10th Oct 2024 07:48
(Alliance News) - The FTSE 100 is called to open higher on Thursday, as eyes turn to US inflation data later, while a supportive move by the People's Bank of China lifted shares in Hong Kong and Shanghai.
"Even though the Fed members' shifted their attention from inflation to jobs, inflation is still important," Swissquote analyst Ipek Ozkardeskaya commented.
"As some Fed members say, the risks are probably roughly 'in balance' right now. That means that any uptick in US inflation could reshuffle the Fed expectations, and the market pricing attached to them."
Thursday's data is expected to show the pace of yearly consumer price inflation in the US abated to 2.3% last month, from 2.5% in August.
China's central bank boosted support for markets Thursday by opening up tens of billions of dollars in liquidity for firms to buy stocks as part of a raft of measures by Beijing to kickstart the country's flagging economy.
The People's Bank of China fleshed out plans to encourage "the healthy and stable development of the capital market" by opening up a "swap facility" worth CNY500 billion, some USD70.6 billion, that will allow firms to access cash to buy stocks.
In early UK corporate news, Segro's effort to acquire Tritax EuroBox was scuppered by Brookfield, while Volution reported growth in annual earnings.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.3% at 8,264.14
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Hang Seng: up 3.2% at 21,302.51
Nikkei 225: up 0.3% at 39,380.89
S&P/ASX 200: up 0.4% at 8,223.00
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DJIA: closed up 431.63 points, 1.0%, at 42,512.00
S&P 500: closed up 0.7% to 5,792.04
Nasdaq Composite: closed up 0.6% at 18,291.62
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EUR: lower at USD1.0941 (USD1.0948)
GBP: lower at USD1.3078 (USD1.3080)
USD: lower at JPY149.12 (JPY149.23)
GOLD: lower at USD2,613.22 per ounce (USD2,613.66)
(Brent): higher at USD76.87 a barrel (USD76.54)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
11:00 BST Ireland CPI
13:30 BST US CPI
13:30 BST US initial jobless claims
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UK Chancellor Rachel Reeves may need to raise up to GBP25 billion from tax increases if she wants to keep spending rising with national income, the Institute for Fiscal Studies estimates. Even if the chancellor changes the debt rule she inherited from the Tories, this would do "almost nothing" to ease the challenge on public service funding, the IFS said as it released its Green Budget report. Because of her promise to meet day-to-day spending out of revenues, Reeves would still need to turn to tax rises to avoid spending cuts and meet her pledge to borrow only to invest. IFS Director Paul Johnson said Reeves' first budget, which she will deliver on October 30, could be "the most consequential since at least 2010". The report, funded by the Nuffield Foundation and using economic forecasting by Citi, analysed the challenges facing the chancellor. In a scenario modelled by Citi, the report concluded that if there are no cuts to spending outside of public services, Reeves would need a tax rise of GBP16 billion to remain on course to balance the budget in 2028-29. This would be on top of the GBP9 billion tax rise from measures set out in Labour's manifesto – adding up to almost GBP25 billion in total.
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House prices are rising across the UK generally for the first time in two years as the market continues to pick up, surveyors have reported. A balance of 16% of professionals reported prices increasing in September, up from a flat 0% result in August and the first positive reading since October 2022. Demand, sales, and new listings all grew in September, the Royal Institution of Chartered Surveyors said. A net balance of 14% of property professionals saw demand from buyers rise rather than fall in September. An overall balance of 5% saw sales increase rather than decrease, with a balance of 23% expecting further rises in the next three months and 45% predicting an increase over the next 12 months. A balance of 22% of professionals reported a rise in new listings. The report also noted that speculation over a potential increase in capital gains tax was cited as encouraging some people to list their properties for sale.
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Irish premier Simon Harris said he made Ireland's position on the Middle East conflict "very clear" when he met US President Joe Biden. Biden hosted Harris at the Oval Office for just under an hour on Wednesday. The taoiseach had previously said the US and other countries should consider what more it can do to bring about a cessation of hostilities – including the supply of arms. While condemning Hamas' attacks in October last year, Harris also criticised Israel's response as "utterly disproportionate". In addition, Biden and Harris' meeting included consideration of the war in Ukraine. The leaders also discussed legacy issues in Northern Ireland, the reset in relations between the UK and Ireland as well as the hurricane hitting Florida. The bilateral meeting is the centrepiece of a series of engagements in Washington DC to mark 100 years of Irish-US diplomatic relations. The US was the first country to recognise and establish diplomatic relations with the Irish Free State in 1924.
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BROKER RATING CHANGES
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JPMorgan cuts Anglo American to 'neutral' (overweight) - price target 2,335 (2,285) - pence
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Barclays raises Premier Foods to 'overweight' (equal-weight) - price target 207 (143) - pence
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COMPANIES - FTSE 100
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GSK agreed to pay up to USD2.2 billion to settle the vast majority of cases linked to its heartburn medicine Zantac. In a statement on Wednesday, the London-based pharmaceuticals firm said that it had reached agreements with 10 plaintiff firms representing around 80,000 people who had brought product liability cases against it in state courts, 93% of all claimants. GSK did not accept any liability. GSK said the participating plaintiff firms are unanimously recommending to their clients that they accept the terms of the settlement, which is expected to be fully implemented by the end of the first half of 2025. Terms of the agreements are confidential. GSK said the settlements are in the best long-term interests of the company and remove "significant financial uncertainty, risk and distraction associated with protracted litigation." GSK also confirmed that it has reached an agreement in principle to pay a total of USD70 million to resolve the Zantac qui tam complaint previously filed by Valisure. The firm expects to recognise a charge of GBP1.8 billion in its third quarter results to include the settlements and the remaining 7% of pending state court product liability cases, partially offset by expected reduced future legal costs.
