16th Mar 2023 07:56
(Alliance News) - London's flagship index was called to open higher on Thursday after Wednesday's sharp sell-off, among the FTSE 100's worst-ever trading days, as it lost 3.8%.
Wednesday's drop, particularly of bank shares, was triggered by more worries about Credit Suisse in light of the collapse of Silicon Valley Bank.
Credit Suisse announced Thursday that it would borrow almost USD54 billion from the Swiss central bank to reinforce the group after a plunge in its share price.
In a statement, Credit Suisse said the central bank loan of up to CHF50 billion, or USD53.7 billion, would "support...core businesses and clients", adding it was also making buyback offers on about USD3 billion worth of debt.
Focus now turns to the European Central Bank.
"With yesterday's fresh stress on bank stocks, a 50 basis point hike from the ECB at today's monetary policy meeting is less than certain. Although the hotter-than-expected inflation data from France would've granted a 50bp hike, and a few more to come, the ECB may opt for a softer rate hike, or no rate hike at today's meeting, to let the dust settle before acting further. But maybe, the ECB will remain on course and hike by 50bp today," Swissquote analyst Ipek Ozkardeskaya commented.
"It's hard to tell. The visibility on monetary policies from the big central banks is heavily lessened by the banking stress and it's difficult to foresee how much weight the policymakers will give to the bank stress versus inflation. Today, the ECB has the difficult task to be the first major central bank to decide what to do amid the banking crisis. It's decision could change the expectations for other central banks."
In early UK corporate news, Rentokil posted an annual revenue rise, while Deliveroo hailed a profitable second half.
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 0.8% at 7,404.95
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Hang Seng: down 1.9% at 19,165.81
Nikkei 225: down 0.8% at 27,010.61
S&P/ASX 200: closed down 1.5% at 6,965.50
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DJIA: closed down 280.83 points, 0.9%, at 31,874.57
S&P 500: closed down 0.7%, at 3,891.93
Nasdaq Composite: closed up 0.1%, at 11,434.05
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EUR: up at USD1.0610 (USD1.0538)
GBP: up at USD1.2080 (USD1.2030)
USD: up at JPY132.94 (JPY132.43)
GOLD: down at USD1,914.72 per ounce (USD1,934.17)
(Brent): up at USD74.17 a barrel (USD72.03)
(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 EU interest rate announcement
11:00 GMT Ireland consumer price index
12:30 GMT US import and export price indexes
12:30 GMT US housing starts and building permits
12:30 GMT US unemployment insurance claims report
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UK train services will be crippled on Thursday because of a fresh strike by rail workers as the wave of industrial action continues to spread across the country. Teachers in England and university staff will also be on strike in a continuation of a walkout on Wednesday, when they took part in one of the single biggest days of action in a decade. Up to half a million teachers, lecturers, junior doctors, civil servants, London Underground drivers, BBC journalists and Amazon employees stopped work on budget day. Union officials at a rally in London attended by tens of thousands of strikers and supporters said the strike sent a strong message to the UK government over its handling of the disputes. The focus will switch to the railways again on Thursday when members of the Rail, Maritime & Transport union at 14 operators will strike in a long-running row over pay, jobs and conditions.
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UK Chancellor Jeremy Hunt has defended his budget plan to get people back to work amid accusations he is handing a massive GBP1 billion tax giveaway to the some of the wealthiest people in the country. The chancellor said the measures he set out in the Commons on Wednesday will have a "transformational" impact on the economy, easing labour shortages which have been holding back growth. They include a major expansion in the access to state-funded childcare intended to remove one of the key barriers preventing parents returning to the workplace – a move that was broadly welcomed. However, there was controversy over a tax break to discourage an estimated 15,000 high earners from leaving the workforce early, including the abolition of the GBP1.07 million lifetime pensions allowance. Labour said it was the "wrong priority" and they would seek to force a vote on it in the Commons next week.
