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LONDON BRIEFING: Lloyds backs outlook as profit beats consensus

23rd Oct 2024 07:53

(Alliance News) - London's FTSE 100 is called to open a touch lower on Wednesday, while the dollar continued to rise as US interest rate cut bets are being dialled back.

The odds of a rate hold by the Federal Reserve next month have increased to around 11%, according to the CME FedWatch Tool. Though such an outcome is still seen as unlikely, the odds of a hold had stood around 6% this time last week.

"Investors are navigating a tangled web of geopolitical tensions in the Middle East, a Federal Reserve turning out less dovish than expected, and the sudden reawakening of the 'Trump Trade.' The latter has shaken the bond market, forcing some bond traders to pull their heads out of the sand as real jitters emerge about the fiscal landscape post-election," SPI Asset Management analyst Stephen Innes commented.

Central bankers will be in focus in what is an otherwise quiet day on the economic calendar.

Bank of England Governor Andrew Bailey and European Central Bank President Christine Lagarde have speak on Wednesday. The Bank of Canada, meanwhile, announces an interest rate decision at 1445 BST.

In early UK corporate news, Lloyds Banking Group and WPP backed guidance.

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 0.1% at 8,300.34

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Hang Seng: up 1.0% at 20,712.28

Nikkei 225: down 0.8% at 38,104.86

S&P/ASX 200: up 0.1% at 8,216.00

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DJIA: closed down 6.71 points at 42,924.89

S&P 500: closed down 2.78 points at 5,851.20

Nasdaq Composite: closed up 0.2% at 18,573.13

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EUR: lower at USD1.0794 (USD1.0808)

GBP: flat at USD1.2974 (USD1.2973)

USD: higher at JPY152.27 (JPY151.06)

GOLD: higher at USD2,748.64 per ounce (USD2,739.35)

OIL (Brent): lower at USD75.24 a barrel (USD75.86)

(changes since previous London equities close)

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ECONOMICS

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Wednesday's key economic events still to come:

Annual meeting of IMF and World Bank continues

15:00 BST eurozone consumer confidence

15:00 BST eurozone European Central Bank President Christine Lagarde speaks

14:00 BST UK Bank of England Deputy Governor Sarah Breeden speaks

21:30 BST UK Bank of England Governor Andrew Bailey speaks

15:00 BST US existing home sales

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UK Chancellor Rachel Reeves has said she is "sympathetic towards the mess" her Cabinet colleagues have faced, after it was reported that Prime Minister Keir Starmer was facing backlash from his ministers over cuts that could come at next week's budget. Reeves has told the BBC it is "perfectly reasonable" that ministers "set out their case" to Number 10 and Number 11 ahead of the fiscal event, and warned problems cannot "just be magicked away". Speaking to Radio5Live from Downing Street in an interview due to be broadcast on Wednesday, she said: "I'm very sympathetic towards the mess that my colleagues have inherited. I understand those challenges, but also my colleagues understand the challenges that we face as a government in making sure that the sums. "It is perfectly reasonable that Cabinet colleagues set out their case, both to me as chancellor and to the prime minister, about the scale of the challenges that they find in their departments. It's been a really constructive process."

Last week, it was reported that the prime minister was facing backlash from senior ministers over potential departmental spending cuts. The prime minister has previously warned that the budget next Wednesday would be "painful", and ministers have been referring to the "black hole" in the public finances since they entered office.

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UK Prime Minister Starmer has insisted his relationship with Donald Trump is not in jeopardy after the presidential candidate's campaign claimed the Labour Party was interfering in the US election. A statement on Trump's website, DonaldJTrump.com on Tuesday night announced an official complaint had been filed with US federal election officials, and claimed the Labour Party had "made, and the Harris campaign has accepted, illegal foreign national contributions". The complaint follows reports of senior Labour officials meeting with Kamala Harris' campaign, and Labour Party staffers volunteering on the ground for her campaign. Asked if it was a mistake for senior staffers to have met with the Harris campaign, Starmer insisted any members of his party were in the US on an entirely voluntary basis, similar to in previous elections. "That's what they've done in previous elections, is what they're doing in this election. And that's really straightforward," he told reporters as he travelled to Samoa for a meeting of Commonwealth leaders. Pressed further about whether Labour officials' involvement in the Harris-Waltz Democrat campaign could jeopardise his relationship with Trump if the ex-president wins re-election, Starmer replied: "No."

