21st Feb 2025 07:51
(Alliance News) - London's FTSE 100 is set for a tepid open, continuing a rough week for the blue-chip benchmark, and following the lead of US stocks which fell overnight.
Chinese technology shares rallied, with Alibaba leading the way on strong earnings. The stock jumped 14%.
The yen was weaker despite accelerating inflation in Japan, meanwhile.
For the FTSE 100, it looks set to be an underwhelming end to an uninspiring week. It has lost 0.8% so far this week, falling every day bar Monday.
In focus in Europe will be flash purchasing managers' index readings.
Pepperstone analyst Michael Brown commented: "It's tough to imagine the figures telling us much we don't already know – the eurozone economy continues to rebound very modestly, the UK economy continues to lose momentum, and the US economy continues to outperform peers."
Already out, UK retail sales topped expectations at the start of the year, numbers from the Office for National Statistics showed.
Retail sales volumes surged by 1.7% in January from December, well-ahead of the FXStreet cited consensus of 0.3%. In December, retail sales had fallen 0.6%, the reading downwardly revised from 0.3%.
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 8,655.07
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Hang Seng: up 3.8% at 23,426.36
Nikkei 225: up 0.3% at 38,776.94
S&P/ASX 200: down 0.3% at 8,296.20
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DJIA: closed down 450.94 points, 1.0%, at 44,176.65
S&P 500: closed down 0.4% at 6,117.52
Nasdaq Composite: closed down 0.5% at 19,962.36
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EUR: higher at USD1.0497 (USD1.0470)
GBP: higher at USD1.2675 (USD1.2638)
USD: higher at JPY150.56 (JPY149.64)
GOLD: lower at USD2,931.20 per ounce (USD2,945.48)
OIL (Brent): lower at USD76.24 a barrel (USD76.83)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
09:00 GMT eurozone flash composite PMI
08:30 GMT Germany flash composite PMI
11:00 GMT Ireland wholesale prices
09:30 GMT UK flash composite PMI
14:45 GMT US flash composite PMI
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The UK notched up a record government borrowing surplus in January thanks largely to self-assessed tax returns, according to official figures. The Office for National Statistics said there was a public sector net borrowing surplus of GBP15.44 billion last month. It is more than the surplus of GBP14.69 billion seen a year ago and is the largest since monthly records began in 1993. The government typically sees a budget surplus – which takes place when tax revenue received is larger than government spending – in January thanks to self-assessment tax payments. The figures come as Chancellor Rachel Reeves prepares to deliver the spring spending statement in March. The surplus was boosted by lower debt repayment costs for the Treasury, after the retail price index, a measure of inflation, showed a smaller-than-forecast rise. However, the ONS said spending on public services, benefits and debt interest all increased since January 2024. ONS deputy director for public sector finances Jessica Barnaby said: "While the public finances are often in surplus in January, this year saw the biggest monthly surplus on record, with high January self-assessment receipts bolstering income. "However, over the financial year to date as a whole, borrowing was still up on last year and was the fourth-highest on record for the year to date." Chief Secretary to the Treasury Darren Jones said the government is "committed to delivering economic stability and meeting our non-negotiable fiscal rules".
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The UK population remains pessimistic about the current economic climate although sentiments are improving according to research carried out by GfK. The UK consumer confidence index remained in negative territory as it edged up to minus 20 in February from minus 22 in January. No change from the previous month was expected according to FXStreet-cited consensus. Meanwhile, the personal financial situation index covering the past 12 months improved to minus 7 in February from minus 10 in the previous month. The general economic situation index also improved to minus 44 from minus 46 over the same period. Neil Bellamy, consumer insights director at NIQ GfK, said: "The Bank of England interest rate cut on February 6th will have brightened the mood for some people, but the majority are still struggling with a cost-of-living crisis that is far from over. Prices are still rising above the Bank of England's target; gas and electricity bills remain a challenge for many households. So, it's no surprise that consumer views on the general economic situation are still lower than 12 months ago, suggesting that people don't expect the economy to show any dramatic signs of improvement soon." The indices are calculated by market research firm GfK as part of the UK Consumer Confidence Barometer using responses to a monthly survey of individuals aged 16 and above from a representative sample of the population.
