5th Dec 2024 07:59
(Alliance News) - London's FTSE 100 is called to open slightly lower on Thursday, despite US stocks spiking to record highs overnight.
Over in Paris, the CAC 40 is called to open 0.4% lower. French President Emmanuel Macron on Thursday will seek ways out of France's political crisis, after Michel Barnier became the first prime minister to be ousted by parliament in over six decades.
Lawmakers voted on Wednesday to oust Barnier's government after just three months in office, approving a no-confidence motion proposed by the hard left but which crucially was backed by the far right headed by Marine Le Pen.
"There are rare moments when the market's reaction to news leaves me baffled. And today – this week – is one of them. The French government just collapsed, and the composition of the government suggests that whoever replaces Micel Barnier will face the same problems than he did, in a France that became ungovernable. But who cares? The EURUSD was around 1.0510 when the news broke yesterday night, and is trading around 1.0526 now. The total absence of reaction from the euro hints that we won't see a bloodshed in stock and bond markets, either," Swissquote Analyst Ipek Ozkardeskaya commented.
"And sentiment among the dollar bulls is weakening despite the Federal Reserve members' cautious communication. The Fed Chair Powell couldn't help but admit that the US economy is in a remarkably good shape and that the downside risks from the labour market have decreased. But his words did little to convince the Fed doves to dial back their 25bp cut expectations for December."
In early UK corporate news, deal-making was in focus. Shell and Equinor announced a North Sea tie-up, while a UK combination of Vodafone and Three's offerings received regulatory backing. Elsewhere, Warpaint said it has agreed to buy Brand Architekts.
Away from M&A, Frasers, DS Smith and Watches of Switzerland reported profit declines.
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 8,323.61
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Hang Seng: down 1.0% at 19,545.56
Nikkei 225: up 0.3% at 39,395.60
S&P/ASX 200: up 0.2% at 8,474.90
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DJIA: closed up 308,51 points, 0.7%, at 45,014.04
S&P 500: closed up 0.6% at 6,086.49
Nasdaq Composite: closed up 1.3% at 19,735.12
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EUR: down at USD1.0526 (USD1.0536)
GBP: flat at USD1.2718 (USD1.2717)
USD: down at JPY149.93 (JPY150.06)
GOLD: down at USD2,647.47 per ounce (USD2,653.48)
(Brent): down at USD72.34 a barrel (USD73.20)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
08:30 GMT eurozone construction PMI
10:00 GMT eurozone retail sales
08:30 GMT Germany construction PMI
09:00 GMT UK new car sales
09:30 GMT UK construction PMI
17:00 GMT UK Bank of England MPC member Megan Greene speaks
13:30 GMT US trade balance
13:30 GMT US initial jobless claims
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The next Irish government has to reflect the "very significant" number of seats Fianna Fail won in the general election, Deputy Premier Micheal Martin has said. Martin, the Fianna Fail leader, said his party had mandated him to begin negotiations with others to form a government that "can last the full term". Fianna Fail was the clear winner of Friday's election, securing 48 of the Dail parliament's 174 seats, while Sinn Fein took 39 and Fine Gael won 38. Martin's party is expected to once again partner with Fine Gael in a coalition, but would still need the support of another party, or a number of independents, to achieve a majority in the Dail. Fianna Fail and Fine Gael have both ruled out entering power with Sinn Fein. When Fianna Fail and Fine Gael entered coalition for the first time after the last general election in 2020, there was only a three-seat difference in their relative strength. That resulted in an equal partnership at the head of the coalition, with the Green Party as the junior partner. The two main parties swapped the role of taoiseach half-way through the term. With Fianna Fail's lead over Fine Gael having grown to 10 seats following this election, focus has turned to the future of the rotating taoiseach arrangement and whether it will operate again in the next mandate and, if so, on what basis.
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US President-elect Donald Trump nominated veteran Washington attorney Paul Atkins to chair the Securities & Exchange Commission, a move cheered by the cryptocurrency industry as bitcoin broke the USD100,000 mark for the first time. Atkins, an SEC commissioner from 2002 to 2008, founded risk consultancy firm Patomak Global Partners in 2009, whose clients include companies in the banking, trading and cryptocurrency industries. An announcement from the Trump transition noted that Atkins had been co-chair of the Digital Chamber of Commerce, which promotes the use of digital assets, since 2017. "Paul is a proven leader for common sense regulations," Trump said in a statement that emphasized Atkins' commitment to "robust, innovative" capital markets. "He also recognizes that digital assets and other innovations are crucial to Making America Greater than Ever Before," Trump added. Bitcoin surpassed USD100,000 for the first time Thursday on hopes that Trump will push through measures to deregulate cryptocurrencies when he takes office next month.
