24th Nov 2020 07:57
(Alliance News) - Stock prices in London are seen opening higher on Tuesday after US President Donald Trump dropped opposition to government aid for Joe Biden's transition team.
In early company news, contract caterer Compass Group said annual profit slumped as the coronavirus pandemic shut down operations. Irish building materials firm CRH said it expects annual earnings to come in higher than last year. Life-insurance consolidator Phoenix was assessing options over a potential sale of one of its units.
IG futures indicate the FTSE 100 index is to open 41.26 points higher at 6,375.10. The blue-chip index closed down 17.61 points, or 0.3%, at 6,333.84 on Monday.
Compass said financial 2020 was a challenging year as lockdown restrictions hindered progress in many of its key markets.
For the 12 months ended September 30, revenue fell 20% to GBP20 billion from GBP24.9 billion in financial 2019, and pretax profit slumped 86% to GBP210 million from GBP1.49 billion last year.
Compass axed its annual dividend having paid out 40.0 pence per share in financial 2019. The company said it will keep future dividends under review and will restart payments when it is appropriate to do so.
More encouragingly, Compass said in the fourth quarter it returned the business to profitability and is now cash neutral. This was achieved, it said, mainly through contract renegotiations to reflect the difficult trading environment, continued discipline in terms of costs, and improvement in volumes.
Looking ahead. Compass expect the underlying operating margin in the first quarter of 2021 to be around 2.5%.
"Although the prospects of a vaccine are encouraging, the resumption of lockdowns in some of our major markets shows that we have to continue to take proactive actions to control the controllable and ensure the business can thrive despite the ongoing pandemic. We are innovating and evolving our operating model to be more flexible and to provide our clients and consumers with an exciting offer that is delivered safely and provides great value. This combined with our existing scale, ability to flex costs and focus on operational execution, will allow us to return to a group underlying margin above 7% before we return to pre-Covid volumes," said Chief Executive Dominic Blakemore.
Also in the FTSE 100, CRH said it delivered a robust performance in a challenging trading environment in the third quarter.
For the nine months to September 30, like-for-like sales were down 3% to USD20.6 billion and earnings before interest tax depreciation and amortisation 2% to USD3.4 billion. For the third quarter alone, like-for-like sales also fell 3%.
Looking ahead, CRH expects full-year earnings before interest tax depreciation and amortisation to be "in excess" of USD4.4 billion for 2020. CRH posted Ebitda of USD4.0 billion in 2019. CRH also expects annual pretax profit to be ahead of the USD2.2 billion figure posted in 2019.
For now, there is limited visibility into 2021, however, the longer-term prospects for CRH remain positive, the company added.
"Markets continue to be impacted by the global pandemic and while we have seen some lower activity levels, I am pleased to report further improvement in trading performance, with an advance in both profitability and margins. The outlook for the coming months remains uncertain and visibility is limited, however, I am confident that we are well-positioned for the challenges and opportunities that lie ahead," said CEO Albert Manifold.
Phoenix Group Holdings noted a press report regarding the potential sale of its European business, Phoenix Europe.
On Monday, Bloomberg reported that the life-insurance consolidator, was considering selling international operations to focus on the UK, citing people with knowledge of the matter. The news agency said a potential deal could be worth EUR650 million.
In light of interest from third parties for the European business, Phoenix confirmed that it is assessing a range of strategic options to maximise value for shareholders, but said there was no certainty that a transaction will be achieved.
In the US on Monday, Wall Street ended mostly higher, with the Dow Jones Industrial Average up 1.1% and the S&P 500 up 0.6%, though the Nasdaq Composite closed down 0.4%.
President Trump came his closest yet to admitting election defeat Monday after the government agency meant to ease Biden's transition into the White House said it was finally lifting its unprecedented block on assistance.
Trump acknowledged it was time for the General Services Administration to "do what needs to be done". In the same tweet he insisted that he was still refusing to concede, saying: "Our case STRONGLY continues, we will keep up the good fight, and I believe we will prevail!"
But for the Republican to sign off on the GSA's decision to work with the Biden transition team signalled that even he sees the writing on the wall after three weeks of evidence-free claims that the November 3 election was stolen from him.
This means that Biden's team will now have access to funds, office space and the ability to meet with federal officials.
"Momentum has been boosted again though by President Trump instructing the General Services Administration to start providing Biden's team with transition resources. It came, coincidentally, a few hours after Michigan state certified its election results in favour of Biden. Although no concession has been formally announced, denied in fact, it appears that President Trump has conceded the writing is on the wall," said Oanda analyst Jeffery Halley.
Investors also welcomed news reports that Biden has tipped former Federal Reserve chair Janet Yellen for the role of US treasury secretary.
In addition, markets have cheered news that Anglo-Swedish drugmaker AstraZeneca and the University of Oxford will seek regulatory approval for their coronavirus vaccine, following similar announcements by Pfizer and Moderna.
"Positive Covid vaccine news puts risk sentiment on the front foot for the third consecutive week, following encouraging trial results from Oxford-AstraZeneca yesterday," said AxiCorp's Stephen Innes.
The Japanese Nikkei 225 index closed up 2.5% on Tuesday. Financial markets in Japan reopened on Tuesday after being closed for a holiday on Monday.
In China, the Shanghai Composite ended down 0.3%, while the Hang Seng index in Hong Kong is up 0.1%.
The risk on sentiment sent the dollar lower against major counterparts for the second straight session.
The pound was quoted at USD1.3351 early Tuesday, up sharply from USD1.3289 at the London equities close on Monday.
The euro stood at USD1.1856, up from USD1.1821. Against the Japanese yen, the dollar was trading at JPY104.37, lower from JPY104.52.
Brent oil was quoted at USD46.60 a barrel Tuesday morning, up sharply from USD45.78 a barrel at the equities close in London on Monday. Gold was trading at USD1,828.65 an ounce, lower from USD1,8333.31.
By Arvind Bhunjun; [email protected]
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