28th Aug 2020 07:47
(Alliance News) - Stock prices in London are seen opening higher on Friday on expectations that US interest rates will stay at low levels for as long as needed to support the world's top economy.
In early company news, plastic and fibre products manufacturer Essentra cancelled its dividend as it reported a drop in half-year earnings due to the effects that the coronavirus crisis has had on its end markets. Guarantor loans provider Amigo Holdings posted a sharp drop in first-quarter earnings due to the granting of payment holidays.
IG futures indicate the FTSE 100 index is to open 38.01 points higher at 6.038.00. The blue-chip index closed down 45.61 points, or 0.8%, at 5,999.99 Thursday.
Essentra said it delivered a resilient performance in the first half of 2020, with revenue and order intake trends improving towards the end of the period.
For the half-year to June 30, revenue fell 12% to GBP448 million from GBP507 million a year ago. Pretax profit was GBP8 million, down 85% from GBP53.1 million.
The company did not declare an interim dividend, having paid a dividend of 6.3 pence last year. Essentra said it will keep under review the possibility of a resumption of dividends for 2020.
"On a divisional basis, the outlook for the second half suggests that: Components will see a continuation in the improvement on like-for-like trends, Filters will see a continued trend of year-on-year growth driven in part by outsourcing contract volumes, and in Packaging - due to some recent softness seen in certain end markets owing to a supply chain adjustment resulting from a reduction in prescriptions and surgeries through lockdown periods - the third quarter should be broadly flat with a return to growth anticipated for the fourth quarter," Essentra said.
Separately, Essentra said it will target carbon neutrality by 2040 through a programme of energy efficiency improvements and emissions reductions across its manufacturing and other sites.
Amigo Holdings reported a drop in first-quarter revenue which it said primarily reflected the effects of Covid-19 payment holidays that it granted to its borrowers. The revenue fall all but wiped out profit.
For the first quarter to June 30, revenue was down 32% to GBP48.8 million from GBP71.5 million in the first quarter last year, and pretax profit tumbled to GBP1.4 million from GBP22.6 million.
The company attributed the performance to Covid-19-related payment holidays granted to 47,000 customers and the temporary pause in all new lending activity. Amigo said that, due to Covid-19, payment holidays were granted to borrowers during the period for up to three months with no increase in monthly instalments when the payments resume.
"We are preparing to restart lending on a prudent basis by the end of 2020. However, until we do so, and until we have more clarity on the financial impact of Covid-19, the board considers it too early to issue guidance for this financial year. We have a strong cash position. Despite the special Covid-19 relief programme, cash collection has remained robust, and we are well-positioned to manage the challenges of the Covid-19 pandemic," Amigo said.
In the US on Thursday, Wall Street ended mostly higher, with the Dow Jones Industrial Average up 0.6% and the S&P 500 up 0.2% but the Nasdaq Composite down 0.3%. The S&P 500 index ended at fresh record highs for the fifth consecutive session.
At the Jackson Hole economic symposium on Thursday, the US Federal Reserve outlined a major policy change that gives greater weight to its mission of maximising employment for the benefit of lower-income families, while placing less emphasis on fighting inflation.
Chair Jerome Powell said the aim is to correct the "shortfalls" in achieving the Fed's full employment goal while recognizing that, with changes in the global economy, a tight job market does not necessarily drive prices higher.
In practice, the change has no impact in the near-term but will keep borrowing rates low for much longer than in prior economic expansions. The new policy makes it clear the central bank will allow inflation to stay above its 2.0% target "for some time" before raising interest rates.
"The S&P 500 continued its record-breaking rally as the Fed is expected to let inflation and employment run higher in a move that will likely accompany low-interest rates for years to come. Fed's move seems to imply a lower rate for longer, which is being viewed favourably today as investors around the world universally like the sound of cheap money," said AxiCorp's Stephen Innes.
The pound was quoted at USD1.3261 early Friday, up from USD1.3192 at the London equities close on Thursday.
The euro stood at USD1.1870 early Friday, up sharply from USD1.1798 at the European equities close Thursday. Against the yen, the dollar was trading at JPY106.40, lower from JPY106.50.
In commodities, Brent oil was quoted at USD45.65 a barrel from Friday morning, up from USD44.68 a barrel at the London equities close Thursday. Gold was quoted at USD1,940.71 an ounce, up from USD1,919.95.
The Japanese Nikkei 225 index closed down 1.6%. In China, the Shanghai Composite is up 0.4%, while the Hang Seng index in Hong Kong is up 0.8%.
Japan's Prime Minister Shinzo Abe is to announce his resignation over health issues, local media reported Friday, hours before he is due to address a press conference.
"Abe intends to resign as his illness has worsened and he worries it will cause trouble" in leading the country, national broadcaster NHK said, without citing a source.
By Arvind Bhunjun; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
EssentraAmigo