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LONDON BRIEFING: United Utilities plots GBP14 billion of expenditure

2nd Oct 2023 07:52

(Alliance News) - London's FTSE 100 is called lower on Monday, with market sentiment still ropey at the start of the fourth-quarter, despite a deal being struck for the US to avoid a government shutdown.

Inflationary worries, and the fear that US interest rates will be higher for longer, continue to cast a cloud of equity markets.

In addition, the latest purchasing managers' index reading did little to ease China growth concerns. The composite purchasing managers' index, which measures the manufacturing and services sectors, eased to 50.9 points in September from 51.7 the month before.

Falling closer towards the 50-point mark that separates contraction from expansion, it shows growth slowed over the month.

In early UK corporate news, water utilities United Utilities and Pennon Group set out business plans, while flooring firm James Halstead lifted its yearly payout but warned of tricky market conditions in the UK.

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 0.2% at 7,594.88

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Nikkei 225: closed down 0.3% at 31,759.88

S&P/ASX 200: closed down 0.2% at 7,033.20

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DJIA: closed down 158.64 points, 0.5%, at 33,507.70

S&P 500: closed down 0.3% at 4,288.05

Nasdaq Composite: closed up 0.1% at 13,219.32

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EUR: down at USD1.0573 (USD1.0585)

GBP: down at USD1.2200 (USD1.2207)

USD: up at JPY149.64 (JPY149.30)

GOLD: down at USD1,845.68 per ounce (USD1,856.33)

(Brent): down at USD92.63 a barrel (USD92.64)

(changes since previous London equities close)

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ECONOMICS

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Monday's key economic events still to come:

China National Day Golden Week continues: financial markets in Shanghai and Hong Kong closed.

UK Chancellor Jeremy Hunt addresses Conservative Party Annual Conference

10:00 CEST EU manufacturing PMI

11:00 CEST EU unemployment

09:55 CEST Germany manufacturing PMI

09:30 BST UK manufacturing PMI

09:00 EDT US Fed New York President John Williams speaks

09:45 EDT US manufacturing PMI

10:00 EDT US ISM manufacturing PMI

19:30 EDT US Fed Cleveland President Loretta Mester speaks

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UK housing market activity "remains weak", mortgage lender Nationwide reported. House prices declined 5.3% on-year last month, following a fall of the same pace in August. On a monthly basis, prices were flat in September, following a 0.8% decline in August from July. Nationwide Chief Economist Robert Gardner said: "Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, [around] 30% below the monthly average prevailing in 2019 before the pandemic struck. This relatively subdued picture is not surprising given the more challenging picture for housing affordability. "

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Britain's ruling Conservatives opened their annual conference Sunday, with the party's chair conceding they were "the underdogs" heading into a general election expected next year amid widespread economic woes. The gathering in Manchester, northwest England, will be Prime Minister Rishi Sunak's first since he became Tory leader last October, and likely the last before the election due by January 2025 at the latest. He is seeking to use the event to rejuvenate his beleaguered party – in power since 2010 - and set out a broader, more populist, policy agenda after nearly a year of trying to stabilise the economy. The dire situation has allowed the main Labour opposition, which starts its yearly conference in Liverpool next Sunday, to open up double-digit poll leads and ready itself for a return to government. Conservative party Chair Greg Hands kicked off the four days of political events with an early afternoon main stage address heavy on realism. "This is likely to be a general election where the Conservatives enter as the underdogs," Hands told the audience. "And I know in recent years, you will have had difficult conversations with voters. I certainly have," he added, before attacking Labour's record in local and regional governance.

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The UK national living wage is set to increase to at least GBP11 an hour from next April, with Chancellor Jeremy Hunt expected to confirm the move in a speech to the Tory party conference on Monday. The Conservatives said the move will benefit two million of the lowest paid, with Hunt also expected to announce that ministers will look again at the benefit sanctions regime in a bid to get the unemployed back into work. The government had already set a target for the national living wage to reach two-thirds of median hourly pay by October next year. The Low Pay Commission estimates the rate required to meet that target should be between GBP10.90 and GBP11.43, with a central estimate of GBP11.16. Hunt is expected to say: "Today I want to complete another great Conservative reform, the national living wage." Hunt is to add: "At the moment it is GBP10.42 an hour and we are waiting for the Low Pay Commission to confirm its recommendation for next year. But I confirm today, whatever that recommendation, we will increase it next year to at least GBP11 an hour."

