4th Nov 2021 07:48
(Alliance News) - Stocks in London are set for an upbeat start ahead of a possible interest rate hike from the Bank of England, taking their cue from Wall Street, where equities rallied even as the US Federal Reserve confirmed plans to taper bond purchases.
In early UK company news, J Sainsbury backed its full-year outlook despite labour and supply chain challenges, BT reinstated its dividend, and Smith & Nephew expects to deliver at the low end of full-year guidance.
IG says futures indicate the FTSE 100 index of large-caps to open up 22.81 points, or 0.3%, at 7,271.70 on Thursday. The FTSE 100 closed down 25.92 points, or 0.4%, at 7,248.89 on Wednesday.
London is on course for a higher start after the US Federal Reserve said it will start to taper its stimulus bond purchases later this month, but can be "patient" before raising interest rates.
The Fed said it would reduce its purchases of Treasury securities by USD10 billion per month and of mortgage-backed securities by USD5 billion, from the total of USD120 billion a month that the Fed currently is buying.
Amid growing concern about rising prices, Fed Chair Jerome Powell stuck to his view that current higher-than-expected inflation levels will come down in the second half of 2022 as the supply bottlenecks are resolved. The US central bank wants to see the labour market in the world's largest economy heal further before increasing the benchmark borrowing rate off zero, he said.
"We think we can be patient," Powell told reporters.
Michael Hewson, chief market analyst at CMC Markets, said: "Powell was fairly unequivocal in insisting that a rate rise remained some way off, which helped to push US stocks to new record highs."
The Dow Jones Industrial Average closed up 0.3%, the S&P 500 up 0.7% and the Nasdaq Composite up 1.0%.
This momentum flowed through to Asia. Tokyo's Nikkei 225 index closed up 0.9%, reopening strongly after a holiday on Wednesday. In China, the Shanghai Composite was up 0.8%, while the Hang Seng index in Hong Kong was up 0.1%. The S&P/ASX 200 in Sydney closed up 0.5%.
With the Fed's taper plans confirmed, eyes now turn to the Bank of England.
The BoE will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes and quarterly Monetary Policy Report, at midday on Thursday. There will be a press conference at 1230 GMT.
Analysts are split over whether the Bank of England will carry out its first post-pandemic rate hike this week after recent hawkish remarks from policy makers.
Recent comments from policy makers have raised the stakes for this year's penultimate meeting. The UK central bank's new chief economist told the Financial Times less than a fortnight ago that the BoE's November policy meeting will have a "live" decision about whether or not to raise interest rates. This came just days after BoE Governor Andrew Bailey cautioned the central bank will have to act to ease inflationary pressures.
CMC's Hewson said: "Having painted themselves into a corner, the markets could be very unforgiving if, having been led up the garden path by the bank they fail to deliver on their promises. More than anything it will be how the central bank manages the message when it comes to further rate rises that will be key, rather than them raising rates today, or at next month's meeting."
Sterling was quoted at USD1.3663 early Thursday ahead of the BoE decision, flat against USD1.3662 at the London equities close on Wednesday.
In early UK company news, J Sainsbury backed guidance despite bracing for a normalisation in shopping trends and facing supply chain challenges.
Revenue for the half-year to September 18 rose 5.3% to GBP15.72 billion from GBP14.93 billion a year ago.
The supermarket chain swung to a pretax profit of GBP541 million from a loss of GP137 million. Underlying pretax profit improved 23% to GBP371 million.
"The business performed well through the first half, benefiting from higher in-home grocery consumption and outperforming grocery competitors, while general merchandise sales declined, as expected, against an exceptionally strong period last year," Sainsbury's said.
In the second half, Sainsbury's expects consumer behaviour to normalise and grocery growth to moderate. It also noted supply chain challenges and a tight labour market. Despite all this, the company continues to expect to report underlying pretax profit of at least GBP660 million for the financial year ending March 2022. Underlying pretax profit was GBP371 million in the first half, up 23% on a year ago.
