22nd Mar 2023 07:55
(Alliance News) - Stocks in London are set to open slightly lower on Wednesday, after UK inflation came in hotter than expected in February.
The consumer price index rose by 10.4% in February from a year before, accelerating from a 10.1% annual rise in January, figures from the Office for National Statistics showed. Market consensus had expected inflation to cool to 9.8% in February, according to FXStreet.
Focus now turns to the US Federal Open Market Committee, which will announce its interest rate decision at 1800 GMT.
According to the CME FedWatch tool, markets believe there is a 86% chance the Federal Reserve will lift US interest rates by 25 basis points, with the remaining 14% expecting rates to stay at their current level.
Earlier this month, before the recent banking industry turmoil, a 50-point hike was considered possible.
"To hike or not to hike, that is the question that will dominate risk sentiment today when the Fed gets set to make a decision on rates in the shadow of a banking crisis that does appear to be all intents and purposes in the rear-view mirror," said Michael Hewson, chief market analyst at CMC Markets.
Treasury Secretary Janet Yellen told a lenders' conference Tuesday that the US banking sector is "stabilizing" after the recent failures of Silicon Valley Bank and Signature Bank rattled the industry.
Yellen said "outflows from regional banks have stabilized" following authorities' moves to shore up confidence and stem contagion in a speech to the American Bankers Association in Washington.
In early UK company news, WPP announced the acquisition of an influencer marketing agency, and Fevertree Drinks reported a drop in annual profit as it struggled with rising costs in 2022.
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 15.72 points, or 0.2%, at 7,520.50
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Hang Seng: up 1.8% at 19,597.41
Nikkei 225: closed up 1.9% at 27,466.61
S&P/ASX 200: closed up 0.9% at 7,015.60
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DJIA: closed up 1.0%, at 32,560.60
S&P 500: closed up 1.3% at 4,002.87
Nasdaq Composite: closed up 1.6% at 11,860.11
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EUR: lower at USD1.0760 (USD1.0778)
GBP: higher at USD1.2257 (USD1.2192)
USD: higher at JPY132.50 (JPY132.29)
Gold: lower at USD1,937.07 per ounce (USD1,943.19)
(Brent): higher at USD74.61 a barrel (USD74.42)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
10:00 CET EU balance of payments
11:00 GMT Ireland wholesale price index
11:00 CET Italy balance of payments
09:30 GMT UK house price index
07:00 EDT US MBA mortgage applications survey
14:00 EDT US Federal Reserve economic projections
14:00 EDT US interest rate decision
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Inflation in the UK came in hotter-than-expected in February, figures from the Office for National Statistics showed on Wednesday.
The consumer price index rose by 10.4% in February from a year before, accelerating from a 10.1% annual rise in January. Market consensus had expected UK inflation to cool to 9.8% in February, according to FXStreet. The print remained below the recent peak of 11.1% in October, which was the highest annual inflation rate since 1981, according to the ONS. On a monthly basis, UK consumer prices rose 1.1%, reversing a 0.6% decline in January. Markets had expected the monthly inflation rate to be just 0.6%. Core annual inflation - excluding energy, food, alcohol, and tobacco - picked up to 6.2% in February from 5.8% in January.
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China has approved its first locally developed messenger RNA vaccine against Covid-19, its manufacturer said, months after the relaxation of strict Covid-zero regulations sparked a surge in cases. The vaccine, developed by CSPC Pharmaceutical, has been approved for "emergency use" by Beijing's health regulator, the company said in a statement. It showed high efficacy in a trial in which it was used as a booster shot for people who have been given other types of vaccines, the company added, without offering further details.
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BROKER RATING CHANGES
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Goldman Sachs cuts British Land to 'sell' - price target 370 pence
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Jefferies cuts Entain price target to 1,805 (1,900) pence - 'buy'
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Goldman Sachs raises Marks & Spencer to 'neutral' - price target 180 pence
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COMPANIES - FTSE 100
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WPP announced the acquisition of influencer marketing agency Goat for an undisclosed amount. Goat creates data-led, end-to-end influencer marketing campaigns, driving brand engagement and integrating targeted paid media, WPP explained. Its clients have included, Dell, Meta Platforms, Tesco, and Uber. Goat will join GroupM, WPP's media investment group, and will merge with its influencer marketing solution INCA to create "the industry's first truly global influencer marketing agency", the advertising and public relations firm said.
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COMPANIES - FTSE 250
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Bytes Technology said that it delivered "strong" sales and profit growth in the financial year ended February 28, with gross profit and adjusted operating profit up 20% against the prior year. The services and software provider said this reflected "very strong" demand from both corporate and public sector clients, despite "well-documented" macroeconomic headwinds. It added that cash conversion returned to higher levels in the second half of its year to around 85%, as expected. Chief Executive Neil Murphy said: "We are delighted with the performance delivered last year. Our successful strategy of acquiring new customers and then growing share of wallet, underpinned by strong vendor relationships and the commercial skills of our people, means we are well-placed to capture the significant growth opportunities ahead of us."
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UK housebuilder Vistry reported a drop in annual profit as it lamented more challenging market conditions in the final quarter of 2022, leading the company to slash its final dividend. Pretax profit fell 23% to GBP247.5 million in 2022 from GBP319.5 million in 2021, as cost of sales widened to GBP2.32 billion from GBP1.97 billion year-on-year. The company also booked exceptional expenses totalling GBP153 million, up from just GBP12.2 million the year prior. Revenue climbed 13% to GBP2.73 billion from GBP2.40 billion. Completions rose 7.9% to 11,951 from 11,080. Vistry reduced its final dividend by 20% to 32 pence per share from 40p a year before. That cut its total annual payout to 55p from 60p.
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OTHER COMPANIES
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Fevertree Drinks reported a drop in annual profit as it struggled with higher costs in 2022, particularly pricier glass used for its bottled sodas. Pretax profit totalled GBP31.0 million in 2022, down sharply from GBP55.6 million in 2021. Revenue climbed to GBP344.3 million from GBP311.1 million. Fevertree explained that industry-wide inflationary pressure hurt its margin during the year, most notably in glass costs and trans-Atlantic freight costs. This was partially mitigated by positive pricing actions and improvements in sales mix. The premium mixers maker proposed a full-year dividend of 16.31 pence per share, up 2% against the prior year. The company also reiterated its full-year guidance for 2023, which expects revenue between GBP390 million and GBP405 million and earnings before interest, tax, depreciation and amortization between GBP36 million and GBP42 million. In 2022, Ebitda totalled GBP39.7 million on an adjusted basis, down from GBP63.0 million the previous year.
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By Heather Rydings, Alliance News senior economics reporter
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