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LONDON BRIEFING: GSK, Aston Martin back outlook; Next raises view

30th Oct 2024 07:50

(Alliance News) - Stocks in London are set to open in the red on Wednesday, ahead of the eagerly-anticipated UK government budget announcement and a batch of US data in the afternoon.

Asian stocks were mixed despite a report from Reuters that China is considering approving the issue of CNY10 trillion, around USD1.4 trillion, in extra debt in the next few years to fire up the economy.

Pepperstone analyst Michael Brown commented: "Chancellor Reeves delivers 'The Budget' this lunchtime, with a GBP40bln combination of tax hikes and spending cuts likely to fill a supposed GBP22bln "black hole" in the public finances, and to build greater fiscal headroom. Said tax hikes will likely leave salaried income untouched, with changes to capital gains tax, inheritance tax, fuel duty, and employer national insurance contributions among the rumoured measures.

"Meanwhile, Reeves is also set to change the debt measurement used to judge progress against the 'fiscal rules' to the catchily-named public sector net financial liabilities metric. This, should, free up around GBP50 billion in headroom for capital investment, though market participants will be seeking strong guardrails to prevent ballooning borrowing as a result of this change."

In early UK corporate news, retailer Next raised its profit outlook, as third-quarter sales impressed. Lender Standard Chartered beat on quarterly earnings and also lifted its outlook. Drugmaker GSK backed its yearly guidance, while Aston Martin also maintained its view, a month after the carmaker cut outlook.

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 0.6% at 8,173.11

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Hang Seng: down 1.6% at 20,379.90

Nikkei 225: up 1.0% at 39,277.39

S&P/ASX 200: down 0.8% at 8,180.40

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DJIA: closed down 154.52 points, 0.4%, at 42,233.05

S&P 500: closed up 0.2% to 5,832.92

Nasdaq Composite: closed up 0.8% at 18,712.75

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EUR: higher at USD1.0819 (USD1.0795)

GBP: higher at USD1.3006 (USD1.2991)

USD: lower at JPY153.26 (JPY153.56)

GOLD: higher at USD2,783.76 per ounce (USD2,765.34)

(Brent): lower at USD71.08 a barrel (USD71.11)

(changes since previous London equities close)

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ECONOMICS

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Wednesday's key economic events still to come:

10:00 GMT eurozone GDP

10:00 GMT eurozone consumer confidence

13:00 GMT Germany CPI

11:00 GMT Ireland CPI

12:30 GMT UK government budget

12:15 GMT US ADP unemployment

12:30 GMT US flash quarterly personal consumption expenditures

12:30 GMT US GDP

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The armed forces of the UK are in line for a GBP3 billion boost, according to reports, as Rachel Reeves prepares to unveil the Labour government's first budget. The chancellor is set to announce an increase in the defence budget for next year in her fiscal statement in the Commons on Wednesday, part of which will be used to give soldiers a pay rise backdated to April, the Telegraph reported. The funding will also be used to buy weapons, with the aim of replenishing stockpiles depleted by donations to Ukraine. A pathway to increasing defence spending to 2.5% of national economic output demanded by the Tories will not be in the budget. Reeves will make history as the UK's first female chancellor when she delivers Wednesday's budget. In her speech, she is expected to say the "prize on offer" is "immense", and she will lay out new funding to cut hospital waiting lists, pave the way for more affordable homes and rebuild crumbling schools. She will add: "More pounds in people's pockets. An NHS that is there when you need it. An economy that is growing, creating wealth and opportunity for all. Because that is the only way to improve living standards."

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BROKER RATING CHANGES

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Jefferies starts easyJet with 'buy' - price target 680 pence

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Jefferies starts IAG with 'buy' - price target 270 pence

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COMPANIES - FTSE 100

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GSK backed its yearly guidance, after "another quarter of sales and core operating profit growth". Its specialty medicines offering impressed, but the pharmaceutical firm's vaccines arm delivered a weaker quarter. Pretax profit in the third-quarter of 2024 slumped 96% to GBP64 million from GBP1.79 billion, its bottom line hit by a GBP1.8 billion charge in relation to a Zantac court settlement. Core pretax profit, however, advanced 1.1% to GBP2.64 billion from GBP2.62 billion. Revenue in the third-quarter of the year fell 1.7% to GBP8.01 billion from GBP8.15 billion. It rose 2% at constant currency, however. Chief Executive Officer Emma Walmsley said: "We have delivered another quarter of sales and core operating profit growth, and further good progress in R&D. Strong growth in specialty medicines helped to offset lower vaccine sales and reflected successful new product launches in oncology and HIV, as well as the resilience we have now built into GSK's portfolio and performance. Our pipeline continues to strengthen with 11 positive phase III trials reported so far this year and we are currently planning launches for 5 major new product approval opportunities next year." For the full-year, it still expects revenue growth between 7% to 9% and a core operating profit rise between 11% and 13%.

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Retailer Next said sales in its third-quarter tipped expectations, and it has lifted its outlook for the full-year. Full price sales in the third-quarter to October 26 rose 7.6% on-year, beating guidance of 5.0%. "We believe the strong performance was driven by the early arrival of colder weather this year, versus an unusually warm September and early October last year," the clothing and homewares seller explained. For the fourth-quarter, it now expects full price sales growth of 3.5%, its outlook lifted from 2.5%. Full-year pretax profit guidance has been upgraded to GBP1.01 billion from GBP995 million. The profit measures excludes items such as the cost of brand amortisation. The new guidance would represent a 9.5% rise on the year prior. Next added: "Total group sales for the full year are expected to be up 7.4% on last year, which is 2.5% higher than our expected growth in full price sales of 4.9%. The difference is the result of acquisitions completed during the last year. We acquired 97% of FatFace in October 2023 and increased our equity share in Reiss in September 2023 and June 2024; we now have a 74% shareholding in Reiss." It will report on Christmas trading on January 7.

