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LONDON BRIEFING: United Utilities hit by storms; Severn Trent bullish

14th Feb 2024 07:48

(Alliance News) - Equities in London are called to open lower on Wednesday, after a morale-boosting UK inflation reading.

The mood in equities was soured by Tuesday's hotter-than-expected US consumer price index reading, though the UK data on Wednesday morning was more favourable for stocks.

"In news that will be welcomed by the Old Lady of Threadneedle Street, UK CPI printed cooler than expected this morning, despite expectations that the rise in the energy price cap and base effects from last year would skew the figures to the upside. In further news for the Bank of England's doves to cheer, the all-important services inflation gauge, while rising 0.1 percentage points to 6.5% year-on-year in January, printed below the Monetary Policy Committee's forecast, likely providing further confidence that the 2% CPI target will, at least briefly, be achieved in the spring," Pepperstone analyst Michael Brown commented.

In early UK corporate news, Coca-Cola HBC reported earnings growth and lifted its dividend. Water utility Severn Trent was confident on achieving outcome delivery incentives, though peer United Utilities noted its outturn has been hit by wet weather.

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 0.5% at 7,552.38

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Hang Seng: up 0.9% at 15,880.09

Nikkei 225: down 0.7% at 37,703.32

S&P/ASX 200: down 0.7% at 7,547.70

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DJIA: closed down 524.63 points, 1.4%, at 38,272.75

S&P 500: closed down 1.4% at 4,953.17

Nasdaq Composite: closed down 1.8% at 15,655.60

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EUR: down at USD1.0705 (USD1.0716)

GBP: down at USD1.2561 (USD1.2596)

USD: down at JPY150.44 (JPY150.66)

GOLD: down at USD1,990.40 per ounce (USD1,995.88)

(Brent): up at USD82.98 a barrel (USD82.93)

(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 GMT eurozone GDP

10:00 GMT eurozone industrial production

10:00 GMT eurozone employment

08:30 GMT eurozone European central bank Vice President Luis de Guindos speaks

11:00 GMT Ireland residential property prices

15:00 GMT UK Bank of England Governor Andrew Bailey speaks

21:00 GMT US Fed Vice Chair for Supervision Michael Barr speaks

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The UK's annual inflation rate was steady last month, defying expectations of an acceleration, numbers showed. According to the Office for National Statistics, the rate of annual consumer price inflation was unmoved at 4.0% in January, where it had stood in December. It had been expected to pick up to 4.2%, according to FXStreet cited consensus. Consumer prices declined 0.6% in January from December. They had been expected to decline at a lesser monthly pace of 0.3%, according to FXStreet. Prices had risen 0.4% in December from November. The UK annual inflation rare hit a recent peak of 11.1% in October 2022, and faded to as low as 3.9% in November of last year. The Bank of England has a 2% inflation target, with the current rate still double that. The next Bank of England decision is on March 21. There will be another consumer price index reading a day prior to that decision for Threadneedle Street to digest.

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UK producer prices fell 3.3% on-year last month, the pace of decline picking up from a 2.1% slip in December. A lesser fall of 3.0% was expected by market analysts, according to FXStreet. On a monthly basis, producer prices fell 0.8% in January from December, defying expectations of a 0.2% rise. They had fallen 0.4% in December from November

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The UK is open to "ideas" of nations seeking to join part of the Aukus trilateral defence agreement, David Cameron has suggested. The foreign secretary said he does not believe there will be additional partners to the deal with the US and Australia which is focused on helping the latter acquire nuclear-powered submarines. But he suggested a more open stance to the second part of the agreement, which focuses on developing advanced military capabilities and increasing interoperability between the three nations' armed forces. Cameron told peers: "Aukus has two pillars. There's the pillar one which is about the nuclear-powered submarines – that is Britain, Australia and America. And I don't think there will be additional partners in that. "But there is pillar two which is looking at advanced military technology for the future, and there we are open to ideas of other countries, possibly Canada people have mentioned, or Japan, who might want to join into pillar two because that is going to be about defence equipment for the future."

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UK Prime Minister Rishi Sunak should declare Northern Ireland's post-Brexit trade arrangements void as they leave people living there as second class citizens, DUP peers have claimed. Unionists in the House of Lords railed against changes to the Windsor Framework made to revive Northern Ireland's devolved government and assembly. A deal struck between the DUP leadership and the government is aimed at ensuring goods flow freely between Great Britain and Northern Ireland to address unionist concerns about a sea border dividing the UK. MLAs are also now able to veto some EU law's application in Northern Ireland with the Stormont brake. But Nigel Dodds, the DUP's Lords leader, said a series of statutory instruments aimed at effecting changes to trade arrangements do not remove the Irish Sea border or "subjection" of Northern Ireland to the EU in certain areas.

