7th Feb 2025 07:49
(Alliance News) - London's FTSE 100 is called to open lower on Friday, as investors digest a Bank of England rate cut and look ahead to a US jobs report.
According to FXStreet cited consensus, the report is expected to show US hiring eased to 170,000 at the start of the year, from 256,000 in December.
On Thursday, the BoE's Monetary Policy Committee voted 7 to 2 for the expected quarter-point cut which takes bank rate to 4.50%, from 4.75%.
All members of the MPC backed a cut in interest rates. Two members Swati Dhingra, and previous 'hawk' Catherine Mann, preferred a larger 50 basis points cut, which would have taken base rate to 4.25%.
"Between the lines, however, the decision was not quite the complete reversal in favour of the doves that the market saw. BoE Governor Andrew Bailey did his best at the press conference to ensure that the vote was not over-interpreted. At the same time, the BoE's growth forecasts, which it raised sharply in November, were already far too optimistic. Although it could be argued at the time that fiscal policy could provide a stimulus to growth, it was rather unlikely that it would be that strong, given that indicators were already weakening at the time. So I see the fact that the BoE has now revised this forecast again as a sign of healthy realism rather than a U-turn," Commerzbank analyst Michael Pfister commented.
"In short, the Bank of England has a tough road ahead if it is to avoid potential stagflation. And I can fully understand why market participants are concerned about the new forecasts and are now pricing in sharper rate cuts. However, the Bank of England has often surprised us in recent years. I would not be surprised to see another hawkish turn in March. While yesterday's announcement may have been a setback for our bullish view on sterling, it is not yet a final defeat."
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 0.3% at 8,699.38
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Hang Seng: up 1.0% at 21,099.80
Nikkei 225: down 0.7% at 38,787.02
S&P/ASX 200: down 0.1% at 8,511.40
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DJIA: closed down 125.65 points, 0.3%, at 44,747.63
S&P 500: closed up 0.4% at 6,083.57
Nasdaq Composite: closed up 0.5% at 19,791.99
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EUR: higher at USD1.0383 (USD1.0375)
GBP: lower at USD1.2420 (USD1.2444)
USD: lower at JPY151.68 (JPY151.82)
GOLD: higher at USD2,864.62 per ounce (USD2,851.18)
OIL (Brent): higher at USD74.77 a barrel (USD74.71)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
11:00 GMT Ireland industrial production
13:30 GMT US nonfarm payrolls
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UK house prices hit a record high at the start of the year, mortgage lender Halifax said. House prices rose 0.7% in January from December. They had fallen 0.2% in December from November. "This increase pushed the average property price to a new record high of GBP299,138," Halidax analyst Amanda Bryden said. However, the pace of annual growth eased to 3.0% in January, from 3.4% in December. It was the slowest annual growth snce July. "Affordability is still a challenge for many would-be buyers, but the market's resilience is noteworthy. There's strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March," Bryden added.
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UK shopper footfall rose in January following a disappointing Christmas season, as buyers took advantage of extended New Year's leave and retailers extended post-Christmas discounts, a survey showed. According to the British Retail Consortium-Sensormatic Footfall Monitor, total UK shopper traffic increased 6.6% on-year in January, compared to a 2.2% on-year decline in December. The survey covered shopper traffic between December 29 and February 1. "Despite snowy weather and Storm Eowyn causing disruption in some areas, footfall was still positive across major UK cities over the whole month," BRC Chief Executive Helen Dickinson commented. Dickinson, however, noted headwinds to improved footfall moving forward: "Retailers want to invest more in stores and staff to enhance the shopping experience for customers and help to grow the economy, but the swathe of additional costs from April will limit investment and lead to job losses and higher prices at the tills."
