26th Mar 2025 07:54
(Alliance News) - London is called to open lower on Wednesday, following soft UK inflation data and ahead of expected spending cuts in Chancellor Rachel Reeves' spring statement.
The chancellor is due to deliver her spring statement at 1230 GMT.
"In the UK, the tariff fears are amplified by the fact that the UK won’t benefit from the ample budget spending that the continental European peers will. On the contrary, the spending hopes for the UK have been crumbling as borrowing costs keep rising and decrease Rachel Reeves’s fiscal headroom. The impact of tax rises, on the other hand, hit appetite and growth. And the Bank of England is not in a hurry to provide relief with rate cuts pointing at global and trade uncertainties. Released this morning, the latest hinted that inflation in the UK came in softer-than-expected, providing a minor relief before today’s budget announcement," commented Swissquote analyst Ipek Ozkardeskaya.
"But we already know that Rachel Reeves will announce a smaller 'spending envelope' later today; she is expected to announce a GBP10 billion cut in day-to-day government spending. The smaller the envelop, the bigger the impact on sterling."
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 8,657.60
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Hang Seng: up 0.3% at 23,407.45
Nikkei 225: closed up 0.7% at 38,027.29
S&P/ASX 200: closed up 0.7% at 7,999.00
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DJIA: closed up 4.18 points at 42,587.50
S&P 500: closed up 9.08 points, or 0.2%, at 5,776.65
Nasdaq Composite: closed up 83.26 points, or 0.5%, at 18,271.86
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EUR: down at USD1.0785 (USD1.0811)
GBP: down at USD1.2910 (USD1.2955)
USD: up at JPY150.42 (JPY149.73)
Gold: up at USD3,028.97 per ounce (USD3,023.13)
(Brent): up at USD73.07 a barrel (USD72.71)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
12:30 GMT UK spring statement
12:30 GMT US durable goods orders
14:30 GMT US EIA crude oil stocks
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Consumer price index inflation in the UK cooled slightly in February, data from the Office for National Statistics showed Wednesday. Consumer price index inflation stood at 2.8% on-year in February, decelerated from 3.0% in January and lower than the 2.9% FXStreet-cited consensus. The UK consumer price index including owner occupiers' housing costs rose by 3.7% in the year to February, down from 3.9% in the year to January. On a monthly basis, CPIH rose 0.4% on-year in February, lower than an FXStreet-cited consensus of 0.5%. The inflation data spells some relief for UK Chancellor Rachel Reeves, who will deliver her spring statement at around 1230 GMT, during which she is expected to acknowledge she needs to go "further and faster to kickstart growth", amid dour predictions about her cost-cutting measures and as she scrambles for savings to help balance the nation's books without hiking taxes. The ONS said: "The largest downward contribution to the monthly change in both CPIH and CPI annual rates came from clothing, with a further large downward effect in CPIH from housing and household services." Core CPI. excluding energy, food, alcohol and tobacco, rose by 3.5% in the year to February, slowed from 3.7% in the year to January and lower than an FXStreet-cited consensus of 3.6%. While UK producer price index inflation had been originally scheduled to be released on Wednesday, last week Friday, the ONS said that it was pausing producer prices publications amid work to improve systems used to create the producer price inflation index.
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An extra GBP2.2 billion will be spent on UK defence over the next year, Chancellor Rachel Reeves is to announce in Wednesday's spring statement. The extra funding is being put on the table as the government aims to hike defence spending to 2.5% of the UK's economic output by 2027. The April funding increase will help pay for new technologies such as directed energy weapons, housing, and an upgrade to HM Naval Base Portsmouth. Defence Secretary John Healey said "This significant increase in defence spending, on top of the GBP2.9 billion announced by the Chancellor at the Budget, means an extra GBP5 billion for our Armed Forces next financial year."
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Rising global borrowing costs are to blame for deteriorating public finances in the UK according to Chancellor Reeves. Speaking to broadcasters ahead of her statement on Wednesday, the Chancellor said "We can see that the world is changing, and part of that change is increases globally in the cost of government borrowing – and Britain has not been immune from those challenges." But she insisted she would meet her "non-negotiable" fiscal rules despite expectations that official forecasts also published on Wednesday will show her "headroom" against those targets had vanished.
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A stamp duty "hangover" has struck London, with demand from home buyers falling back, according to an index. Zoopla estimates that around 8 in 10 first-time buyers in London will pay stamp duty from April 2025, compared with less than half under current thresholds. From April, the "nil-rate" stamp duty threshold for first-time buyers is set to reduce from GBP425,000 to GBP300,000, among other changes. Zoopla said the London housing market is suffering something of a hangover after buyers rushed to beat the April 1 stamp duty deadline. "This has created a lull in market activity, with demand 3% lower over the last year. The impact is more pronounced amongst first-time buyers, hitting price rises in the capital," the London-based online property insight company added.
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Russia and Ukraine agreed to halt military strikes in the Black Sea and on energy sites during talks brokered by the US, which offered to ease pressure on agricultural exports as a first concrete incentive to Moscow. With US President Donald Trump pushing for a rapid end to the war that has killed tens of thousands of people, US negotiators shuttled separately over three days in the Saudi capital Riyadh between delegations from Ukraine and Russia. In parallel statements, the White House said that each country "agreed to ensure safe navigation, eliminate the use of force and prevent the use of commercial vessels for military purposes in the Black Sea." The US said it would also look for ways to enforce a ban on strikes on energy infrastructure in the two countries. The Kremlin meanwhile said the agreement to halt strikes on the Black Sea could come into force only after the lifting of restrictions on its agriculture sector. It said Russia and the US agreed that a 30-day energy truce ordered by Russian President Vladimir Putin last week applies to pipelines, power stations and refineries. Ukrainian President Volodymyr Zelensky, who has turned to diplomacy after heavy pressure from Trump including a brief ban on US aid and intelligence sharing, said it was too early to tell if the agreements would work but that they were "the right steps." Zelensky told a news conference in Kyiv that the talks also discussed bringing in third parties to oversee a future truce.
