22nd Oct 2024 07:53
(Alliance News) - London's FTSE 100 is called to open lower on Tuesday, after mixed trade on Wall Street and an underwhelming day in Asia.
The data calendar is quiet once again on Tuesday, though Bank of England Governor Andrew Bailey and European Central Bank President Christine Lagarde have speaking engagements, putting central banks in focus.
Pepperstone analyst Michael Brown commented: "There is only one economic release of note, in the form of October's manufacturing survey from the Richmond Fed. While the index tends to help shape expectations for the more widely-watched ISM survey next week, the figures on their own tend not to be a major market mover. That said, the central bank speaking calendar is a busy one, as the annual IMF-World Bank meetings kick-off in Washington DC. Unsurprisingly, this will likely result in a lot of 'noise', and very little 'signal', though appearances from BoE Governor Bailey and ECB President Lagarde might be worth watching regardless, on the off-chance that either says anything interesting."
Over in New York, there are earnings from industrial firm 3M and tobacco company Philip Morris International to come.
"Participants, naturally, will be looking for the solid earnings performance seen thus far during reporting season to continue, as the S&P remains set for its fifth straight quarter of YoY earnings growth," Pepperstone's Brown continued.
In early UK corporate news, InterContinental Hotels said it is on track to meet guidance, Hunting cut its outlook, while Morgan Sindall expects profit to top expectations. Elsewhere, HSBC announced a new finance chief and some organisational changes. Mulberry labelled a Frasers takeover bid as "untenable", meanwhile.
And in early UK economic news, government borrowing spiked before next week's budget.
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 0.4% at 8,282.24
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Hang Seng: flat at 20,480.41
Nikkei 225: down 1.4% at 38,411.96
S&P/ASX 200: down 1.7% at 8,205.70
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DJIA: closed down 334.31 points, 0.8%, at 42,931.60
S&P 500: closed down 0.2% at 5,853.98
Nasdaq Composite: closed up 0.3% at 18,540.01
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EUR: flat at USD1.0826 (USD1.0825)
GBP: higher at USD1.3012 (USD1.2984)
USD: higher at JPY150.70 (JPY150.34)
GOLD: higher at USD2,734.36 per ounce (USD2,723.74)
(Brent): lower at USD73.74 a barrel (USD73.85)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
15:00 BST eurozone European Central Bank President Christine Lagarde speaks
16:00 BST eurozone European Central Bank Governor Philip Lane speaks
14:15 BST UK Bank of England MPC member Megan Greene speaks
14:25 BST UK Bank of England Governor Andrew Bailey speaks
20:15 BST UK Bank of England Deputy Governor Sarah Breeden speaks
16:00 BST US Richmond Fed manufacturing index
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UK public sector borrowing spiked in September, ahead of the government's budget next week, amid lofty interest payable on government debt. According to the Office for National Statistics, public sector net borrowing amounted to GBP16.61 billion in September, stretching from GBP13.02 billion in August and GBP14.48 billion a year prior. It was the "third highest September borrowing since monthly records began in January 1993", the ONS said. "The interest payable on central government debt was GBP5.6 billion in September 2024, GBP4.6 billion more than in September 2023; this was owing to the interest payable in September 2023 being exceptionally low at GBP900 million because of movements in the retail price index around that time, rather than September 2024's interest being unusually high." Public sector net debt, excluding public sector banks, was estimated at 98.5% of gross domestic product in September, sitting at levels last seen since the "early 1960s", but fading slightly from 98.8% in August. Net debt to GDP was at 86.2% in September 2023. "Excluding the Bank of England, debt was 91.2% of GDP, 5.0 percentage points more than at the end of September 2023 but 7.3 percentage points lower than the wider debt measure," the ONS added.
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The Cabinet is united on the UK government's spending plans, Rachel Reeves has insisted amid reports of arguments over the upcoming budget. The chancellor was reportedly locked in negotiations with some ministers until last week as she sought GBP40 billion of tax rises and spending cuts ahead of the announcement on October 30. Speaking to the PA news agency, Reeves said the final settlements had been confirmed but acknowledged it had been "right for all Cabinet members to want to get the best settlement for their departments". She added that settling departmental budgets was "an important achievement and shows the determination of this government to get a grip of the public finances, and shows that we are as one, united in fixing the mess that the Conservatives left for us". Several ministers were reported to have written to the prime minister to express concern about the scale of cuts being demanded in some areas as the chancellor attempts to find GBP40 billion with which to deliver Labour's promises.
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BROKER RATING CHANGES
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Berenberg raises SSE price target to 2,300 (2,100) pence - buy
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COMPANIES - FTSE 100
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InterContinental Hotels said it traded well in the third-quarter, and it is "on track to finish 2024 in line with market expectations". Revenue per available room, a key metric for hotel companies, increased 1.5% on-year in the third-quarter of 2024. RevPAR rose 1.7% in the Americas and shot up 4.9% in the Europe, the Middle East, Africa and Asia region. In Greater China, however, it fell 10%. "We came up against strong comparatives of resurgent domestic travel this time last year, and the quarter was still broadly in line with 2019 levels," Chief Executive Officer Elie Maalouf said. IHG also noted "adverse impacts from shifts in the timing of public holidays and the typhoons in September" in China. In the Americas, trading momentum was "broad-based", while in EMEAA, it was "another period of strong demand for this diverse region". Maalouf added: "We are pleased with the latest trading performance and another strong period of development activity, and we are on track to finish 2024 in line with market expectations." The firm also added it is on track to return over USD1 billion to shareholders in 2024 through dividends and buybacks.