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BROKER RATING CHANGES
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HSBC raises Wizz Air to 'buy' - price target 1,900 pence
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Barclays raises International Workplace Group to 'overweight' (equal-weight) - price target 260 (161) pence
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COMPANIES - FTSE 100
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Legal & General Group said it will sell its US insurance entity for USD2.3 billion to Japanese mutual life insurance firm Meiji Yasuda Life Insurance. The duo will establish a "strategic partnership" and Meiji Yasuda may snap up a stake in L&G. In addition, the FTSE 100 listing said more than half of the deal proceeds will be returned to shareholdes. The US insurance entity includes L&G's US protection and US pension risk transfer arms. L&G expects the transaction to complete towards the end of 2025. "Following completion, Meiji Yasuda will own L&G's US protection business and have a 20% economic interest in its US PRT business, with L&G retaining 80% of existing and new PRT through reinsurance arrangements between L&G and Meiji Yasuda," L&G explained. L&G said a partnership with Meiji Yasuda will look to "support L&G's growth ambitions" in US pension risk transfer and in asset management. In addition, Meiji Yasuda plans to acquire a roughly 5% stake in L&G, "deepening the strong corporate relationship and bringing closer alignment of interest between the two companies". "Meiji Yasuda will expand its established partnership with L&G in asset management by outsourcing the investment management of US PRT and protection assets to L&G. In addition, the two companies will form a long-term partnership in global private assets. This will include significant co-investment into L&G's range of private assets capabilities over several years, supporting the group's ambition in this business," L&G added. Around GBP400 million of the proceeds from the unit sale will fund the US PRT offering. It added that GBP1.0 billion, more than half the proceeds, will be returned to shareholders. "This would be incremental to the group's existing distribution policy. L&G therefore expects to return the equivalent of [around] 40% of its market cap to shareholders over 2025-2027 through a combination of dividends and buybacks. The remaining net proceeds from the transaction would be retained and invested to support the delivery of the group's growth strategy," L&G said. L&G reiterated its guidance for 2024. It still expects to report mid-single digit growth in core operating profit.
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COMPANIES - FTSE 250
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JPMorgan Global Growth & Income and Henderson International Income Trust said they have agreed a combination, creating an investor with GBP3.4 billion worth of net assets. As part of the proposed deal, a scheme of reconstruction will see HINT's assets rolled into JGGI. In exchange, HINT shareholders will receive new JGGI shares. There is no cash option proposed "in light of the strong rating and liquidity of JGGI's shares, and the similarity of the investment strategies, with both companies offering exposure to global equities and an attractive level of income". JP Morgan Asset Management will manage the enlarged JGGI. Last year, JGGI combined with JPMorgan Multi-Asset Growth & Income and back in 2022, sealed a tie-up with JPMorgan Elect PLC and Scottish Investment Trust. HINT is managed by Janus Henderson. Among the firms JGGI and HINT each back are Microsoft and Taiwan Semiconductor Manufacturing. A statement added: "Following completion of the transaction, it is expected that the board of the enlarged JGGI will consist of seven directors, with six from the current board of JGGI and one director from the board of HINT. It is expected that the JGGI board will revert to six directors with the director from the board of HINT stepping down within 12 months, following a transitionary period." The deal is expected to conclude by July 2025.
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Victrex backed annual guidance after "good progress" in its first-quarter. The polymer solutions provider said the second-quarter "has also started solidly". It said trading in January was "well ahead of the prior year". "Despite overall top-line progress, trading conditions remain mixed, with Medical revenues continuing to be subdued on a year-to-date basis, driven by ongoing industry destocking amongst medical device customers," Victrex said. In the first-quarter to December 31, revenue rose 9% on-year to GBP66.6 million and volumes climbed 20%. Chief Executive Jakob Sigurdsson said: "The group has delivered a solid start to the year and our full year expectations are unchanged. Based on our momentum at this early stage, our guidance remains for at least mid-single digit volume growth for FY 2025, with underlying [pretax profit] growth ahead of volume growth." The CEO continued: "Cost control, self-help measures, higher asset utilisation and lower raw material costs will help to underpin profit improvement in FY 2025. However, we are mindful that current trading conditions remain mixed, with continuing softness in Medical. As a result, profit growth will be weighted to the second half year. This reflects Medical and sales mix, the impact of currency - which is a GBP7 million-GBP8 million headwind to PBT for the year - being heavily weighted to H1 2025, and annualised costs from our new China facility." The firm holds an annual general meeting on Friday.
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OTHER COMPANIES
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Residential Secure Income hailed its "operational performance" amid strong rent collection, but it reported a decline in net asset value. Net asset value per share at December 31 amounted to 76.0 pence, down 6.9% from 81.6p in September. This was "driven by a 6p, or 3.5%, decrease in like-for-like investment property values", the investor in retirement living and shared ownership investment portfolios said. The firm said rent collection was at over 99% during the quarter to December 31. It declared a 1.03 pence per share dividend.
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By Eric Cunha, Alliance News news editor
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