11th May 2023 07:53
(Alliance News) - London FTSE 100 index was called to open higher on Thursday, recovering some of its 0.6% loss for the week so far, as investors digest inflation readings from the US and China and look ahead to the Bank of England's interest rate decision at midday.
Threadneedle Street is expected to lift UK interest rates by 25 basis points on Thursday, but attention will be on whether it guides for more hikes in meetings ahead, or suggests a pause is coming.
The expected quarter-point hike would take the benchmark rate to 4.50%. The announcement at 1200 BST is followed by a press conference with Governor Andrew Bailey at 1230 BST.
Indications about where bank rate goes thereafter will be closely scrutinised, particularly in light of the Federal Reserve last week strongly hinting a hike pause.
Inflation in the US is running around half as hot as in the UK, however. It slowed to 4.9% in April from 5.0% in March, according to data released on Wednesday. In the UK in March, inflation was 10.1%.
"In view of continued high inflation rates in the UK the market assumes that the Bank of England will hike its key rate by a further 75bp until the summer, including today's step. That means at today's BoE meeting it will likely be less the step itself that will be decisive for sterling, as it is priced in, but instead the voting patterns amongst the committee members and possible indications as to its future monetary policy," Commerzbank analyst Antje Praefcke commented.
In early UK corporate news, Vodafone said it has struck an operating agreement that reinforces Emirates Telecommunications Group as a key shareholder. Jet engine maker Rolls-Royce maintained guidance.
Here is what you need to know at the London market open:
FTSE 100: called up 0.2% at 7,754.03
Hang Seng: down 0.7% at 19,618.13
Nikkei 225: flat at 29,126.72
S&P/ASX 200: down 0.1% at 7,251.90
DJIA: closed down 30.48 points, 0.1%, at 33,531.33
S&P 500: closed up 0.5% at 4,137.64
Nasdaq Composite: closed up 1.0% at 12,306.44
EUR: down at USD1.0955 (USD1.0975)
GBP: down at USD1.2609 (USD1.2620)
USD: down at JPY134.21 (JPY134.48)
GOLD: higher at USD2,031.42 per ounce (USD2,023.42)
(Brent): unchanged at USD76.85 a barrel
(changes since previous London equities close)
Thursday's key economic events still to come:
11:00 BST Ireland consumer price index
12:00 BST UK BoE interest rate decision
13:30 BST US producer price index
13:30 BST US initial jobless claims
The average price paid for motor insurance in the UK jumped by 16% annually in the first quarter of this year, as rising costs have become increasingly challenging for insurers to absorb, according to the Association of British Insurers. Motorists typically paid GBP478 for private comprehensive cover in the first three months of 2023, which was a 2% increase compared with the previous quarter and the highest figure recorded since premiums cost GBP483 on average in the final quarter of 2019. The ABI said insurers have been facing above-inflation cost increases, but they are doing all they can to offer competitive deals. Energy charges, paint prices and courtesy car costs are among the outgoings which are pushing up the cost of repairs, while the price of second hand cars has also jumped, the ABI added.
Inflation in China ebbed to a more than two-year low, according to figures from the National Bureau of Statistics. Consumer prices grew just 0.1% on-year in April, slowing from a 0.7% climb in March and falling short of FXStreet cited consensus of a 0.3% rise. It was the tamest annual inflation rate since consumer prices fell 0.2% year-on-year in February 2021. On a monthly basis, consumer prices fell 0.1% in April, after declining 0.3% in March from February. The outcome was shy of consensus, which had predicted prices to be flat monthly, according to FXStreet. The inflation readings may boost the case for fiscal policy stimulus. On Tuesday, trade data suggested demand in China is on precarious footing, despite Covid-19 curbs being eased recently. Imports slid last month, while growth in exports slowed. Imports fell much more sharply than expected in April, dropping 7.9% year-on-year, compared with a 1.4% decline in March. Analysts polled by Bloomberg had expected imports to decline by 0.2%.