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BROKER RATING CHANGES

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Berenberg raises BAE Systems to 'buy' (hold) - price target 1,170 (1,050) pence

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Jefferies raises PageGroup to 'hold' (underperform) - price target 420 (375) pence

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HSBC cuts Robert Walters to 'hold' - price target 405 pence

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COMPANIES - FTSE 100

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United Utilities is planning just shy of GBP14 billion worth of total expenditure across 2025-30, the water utility said as it set out its latest business plan. Focused on the North West of England, the company said the plan will support 30,000 jobs in the area, 7,000 of them being new ones. The plan will drive "significant" regulatory capital value growth of 8.7% per year during the period. In water utility, RCV is essentially a firm's market value plus its accumulated capital investment. Chief Executive Officer Louise Beardmore said: "We've been listening to customers and communities right across our region to understand what really matters. What's clear is that we need to improve services for customers and the environment. That's why we are proposing the largest investment in water and wastewater infrastructure in over 100 years, with GBP13.7 billion planned between 2025 and 2030 to build a stronger, greener and healthier North West for everyone." The firm added: "What is clear is that we have options and flexibility around funding this capital requirement." United Utilities added that current trading is in line with expectations for the year ending March 31. Severn Trent also delivered its business plan for the same period. It had announced on Friday plans for GBP12.9 billion total expenditure across its network.

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COMPANIES - FTSE 250

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Pennon Group said it is trading in line with internal expectations, and its South West Water delivered to the UK watchdog its latest five-year business plan. South West Water, which covers areas such as Devon and Cornwall, is plotting GBP2.8 billion of capital investments for the period between 2025 and 2030. Pennon CEO Susan Davy said: "In our South West Water 2025-30 business plan, we're set to tackle the challenges that matter most in our region head on, with progress already underway. We plan to invest GBP2.8 billion in water quality and resilience, with a pledge to fix storm overflows at beaches and eradicate pollutions, whilst delivering on our net zero 2030 promise to the planet. Our robust balance sheet underpins our ambition. This plan will create 2000 jobs in our communities, alongside our plan for 1000 apprenticeships and graduates. At the same time, we will do more with less, as we drive efficiency and innovation, with a nature first principle, keeping unwelcome bill increases as low as possible."

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OTHER COMPANIES

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Flooring manufacturer James Halstead reported "respectable" annual results, as it grappled with tricky market conditions. Revenue in the year to June 30 edged up 4.0% to GBP303.6 million from GBP291.9 million. Pretax profit was largely unmoved at GBP52.1 million. "Against a challenging backdrop, I am pleased to announce a very respectable performance across the group and another record sales performance. Good demand across a number of our key markets has continued to drive the positive top line," CEO Mark Halstead said. James Halstead lifted its final dividend by 4.5% to 5.75 pence per share from 5.50p. Its full-year dividend totalled 8.0p, a "record level", up 3.2% from 7.75p. James Halstead added that while trading since the year-end has been "positive", demand in the UK is "slightly less buoyant". It cautioned: "Our UK business is far more focused on commercial flooring and repair, renewal and refurbishment and consequently less exposed to consumer spending. Nevertheless, there are budgetary constraints on renewal spending."

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Peel Hunt reported "encouraging signs" that tough market conditions are abating, with the investment bank predicting a single-digit first-half revenue rise, but an increase in costs. Revenue for the six months to September 30 is expected to rise 3.2% on-year to GBP42.4 million. During the period, its Investment Banking arm served as joint bookrunner for the float of fintech firm CAB Payments. "Whilst revenues in Investment Banking were significantly ahead of the same period last year, overall deal activity has remained subdued," it said, however. In Execution Services, which includes fixed income, trading has been "resilient" despite lower volumes. Peel Hunt faced cost pressure during the period, it cautioned. "Whilst there has been a focus on costs during the period, this has been against headwinds of inflationary cost increases, particularly in service provider and technology costs, with interest rate rises impacting our debt facilities. As a result, costs have increased broadly in line with inflation over the period," the company said. Looking ahead, it added: "Whilst exact timing of recovery cannot be predicted, there are encouraging signs that interest rate rises are bringing inflation under control, and we may be nearing the end of the current tightening cycle. We have the balance sheet strength and regulatory capital to weather the remainder of this cyclical downturn and are well positioned to benefit from the strength of our platform and considerable operational gearing as market conditions normalise."

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CPPGroup distanced itself from its founder Hamish Ogston after a Sunday Times report which alleged that there is evidence he trafficked sex workers. Ogston, also a shareholder in CPPGroup, left the firm's board in 2013. The company said that "save for those rights reserved for shareholders, has had no involvement in the management or operations of the group". The Sunday Times reported that an investigation found evidence that Ogston "for the last 15 years he has engaged in the exploitation of vulnerable southeast Asian sex workers". The Sunday Times report read: "Documents suggest Ogston has trafficked or attempted to traffic Thai and Filipina sex workers, and hosted women who entered the country as tourists only to stay at his property and engage in sex work."

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By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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