21st Nov 2024 07:59
(Alliance News) - London's FTSE 100 is called to open higher on Thursday, shaking off an underwhelming investor response to Nvidia's earnings, which came despite the chip-making sensation beating consensus.
"In today's Nvidia-fuelled AI mania, even great results fall short of the market's insatiable appetite for upside surprises," SPI Asset Management analyst Stephen Innes commented.
"In a market defined by exuberance, Nvidia's earnings serve as a stark wake-up call: In the race for AI dominance, excellence might no longer be enough—it's all about perfection."
Nvidia fell 2.5% after hours in New York.
In early UK corporate news, JD Sports warned trading during the final weeks of its third-quarter underwhelmed, while boohoo appointed a new chair as its spat with Frasers continues.
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 0.3% at 8,111.07
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Hang Seng: down 0.4% at 19,626.46
Nikkei 225: down 0.9% at 38,026.17
S&P/ASX 200: marginally lower at 8,323.00
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DJIA: closed up 139.53 points, 0.3%, at 43,408.47
S&P 500: closed up 0.13 points at 5,917.11
Nasdaq Composite: closed down 0.1% to 18,966.14
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EUR: higher at USD1.0533 (USD1.0515)
GBP: higher at USD1.2646 (USD1.2634)
USD: lower at JPY154.78 (JPY155.36)
GOLD: higher at USD2,664.01 per ounce (USD2,648.58)
OIL (Brent): lower at USD73.13 a barrel (USD73.20)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
15:00 GMT eurozone consumer confidence
14:00 GMT UK Bank of England Monetary Policy Committee member Catherine Mann speaks
13:30 GMT US initial jobless claims
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Storm Shadow missiles supplied to Ukraine by Britain have been used in Russia, according to reports. Wreckage from one of the long-range weapons has been found in Russia's Kursk region, which borders Ukraine, several media outlets have said. Storm Shadow's use in Russia comes a day after Moscow said American long-range weapons had been fired into its territory. Russian President Vladimir Putin has lowered the threshold for using nuclear weapons, after US President Joe Biden gave Kyiv permission to fire US ATACMS long-range missiles into Russia. Defence Secretary John Healey had earlier told MPs he had spoken with his counterpart in Kyiv on Tuesday where they discussed the UK's plan to support Ukraine. Healey told the Commons on Wednesday: "We've seen over recent weeks significant change in the action and in the rhetoric on Ukraine, and Ukraine's action on the battlefield speaks for itself.
"We as a nation and as a government are doubling down on our support for Ukraine and determined to do more. I discussed this with (Ukrainian) minister (Rustem) Umerov in a call yesterday where he talked about the robust response that Ukraine is making to recent Russian escalations."
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The automotive industry has pledged to work with the UK government to "identify any adjustments necessary" to sales quotas for electric vehicles. Carmakers outlined the "negative effect" of the zero-emission vehicles mandate in a meeting with Transport Secretary Louise Haigh and Business Secretary Jonathan Reynolds on Wednesday. Under the mandate, at least 22% of new cars sold by each manufacturer in the UK this year must be zero-emission, which generally means pure electric. The threshold will rise annually. Failure to abide by the rule or make use of flexibilities – such as buying credits from rival companies or making more sales in future years – will result in a requirement to pay the government GBP15,000 per polluting car sold above the limits. Under the current rules, the mandate will reach 80% by 2030, but the government has committed to bring the ban on the sale of new petrol and diesel cars and vans forward from 2035 to 2030. The government said it will set out further details in due course. There are fears the Zev mandate is putting jobs at risk at UK vehicle factories. Incentives are in place for fleet purchases of EVs, but manufacturers want subsidies for private buyers to be reinstated. Mike Hawes, chief executive of the Society of Motor Manufacturers & Traders, said the meeting with ministers was "an important opportunity to restate the UK automotive industry's commitment to both economic growth and net zero."
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UK public sector borrowing spiked to the second-highest October level since records began, numbers on Thursday showed. According to the Office for National Statistics, public sector net borrowing amounted to GBP17.35 billion last month, increasing 7.6% on-month from GBP16.14 billion, and up 9.8% annually from GBP15.80 billion. The ONS said it was "the second-highest October borrowing since monthly records began in January 1993". Net debt as a percentage of gross domestic product rose to 97.5% in October, from 97.1% in September, and 95.9% a year prior. It remains at "levels last seen in the early 1960s". "Public sector net financial liabilities excluding public sector banks was provisionally estimated at 83.7% of GDP at the end of October 2024; this was 2.5 percentage points more than at the end of October 2023, but 13.8 percentage points lower than public sector net debt," the ONS said.
UK Chancellor Rachel Reeves last month selected the PSNFL measure as the benchmark for government debt, rather than the prior measure of underlying public sector net debt. The shift to PSNFL gave her greater headroom to meet her debt reduction target, because it includes a wider mix of state assets and liabilities – notably including expected student loan repayments to offset some of the liability. The reading follows last month's budget. Chancellor Reeves used October's financial statement to confirm an increase to employer national insurance contributions, changes to inheritance tax rules for farmers and a rise in the minimum wage. Taxes were raised to a historic high, with GBP40 billion extra a year in revenue used to pour into schools, the NHS, transport and housing.