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BROKER RATING CHANGES

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Jefferies raises Ibstock to 'buy' (hold) - price target 251 (200) pence

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RBC cuts Sabre Insurance price target to 180 (200) pence - outperform

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COMPANIES - FTSE 100

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Lloyds Banking Group affirmed its annual outlook, after a "robust financial performance" in the third-quarter of 2024. Earnings during the period weakened, however, as net interest income declined. Pretax profit was 1.9% lower on-year at GBP1.82 billion from GBP1.86 billion. Pretax profit beat company-compiled consensus of GBP1.6 billion, however. Net income fell 3.7% to GBP4.35 billion from GBP4.51 billion, as a 6.2% fall in underlying net interest income to GBP3.23 billion hurt its bottom line. "The group delivered a robust financial performance in the third quarter of 2024, with growth in income alongside continued cost discipline and strong asset quality. Our performance allows us confidently to reaffirm our 2024 guidance," Chief Executive Charlie Nunn said. For the full-year, it still expects a banking net interest margin "of greater than 290 basis points". For the third-quarter, the banking NIM fell 13 basis points on-year to 2.95% from 3.08%.

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Reckitt Benckiser said its third-quarter was in line with guidance, with revenue in its health and hygiene arm improving, though there was a decline in the nutrition division amid "supply-related challenges". The consumer goods firm, with brands such as Air Wick and Dettol in its stable, said net revenue in the third-quarter fell 4.0% on-year to GBP3.46 billion. On a like-for-like basis, it weakened 0.5%. Hygiene revenue fell 1.4% on a reported basis but increased 2.1% like-for-like. Health revenue was down 0.4%, but up 3.2% like-for-like. In Nutrition, which includes the Enfamil baby formula products, revenue slumped 21%, and 17% like-for-like. Nutrition's performance was "primarily impacted by around GBP100 million of supply-related challenges from the Mount Vernon tornado in July, which reflects a better-than-expected recovery of inventories." The firm said it is on track to meet full-year targets. All units are "well placed to deliver strong LFL net revenue growth in Q4". Reckitt unveiled plans for a wide-ranging shake-up back in January. Reckitt plans to focus on a portfolio of 'powerbrands', which it defined as high-growth, high-margin businesses that it thinks have the potential for long-term growth. These include Mucinex, Strepsils, Gaviscon, Nurofen, Lysol, Dettol, Harpic, Finish, Vanish, Durex and Veet. The company plans to sell non-core home care brands including Air Wick, Mortein, Calgon and Cillit Bang. The Times last week Thursday had reported Apollo Global Management, KKR and Clayton, Dubilier & Rice are among the buyout firms mulling a bid for the home care brands porfolio. Reckitt adviser Morgan Stanley had sent possible suitors a "teaser" document, The Times reported.

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Barratt Redrow said it is "beginning to see more stable market conditions" in the housebuilding sector. The company, now in an "exciting new chapter" with the tie-up of Barratt Developments and Redrow now in force, warned it may still take some time for consumer confidence to recover. "Long-term housing market fundamentals continue to reflect a significant imbalance between housing supply and demand. The new government has demonstrated that it is committed to improving the planning system and addressing funding challenges in the affordable housing sector. Whilst these supply-side reforms will also take some time to be fully implemented, we are confident that they will help to unlock permissioned land supply and the delivery of more high-quality, sustainable homes across the country," the company said. The outlook for the standalone Barratt operations are unchanged. It expects annual home completions there, including joint-ventures, between 13,000 and 13,500. For the whole Barratt Redrow group, completions are expected to be between 16,600 and 17,200. Its financial year ends in June.

