11th Jan 2023 07:59
(Alliance News) - London's FTSE 100 was set to open higher on Wednesday, amid relief that Federal Reserve Chair Jerome Powell didn't add to the hawkish tone of recent commentary by Fed officials.
The US central bank chief offered little in the way of policy clues when he spoke in Stockholm on Tuesday.
"The lack of hawkish comment from chair Powell yesterday gave US markets the perfect reason to stop trending lower as we saw a modest rebound into the close, led by the Nasdaq, although rather perversely bond yields also edged higher. This rebound after Europe had closed looks set to see European markets open modestly higher this morning, on a day with little in the way of economic data drivers," CMC Markets analyst Michael Hewson commented.
Comments from another Fed central banker also were taken positively.
Fed Governor Michelle Bowman said Tuesday that "unemployment has remained low as we have tightened monetary policy and made progress in lowering inflation", in a prepared speech to an event in Florida.
In UK corporate updates, JD Sports and Sainsbury's achieved Christmas sales hikes. News from housebuilder Barratt and insurer Direct Line was less positive, however.
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 0.2% at 7,707.49
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Hang Seng: up 0.5% at 21,428.44
Nikkei 225: up 1.0% at 26,446.00
S&P/ASX 200: up 0.9% at 7,195.30
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DJIA: closed up 186.45 points, or 0.6%, at 33,704.10
S&P 500: closed up 27.16 points, or 0.7%, at 3,919.25
Nasdaq Composite: closed up 106.98 points, or 1.0%, at 10,742.63
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EUR: up at USD1.0755 (USD1.0724)
GBP: up at USD1.2173 (USD1.2146)
USD: soft at JPY132.27 (JPY132.29)
GOLD: up at USD1,882.53 per ounce (USD1,875.50)
(Brent): soft at USD79.66 a barrel (USD79.74)
(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 EU balance of payments
11:00 GMT Ireland unemployment
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UK Foreign Secretary James Cleverly has said post-Brexit trading issues which "risk and undermine" Northern Ireland's place within the UK must be addressed. Cleverly was speaking as he prepared to meet with political and business leaders in Belfast to discuss the impact of the Northern Ireland Protocol. Northern Ireland Secretary Chris Heaton-Harris will also take part in the talks, which the government hopes will help to break the Stormont power-sharing deadlock. Devolution in Northern Ireland has been in flux since last February when the DUP, the region's largest unionist party, withdrew its first minister from the ministerial executive in protest at the protocol. The party has made clear it will not allow a return to power-sharing until radical changes to the protocol are delivered. It claims the treaty has undermined Northern Ireland's place within the UK by creating economic barriers on trade entering the region from Great Britain. However, earlier this week, progress between the EU and the UK on post-Brexit data-sharing was hailed as a positive step in ongoing talks to find a solution to the row.
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The prime ministers of the UK and Japan will sign a "hugely significant" new defence deal allowing UK troops to deploy in Japan when the pair meet in London on Wednesday, Downing Street said. The agreement is the latest sign of London's growing interest in the Asia-Pacific region, and Tokyo's efforts to strengthen its alliances to face the challenges posed by China. The deal creates a legal basis for the deployment of British and Japanese troops on each others' territory for training and other operations. Prime Minister Rishi Sunak's office called it "the most significant defence agreement between the two countries in more than a century". "In the past 12 months, we have written the next chapter of the relationship between the UK and Japan – accelerating, building and deepening our ties," said Sunak.
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BROKER RATING CHANGES
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HSBC reinitiates Smith & Nephew with 'buy'
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Liberum raises Dechra Pharmaceuticals to 'buy'
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JPMorgan cuts Deliveroo to 'underweight' ('neutral') price target 91 (94) pence
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COMPANIES - FTSE 100
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JD Sports said revenue growth quickened in the run-up to Christmas, with the athleisure retailer now expecting annual profit at the top end of market expectations. JD Sports said organic revenue in the six weeks to December 31 jumped more than 20% from a year before. In the 22 weeks to the end of December, organic revenue rose more than 10% annually. Organic annual growth picked up from 5% in the first-half. JD Sports now expects pretax profit before exceptional items for the financial year ending January 28 at the top end of a GBP933 million and GBP985 million market consensus range. The very top of that range represents growth of 4.0% from GBP947.2 million the year prior. "The ultimate outturn will, however, reflect trading through the remainder of January with the post-Christmas sale period still to take place in some of our most important European markets," JD Sports said. For financial 2024, it predicts its bottom-line to rise to GBP1 billion.