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Standard Chartered said it delivered a strong performance in the third quarter. Pretax profit surged to USD1.72 billion from USD633 million a year prior. Operating income rose 9.4% to USD4.95 billion from USD4.52 billion. Pretax profit beat consensus of USD1.49 billion. Underlying pretax profit rose 37% to USD1.81 billion, while underlying operating income climbed 11% to USD4.90 billion. The lender upped guidance. It now predicts operating income growth of 10% this year at constant currency. It had previously predicted a rise of 7%. It also raised its shareholder distribution target for the 2024 to 2026 period. "We are increasing both our 2026 [return on tangible equity] target from 12% to approaching 13%, and our shareholder distribution target from at least USD5 billion to at least USD8 billion from 2024 to 2026," Chief Executive Bill Winters said.

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COMPANIES - FTSE 250

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Aston Martin said it performed in line with expectations in the third-quarter, leaving it on track for yearly guidance. The sports car maker said revenue in the third-quarter was up 8.1% to GBP391.6 million from GBP362.1 million. Its pretax loss slimmed to GBP12.2 million from GBP117.6 million. Total wholesale volumes rose 14% to 1,641 from 1,444. Adjusted earnings before interest, tax, depreciation, and amortisation were largely flat at GBP50.7 million from GBP50.5 million a year prior. "Having only joined Aston Martin in September, I can already clearly see growth opportunities for the company as we bring incredible products to market and deliver on our vision to be the world's most desirable, ultra-luxury British performance brand," CEO Adrian Hallmark said. "Improved financial and operational performance in Q3 2024, demonstrates our strategy's effectiveness. We are on track to meet our revised full year 2024 guidance, which reflects the necessary action taken in September to adjust our production volumes given supplier disruption, which we are proactively managing, and the weak macroeconomic environment in China." Aston Martin last month cut annual guidance, as it grappled with tepid demand in China and the late arrival of components from "several" of its suppliers. Aston Martin cut its wholesale volume guidance by 1,000 units "to address disruption in its supply chain and continued macroeconomic weakness in China". An adjusted Ebitda margin in the high teens is expected for the year, its outlook cut from the "low 20s" last month. Its adjusted Ebitda margin in 2023 was 18.7%.

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Gold miner Hochschild Mining said it has exercised an option to acquire 100% of the Monte Do Carmo asset in Brazil. Hochschild unit Amarillo Mineracao do Brasil back in March entered into an option agreement with Cerrado Gold Inc, a gold miner operating in North and South America, to acquire the Monte Do Carmo gold project. Amarillo will make further cash payments totalling USD30 million as part of the option exercise. It had previously paid USD15 million when it agreed the option. A further USD15 million may be payable in milestones, giving a total deal of up to USD60 million. Hochschild CEO Eduardo Landin "Following the successful commissioning and ramp-up of Mara Rosa, I am delighted that we have been able to move the Monte do Carmo project, in the neighbouring state of Tocantins, from option status to a fully integrated part of our project pipeline. We have conducted an extensive exploration and twin drilling programme which has returned encouraging results giving us confidence in our ability of defining a compelling project. We believe that we have the right team in place to deliver an exciting opportunity for all stakeholders."

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OTHER COMPANIES

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Bank of Ireland Group left its annual outlook unchanged, with year-to-date net interest income in line with expectations. Net interest income was 3% lower in the nine months to September, the lender said. "This performance reflects the evolving interest rate environment, growth in lending income particularly in Ireland, higher funding costs (market and customer) and continued commercial pricing discipline," the company said. It still expects net interest income of EUR3.55 billion for 2024, despite "modestly lower interest rate expectations". It now expects a year-end European Central Bank deposit rate of 3.00%, compared to its previous forecast of 3.25%. "As we approach the end of the second year of our three-year strategic cycle, our highly capital generative and differentiated business model, operating in structurally attractive and growing markets, positions us well to continue to support our customers, invest in our business and deliver attractive returns for our shareholders," CEO Myles O'Grady said.

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Media and hospitality firm Time Out Group reported a narrowed yearly loss, but a slight revenue decline, and it announced a fundraise to help go towards possible new sites in London and in New York. Its pretax loss in the year ended June 30 slimmed to GBP8.5 million from GBP25.0 million. Revenue, however, fell 1.5% to GBP103.1 million from GBP104.6 million. Net revenue rose 3.7% to GBP78.7 million from GBP76.0 million. Net revenue excludes concessionaires' share. Time Out proposed a placing to raise GBP8 million at 50 pence per share, a 9.9% premium, to its 45.5p closing price on Tuesday. The placing is being conducted through an accelerated bookbuild. "Net proceeds of the Placing will be utilised to fund capital investment in connection with opening two new potential markets in London and New York, and to accelerate Media technology investments," Time Out said. Its two largest shareholders Oakley Capital Investments Ltd and Lombard Odier Asset Management (Europe) Ltd have indicated their intention to participate.

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By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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