26th Sep 2019 07:37
(Alliance News) - The FTSE 100 is set to resume its recent losing streak on Thursday as extraordinary politics continues to dominate both in the UK and the US.
In early UK company news, International Consolidated Airlines, tobacco firm Imperial Brands and publisher Pearson all issued downbeat trading updates, respectively hit by industrial action, a challenging US vaping market, and weak US Higher Education Courseware trading.
IG says futures indicate the FTSE 100 index of large-caps to open 11.39 points lower at 7,278.60 on Thursday. The FTSE 100 index closed down 1.44 points at 7,289.99 on Wednesday.
"Stock markets have continued to get pulled around by political headlines, with European stocks sliding to two-week lows, on a combination of concerns about impeachment proceedings against the US president, as well as a harder trade line with respect to a China trade deal," said Michael Hewson, chief market analyst at CMC Markets.
"The pound also came under pressure as Parliament returned from the prorogation that never was, and pretty much picked up where it left off, with MPs giving full vent to a range of emotions, some of them quite ugly. If last night's events are any guide getting consensus for any kind of deal is going to be a very big ask," he added.
Sterling was quoted at USD1.2363 early Thursday, flat on USD1.2360 at the London equities close on Wednesday. On Wednesday morning, the pound had been trading up near USD1.2470.
Prime Minister Boris Johnson was forced back to Westminster on Wednesday, cutting short his visit to the United Nations General Assembly in New York, after the Supreme Court ruled his five-week suspension of Parliament was illegal.
As the House of Commons resumed, there was was uproar as the prime minister repeatedly berated MPs, rejected calls to temper his language and said the best way to honour murdered parliamentarian Jo Cox – an ardent Remainer – was to "get Brexit done".
Despite Johnson's attacks, opposition parties again made clear they would not agree to an election until they were sure the threat of a no-deal Brexit on October 31 was off the table. Downing Street said if opposition MPs did not take up the prime minister's offer to table a no-confidence motion, the government would take it as a mandate to press on with Brexit.
The government will ask MPs on Thursday to agree to a three-day break for the Commons next week while the Tories stage their annual party conference in Manchester. But amid the angry mood at Westminster, the opposition parties appear unlikely to agree, meaning Johnson could be forced to rearrange his keynote speech due to be held on the final day on Wednesday.
In early UK company news, International Consolidated Airlines said it expects annual operating profit to be lower than in 2018.
IAG expects to take a EUR137 million hit from strikes at British Airways, with "further disruption events", included including threatened strikes by Heathrow Airport employees, to see the airline group book a further EUR33 million charge.
In addition, IAG said that the latest booking trends in its low-cost airlines, primarily Vueling and Level, should result in a EUR45 million hit.
Overall, IAG expects operating profit before exceptional items in 2019 to be EUR215 million lower than the EUR3.49 billion achieved in 2019. Passenger unit revenue is expected to be slightly down at constant currency, compared to flat guidance previously.
Meanwhile, there have been no further talks between British Airways and union BALPA.
"The airline's offer of a 11.5% pay increase over three years still stands and has been accepted by British Airways' other unions, representing 90% of the airline's employees. Clearly any further industrial action will additionally impact IAG's full-year 2019 operating profit," IAG said.
Imperial Brands said it expects net revenue for its financial year ending on Monday to grow around 2%. Earnings per share is expected to be "broadly flat" at constant currency.
This is due to a "challenging" next-generation product market in the US and "changes to our results expectations" in the Africa, Asia and Australasia division.
Imperial Brands expects its NGP business to grow net revenue by around 50% this year, which would be below expectations. The NGP environment in the US has "deteriorated considerably" over the last quarter, with an increasing number of wholesalers and retailers not ordering or not allowing promotion of vaping products.
"Whilst this is disappointing for the current year, we believe that NGP provides a significant opportunity to deliver additive growth to complement our Tobacco business. We continue to refine our investment behind building a strong and profitable NGP business in a rapidly evolving market," said Imperial Brands.