BROKER RATING CHANGES
Barclays raises Compass price target to 2,300 (2,150) pence - 'overweight'
Jefferies raises Diploma to 'buy' (hold) - price target 795 (785) pence
COMPANIES - FTSE 100
Vodafone said it has struck a deal Emirates Telecommunications Group, or e&, which reinforces e& as a "cornerstone shareholder" in the London-listed telecommunications operator. "This is the next phase in a strategic relationship that began in May 2022, when e& made its original investment in Vodafone," the company said. The deal will see the duo explore jointly offering cross-border digital services, mull adopting joint procurement, and work together to become "the partner of choice in providing access to high-quality digital infrastructure". They also will work together on adopting new technology. As long as e& maintains its stake of just under 15% in Vodafone, e& Chief Executive Hatem Dowidar will join the Vodafone board. If e& boosts its stake to above 20%, it can nominate a second non-executive director who is independent of e&. Vodafone CEO Margherita Della Valle said: "We know e& well, and I'm delighted we have strengthened our existing relationship through this strategic partnership. This closer alignment allows us to capture opportunities in our respective markets and brings additional telecoms experience to our board."
Rolls-Royce backed annual guidance and said its transformation under new CEO Tufan Erginbilgic "is moving at pace". Its performance in the four months ended April was "in line with our expectations". Rolls-Royce backed its underlying operating profit guidance range of GBP800 million to GBP1.0 billion for the full-year, and maintained its free cash flow guidance of GBP600 million to GBP800 million. In Civil Aerospace, it said it has continued to win new deals, though it added "supply chain management remains a key operational challenge" in the unit in particular. Power Systems has enjoyed revenue growth, "driven by demand for aftermarket services and exceptionally high order intake in the prior year". "In Defence, we continued our successful run of key programme awards with the announcement that the AUKUS submarine programme will be powered by Rolls-Royce nuclear reactors," Rolls-Royce said. The company added: "Work on the transformation programme is moving at pace. Our increased focus on efficiency and simplification is helping to keep costs down and has already identified savings."
COMPANIES - FTSE 250
Television broadcaster ITV said it performed in line with expectations in the first quarter of 2023, though revenue fell amid a weaker advertising market. Total revenue was down around 7.0% to GBP776 million from GBP834 million a year earlier. Total ITV Studios revenue was flat on-year at GBP457 million, while in ITV Media & Entertainment, it fell some 9.2% to GBP495 million. Total advertising revenue fell 10%, as expected, in an outcome the company said bettered "the wider TV advertising market". Chief Executive Carolyn McCall said: "We are looking forward to Q3 with Love Island and the Rugby World Cup set to draw large broadcast and streaming audiences." ITV M&E houses the new ITVX streaming arm. "We are further strengthening ITVX with must-see content, such as Malpractice, Crime and Love and Death, and further enhancing the user experience. This, together with our deep relationships with advertisers and strong demand for digital advertising through Planet V, continues to give us confidence that we will deliver at least GBP750 million of digital revenues by 2026," the company said.
Advertising company S4 Capital reported improved first-quarter revenue in a "solid start to the year". Net revenue in three months to March 31 climbed 29% to GBP219.1 million from GBP171.1 million. The Americas region led the charge, with revenue climbing 39% to GBP173.6 million. Europe, Middle East & Africa revenue fell 0.9% and in Asia Pacific, it declined 5.9%. "We have had a solid start to the year, with net revenue rising 7%, while maintaining a focus on balancing growth in net revenue with costs, which is reflected in our people numbers remaining almost constant," Executive Chair Martin Sorrell said. "We remain cautiously optimistic for the rest of the year, despite a slowdown of forecast growth rates in our two major addressable markets." S4 backed its net revenue growth guidance of 8% to 12%. Sorrell also gave a nod to artificial intelligence, technology which has attracted much attention in recent months. Sorrell said: "It is very early days, and the world is not even in the foothills of exploration and development, but this new industrial revolution is already set to have a major impact on productivity and the patterns of employment. We are immediately seeing positive impact in four areas - use of AI as a superpower or supertool to improve our people's effectiveness; speeding up the creation of advertising content through faster copywriting and visualisation; hyperpersonalisation at scale providing more empathetic advertising assets; and improved media planning and buying, particularly in digital improving targeting and optimisation and catering to client concerns around TV frequency capping and reach."
By Eric Cunha, Alliance News news editor
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