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Sainsbury's said its Christmas grocery volumes outperformed the market. In the six weeks to January 7, total retail sales, excluding fuel, grew 7.1% year-on-year. They were 9.6% higher on three years earlier. Grocery sales alone climbed 7.1% annually during the six-week period, surging 15% on pre-virus times. In the 16 weeks to January 7, the grocer's third-quarter, retail sales rose 5.2% year-on-year. "We delivered the best possible Christmas for customers as millions of households managed their budgets differently, hosting larger gatherings again and treating themselves at home. Customers shopped early, buying Christmas treats and fizz more than once and looked for deals, taking advantage of Black Friday and other seasonal offers. Argos offered great value and quality and, as train and postal strikes disrupted the country, customers appreciated its reliability and convenience," Chief Executive Simon Roberts said. Sainsbury's now expects underlying pretax profit for the financial year ending in March to be towards the upper end of GBP630 million to GBP690 million guidance. This would be down from GBP730 million a year earlier, however. "We additionally expect to generate retail free cashflow of around GBP600 million, ahead of our previous guidance of at least GBP500 million," Sainsbury's said.
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Housebuilder Barratt Developments said it performed strongly in the first half of its financial year, though it warned that the UK housing market has suffered a slowdown. In the six months to December 31, total home completions, including joint ventures, rose annually to 8,626 from 8,067. Its sales rate weakened, however, to 0.44 net private reservations per active outlet per week, from 0.79 a year earlier. The total forward order book is worth GBP2.54 billion, down from GBP3.79 billion a year prior. Barratt added: "Assuming net reservation rates increase in line with normal spring trading patterns to around 0.50 homes per active outlet per week, we will remain on track to deliver consensus total home completions of 17,475." It warned home completions will be below consensus and in the range of 16,000 to 16,500 should there not be spring housing market recovery. "We have taken a number of actions to respond to current market conditions, including significantly reducing land approvals, pausing recruitment of new employees and introducing further controls for new site openings to manage our working capital deployment," it said.
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In addition, Barratt named Caroline Silver as its next chair, succeeding John Allan on September 6. Silver joins the board as a non-executive director from June 1.
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COMPANIES - FTSE 250
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Direct Line Insurance will not declare a final dividend for 2022, as the insurer's fourth quarter was marred by an increase in claims due to cold December weather. The motor insurer warned: "These claims, combined with further increases in motor inflation, have had a significant impact on our underwriting result for 2022. We have also seen reductions in the valuations of the commercial property holdings in our investment portfolio in line with movements in the broader property market." It expects claims from the "freeze event" to be roughly GBP90 million in its Home & Commercial arm. Direct Line added: "This, together with the freeze event from January 2022 and subsidence related claims over the summer means that we currently expect total weather claims to be in the region of GBP140 million for 2022, well above our 2022 expectation of GBP73 million." Elsewhere, claims inflation remains a "feature" in its Motor arm. With the absence of a final payout, Direct Line's total dividend for the year will amount to 7.6 pence, down from 22.7p in 2021.
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Ferrexpo rounded off a "difficult" 2022 with a tricky fourth quarter, as the iron ore pellet maker's output was hit by power constraints as Russia's war on Ukraine continues. Ferrexpo has operations in central Ukraine. Total iron ore pellet production for the fourth quarter amounted to 400,000 tonnes, down sharply from 3.1 million a year earlier. "This reduction is primarily due to the loss of electrical power for the majority of the quarter, which was partially restored in late December, in addition to existing constraints relating to Russia's invasion. As of the date of this release, the group continues to produce iron ore pellets using one pelletiser line (out of a total of four)," Ferrexpo explained. Full-year pellet production fell 46% to 6.1 million tonnes and sales fell at the same rate to 6.2 million tonnes. Ferrexpo put the sales slump down to "the closure of Ukraine's access to the Black Sea, Russian attacks on Ukraine's state-owned electricity network, and logistics constraints for users of Ukraine's railway network".
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OTHER COMPANIES
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Ten Entertainment achieved a "record performance" in 2022. For the year ended January 1, sales jumped 88% annually, 5.5% on a like-for-like basis. "Costs have been carefully managed, with operational efficiencies extracted to minimise the impact of cost inflation without the need to raise prices to our customers," the ten-pin bowling site operator said. It kept a lid on costs but still made "significant investment" in 11 centres during the financial year. There six refurbishments and five bowling upgrades. Adjusted pretax profit for the year is expected to be at the upper end of a GBP25.0 million to GBP26.1 million market consensus range.
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Tharisa said platinum and chrome production dropped in its first quarter due in part to operational issues at its mine in South Africa. It said platinum group metal output fell by 5.7% to 42,700 ounces for the first quarter that ended December 31, from 45,300 ounces in the fourth quarter. Chrome production dropped by 8.0% to 383,100 tonnes from 416,200 tonnes. The group said mining volumes were hurt by unprecedented rainfall not seen in the history of the Tharisa mine, which is located near Rustenburg in South Africa.
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By Eric Cunha, Alliance News news editor
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