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BROKER RATING CHANGES
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Jefferies starts Auction Technology with 'underperform' - price target 380 pence
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RBC cuts CVS Group price target to 940 (1,200) pence - 'sector perform'
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COMPANIES - FTSE 100
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JD Sports predicted annual profit will be at the lower end of guidance, as a decent start to its third-quarter was hampered by a "volatile" October. The athleisure retailer said the tricky trading conditions were particularly evident in North America and the UK towards the back end of the 13 weeks to November 2. Group like-for-like sales fell 0.3% on-year during the third-quarter, but rose 5.4% on an organic basis. In the UK alone, they fell 2.4% like-for-like and 0.1% organically. North America sales fell 1.5% but rose 5.9% organically. Chief Executive Officer Regis Schultz said: "After a good start to the period, helped by strong back-to-school sales, we saw increased trading volatility in October, particularly in North America and the UK, reflecting elevated promotional activity and mild weather. Against this backdrop, we maintained our commercial discipline, improving gross margin by 0.3%pts while still delivering 5.4% organic sales growth. In addition, we made further, strong progress on our long-term growth strategy including opening 79 new JD stores across the world." The CEO added: "We have performed well in the key trading events this year and we are well positioned for the upcoming peak season. The trading environment remains volatile though and, following October trading, we now anticipate full year profit to be at the lower end of our guidance range." Its pretax profit before adjusting items guidance range stands at GBP955 million to GBP1.04 billion so it still expects an increase from the GBP917.2 million it achieved in the 53 weeks to February 3, its prior financial year. On a 52-week basis to January 27, it achieved profit of GBP912.4 million.
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Halma lifted its half-year payout and reported a rise in revenue and profit. The safety equipment maker said pretax profit in the six months to September 30 rose 16% on-year to GBP174.0 million from GBP150.2 million a year prior. Revenue climbed 13% to GBP1.07 billion from GBP950.5 million. "It has been a successful first half for Halma. These results further extend our track record of delivering strong and compounding revenue and profit growth, substantial cash generation enabling continued investment, and returns well above our cost of capital, while growing a safer, cleaner, healthier future for everyone, every day," CEO Marc Ronchetti said. Halma expects to see "varied conditions
in our individual companies' end markets" as the year progresses, however. It expects "good organic constant currency revenue growth" and an adjusted earnings before interest and tax margin of around 21%, landing in the middle of its target range. Halma upped its interim dividend by 7.0% to 9.00 pence per share from 8.41p.
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COMPANIES - FTSE 250
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Close Brothers said it has restarted a "significant portion" of its motor finance business, where it temporarily paused lending roughly a month ago. A "full resumption" is expected in the "very near future", it said. "We are updating our documentation and processes to ensure disclosure of commission amounts on finance agreements and obtain full customer consent for all necessary issues, including credit broker commissions, before customers enter into credit agreements. We have also implemented necessary measures to verify credit brokers' compliance with these new requirements," the merchant bank said. Historical motor finance arrangements have been in focus in recent weeks and months and have weighed on shares in the likes of Close Brothers. The stock is down more than 50% over the past three months. The Financial Conduct Authority on Thursday said it is "seeking feedback on proposals to extend the time firms have to respond to motor finance complaints". The FCA's update follows the Court of Appeal's judgment late last month which ruled in favour of consumers. In the ruling, the court decided it was unlawful for brokers and car dealers to receive a commission from the lender providing motor finance without obtaining the customer's informed consent to the payment. This requires the consumer to be told all material facts such as the amount of the commission and how it was to be calculated. In a trading statement on Thursday, Close Brothers hailed a "robust performance" in its first-quarter ended October 31. Finance Director Mike Morgan said: "In our Banking division, customer demand remained healthy, alongside a strong net interest margin and a resilient credit quality. Whilst Winterflood continued to experience unfavourable market conditions, it remains well positioned to benefit when investor appetite returns." Its annualised net interest margin year-to-date in Banking stands at 7.3%. Close Brothers Asset Management has achieved year-to-date annualised net inflows of 4% and managed assets stand at GBP19.5 billion, up slightly from GBP19.3 billion in July. Winterflood suffered a first-quarter operating loss of GBP700,000, narrowing from GBP2.5 million a year prior.
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OTHER COMPANIES
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Online only fashion retailer boohoo Group named Tim Morris as independent chair with immediate effect, wth Mahmud Kamani becoming executive vice chair. Kamani's position has been divided between "his executive capacity and his role as the board's chair, to enable the company to have an independent chair and allow Mahmud to continue his day to day executive role". boohoo added: "Tim Morris will be responsible among other things for overseeing the group's recently announced business review, which will be led by Dan Finley and supported by the rest of the board. Tim's appointment and experience across legal, governance, business and board advisory, will ensure high standards of corporate governance continue to be upheld, including with regards to the business review." Finley was named as chief executive officer earlier this month, snubbing Mike Ashley, who Sports Direct owner Frasers Group PLC wanted to install as boohoo boss. Continuing a spat with investee boohoo, Frasers on Thursday said "recent events at boohoo should leave shareholders in no doubt" that Kamani "must go". Frasers owns 28% of boohoo. Frasers urged boohoo shareholders to vote to appoint Ashley and Mike Lennon to the boohoo board at a shareholder vote in December. "Frasers also urges shareholders to vote for the removal of Mr Kamani when the board convenes a separate shareholder meeting," it said.
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Low-cost airline Ryanair threatened Wednesday to stop serving 10 French regional airports if the government goes forward with a proposed tax hike. The French government is scrambling to plug a larger-than-expected budget deficit, and a tripling of a tax on airline tickets, as well as private jets, is one of the measures currently under consideration. "Ryanair is now reviewing its French schedules and expects to cut capacity to/from regional French airports by up to 50% from January 2025 if the French government proceeds with its short-sighted plan to triple passenger taxes," Ryanair's Chief Commercial Officer Jason McGuinness said in a statement. "The impact of increased passenger taxes will be most damaging for regional France which depends on competitive access costs," McGuinness said.
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By Eric Cunha, Alliance News news editor
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