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LONDON MARKET OPEN: FTSE 100 flat; Melrose up as focuses on aerospace

10th May 2023 09:12

(Alliance News) - Early trading was cautious in London on Wednesday, as investors look ahead to inflation data from the US, as well as a key interest rate decision from the Bank of England on Thursday.

The FTSE 100 index opened down 1.55 points at 7,762.54. The FTSE 250 was down 5.13 points at 19,271.91, and the AIM All-Share was down 1.82 points, or 0.2%, at 827.53.

The Cboe UK 100 was down 0.1% at 776.21 and the Cboe UK 250 was down marginally at 16,884.88, but the Cboe Small Companies was up 0.1% at 13557.31.

European indices were mixed early Wednesday, with the CAC 40 in Paris up 0.1% and the DAX 40 in Frankfurt down 0.1%.

In the US on Tuesday, Wall Street ended lower. The Dow Jones Industrial Average ended down 0.2%, the S&P 500 down 0.5% and the Nasdaq Composite down 0.6%.

There was some good news for Germany on Wednesday, as consumer price inflation eased in April. The annual rate of consumer price inflation slowed to 7.2% in April from 7.4% in March.

"The rate of inflation has therefore slowed for the second month in a row but remains at a high level," said Ruth Brand, president of the Federal Statistical Office. "Looking at the basket of goods and services surveyed, food prices continued to be the biggest driver of inflation in April."

Across the Atlantic, US inflation data will be released at 1330 BST on Wednesday.

In March, the US inflation rate was cooler than expected, fading to 5.0% in March from 6.0% in February. Markets are expecting the annual inflation rate remain at 5.0% in April, according to FXStreet.

Inflation will be the central concern for the Bank of England, which will be deciding UK interest rates this week. A decision is due at 1200 BST on Thursday.

The dollar was lower against European currencies but firm against the yen.

The pound was quoted at USD1.2629 early on Wednesday in London, up compared to USD1.2618 at the equities close on Tuesday. The euro stood at USD1.0974, higher against USD1.0955. Against the yen, the dollar was trading at JPY135.29, up compared to JPY135.09.

On the FTSE 100, Melrose Industries jumped 5.8%, making it the best performer in the index Wednesday morning.

Melrose said it traded materially ahead of expectations in the four months to April 30, with "significant growth in revenue, profit and margin being achieved".

Revenue was 19% higher year-on-year at constant currency, helped by a 28% improvement in its Engines divisions. The adjusted operating margin rose "substantially" to 10%. The figures remove its recently demerged divisions from the comparative period.

Looking ahead to the rest of 2023, Melrose expects revenue between GBP3.35 billion and GBP3.45 billion. The higher end of that range would top company-compiled consensus of GBP3.4 billion. Melrose had reported revenue of GBP7.54 billion in 2022, though that included recent spin-off Dowlais Group.

Adjusted operating profit of between GBP340 million and GBP360 million is expected, before head office costs. Melrose expects adjusted earnings before interest, tax, depreciation and amortisation between GBP495 million and GBP515 million, also before head office costs.

Melrose also announced a departure from its industrial turnaround strategy, focusing on just aerospace instead for now. And it revealed the prospect of consistent share buybacks as a restructuring of its aerospace offering progresses.

Compass Group was up 1.5%, after it announced a GBP750 million share buyback programme.

The Chertsey, Surrey-based contract caterer said revenue rose 36% to GBP15.7 billion in the half year that ended March 31 from GP11.5 billion a year earlier. Pretax profit rose to GBP831 million from GBP632 million.

Compass declared an interim dividend of 15.0p per share, up 60% year-on-year from 9.4p. It also said that it will complete a GBP750 million share buyback programme.

Looking ahead, Compass upped its full-year guidance. It now expects profit growth towards 30%, up from above 20% previously, and revenue growth of about 18%, up from about 15% previously.

"The group performed strongly in the first half of the year, benefiting from balanced growth across all regions. Net new business continued to be excellent, and significantly higher than our historical rate," said Chief Executive Officer Dominic Blakemore.

In the FTSE 250 index, online fashion retailer Asos lost 7.7%.

Asos said revenue fell to GBP1.84 billion in the six months ended February 28 from GBP2.00 billion a year earlier. It said this reflects "both deliberate actions on capital allocation to improve profitability and a challenging trading backdrop".

Pretax loss widened to GBP290.9 million from GBP15.8 million a year ago. Adjusted Ebit margin in the first half of the year swung to negative 3.8% from positive 1.3% a year ago.

Looking ahead, Asos said it will retain its focus on profitable sales into the second half of its financial year. It also expects financial 2023 sales to be down by low double-digit percentage at constant FX, excluding-Russia.

On AIM, Unbound Group plummeted 62%, after Marwyn Investment Management withdrew its offer of a GBP10 million equity investment in the footwear retailer. Marwyn cited concerns over Unbound's current trading.

Separately, Unbound said the trading environment has remained challenging over the first quarter of the year.

In Asia on Wednesday, the Nikkei 225 index closed down 0.4%. In China, the Shanghai Composite was down 1.2%, while the Hang Seng index in Hong Kong was down 0.4%. The S&P/ASX 200 in Sydney closed down 0.1%.

Brent oil was quoted at USD76.67 a barrel at early in London on Wednesday, up from USD74.94 late Tuesday. Gold was quoted at USD2,029.99 an ounce, up against USD2,025.96.

By Sophie Rose, Alliance News reporter

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