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BROKER RATING CHANGES
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Goldman Sachs raises Legal & General to 'buy' (neutral) - price target 256 (321) pence
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JPMorgan raises Bellway to 'overweight' (neutral) - price target 3,290 pence
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COMPANIES - FTSE 100
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Shell and Equinor announced a deal to combine their UK offshore oil & gas assets. The tie-up will form a new entity "which will be the UK North Sea's biggest independent producer". The oil firms will each own a 50% chunk of the joint-venture. "The new company will invest to provide a long-term future for the individual oil and gas fields and platforms, helping extend the life of this crucial sector for the benefit of the UK. Based in Aberdeen, the heart of the nation's energy sector, the joint venture will include Equinor's equity interests in Mariner, Rosebank and Buzzard, and Shell's equity interests in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair and Schiehallion. A range of exploration licenses will also be part of the transaction," Equinor said. Shell’s Integrated Gas & Upstream Director Zoe Yujnovich said: "Domestically produced oil and gas is expected to have a significant role to play in the future of the UK’s energy system. To achieve this in an already mature basin, we are combining forces with Equinor, a partner of many years. The new venture will help play a critical role in a balanced energy transition providing the heat for millions of UK homes, the power for industry and the secure supply of fuels people rely on."
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Vodafone's UK tie-up with Three has been backed by the domestic competition watchdog. The UK Competition & Markets Authority cleared the deal "after 18 months of detailed and thorough analysis". Telecommunications firm Vodafone and CK Hutchison announced a GBP15 billion deal in June of last year to combine the UK businesses into a joint venture, with Vodafone to own 51% and CK Hutchison 49% of the combined operation. "The merger is a once-in-a-generation opportunity to transform the UK's digital infrastructure," Vodafone said. "Vodafone and Three have committed to invest GBP11 billion to create one of Europe's most advanced 5G networks. The new network will reach 99% of the population and benefit over 50 million customers, through significantly better quality, greater reliability and enhanced capacity for handling ever-increasing data demand. This demand is set to accelerate further with more widespread adoption of new technology, such as AI." The merger is expected to formally be sealed in the first half of next year.
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DS Smith reported an earnings decline in what it labelled as a "solid" first-half performance amid tricky market conditions. The packaging firm said pretax profit in the six months to October 31 slumped 89% on-year to GBP29 million from GBP268 million a year prior. Revenue declined 4.0% to GBP3.37 billion from GBP3.51 billion. "We have delivered a solid performance, with profitability in line with our expectations, despite a continued challenging market environment. We have maintained our relentless focus on customer service, product quality and innovation, together with significant cost and productivity initiatives, to mitigate the impact of a softer than expected overall market," DS Smith Chief Executive Miles Roberts said. "Looking forward, whilst recognising the recent paper price weakness, we continue to expect modest growth in packaging volumes and increasing sequential prices to recover higher input costs." The firm back in April agreed to a bid from International Paper. At the time of the offer, it valued DS Smith at around GBP5.8 billion. CEO Roberts said: "We are working extensively with International Paper and expect completion in the first quarter of 2025. Our planning for the integration of our businesses is progressing well, and we remain excited about the opportunities for customers, employees and shareholders." DS Smith upped its interim dividend by 3.3% to 6.2 pence per share from 6.0p.
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Frasers Group hailed "another period of progress" during its half-year, but warned weaker consumer confidence in the lead up to the October UK budget will keep a lid on yearly profit. In the 26 weeks to October 27, pretax profit fell by a third to GBP207.2 million from GBP310.2 million. Revenue declined 8.3% to GBP2.54 billion from GBP2.77 billion. Retail revenue alone was 8.4% lower on-year at GBP2.46 billion. UK Sports Retail, which includes Sports Direct, suffered a 7.6% revenue decline on-year to GBP1.37 billion. CEO Michael Murray said: "The first half of this year has been another period of progress for the Group, delivering on our objectives as the Elevation Strategy continues to take the business to the next level. Sports Direct UK delivered further sales growth, and our Property and Financial Services divisions are seeing encouraging progress. We continue to operate with discipline to ensure our business is as resilient as possible - proactively right-sizing recent acquisitions to set them up for profitable long-term growth and driving further automation benefits to exceed our stock reduction targets for the period. We have also made significant strides in international expansion, developing new partnerships across Australia and Africa." Looking ahead, Frasers lowered its profit outlook. Murray explained the firm expects "another year of profitable growth" but noted "recent weaker consumer confidence leading up to and following the budget". Frasers now predicts annual adjusted pretax profit in the range of GBP550 million and GBP600 million. It had previously expected an outcome between GBP575 million and GBP625 million. Adjusted pretax profit in financial 2024 totalled GBP544.8 million. In the recent half-year, it declined 1.5% to GBP299.2 million.
