growth" and say that Britain "can do so much better" . The chancellor will say that Britain has "fundamental strengths" but has been "held back" and accepted "stagnation" in her address in Oxfordshire on Wednesday. Reeves' speech in Oxfordshire on Wednesday is expected to lay out plans for projects around the Oxford and Cambridge region, as well as confirm support for the expansion of Heathrow Airport and reiterate the government's backing for the redevelopment of Old Trafford. During her speech, the chancellor is expected to describe Britain as a country of "huge potential" but also to say that "for too long, that potential has been held back". "Low growth is not our destiny. But growth will not come without a fight. Without a government that is on the side of working people. Willing to take the right decisions now to change our country's course for the better," she is to say. It is also expected the chancellor will touch on the Environment Agency having dropped its objections to a new development near Cambridge that could see 4,500 new homes being built.
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BROKER RATING CHANGES
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Berenberg starts Serco Group with 'buy' - price target 200 pence
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Berenberg starts Mitie Group with 'buy' - price target 160 pence
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COMPANIES - FTSE 100
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United Utilities backed annual guidance and said it will push on with a "historic GBP13 billion investment" after accepting a regulatory price review. United Utilities, which last month said it would "take time" to review the final determination by watchdog Ofwat, said it has "accepted" the scheme which covers the five years to March 2030. "With the final determination agreed, we are now able to progress what will be the largest investment in water and wastewater infrastructure in over 100 years, to build a stronger, greener and healthier north west," Chief Executive Officer Louise Beardmore said. "This historic GBP13 billion investment will support 30,000 jobs across the North West, bringing focused investment in skills and opportunities, supporting economic growth in our region." United Utilities, which provides water and wastewater services in the north west of England, "can move forward and deliver the step change in performance we all want to see", the CEO added. United Utilities said it will continue to lift its dividend in line with the consumer prices index, including owner occupiers' housing costs, rate. The firm said it "continued to deliver a strong operating performance" in the third quarter of its financial year. "We maintain our FY25 financial guidance and remain on track to deliver net [outcome delivery incentives] rewards higher than last year's GBP34.5 million," it added. The firm's financial year ends on March 31.
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Anglo American has completed the sale of its minority interest in Jellinbah Group to Zashvin earlier than expected. Jellinbah is a joint venture that owns a 70% interest in the Jellinbah East and Lake Vermont steelmaking coal mines in Australia. Under the terms of the transaction, Anglo American has received AUD1.4 billion in addition to the AUD228 million already received for its 33.3% stake in Jellinbah. Total cash proceeds amount to AUD1.6 billion, or about USD1.0 billion. Anglo American first announced the Jellinbah deal early in November last year. The transaction was originally expected to conclude in the second quarter of 2025. The Jellinbah sale wraps up the disposal of Anglo American's steelmaking coal business, which forms part of its new strategy to divest some assets, including Anglo American Platinum Ltd and De Beers.
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COMPANIES - FTSE 250
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Automotive engineering firm Dowlais has agreed to a GBP1.16 billion takeover by American Axle & Manufacturing, a producer of driveline products and systems. The cash and share offer by the New York-listed is to create a "larger, diversified global manufacturer well-positioned for long-term profitable growth". Dowlais shareholders stand to receive 0.0863 of a new AAM share, as well as 42 pence in cash and up to 2.8p in the form of a Dowlais final dividend. The terms of the deal imply an 85.2p value per Dowlais share, based on AAM's closing price of USD5.82 on Tuesday. The offer price is a 25% premium to the Dowlais Tuesday closing price. Dowlais has a market capitalisation of GBP919.6 million. The deal gives the firm a GBP1.16 billion value on a fully diluted basis. AAM is worth USD684.3 million. "AAM and Dowlais are leading global tier-one automotive suppliers specialising in driveline and metal forming technologies for internal combustion, electric and hybrid vehicles. The combination of AAM and Dowlais will create a leading global manufacturer with the scale, product portfolio, technology and global diversification required to lead and innovate in a transitioning business environment," a statement on Wednesday said. Dowlais was spun out of Melrose Industries in April 2023. Dowlais includes the GKN Automotive and the GKN Powder Metallurgy businesses. Dowlais said it has cancelled a previously announced GBP50 million share buyback programme with immediate effect after agreeing the AAM deal.
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Pennon Group said it has accepted Ofwat's final determination for South West Water and Sutton & East Surrey water units. The water utility said it will "not be seeking a reference to the Competition & Markets Authority". "The final determinations support a significant uplift in investment over the K8 period to 2030," it said. Capital expenditure is to increase to a record GBP3.2 billion, from an expected GBP1.9 billion for K7, the 2020-2025 period. "The investment will be across a range of transformational projects that are focused on areas like tackling the use of storm overflows, bolstering water resources through a new reservoir in the South West, and expanding our programme of nature recovery," Pennon added. Pennon said it is launching a GBP490 million rights issue, to aid its "balance sheet resilience". The funds will go towards "increased investment in the water businesses". It proposed a rights issue of 185.9 million new shares at 264p each, on the basis of 13 new share for every 20 existing shares. Pennon said it has revised its dividend policy. The total dividend amount of GBP129.3 million for the year which ended last March will be "rebased on a dividend per share basis". The rebased payout will grow by the CPIH rate of inflation from the current financial year.
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Retailer WH Smith said it made a "good start" to its financial year, hailing trading in its core Travel business. Revenue in the 21 weeks to January 25 rose 3% on-year, with 7% growth in Travel offset by a 6% decline in the High Street offering. Ahead of an annual general meeting on Wednesday, Chief Executive Carl Cowling said: "The group has had a good start to the financial year, and we continue to see strong momentum across our core Travel business. Our UK Travel business has delivered another excellent performance across all channels, as we continue to make good progress with the rollout of our one-stop-shop for travel essentials format. In North America, we have seen a notable shift in like-for-like revenue growth, up 3%, as a result of the actions we have taken to enhance our ranges and introduce new categories. We are also delighted to announce that we have won 8 stores at Orlando airport, further to our announcement in November and, more recently, a further 4 stores at Portland airport." WH Smith over the weekend said it is "exploring potential strategic options" for the High Street unit, including a possible sale. WH Smith announces half-year results on April 16.
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OTHER COMPANIES
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IT-focused professional services provider FDM Group said it expects market conditions to remain uncertain this year, and warned its 2025 earnings may be "below its previous expectations". FDM said it "delivered a resilient performance in 2024" amid tough market conditions. It expects to report revenue for 2024 fell 23% to GBP258 million from GBP334 million. "We anticipate that market conditions will remain uncertain during 2025, and it is difficult to predict when they might demonstrate signs of a sustained improvement. While we continue to see encouraging levels of engagement with clients, it is unclear how soon clients' hiring budgets will be released to enable a recovery in our major end markets. Consequently, the board will continue to take the appropriate measures to adjust recruitment, training, and staffing levels to align with market conditions and seek to optimise the performance of the group for all of our stakeholders," CEO Rod Flavell said. "We opened 2025 with a lower level of consultants deployed than we had previously anticipated and this, taken with current market conditions, leads the board to anticipate that the 2025 full year financial performance may be below its previous expectations."
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By Eric Cunha, Alliance News news editor
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