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COMPANIES - FTSE 250
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Tritax EuroBox withdrew its backing for a takeover offer by FTSE 100-listed industrial property investor Segro and instead supported a chunkier bid by private equity firm Brookfield. Brookfield will pay 69.0 pence in cash for Tritax Eurobox, a 6% premium to the implied 65.1p value of the Segro offer, based on the latter's closing price on Wednesday. The Brookfield bid values Tritax EuroBox at GBP557 million on a fully-diluted basis. The enterprise value, including debt, is GBP1.10 billion. At the time the Segro bid was agreed in early-September, that offer valued Tritax EuroBox at GBP552 million on a fully-diluted basis and GBP1.10 billion on an enterprise basis. Under the Segro offer, investors in distribution centre investor Tritax EuroBox would have received 0.0765 of a new Segro for every one held in Tritax EuroBox. However, the Brookfield bid is a cash offer. Tritax EuroBox noted "the scope for the implied value of the Segro offer to increase or decrease between now and completion, as compared to a fixed cash amount from Brookfield". "While the deliverability of the two offers is now similar, a cash offer from Brookfield would provide increased certainty for Tritax EuroBox shareholders as compared to continued market risk between now and completion for the Segro offer," Tritax EuroBox said. "Accordingly, the Tritax EuroBox directors have withdrawn their recommendation that Tritax EuroBox shareholders vote in favour of the Segro offer." The Brookfield offer will come from newly-formed company Titanium Ruth Bidco, which is indirectly owned by one of Brookfield's real estate private funds.
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Volution Group reported an increase in annual earnings, and it has "confidence" it can achieve another strong year. Revenue in the year ended July 31 rose 6.0% to GBP347.6 million from GBP328.0 million a year prior. Pretax profit shot up 16% to GBP56.6 million from GBP48.8 million. Volution, a designer and manufacturer of energy efficient indoor air quality solutions, raised its final dividend by 13% to 6.2 pence per share from 5.50p. Its total dividend for the year is 9.0p, also up 13%, from 8.0p. Chief Executive Officer Ronnie George said: "Volution has delivered another strong set of results and made further good progress against our strategic and financial priorities in the year that we celebrated our tenth year as a listed company. I am incredibly proud of how, during this time, we have moved from being a largely UK centric ventilation leader to having a broad-based presence across the UK, Continental European and Australasian ventilation markets." The CEO continued: "The new financial year has started as anticipated, with both revenue and adjusted operating profit ahead of the same period last year. Also, in an exciting post year-end development, we have announced an agreement to acquire Fantech's ventilation activities in Australia and New Zealand, which would represent our largest acquisition to date by some considerable distance. This, along with the momentum we have across many parts of the business, provides the board with confidence of another year of good progress across the group."
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Auction Technology Group said it expects to report an increase in annual revenue, though it noted "headwinds" in end markets have persisted. The auction market operator and technology company expects to report a 5% revenue increase to USD174 million for the year ended September 30. The company said: "ATG has continued to make good progress against its strategic initiatives, including growing the adoption of value-added services and rolling out our cross-listing product, atgXL. Encouragingly, [gross merchandise value] has demonstrated significantly improved momentum in the second half of FY24." However, it cautioned that GMV "is still slightly negative year-over-year". ATG added: "Headwinds in the underlying end markets have yet to reverse." ATG reports annual results on November 27. The firm also announced Tom Hargreaves is to step down as chief financial officer to take up a role in a "private equity-backed company" Hargreaves is to stay at ATG until "early next year in order to ensure a smooth transition". The FTSE 250 listing said it has kicked off a search to find a new CFO.
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OTHER COMPANIES
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Kitchen and bathroom products supplier Norcros expects annual results in line with expectations, despite "ongoing challenging market conditions". For the half-year ended September 29, it expects to report a revenue decline of around 7% to GBP188 million from GBP201.6 million a year earlier. On a like-for-like basis at constant currency, revenue is expected to be flat on-year. "Our in-house product design and development capabilities, excellent customer service and the ongoing implementation of our strategy have ensured that we continue to grow market share and are well placed to capitalise on our position as the market recovers," Norcros said. "The board remains confident that our market leading positions and strategy implementation will continue to deliver market share gains for the year ending 31 March 2025. Despite the ongoing challenging market conditions, the board expects full year underlying operating profit to be in line with market expectations and to show further progress towards our medium-term targets." Norcros puts underlying operating profit consensus for the full-year at GBP43.2 million.
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Extracts and ingredients manufacturer Treatt expects to report annual revenue growth, helped by "strong China regional growth". Revenue of GBP155.2 million is expected for the year ended September 30, up 5% from GBP147.4 million. Pretax profit before exceptional items of GBP18.8 million is predicted, a rise of 9% from GBP17.3 million. It would be an outcome in line with board expectations. "We are particularly pleased with the H2 sales momentum, with 16% sales growth led by improved Heritage and strong China regional growth," Treatt said. The Heritage division, which includes citrus, synthetic aromas and herb, spices & florals, had revenue rise 10% in the full-year to GBP105.7 million, Treatt added. In the New Market segment, revenue fell 9%, "as expected", to GBP14.7 million. This was largely down to the performance of its coffee offering. New Market also includes China, where revenue rose 27% over the course of the full-year.
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By Eric Cunha, Alliance News news editor
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