Massachusetts this week officially became the first US state to ban – if temporarily – the sale of all electronic cigarettes, going further than states that only prohibited flavoured products. On Wednesday, US tobacco giants Philip Morris International and Altria Group said they had ended merger discussions, partly due to challenges to the e-cigarette market.
Educational publisher Pearson said Thursday it expects annual profit at the bottom of its guided range.
Pearson said it continues to expect revenue to stabilise this year, but weaker than expected trading in the US Higher Education Courseware business in its key selling season means adjusted operating profit is now expected to be at the bottom of the company's GBP590 million to GBP640 million guided range.
"The third quarter has been significantly weaker than we expected in US Higher Education Courseware. Whilst difficult in the short term this places more importance on our work to remake this part of Pearson and we are exploring new ways of deploying our new technology platform so that we can offer students highly affordable, convenient, adaptive, digital courseware," said Chief Executive John Fallon.
Energy provider SSE said it made "encouraging" progress in its first half with annual earnings seen in line with analyst forecasts.
The firm said it expects adjusted earnings per share for the current financial year around 85p to 90p, in line with consensus and guidance. SSE added that it is making good progress with the planned disposal of its interests in gas production.
"SSE has made encouraging progress in the first six months of the financial year. The agreement to sell Energy Services to OVO paves the way for an even clearer strategic focus on regulated electricity networks and renewable energy," said Finance Director Gregor Alexander.
Travel concessions operator SSP said it had a "good" fourth quarter.
Revenue is expected to have risen 7.8% on a constant current basis for the quarter ended September 30, comprising like-for-like sales growth of 1.8% and net contract gains of 6.0%. At actual exchange revenue, revenue is expected to have growth 10% year-on-year.
"After another strong quarter, net contract gains for the full year are expected to be just above our previous expectations, at around 5.5%, and as usual they will be accompanied by pre-opening costs," said SSP.
Despite "external challenges", the firm said it performed well and its guidance for the financial year remains changed. Looking into 2020, many of these challenges are expected to remain as well as ongoing economic uncertainty and the expectation of airline capacity cuts, though SSP said it is well placed to benefit from structural growth opportunities.
Mitchells & Butlers said it expects annual profit to be at a similar level year-on-year, despite cost headwinds, following a strong end to the financial year.
The pub firm said like-for-like sales in the eight weeks to September 21 were up 3.3%, with drinks growth particularly strong, the firm noted. In the year-to-date - or 51 weeks to September 21 - like-for-like sales were up 3.6%, with total sales 4.0% higher.
"Sales growth has remained consistently ahead of the market and we carry this momentum forward into the new financial year. We remain confident of the impact of our Ignite initiatives which will be continually reviewed and refreshed as the business moves forward," said Chief Executive Phil Urban.
To come in Thursday's corporate calendar, dual-listed cruise line Carnival is expected to report third-quarter results in the afternoon at 1500 BST.
In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.6%, the S&P 500 also up 0.6% and the Nasdaq Composite up 1.1%.
US President Donald Trump lashed out Wednesday at Democrats for opening impeachment proceedings against him, calling the probe into his efforts to get Ukraine to investigate political rival Joe Biden a "manufactured crisis."
Trump repeatedly prodded Ukraine's president to look into Biden, according to a rough transcript summarising a call between the two leaders.
"There's a lot of talk about Biden's son, that Biden stopped the prosecution and a lot of people want to find out about that," Trump said to Ukrainian president Volodymyr Zelenskiy. The conversation between the two leaders is one piece of a whistleblower's complaint, which followed the July 25 call.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.1%. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was up 0.2%.
Trade was cautious overnight in China ahead of October 1 celebrations, marking the Chinese Communist Party's 70th anniversary.
"Investors could further trim their exposure to Hong Kong stocks, as October 1st celebrations are expected to fuel the anti-China protests in the city's streets and further weigh on the business sentiment," said Ipek Ozkardeskaya, senior market analyst at London Capital Group.
The economic events calendar on Thursday has US second-quarter GDP readings and quarterly personal consumption expenditure prices at 1330 BST.
By Lucy Heming; [email protected]
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