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The UK job market showed signs of recovery in January, with active job postings rising for the first time since June 2024, according to the latest labour market tracker from the Recruitment & Employment Confederation and Lightcast. The number of active job postings increased by 7.2% from December to 1.5 million, while new job postings surged about 34% to 738,040, a stronger rebound than the 28% rise recorded in January 2024. The data suggests employers are returning to the job market despite ongoing economic challenges. Every region in the UK saw an increase in job postings, with the East Midlands recording the highest rise at 12%, while London had the smallest increase at 3.4%. REC Deputy Chief Executive Kate Shoesmith said the figures indicate it is "too soon for gloom" regarding the UK's economic outlook in 2025. "[The] increase in new jobs signals a solid rebound in demand, showing that businesses remain resilient, despite both domestic and international headwinds. We will look closely in the coming months to see if we are looking at a broader turn", she says. However, she cautioned that fiscal uncertainty, rising national insurance costs, and potential regulatory changes could still weigh on employer confidence. "The government's increased focus on economic growth is encouraging, but fostering business confidence requires tangible actions, not just rhetoric.
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BROKER RATING CHANGES
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RBC cuts Conduit Holdings to 'sector perform' - price target 425 (575) pence
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RBC raises Bank of Ireland to 'outperform' - price target 11.75 (9) EUR
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COMPANIES - FTSE 100
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Standard Chartered reported annual earnings growth and the lender announced a new share buyback. Relative to consensus, numbers were mixed. For 2024, StanChart's reported pretax profit increased 18% to USD6.01 billion from USD5.09 billion. Reported operating income increased 8.5% to USD19.54 billion from USD18.02 billion. Underlying operating income rose 13% to USD19.70 billion from USD17.38 billion. Underlying operating income beat consensus of USD19.32 billion, though pretax profit fell short of the market view of USD6.20 billion. Fourth-quarter underlying operating income rose 20% on-year to USD4.83 billion from USD4.02 billion. Pretax profit fell 30% to USD800 million from USD1.14 billion. Hurting its quarterly bottom line was the non-repeat of a USD262 million gain on the sale of its Aviation Finance business reported a year prior. Quarterly underlying operating income beat consensus of USD4.46 billion, pretax profit fell short of a USD983 million forecast. Underlying pretax profit before impairment rose 34% to USD1.56 billion from USD1.16 billion, beating consensus of USD1.36 billion. "We produced strong results in 2023, continuing to demonstrate the value of our franchise and delivering our financial objective of a 10% RoTE for the year. We will now build on this success, taking action to deliver sustainably higher returns with a focus on driving income growth and improving operational leverage and targeting 12% RoTE in 2026," CEO Bill Winters said. StanChart announced a USD1.5 billion share buyback and a 28 cents final dividend. It brought its total dividend 37 cents, up 37%. Its final dividend was raised by a third from 21 cents.
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The UK Competition & Markets Authority fined four banks a total of over GBP100 million as a separate cases related to UK government bonds were settled. HSBC, Citi, Morgan Stanley and Royal Bank of Canada will pay fines totalling GBP104.5 million. The banks agreed to pay the fines for "specific instances in which traders shared competitively sensitive information about aspects of the pricing of UK bonds". "The sharing of information occurred in one-to-one exchanges between traders about the buying and selling of gilts and gilt asset swaps. This conduct took place on various dates between 2009-2013, with the last exchanges occurring in 2010 for HSBC, 2012 for Morgan Stanley, and 2013 for each of Citi, Deutsche Bank and Royal Bank of Canada. Since then, the banks have implemented extensive compliance measures to ensure this behaviour does not happen again," the CMA said. Deutsche Bank has immunity for reporting its conduct, the CMA explained. Traders at each bank had "private one-to-one Bloomberg chatrooms in which they shared sensitive information relating to buying and selling gilts", the CMA said. HSBC will pay GBP23.4 million. Citi has the most lenient fine at GBP17.2 million. It had applied for leniency. RBC pays the chunkiest fine at GBP34.2 million. Morgan Stanley is to pay GBP29.7 million.
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COMPANIES - FTSE 250
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Frasers shortly before the market close on Thursday said it will not be pursuing a move to acquire all of Norway's XXL. The Shirebrook, England-based owner of multiple retailers, including House of Fraser, Sports Direct and Flannels, in December launched a voluntary offer to acquire the shares in the sporting goods retailer it does not already own. Frasers explained: "It will not proceed with the intended offer on the basis that the condition requiring acceptance of the Intended Offer by a sufficient number of shareholders to ensure that Frasers would hold more than 50% of XXL's shares and votes on a fully diluted and converted basis would not be satisfied." Frasers is already the second-largest shareholder in XXL, owning around 26% of share capital in the Oslo-based firm. Frasers Group's voluntary offer was to purchase the remaining shares for NOK10 each. The proposal valued XXL at approximately NOK246.4 million, some GBP17.5 million.