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Frasers Group has been relegated from the FTSE 100 index in its latest quarterly shuffle alongside two constituent peers, housebuilder Vistry Group and variety goods retailer B&M European Value Retail. Heading into London's blue-chip index are St James's Place, Alliance Witan and Games Workshop Group. The relegated FTSE 100 firms will be joined in the FTSE 250 by a host of new additions, namely Deliveroo, Oxford Nanopore Technologies, Ferrexpo and Diversified Energy. PZ Cussons, PureTech Health, Ceres Power and Close Brothers would all be deleted from the index.
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COMPANIES - FTSE 250
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Watches of Switzerland Group backed its annual outlook and hailed "improved trading and good momentum" in the final stretch of its first-half. The luxury watch seller said it was boosted by "growing demand in the UK and US". Revenue in the 26 weeks to October 27 improved 3.1% to GBP784.8 million from GBP761.4 million a year prior, though pretax profit fell 39% to GBP40.5 million from GBP66.5 million. WoSG noted a slower start to the half-year, before things picked up in the second-quarter. "In Q1 we increased showroom stock levels of key brands to enhance displays and client experience, particularly in the US. With the stock rebuild complete, in Q2 we drove significantly improved US revenue of 24% (constant currency) and revenue in the UK market turned positive. Price increases from brands in the half have been modest, and this has also positively influenced consumer sentiment. Consequently, overall group revenue increased 11% in Q2, in constant currency," CEO Brian Duffy said. "Q3 trading has started encouragingly, and we have continued with our showroom transformation programme. Looking ahead, key showroom openings in H2 include the flagship Rolex boutique in Old Bond Street, London; Audemars Piguet Town House, Manchester; Rolex introduction in Plano, Texas, and a reintroduction in Jacksonville, Florida; and the conversion of Mayors Lenox, Atlanta, to a Rolex mono-brand boutique. Our trading momentum through November, visibility of intake and second half opening of large showroom investments support our full year guidance, which is unchanged." The firm still expects annual revenue between GBP1.67 billion and GBP1.73 billion, growth of up to 17% at constant currency.
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OTHER COMPANIES
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Warpaint London said it has agreed to buy fellow London listing Brand Architekts in a GBP13.9 million deal. The colour cosmetics supplier, that owns W7 and Technic brands, will pay 48 pence in cash per Brand Architekts share. It is double the beauty sector challenger brand's Wednesday closing price of 24p. It values its entire issued, and to be issued, ordinary share capital at around GBP13.9 million. "The Warpaint board considers that Brand Architekts provides a similar opportunity as its previous acquisitions, and that the acquisition will enhance Brand Architekts' proposition and profitability as part of a larger, successful health, beauty and personal care business," a statement said. Warpaint's bid has the backing of Peter Gyllenhammar, who owns around a quarter of Brand Architekts. Brand Architekts Chair Roger McDowell said: "The Brand Architekts board has worked hard to deliver on the Brand Architekts Group's strategic priorities against a challenging environment and continues to have confidence in its brands and longer-term prospects. However, the Brand Architekts board recognises the certainty of value of the cash offer at a 100% premium to the current share price, against the backdrop of an uncertain macro-economic environment." Warpaint, meanwhile, proposed a placing to raise GBP14 million, with a retail offer to net another GBP1 million. The placing is for 2.7 million new shares at a price of 510p each. The retail offer will be for 196,078 new shares at the same price. "Warpaint proposes to use the net proceeds of the placing to repay the bridging loans which have been used to fund the maximum cash consideration payable by the company pursuant to the acquisition," it said. Warpaint expects annual results in line with expectations. It has seen "continued strong momentum" since mid-September.
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By Eric Cunha, Alliance News news editor
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