31st May 2023 07:58
(Alliance News) - Stocks in London were called to open down on Wednesday, as the US government edges closer to its debt ceiling deadline and after some weak manufacturing data in China.
A deal to raise the US debt ceiling passed its first major test in Congress on Tuesday, surviving a crucial procedural vote amid a conservative backlash that resurrected the threat of the country's first-ever default.
US political leaders scrambled to push through legislation to suspend the national debt limit and avert economic catastrophe as a growing conservative backlash threatened to sink the deal at its first major hurdle.
Congress has until Monday next week to green-light an agreement between Republicans and Democrats to allow more borrowing and ensure the country doesn't miss loan repayments and default for the first time in history.
The 99-page 'Fiscal Responsibility Act' - hammered out between Republican House Speaker Kevin McCarthy and Democratic President Joe Biden over the weekend - pares back federal spending and raises the debt ceiling until 2025.
It needs lawmakers' support at a crucial vote Wednesday in the House of Representatives, and cleared a preliminary hurdle Tuesday, as the Rules Committee prepared it for a floor debate.
In early corporate news in London, Prudential promoted Ben Bulmer to chief financial officer, as James Turner left the company immediately over a code of conduct breach. B&M European Value Retail lowered its full-year dividend, as profit fell.
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 0.6% at 7,479.70
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Hang Seng: down 2.7% at 18,093.12
Nikkei 225: closed down 1.4% at 30,887.88
S&P/ASX 200: closed down 1.6% at 7,091.30
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DJIA: closed down 50.56 points, or 0.2%, to 33,042.78
S&P 500: closed up 0.07 of a point at 4,205.52
Nasdaq Composite: closed up 41.74 points, 0.3%, at 13,017.43
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EUR: down at USD1.0686 (USD1.0721)
GBP: down at USD1.2378 (USD1.2404)
USD: down at JPY139.54 (JPY139.74)
Gold: up at USD1,961.13 per ounce (USD1,960.99)
(Brent): down at USD73.47 a barrel (USD74.30)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
09:55 CEST Germany labour market statistics
14:00 CEST Germany consumer price index
11:00 IST Ireland unemployment
07:00 EDT US MBA mortgage applications survey
08:55 EDT US Johnson Redbook retail sales index
09:45 EDT US ISM-Chicago business survey
10:00 EDT US labor turnover survey
14:00 EDT US Federal Reserve Beige Book
16:30 EDT US API weekly statistical bulletin
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China's manufacturing activity shrank in May for the second successive month, official figures showed, the latest sign that the country's economic recovery is losing steam. The official manufacturing purchasing managers' index fell to 48.8 this month, below the 50-point mark that separates expansion and contraction, according to the National Bureau of Statistics. The figure followed an unexpected fall to 49.2 in April, which reversed three consecutive months of growth. It was lower than the median estimate of 49.5 in a Bloomberg survey of economists. The drop "indicates the economic recovery faces challenges", said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. They include a cooling property market and a burgeoning second wave of Covid-19 that has weakened domestic demand, Zhang said.
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The UK's trade deals with Australia and New Zealand came into force at midnight, with special shipments of British goods such as signed Beano comics among the first to be sent under the new arrangements. The agreements are the first trade deals negotiated post-Brexit to enter into force and come after the UK, Australia and New Zealand completed their domestic ratification processes. Under the deals' terms, from Wednesday tariffs on all UK goods exports to Australia and New Zealand will be removed, access to these markets for services unlocked and red tape slashed for digital trade and work visas. Business & Trade Secretary Kemi Badenoch said: "Today is a historic moment as our first trade deals to be negotiated post-Brexit come into effect."
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Rail passengers in the UK are suffering fresh travel disruption because of more strikes in long-running disputes over pay, jobs and conditions. Train companies are warning that services are "severely reduced" because of industrial action by drivers and other workers.Members of the drivers' union Aslef walked out on Wednesday, meaning several operators such as Avanti West Coast, CrossCountry, Northern and Thameslink are running no trains. The Rail, Maritime & Transport union has called a strike on Friday, while another Aslef walk out will take place on Saturday.
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BROKER RATING CHANGES
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Numis cuts 3i Group to 'add' (buy) - price target 2,285 pence
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JPMorgan places British American Tobacco on 'negative catalyst watch'
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COMPANIES - FTSE 100
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Prudential promoted Ben Bulmer as its new CFO. Hong Kong-based Bulmer, currently CFO for Insurance & Asset Management, has served in a variety of leadership positions across the finance function in Asia and London since joining Prudential in 1997. Bulmer succeeds James Turner, who has resigned "in light of an investigation into a code of conduct issue relating to a recent recruitment situation". Turner will remain available to the company for four months to support the transition. "The group sets itself high standards and Mr Turner fell short on this occasion," Prudential said.
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B&M European Value Retail said revenue in the 52 weeks that ended March 25 rose to GBP4.98 billion from GBP4.67 billion a year earlier. However, pretax profit fell to GBP436 million from GBP525 million. B&M recommended a final dividend of 9.6p per share, down from 11.5p. This brings the company's full-year dividend to 14.6p, down from 16.5p. Looking ahead, B&M said it expects to grow sales and profits in financial 2024, despite economic uncertainty.
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According to the latest set of indicative index changes from FTSE Russell, posted last Tuesday, engineering firm IMI is set to replace Ocado in the FTSE 100 in Wednesday's quarterly review. There will also be a handful of departures on the FTSE 250, according to indicative changes. Upstream energy company Capricorn Energy, Africa and South America-focused exploration firm Tullow Oil, and oil and gas industry services provider Hunting are primed to be cut. The index changes will be announced after the market close on Wednesday, based on closing prices on Tuesday.
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COMPANIES - FTSE 250
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Sirius Real Estate said it expects its total dividend for the full year ended March 31, 2023 to be between 5.566 cents and 5.794 cents per share, representing an increase of between 26% and 31% compared to the total dividend of 4.410 cents per share a year earlier. This expected increase is predominantly due to an increase in funds from operations, the company explained
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Bodycote said that trading in the four months ended April 30 has been "modestly" ahead of its expectations. Group revenue for the period was GBP281 million, up 22% at actual rates and 17% higher at constant currency. Looking ahead, guidance for the full-year remains unchanged. In a separate announcement, Bodycote said CEO Stephen Harris has decided to retire next year. Harris joined Bodycote in November 2008 and became CEO in January 2009. A formal process to appoint Harris' successor will now begin.
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OTHER COMPANIES
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Impax Asset Management posted revenue of GBP88.0 million in the half year ended March 31, down from GBP88.6 million a year earlier. Pretax profit fell to GBP28.2 million from GBP34.0 million. However, assets under management rose to GBP40.1 billion from GBP38.0 billion year-on-year. Impax Asset Management explained that this was driven by positive net flows of GBP1.1 billion. It will pay shareholders an interim dividend of 4.7p, unchanged year-on-year. "Although the macroeconomic backdrop remains challenging, the easing of inflationary pressures, due to lower energy prices and the lessening of supply chain disruptions is expected to bring some relief for businesses in the near term," the company said.
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By Sophie Rose, Alliance News reporter
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