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HSBC announced that starting next year, it will simplify its organisational structure, as it promoted its chief risk officer to the role of chief financial officer. The London-based bank said it promoted Chief Risk & Compliance Officer Pam Kaur to CFO from January 1, with HSBC updating on a successor for her current role in due course. Kaur has almost 40 years of experience, having worked in the UK and the US for British, American and German banks. Further, the company said from January 1 it will simplify its organisational structure into four businesses: Hong Kong, UK, Corporate & Institutional Banking, and International Wealth & Premier Banking. Hong Kong will include personal banking and commercial banking services. The UK arm will house its ring-fenced domestic bank. The restructuring aims at reducing the duplication of processes and decision making built into the current structure. HSBC added: "We are creating a new Corporate & Institutional Banking business through the integration of our Commercial Banking business (outside the UK and Hong Kong) with our Global Banking and Markets business and with the geographic region of the Western Markets (comprising our UK non ring-fenced bank, Europe, and the Americas), which is a predominantly wholesale banking region. "Our new International Wealth and Premier Banking business will bring together our Premier banking focussed businesses outside of Hong Kong and the UK, our Global Private Bank, and our wealth manufacturing businesses, Asset Management & Insurance."
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COMPANIES - FTSE 250
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Hunting cut its annual profit guidance, as a recent decline in oil and US natural gas pricing has hit sector sentiment. The manufacturer of equipment for the energy industry now expects 2024 earnings before interest, tax, depreciation, and amortisation between USD123 million and USD126 million, its outlook cut from the USD134 million and USD138 million range. In 2023, its Ebitda totalled USD103.0 million. In the nine months to September 30, its Ebitda was 16% higher on-year to USD87 million. The third-quarter was largely in-line with management's expectations. "With the recent decline in the oil price and renewed falls in US natural gas pricing, sentiment has reduced in recent weeks in areas of the sector, which will likely lead to lower client activity within certain product groups throughout the remainder of the year, most notably within the short-cycle Perforating Systems product group," Hunting said. CEO Jim Johnson said the firm's guidance had been "predicated on a strong international market coupled with some improvement in our US onshore businesses". "Whilst the outlook for the international and offshore subsectors of the industry continues to remain firm, the slower than anticipated improvement within the US onshore has led to a deterioration in our short-term trading expectations," the CEO added.
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Morgan Sindall expects results for 2024 to be "significantly ahead of its previous expectations". The construction group said profit in its Partnership Housing division will be "slightly ahead of the group's previous expectations". Trading has stayed "subdued" in the Mixed Use Partnerships offering, though the unit has secured preferred bidder positions for a number of developments in the UK. Morgan Sindall continued: "Fit Out's profits have continued to strengthen significantly due to exceptional volumes and is now expected to materially exceed the group's previous expectations. Both Construction and Infrastructure are on target to meet their revenue and margin medium-term targets this year. Property Services remediation plan remains on track to be completed by the end of 2024 and is expected to return to profit in 2025."
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OTHER COMPANIES
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Mulberry said a sweetened takeover tilt by Frasers is "untenable", as the handbag maker's largest shareholder refused to throw its weight behind the offer. Sports Direct owner Frasers, which itself has a stake in the AIM listing, had earlier this month offered 150 pence per Mulberry share it does not already own. The bid implied a Mulberry valuation of GBP111 million. It put a value of GBP72 million on the chunk of Mulberry that Frasers does not already own. It was chunkier than a 130p per share bid tables previously. However, Mulberry's largest shareholder Challice did not back the offer. As a result, Mulberry believes the Frasers tilt is "untenable and that the company should focus its attention on driving the commercial performance of the business". "The board acknowledges that Frasers, through its participation in the company's recent fundraising, has shown itself to be supportive of maintaining the value of the Mulberry brand. The board appreciates this and looks forward to further interactions with Frasers in the future," Mulberry added. Under the equity raise, Frasers subscribed for 4.0 million shares, edging its stake in Mulberry up to 37.3% from 36.9%. The 100p equity raise price was lower than the acquisition offer.
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Wickes left its annual guidance unchanged, with trading in its third-quarter boosted by consumers catching up on outdoor projects after a wet start to the UK summer. In the 13 weeks to September 28, group revenue rose 2.1% on-year to GBP391.3 million. Revenue was 0.4% higher on a like-for-like basis. Retail revenue alone rose 4.7% on-year, up 4.2% like-for-like. Design & Installation revenue shrunk 7.1%, 13% like-for-like. Wickes added: "Trading in Q3 also benefitted from customers catching up on outdoor projects delayed by the wet weather during spring and early summer. We expect this pent-up demand to subside in Q4." The firm continued: "Given current trading, we remain comfortable with market expectations for adjusted profit before tax for 2024. Wickes' proven growth strategy and consistent market share gains position us well for faster growth as market conditions improve."
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By Eric Cunha, Alliance News news editor
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