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WPP backed guidance after a third-quarter revenue rise, though it cautioned on a tough comparative and tricky market conditions for the final stretch of the year. Third-quarter revenue rose 1.4% on-year to GBP3.56 billion, the advertising firm said. Excluding pass-through costs, however, revenue fell 2.6% to GBP2.77 billion. It won deals with the likes of Amazon, Unilever and Starbucks during the quarter. For the whole of 2024, it still expects like-for-like revenue, excluding pass-though costs, outcome ranging from a 1% fall to flat from 2023. It said the fourth-quarter is "facing a tougher comparative" than the third, as well as "macro uncertainty".

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The EU on Tuesday said it has conditionally approved British sports fashion retailer JD Sports Fashion's EUR520-million bid for French peer Courir. JD Sports first announced its plans in May last year as it pursued expansion in Europe and North America. The European Commission, the EU's antitrust regulator, gave the green light for the purchase after the companies offered commitments to address the bloc's concerns. The remedies offered include divesting all Courir stores in Portugal and several shops in certain parts of France to Snipes, a "direct competitor" in the leisure sports goods market, the commission said. "We had concerns that the acquisition of Courir by JD Sports could affect the retail markets for sports footwear in France and Portugal," EU competition chief Margrethe Vestager said in a statement. "The divestiture of certain Courir stores to Snipes will preserve competition in these markets, to the benefit of consumers in terms of prices, quality and choice," she added.

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COMPANIES - FTSE 250

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Watches of Switzerland Group has faced a call to shift its primary listing to New York, in a move which mean it exits the FTSE 250 index. Gatemore Capital Management, though impressed with the "track record" of the luxury watches seller, believes it must move its primary listing to New York to "fully unlock the value of its stock". Gatemore in September said it owned 1.9 million WoSG shares, which would equate to a roughly 0.8% stake. Gatemore said on Wednesday: "In order for WOSG to fully unlock the value of its stock, we are now calling for the company to move its primary listing to the US, a key growth market around which WOSG is already pursuing an ambitious growth strategy. As a result of this, we expect WOSG to generate the majority of its future revenues from the US market; now is the time for this listing change."

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British Land said it has made its chief operating officer its new finance chief, with effect next month. David Walker, who currently does not sit on the property firm's board, will take up a seat when he becomes CFO on November 20. As COO, he is on British Land's executive committee. British Land said: "David joined British Land in 2017. He qualified as a Chartered Accountant with PwC, before spending over seven years in various roles within the Corporate Finance division at Deutsche Bank. After that, he worked for over 10 years in investor relations, strategy, finance and corporate development roles within UK listed businesses." Walker replaces Bhavesh Mistry, who was named as the next CFO of DIY retailer and B&Q owner Kingfisher back in June. Mistry will step down from the British Land board and his CFO position there next month. Kingfisher in June said Bernard Bot, its current finance chief, will step down no earlier than January. It is yet to announce an exact start date for Mistry.

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The UK's competition watchdog is probing whether brewer Carlsberg's planned buy of Britvic will "result in a substantial lessening of competition". Britvic, behind drinks brands Robinsons, J2O and Tango, accepted a GBP3.3 billion takeover approach from Copenhagen-based Carlsberg back in July. The CMA said it has launched its merger inquiry and has until December 18 to make a phase one decision.

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OTHER COMPANIES

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Gem Diamonds said its revenue rose in the third-quarter as it sold more carats. Revenue in the third-quarter rose 23% to USD42.7 million from USD34.8 million in the second-quarter. It said 26,617 carats were sold during the period, up from 24,422 carats in the second. "Six diamonds sold for more than USD1.0 million each, contributing USD22.6 million to the revenue for the period," the diamond miner in Lesotho and Botswana said.

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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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