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OTHER COMPANIES
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Videndum said it is seeing signs that the "direction of travel is for improved strength". The provider of hardware and software for broadcasters, film studios and other media content creators said a February covenant test with lenders has been waived. However, it said March waiver is needed as it will not meet that test. "An amendment or waiver of the March 2025 covenant will be required as the performance in H2 FY24 was weaker than that anticipated in the H1 FY24 results announcement," it affirmed. "The work required to refinance the revolving credit facility, set to expire in August 2026, continues and our lending banks remain supportive of the company." Videndum said it has begun additional restructuring initiatives including the planned transfer of manufacturing operations from Bury St Edmunds to Feltre in Italy. "This is part of our ongoing operational efficiency programme, which is continuing at pace, with employee and union agreements necessary to deliver the planned savings now in place. As a result of the additional initiatives, we have increased our 2025 cost-saving target of GBP15 million, from GBP10 million previously. These costs are primarily structural in nature and not expected to return as volumes rise. The associated cash restructuring costs related to announced initiatives is now expected to be GBP15 million, of which GBP3 million was incurred in FY24. The measures we are taking are positioning Videndum for a strong recovery and expanding margins," it explained. Executive Chair Stephen Harris said: "The gradual improvement in our markets has continued. We are seeing improving signs, particularly in cine and broadcast, in terms of quantity and quality of projects and enquiries. These should start turning into stronger order momentum once we get past the traditional doldrums of January and early February. While we are not planning on a strong uptick in orders and revenues as we drive the business forward, we are gaining increasing confidence that the direction of travel is for improved strength in revenues as we move through the year. There is still work to do, but I am confident that we are on the right path - building a stronger business, well positioned to capitalise on the market recovery."
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Poolbeg Pharma said it is "surprised and disappointed" by a suitor opting against making a bid for the company. Hookipa Pharma said Thursday it is not going ahead with a bid for the clinical stage biopharmaceutical firm. In a brief statement regarding a possible combination between the two firms, the US-listed biopharmaceutical company said "it does not intend to make an offer for Poolbeg." "Non-binding" and "non-exclusive" talks between the two firms were announced in early January. Under the proposed terms announced in January, shareholders in Poolbeg, the London-based clinical stage biopharmaceutical firm, would have received 0.03 Hookipa shares for each Poolbeg share. Poolbeg Executive Chair Cathal Friel said Friday: "We were surprised and disappointed to hear of HOOKIPA's decision to withdraw from the combination discussions. Throughout this process, we have seen strong interest in the potential of POLB 001 and we continue to be focused on maximising the potential of our in-house programmes and exploring new opportunities to generate value for our shareholders."
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Savannah Resources said it can resume fieldwork for the drilling campaign at the Barroso lithium project in Portugal. Savannah said it has received a "reasoned resolution" from the Portuguese government. This was after Savannah announced earlier this month it was forced to temporarily stop work on land it had been given temporary access due to legal action. A precautionary measure had been filed at the Administrative & Fiscal Court of Mirandela in northeastern Portugal by three local landowners against the Portuguese Ministry for the Environment & Energy. "The company will seek to make up the time lost during this unwanted two-week stoppage over the remainder of the programme," Savannah Resources said. "Savannah is pleased that its previously stated expectation of being able to return to the field promptly has now been met."
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Litigation Capital Management said a class action case it has funded was not successful. The litigation financing firm, which funded the action on behalf of shareholders in Quintis, noted there is a right of appeal. Quintis operated an extensive plantation of Indian sandalwood trees in northern Australia. A judgement found that a former director of Quintis and its auditors Ernst & Young "engaged in misleading and deceptive conduct in relation to the financial statements issued by Quintis". However, the judgement stated that LCM's funded party "failed to establish that this misleading and deceptive conduct caused them loss and damage and was therefore unsuccessful". "There is a right of appeal from the judgment which must be filed within 28 days of final orders being made (which has not yet occurred). LCM is considering the Judgment with the legal team and the merits of any appeal," LCM added. The firm said it invested AUD13.2 million, around GBP6.7 million, of its own balance sheet coffers into the case. "LCM has a policy of insurance in place providing an indemnity in relation to the adverse costs exposure of this claim," it said.
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By Eric Cunha, Alliance News news editor
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