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BROKER RATING CHANGES

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Jefferies cuts BAE Systems to 'hold' (buy) - price target 1,210 (1,150) pence

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Deutsche Bank raises Wizz Air to 'hold' (sell) - price target 2,300 (1,800) pence

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COMPANIES - FTSE 100

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Drink bottling company Coca-Cola HBC lifted its dividend and announced "record" annual profit. The firm, which operates in nations including Cyprus, Greece and Italy, said net sales revenue surged 11% in 2023 to EUR10.18 billion, from EUR9.20 billion in 2022. Net sales fell shy of the Vuma cited consensus of EUR10.25 billion. Pretax profit shot up 46% to EUR910.3 million from EUR623.6 million, but was shy of consensus of EUR976.3 million. "I am deeply proud of our team as we delivered a third year of double-digit growth and record profits," Chief Executive Officer Zoran Bogdanovic said. "2023 was another year of consistent execution of our growth strategy. We delivered volume growth, share gains, improved margins and record levels of free cash flow. As a result, we were able to increase shareholder returns, including the launch of a share buyback programme." Coca-Cola HBC proposed an ordinary 2023 dividend of EUR0.93 per share, up 19% from 2022. For 2024, it targets organic revenue growth in its 6% to 7% medium-term target range. Organic revenue in 2023 jumped 17%.

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Severn Trent hailed a "robust" performance which has been in line with expectations. The company, which wraps up its financial year on March 31, is continuing to guide for at least GBP50 million in outcome delivery incentives this year. ODIs provider water utilities with rewards should they meet in line with "stretching performance targets", Severn Trent explained. They can be penalised if their performance is below target, however. Severn Trent said achieving this would take its total cumulative rewards across the first four years of the asset management plan regulatory period which spans 2020 to 2025 to over GBP250 million.

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United Utilities backed annual guidance and said it has traded strongly since it released half-year results in November. The firm, which also concludes its financial year at the end of next month, said heavy rainfall has hurt its ODI performance by around GBP25 million, however. "Since the start of 2023, there have been 14 named storms, of which 9 have occurred since the end of September," United Utilities explained. "Net ODI outperformance is expected to be around GBP40 million for 2023/24."

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COMPANIES - FTSE 250

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Homewares retailer Dunelm reported half-year revenue and profit growth and left its outlook unchanged. Revenue in the six months to December 30 increased 4.5% on-year, GBP872.5 million from GBP835.0 million. Pretax profit climbed 4.8% to GBP123.0 million from GBP117.4 million. Dunelm lifted its ordinary dividend by 6.7% to 16 pence per share from 15p. It declared a 35p special dividend, down 13% from 40p. Dunelm added: "We continued to perform strongly in the first half. We outperformed a challenging market and demonstrated our ability to maintain a strong operational grip across the business, whilst navigating some periods of volatile demand. We are very confident in our ability to navigate the current market and economic uncertainty and to deliver market share gains as we continue to invest in our business." For the full-year, it expects pretax profit in line with consensus of GBP202 million, which would be a rise of 4.8% from the GBP192.7 million achieved in financial 2023.

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OTHER COMPANIES

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Bloomsbury Publishing expects annual results to be "significantly ahead of upgraded market expectations". The publisher noted that consensus for the year ending February 29 stands at GBP291.4 million for revenue, and GBP37.2 million for pretax profit before "highlighted items". "I am overjoyed to report an exceptionally strong period of trading, principally driven by the increasing demand for fantasy fiction," Chief Executive Nigel Newton said.

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Acquisition vehicle Kelso Group Holdings said its own chief executive and chief financial officer have been appointed to the board of arts and crafts retailer TheWorks. John Goold, Kelso's CEO and Mark Kirkland, its CFO, join TheWorks as non-executives. Kelso has a 5.1% stake in the TheWorks. Kelso added: "John and Mark will become members of the board but, as non-independent directors, will not join any committees. Their focus will be on all matters relating to shareholder value. The Works has consulted with certain of its major shareholders, who are supportive of these appointments." In addition, a regulatory filing showed Matthew Moulding, founder and chief executive of e-commerce firm THG, has raised his stake in Kelso to 8.5% from 7.0%. Kelso owns a 0.6% THG stake.

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By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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