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BROKER RATING CHANGES
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Credit Suisse cuts Prudential price target to 1,480 (1,540) pence - 'outperform'
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Berenberg raises 4imprint price target to 5,300 (4,800)
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Jefferies raises Restaurant Group price target to 50 (45) pence - 'buy'
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COMPANIES - FTSE 100
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Rentokil reported annual revenue growth, and the pest control and hygiene company lauded early progress in integrating its Terminix acquisition. Rentokil said revenue in 2022 jumped 26% to GBP3.71 billion from GBP2.96 billion. Pretax profit, however, fell 9.1% to GBP296 million from GBP325 million. It reported a 29% rise in operating expenses to GBP3.37 billion. "Our strong financial results, with organic revenue growth of 6.6%, demonstrate the resilience of our business model. We continue to successfully manage cost inflation, while driving investment in our services and people to sustain high levels of customer and colleague retention," Chief Executive Andy Ransom said. "All of this has been achieved alongside the landmark acquisition of Terminix, reinforcing Rentokil Initial as the largest pest control company in the world. Early progress on integration has been excellent. I am especially pleased with today's announcement of an increase in expectations for total cost synergies to at least USD200 million that evidences our strong conviction in the enlarged group's financial and strategic opportunities going forward." Looking to 2023, Rentokil expects its adjusted operating margin to expand to 16.5%, from 15.4% in 2022, which was its "highest for 20 years". The company lifted its final payout by 20% to 5.15 pence from 4.30p, raising its total dividend to 7.55p from 6.39p.
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COMPANIES - FTSE 250
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Centamin reported improved revenue and profit for 2022 and the Egyptian gold miner left production guidance for the new year unchanged. Centamin said revenue in 2022 rose 7.5% to USD788.4 million from USD733.3 million. Pretax profit grew 11% to USD171.0 million from USD153.6 million. "Centamin made great progress in 2022, a year in which we celebrated the Sukari gold mine producing its 5 millionth ounce underpinning the quality of the orebody which has 6 million ounces in mineral reserves remaining and identified further upside potential. We spent the past year successfully progressing our reinvestment plan and remain on track to consistently return Sukari to production levels towards 500,000 ounces per annum from 2024," CEO Martin Horgan said. For 2023, Centamin maintained its gold production guidance range at 450,000 to 480,000 ounces, which would at best be an 8.8% rise from 440,974 ounces in 2022. Centamin declared a 2.5 cents per share final dividend, halved from a year earlier. Its yearly payout amounted to 5 cents per share, down 44% from 9 cents.
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OTHER COMPANIES
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Deliveroo said it turned to profit by an adjusted measure in the second half of 2022, a year earlier than it guided. The takeaway delivery company said revenue in 2022 rose 14% to GBP1.97 billion from GBP1.74 billion. Its pretax loss narrowed to GBP230.6 million from GBP281.8 million. Deliveroo reported an adjusted loss before interest, tax, depreciation and amortisation of GBP70.5 million, narrowed from GBP131.4 million. However, it was adjusted Ebitda positive in the second half, an outcome that was "significantly ahead of expectations". Looking to 2023, it expects and adjusted Ebitda between GBP20 million and GBP50 million. "I'm proud of our performance in the past 12 months. Our team has delivered in difficult market conditions, with continued growth and share gains in our key markets. I'm particularly pleased that the company reached adjusted Ebitda profitability in the second half of last year. This is a significant step on our path to sustainable cash generation, and we achieved this milestone a year earlier than our guidance by executing our strategy successfully despite headwinds from the market environment," CEO Will Shu said. Shu added: "The macroeconomic outlook for the year ahead remains uncertain, but our record in the past 12 months makes me optimistic about our ability to adapt and continue to deliver on our plans to drive profitable growth."
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DFS Furniture hailed a "record market share position" but suffered a first-half earnings fall amid consumer confidence pressure. The furniture seller said revenue in the six months to December 25 slipped 2.2% to GBP544.5 million from GBP556.5 million a year earlier. Pretax profit dropped 70% year-on-year to GBP6.8 million from GBP22.8 million. It extended its market share to 38%, however, affirming itself as the "clear market leader". CEO Tim Stacey said: "The share gains have gone some way to alleviating the impact of the weaker market we have observed in 2022 overall. Those gains built throughout the period with the group delivering strong order intake growth in the second quarter. The order intake momentum has continued through the important winter sale period."
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Gym Group reported improved earnings for 2022 but said it has had an "uneven" start to the new year. Revenue for 2022 was 63% higher at GBP172.9 million from GBP106.0 million. Its pretax loss narrowed to GBP19.4 million from GBP44.2 million. "This time last year, we reflected on emerging from the pandemic and indicated that we hoped 2022 would see a return to a more normal trading environment. It is now clear that it will take a longer time to return to pre Covid-19 levels as a result of both the changes to customers' everyday lives and lifestyles and the macroeconomic headwinds that we are all facing," CEO John Treharne said.
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By Eric Cunha, Alliance News news editor
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