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LONDON BRIEFING: FTSE 100 to open higher; BP swings to profit

1st Nov 2022 07:56

(Alliance News) - Stocks in London are set to open in the green on Tuesday, as the US Federal Reserve policy meeting gets underway.

In early corporate news, BP swung to a replacement cost profit in the third quarter, while AstraZeneca won full marketing authorisation in the EU for its Covid vaccine.

Global markets were keenly anticipating the next move from the US central bank, as its two-day meeting of the Federal Open Market Committee starts on Tuesday.

While a 75 basis hike point is widely expected to be announced on Wednesday, analysts will be watching closely for any hints as to the central bank's thinking about future rate hikes.

"So, we are at that point, where, after this week's 4th consecutive 75bp rate hike, the Fed could hint at a 50bp hike in December. Then, the season finale would come with a couple of 25bp hikes in the first quarter of 2023, then a pause," said Swissquote Bank's Ipek Ozkardeskaya.

"But there is a risk in there. The risk is, because investors are waiting in ambush for the Fed to soften its tone, any sign of a less hawkish Fed could send both the bond and equity markets rallying. And that's exactly what the Fed doesn't want to happen. A broadly cheerful market rally would boost inflation expectations, and inflation. And inflation is nowhere close to the Fed's 2% policy target," Ozkardeskaya continued.

To follow on Thursday will be the interest rate decision by the Bank of England.

"The return to fiscal discipline under the new UK prime minister, Rishi Sunak, and chancellor, Jeremy Hunt, has reduced the pressure on the Bank of England to 'go big' at its upcoming meeting on Thursday," said Berenberg's Kallum Pickering.

According to Pickering, the market is now expecting a 75 basis point hike in both November and December, with rates to reach 4.9% by the third quarter of 2023.

Here is what you need to know ahead of the London market open:

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MARKETS

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FTSE 100: called up 54.7 points, 0.8%, at 7,149.23

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Hang Seng: up 5.1% at 15,433.08

Nikkei 225: closed up 0.3% at 27,678.92

S&P/ASX 200: closed up 1.7% at 6,976.90

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DJIA: closed down 128.85 points, 0.4%, at 32,732.95

S&P 500: closed down 0.8% at 3,871.98

Nasdaq Composite: closed down 1.0% at 10,988.15

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EUR: up at USD0.9933 (USD0.9885)

GBP: up at USD1.1545 (USD1.1500)

USD: down at JPY147.86 (JPY148.61)

GOLD: up at USD1,644.66 per ounce (USD1,638.60)

OIL (Brent): up at USD94.14 a barrel (USD92.24)

(changes since previous London equities close)

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ECONOMICS

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Tuesday's key economic events still to come:

09:30 GMT UK manufacturing PMI

08:55 EDT US Johnson Redbook retail sales index

09:45 EDT US manufacturing PMI

10:00 EDT US job openings and labor turnover survey

16:30 EDT US API weekly statistical bulletin

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Nationwide said UK annual house price growth slowed to 7.2% in October from 9.5% in September. Prices fell 0.9% on a seasonally-adjusted monthly basis, which was the first monthly decline since July of 2021. "The market has undoubtedly been impacted by the turmoil following the mini-budget, which led to a sharp rise in market interest rates. Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation," said Robert Gardner, Nationwide chief economist. The average UK house price stands at GBP268,282 in October, compared to GBP272,259 in September. The housing market is predicted to slow in the quarters to come, but Gardner notes that longer-term borrowing costs have fallen back in recent weeks "and may moderate further if investor sentiment continues to recover".

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Irish factory activity continued to expand in October, though at a marginally slower pace than in September, according to a survey. The S&P Global manufacturing purchasing managers' index registered 51.44 points last month, down from 51.5 the month before, though still above the neutral mark of 50 points.

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Japan's manufacturing sector remained in growth territory last month, but output and new order wins weakened on softer demand, figures showed. The latest au Jibun Bank Japan manufacturing PMI slowed mildly to 50.7 points in October, from 50.8 in September. Though still above the 50.0 no change mark, the figure suggests growth has slowed. The bank noted that October's value was the lowest in 21 months. "The latest survey data signalled that Japan's manufacturing sector lost further momentum in October. Sluggish markets and weaker demand conditions, on both a domestic and international level, became a recurring trend throughout the report and were seemingly the driving forces behind the slower sector performance," said Laura Denman, economist at S&P Global Market Intelligence.

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BROKER RATING CHANGES

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Berenberg reinitiates Next Fifteen Communications with 'buy' - price target 1,450 pence

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Barclays reinitiates Capricorn Energy with 'equal weight' - price target 242 pence

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Barclays starts Auction Technology Group with 'overweight' - price target 1,040 pence

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COMPANIES - FTSE 100

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Oil major BP continued "performing while transforming" in the third quarter of the year. It recorded USD57.81 billion in revenue during the quarter, up from USD37.87 billion a year prior. It swung to a pretax profit of USD1.98 billion from a loss of USD495 million a year before. BP also swung to a replacement cost profit of USD23 million from a loss of USD2.93 billion a year before. Underlying RC profit rose to USD8.15 billion from USD3.32 billion. BP announced a dividend of 6.006 cents per share to be paid in December. It expects oil prices to remain elevated in the fourth quarter, due to OPEC+ cutting supply, however it expects global gas prices to be more volatile. "BP expects industry refining margins to remain elevated in the fourth quarter due to sanctioning of Russian crude and product and energy prices are also expected to remain high," the company said. Upstream production in the fourth quarter is likely to be slightly lower than in the third quarter, BP guided.

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Rentokil said it was seeing "good momentum" in the third quarter, as group ongoing revenue - excluding disinfection services - rose 12%. It said it has successfully managed inflationary pressures via pricing and cost control actions, and maintains its outlook for the underlying business for the full year. "We continue to deliver both good growth and profitability, while retaining high levels of customer and colleague retention...Our cost synergy programme is progressing well with c.USD20-USD25 million of annualised synergies expected to be realised by year end," said Chief Executive Andy Ransom.

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AstraZeneca's Covid vaccine Vaxzevria won full marketing authorisation in EU. "As there continues to be sufficient evidence of safety and efficacy confirming the benefits of Vaxzevria, the European Medicines Agency has now granted a full marketing authorisation. This decision follows positive recommendation for a full MA by the Committee for Medicinal Products for Human Use of the EMA," it said.

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COMPANIES - FTSE 250

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Capital & Counties said it signed 35 new leases and renewals in the period from June 30 to October 31, which brought in GBP3.0 million in contracted income, signed at 6.2% ahead of the estimated rental value at the end of June. It noted strong demand ahead of estimated rental value across all uses and has a further GBP2.0 million of rent under offer or negotiation. "Trading performance at Covent Garden remains resilient with positive operational indicators on footfall and sales," Capco said. It confirmed it expects the merger with Shaftesbury to become effective in the first quarter of next year.

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OTHER COMPANIES

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Shaftesbury reported "good" leasing activity across all uses. In the six months to September 30, it tied up commercial lettings, renewals and rent reviews for a total rental value of GBP15.8 million, and residential lettings which totalled GBP6.2 million. "The West End has enjoyed its first summer of trading unaffected by Covid restrictions since 2019, with strong domestic footfall and a rebound in international visitor numbers, which have continued into the first weeks of autumn. Our occupiers continue to report trading revenues, on average, above 2019 levels," said Chief Executive Brian Bickell.

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By Elizabeth Winter; [email protected]

Copyright 2022 Alliance News Limited. All Rights Reserved.

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