2nd Oct 2019 07:44
(Alliance News) - Stocks in London on Wednesday are set to add to the previous session's losses following worrying manufacturing data out of the US and Europe, while in the UK eyes are on Manchester where the prime minister will lay out his plans for a Brexit deal.
In early UK company news, Tesco reported a good first half of the year and announced the departure of its chief executive, while Flutter Entertainment agreed a merger with The Stars Group and the founder of Aberdeen Asset Management intends to leave Standard Life Aberdeen next year.
IG says futures indicate the FTSE 100 index of large-caps to open 40.42 points lower at 7,319.90 on Wednesday. The FTSE 100 index closed down 47.89 points, or 0.7%, at 7,360.32 on Tuesday.
"Following the US ISM miss Tuesday, Treasury yields plummeted, the dollar erased gains, and stocks swung to losses, driving credit spreads wider. Crude futures fell to their weakest levels in a month while gold prices briefly looked above the critical USD1,480 level," said Stephen Innes, market strategist at Axitrader.
The ISM's monthly manufacturing index, released on Tuesday, fell to 47.8, a sharp drop from 49.1 in August. The decline was a surprise to economists who forecast a slight uptick following the decline in August.
David Madden at CMC Markets said: "Looking at the broader picture, it is fair to say that the worldwide manufacturing sector is in trouble. The US-China trade spat is having a knock-on effect around the globe, hence why we saw a sharp move lower in stocks yesterday. Trade talks between the US and China will continue next week, so traders will be paying close attention to any developments. The best dealers can hope for is a de-escalation in trade tensions, but it is obvious that the damage has been done."
In the US on Tuesday, Wall Street ended sharply lower, with the Dow Jones Industrial Average ending down 1.3%, the S&P 500 down 1.2% and Nasdaq Composite shedding 1.1%.
In Asia on Wednesday, the Japanese Nikkei 225 index ended down 0.5%. Financial markets in China are closed over this week to commemorate 'Golden Week', though markets in Hong Kong re-opened on Wednesday after the National Day holiday, and the Hang Seng was trading 0.2% lower.
In early UK company news, grocer Tesco said it saw a strong start to the financial year but also announced the departure of Chief Executive Dave Lewis.
Lewis will leave the business next year, said Tesco, to be succeeded by Ken Murphy. Murphy is executive vice president, chief commercial officer & president global brands at Walgreens Boots Alliance and, as he has contractual commitments to his previous employer, his start date at Tesco will be announced in due course.
Lewis said he decision to step down was a "personal one", adding that the tenure of a CEO should be "finite" and now is "the right time to pass the baton".
"Our turnaround is complete; we have delivered all the metrics we set for ourselves. The leadership team is very strong, our strategy is clear and it is delivering," said Lewis.
Revenue for the half year to August 24 rose 0.6% to GBP31.9 billion, while pretax profit increased 6.7% to GBP494 million. Like-for-like group sales were down 0.4%, with the UK & Ireland up 0.1% while Central Europe down 3.1% and Asia reported a 1.3% fall.
The supermarket chain said it has had a strong start to the year, leaving it "well-positioned to continue to be highly competitive in challenging markets".
Tesco added that its merger with wholesaler Booker continues to generate synergies ahead of plan, and it is confidence in reach its cumulative target of GBP140 million this year and GBP200 million by the 2021 financial year.
Flutter Entertainment said it has agreed an all-share merger with Sky Bet-owner The Stars Group.
Under the agreement, expected the be completed in the second or third quarter of 2020, TSG shareholders will be able to receive 0.2253 Flutter shares for each TSG share held.
On a proforma basis, the combined group's annual revenue would have been GBP3.8 billion in 2019, making it the largest online betting and gaming operator globally. The combined group will be incorporated, headquartered and domiciled in Dublin with a premium listing on the London Stock Exchange and a secondary listing on Euronext Dublin.
"The combination represents a great opportunity to deliver a step change in our presence in international markets and ensure we are ideally positioned to take advantage of the exciting opportunity in the US through a media relationship with FOX Sports as well as our development of US sports betting through Flutter's FanDuel and TSG's FOX Bet brands," said Flutter Chief Executive Peter Jackson.
"We are committed to these two high quality brands to drive the growth of the combined group in the US," he added.
Flutter was known as Paddy Power Betfair until changing its name in May.
Standard Life Aberdeen said Vice Chair Martin Gilbert will not seek re-election at the company's annual general meeting in May next year, and will retire from the investment firm on September 30, 2020.
Gilbert, founder of Aberdeen Asset Management, was previously co-CEO at Standard Life before the firm ended its joint leadership structure which had been formed as a result of the merger between Standard Life and Aberdeen Asset Management.
In July, the Financial Times had reported that Gilbert would be stepping down from his role to become chair of digital bank Revolut.
In UK political news, Prime Minister Boris Johnson's plan for a Brexit deal will be delivered to Brussels on Wednesday with a message that there will be no delay beyond the October 31 deadline.
Johnson will use his speech at the Conservative Party Conference to say "we can, we must and we will" get Brexit done because voters feel they are being "taken for fools" by Westminster's politicians.
The prime minister will restate his commitment to the October 31 date despite legislation aimed at preventing him taking the UK out of the EU without a deal unless he has the consent of Parliament. It has also been reported Johnson will unveil a "two borders for four years" plan on Wednesday that will leave Northern Ireland in a relationship with Europe until 2025, according to The Daily Telegraph.
"Traders are likely to be nervous on the run up to the announcement from Mr Johnson as there is chatter it could be make or break for the negotiations," said CMC's Madden.
Sterling was quoted at USD1.2279 early Wednesday, firm compared to USD1.2251 at the London equities close on Tuesday.
In Wednesday's economic calendar, UK construction PMI is at 0930 BST. In the US, ADP employment is out at 1315 BST ahead of Friday's eagerly-awaited non-farm payrolls report.
Markets in Germany will be closed for the day of German Unity on Wednesday.
Already released, UK shop prices continued to fall in September, according to the latest British Retail Consortium-Nielsen shop price index.
Shop prices in September fell 0.6% year-on-year, following on from a 0.4% decrease in August. The latest figure marked the steepest rate of decline since May 2018.
By Lucy Heming; [email protected]
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