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The US added dozens of entities to a trade blacklist Tuesday, the Commerce Department said, in part to disrupt Beijing's artificial intelligence and advanced computing capabilities. The action affects 80 entities from countries including China, the UAE and Iran, with the department citing their "activities contrary to US national security and foreign policy." Those added to the so-called "entity list" are restricted from obtaining US items and technologies without government authorisation. "We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives," said US Commerce Secretary Howard Lutnick in a statement. The entities targeted include 11 based in China and one in Taiwan, accused of engaging in the development of advanced AI, supercomputers and high-performance AI chips for China-based users "with close ties to the country's military-industrial complex."
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BROKER RATING CHANGES
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Berenberg raises Shell price target to 3,300 (3,250) pence - 'buy'
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Goldman Sachs reinitiates Deliveroo with 'neutral' - price target 148 pence
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RBC cuts Adriatic Metals price target to 260 (295) pence - 'outperform'
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COMPANIES - FTSE 100
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Babcock International said it secured a five-year contract extension worth around GBP1.0 billion with the UK Ministry of Defence. "As a strategic partner to the UK MOD, this contract award further underpins Babcock's commitment and long-term relationship with the British Army. Specialising in building new vehicles, supporting its fleet, and training its soldiers, Babcock plays a crucial role in ensuring operational readiness for the British Army. The transformation of the original contract [DSG] over the first 10 years will be further accelerated over the extension period directly supporting the delivery of the Defence Industrial Strategy, delivering significant value to the MOD and growth to the UK economy," the provider of technical and engineering support services to the defence and civil sectors said.
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COMPANIES - FTSE 250
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Housebuilder Vistry reports GBP104.9 million in pretax profit for 2024, down 64% from a restated GBP293.0 million in 2023. Revenue, on the other hand, grows 6.2% to GBP3.78 billion from a restated GBP3.56 billion. 2023 results were restated to "correct the prior year error that arose due to the cost forecasting issue in the South Division", the cost of which had a total impact of GBP165 million. Total completions over the year totalled 17,225 units, up 6.9% from 16,118 units a year prior, and Vistry notes its current 2025 forward order book stands at GBP4.4 billion, down from GBP4.6 billion the year before. Looking ahead, Vistry expects its 2025 profits to be second-half weighted and is targeting revenue growth between 5% and 6% a year in the medium term. "Our focus is now firmly on the future and executing our differentiated partnerships strategy. We are pleased to see the Government bring forward a further £2 billion of much-needed funding for affordable homes, and will be seeking to progress as quickly as possible with our partners to deliver quality new homes across the country. We continue to drive a capital light, high return model, with a targeted 40% return on capital employed in the medium term," says Chief Executive Officer Greg Fitzgerald. "Finally, demonstrating that the group retains a strong financial position remains a top priority for 2025 and we expect to deliver improved cash generation and reduce net debt through the year." Vistry had carried out a share buyback of GBP5 million during the year in lieu of a dividend, as well as a further special buyback of up to GBP75 million.
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OTHER COMPANIES
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Evoke records a widened pretax loss for 2024, stretched to GBP168.8 million from GBP130.1 million in 2023. The bookmaker's revenue grew 2.3% to GBP1.75 billion during the year from GBP1.71 billion, with adjusted earnings before interest, tax, depreciation and amortisation up 4.3% to GBP312.5 million from GBP299.5 million a year prior. Evoke declares no dividend, unchanged from 2023. Looking ahead, CEO Per Widerstrom says: "2025 is shaping up to be another exciting year for Evoke. While Q1 revenue growth is expected to be low single digit, we remain highly confident in our full year expectations of 5-9% growth in addition to driving further margin expansion as a result of our more efficient operating model. Our exciting product pipeline, continued UK Retail optimisation programme, and ever-improving capabilities around data and personalisation all reinforce my confidence in making further progress in 2025 as we continue to execute against our plans to create significant shareholder value." First-quarter adjusted Ebitda is expected to increase on-year by GBP18 million to GBP28 million, while Evoke continues to target an adjusted Ebitda margin of at least 20% for 2025.
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Virgin Wines UK reports pretax profit growth of 18% in the six months that ended December 27, to GBP1.3 million from GBP1.1 million. Operating expenses reduce 5.2% to GBP9.2 million from GBP9.7 million, and finance income more than doubled to GBP372,000 from GBP161,000. Revenue, however, declined 0.6% to GBP34.1 million from GBP34.3 million, and the online wine seller continues to declare no interim dividend, though notes it will keep its dividend policy "under review". The firm outlines that trading for the full-year to date is in line with expectations, but "not without its challenges", amid duty tax increases on wine and an increased "administrative burden" as a result. Virgin Wines UK intends to use its cash reserves to invest for growth and introduce a share buyback programme, with the additional investment expected to have a short-term impact on profitability. The planned buyback will involve the purchase of up to 15% of its current shares, and will be funded by GBP23.7 million in gross cash. Virgin Wines UK targets GBP100 million in annualised revenue within the next five years, against revenue of GBP59 million reported for financial 2024.
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By Emily Parsons, Alliance News reporter
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ShellDeliverooAdriatic Metal.Vistry GrpEvokeVirgin WinesBabcock