"Our industry faces labour and supply chain challenges. However our scale, advanced cost saving programme, logistics operations and strong supplier relationships put us in a good position as we head into Christmas," said Chief Executive Simon Roberts.
Telecommunications firm BT reported a 3% dip in revenue for the six months to September 30 to GBP10.31 billion. Pretax profit slipped 5% to GBP1.01 billion.
However, it highlighted progress in the period. BT said it delivered GBP1 billion of gross annualised savings 18 months early at a cost of GBP571 million. It has brought forward its 2025 financial year target of achieving GBP2 billion in gross annualised savings to 2024, and peak capital expenditure from 2023 is now expected to be GBP4.8 billion, down from GBP5 billion seen previously.
It also reported record Openreach 'fibre to the premises' build in the second quarter, to bring its footprint to nearly 6 million.
"BT is on track and with results in-line with our expectations, we are today confirming our financial outlook for FY22 and FY23," said Chief Executive Philip Jansen.
"Looking further out, as we pass the peak of our fibre build and move towards an all-fibre, all-IP network, we expect a reduction in capex of at least GBP1 billion and lower operating costs of GBP500 million. From these two factors alone, by the end of the decade we expect an expansion of at least GBP1.5 billion in normalised free cash flow compared to FY22."
BT reinstated its dividend with an interim payout of 2.31p per share.
Smith & Nephew said it is on track to deliver at the low end of full-year guidance due to the Delta variant of coronavirus, as well as supply constrains.
For the third quarter, revenue rose 5.5% to USD1.27 billion, and grew 2.3% on an underlying basis. Sports Medicine & ENT and Advanced Wound Management both saw solid growth, while Orthopaedics revenue slipped.
For the first nine months of the year, group revenue growth was 20%, or 14% on an underlying basis.
"Third quarter performance included the impacts of the Delta variant, which we expect to be less in the final quarter, and continued supply constraints," the medical devices maker said.
As a result, Smith & Nephew said it is on track to deliver at the low end of its full-year guidance ranges. For 2021, the underlying revenue growth guided range was 10.0% to 13.0%, and trading profit margin guided range was 18.0% to 19.0%.
Aston Martin Lagonda Global Holdings reported a surge in nine-month revenue and a narrowed loss.
Total wholesale volumes for the first nine months of 2021 soared to 4,250 from 1,555 a year ago, leading revenue to jump to GBP736.4 million from GBP270.0 million. Pretax loss narrowed to GBP188.6 million from GBP307.9 million - this was despite its third quarter loss widening to GBP97.9 million from GBP80.5 million.
The luxury car maker said year-to-date trading is in line with its expectations and held full-year guidance.
"The shift to a demand-led, ultra-luxury operating model achieved earlier this year continues to support strong pricing dynamics with order cover through 2021 and extending into 2022," said Chief Executive Tobias Moers.
Currys unveiled plans to launch a GBP75 million share buyback after "robust" trading for the electrical goods retailer.
Sales over the first six months of the year were up 15% on a like-for-like basis compared to two years ago, though fell 1% year-on-year.
"The group expects to deliver a robust peak trading season. We have put in place measures to mitigate the well-publicised supply chain disruption caused by industry-wide availability challenges and labour shortages. We believe that these measures combined with our scale, stores and expert colleagues, mean we are on track to meet consensus expectations for full year 2021/22," Currys said.
The euro traded at USD1.1579 early Thursday, flat on USD1.1581 late Wednesday. Against the yen, the dollar rose to JPY114.23 versus JPY114.04.
Gold was quoted at USD1,775.37 an ounce early Thursday, higher than USD1,766.02 on Wednesday. Brent oil was trading at USD81.87 a barrel, down from USD82.02 late Wednesday.
Besides the BoE, the economic events calendar on Thursday has services PMI readings from Germany at 0855 GMT and the eurozone at 0900 GMT, while a UK construction PMI is out at 0930 GMT.
By Lucy Heming; [email protected]
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