22nd Oct 2021 07:48
(Alliance News) -Â Stock prices in London are set to open higher on Friday as investors breathed a sigh of relief over news that embattled Chinese property firm Evergrande has made an interest payment ahead of a weekend deadline, narrowly avoiding a default.
In early UK company news, London Stock Exchange Group reported third quarter growth, InterContinental Hotels Group saw hotel trends improve, and J Sainsbury has decided to retain its banking unit. Building products supplier SIG raised its outlook, shaking off supply-chain issues.
In economic data, the Office for National Statistics showed UK retail sales fell 0.2% month-on-month in September, moderating from August's 0.6% decline but disappointing consensus expectations, according to FXStreet, for a 0.5% rebound.
IG says futures indicate the FTSE 100 index of large-caps to open 24.20 points, or 0.3%, higher at 7,213.30 on Friday. The FTSE 100 closed down 32.80 points, or 0.5%, at 7,190.30 on Thursday.
London is set for a higher open after Evergrande made a key offshore interest payment a day ahead of a weekend deadline, state media said, averting a default for now.
The crisis at one of China's biggest property developers, which is drowning in USD300 billion of debt, has hammered investor sentiment and fuelled fears of a spillover into the wider economy.
After tumbling 13% on Thursday - when the collapse of a planned USD2.5 billion sale of a property services unit heightened fears that the company's collapse was imminent - Evergrande shares were trading 3.1% higher in afternoon trade in Hong Kong on Friday.
"I note that Evergrande has another grace period payment due on the 29th of October of USD45.17 million. Still, if they've managed to scrape together the funds for this one, it is reasonable to surmise that next week's will also be met," said Jeffery Halley, senior market analyst at Oanda.
The relief spread across Asia, where stocks made modest gains.
The Nikkei 225 index in Toyko ended up 0.3%. In China, the Shanghai Composite was down 0.3%, while the Hang Seng index in Hong Kong was up 0.3%. The S&P/ASX 200 in Sydney ended marginally higher.
In the US on Thursday, Wall Street ended mostly higher, with the Dow Jones Industrial Average slightly lower, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.6%.
In early UK company news on Friday, London Stock Exchange Group reported growth in its third quarter as it continues to integrate Refinitiv.
LSEG reported a "strong performance across all divisions", leading to 2.1% growth in total income to GBP1.78 billion in the third quarter of 2021 and gross profit growth of 2.4% to GBP1.56 billion.
It has continued to integrate financial information and trading platform Refinitiv and is "comfortably" on target for full-year run-rate cost synergy delivery of GBP125 million.
"The group is well placed as we make targeted investments in product and technology enhancements to help us meet the needs of our customers and capitalise on the growth trends driving change across our industry," said Chief Executive David Schwimmer.
InterContinental Hotels Group said it saw trends improve towards pre-virus levels amid strong domestic demand over the summer.
The Holiday Inn hotel owner reported third-quarter RevPAR - revenue per available room, a key hospitality metric - growth of 66% on a year ago, though it remained down 21% on 2019. In its half-year results, IHG reported RevPAR up 20% on 2020 and down 43% on 2019.
In the Americas, RevPAR was up 76% on 2020 and down 10% on 2019, with US RevPar down just 7% on pre-virus levels. In Europe, Middle East, Africa & Australia, RevPAR was down 43% on 2019.
In greater China, RevPAR was down 30% on 2019, with IHG noting that in July, this was down just 6% due to strong domestic leisure demand. However, a resurgence in Covid cases in August saw RevPAR weaken to a 55% decline in August, though the recovery resumed once more in September.
"While we remain vigilant to fluctuating Covid restrictions in different markets, the pace of returning demand is very encouraging as travel increasingly re-opens in every region," said Chief Executive Keith Barr.
Among UK retailers, JD Sports made an acquisition while J Sainsbury decided against one.
Athleisurewear purveyor JD Sports has bought an 80% stake in Crete-based Cosmos Sport. Cosmos operates 57 stores in Greece and three in Cyprus across its Cosmos fascia - its core offering which has an elevated sporting goods and lifestyle proposition - and Sneaker 10, a premium footwear offering.
"The size of the transaction does not meet the thresholds for mandatory notification under Listing Rule 10. However, we can confirm that put and call options have been agreed, to enable future exit opportunities for the Tsiknakis Family with whom we will work in partnership," JD Sports said.
Meanwhile, Sainsbury's has decided to retain its banking arm after having looked for buyers.
The grocer said it believes it was in the best interests of shareholders to explore expressions of interest for Sainsbury's Bank, but has decided that these do not offer better value than will be realised through keeping the unit. As such, talks over the bank have ended.
"We continue to make progress strengthening and simplifying our Financial Services business in line with our strategy and we remain comfortable with consensus profit forecasts for the division," said Sainsbury's.
SIG lifted its guidance after a strong trading performance continued into September.
The building products supplier reported like-for-like sales growth of 17% in the third quarter of 2021 on a year ago, following on from 33% growth in the first half - a figure the company said was "distorted" by Covid a year ago. Against pre-Covid 2019 comparatives, third quarter growth was 9%, up from the 1% growth seen in the first half.
UK Distribution was the main driver behind the performance. The France and UK Exteriors businesses, and the Poland business, continue to perform very strongly, and Ireland rebounded after a Covid-hit first half.
"Whilst supply issues persist across many product groups, order books continue to build and the outlook for materials shortages has become clearer. We are mindful of the potential impact of these shortages should the situation persist for an extended period, but remain highly confident in the effectiveness of our supply chain management and commercial agility," said SIG.
The company now expects full-year underlying operating profit to be ahead of current market forecasts. For 2020, SIG made an underlying operating loss of GBP53.3 million, swinging from a profit of GBP42.5 million in 2019.
Gold was quoted at USD1,789.64 an ounce early Friday, higher than USD1,780.15 on Thursday. Brent oil was trading at USD83.98 a barrel, lower against USD84.12 late Thursday.
The dollar was on the front foot at the end of the week.
The euro traded at USD1.1633 early Friday, easing from USD1.1640 late Thursday. Against the yen, the dollar rose to JPY113.98 versus JPY113.85.
Sterling was quoted at USD1.3791 early Friday, soft against USD1.3808 at the London equities close on Thursday.
The pound slipped even after the UK central bank's new chief economist told the Financial Times that the Bank of England's November policy meeting will have a "live" decision about whether or not to raise interest rates.
Huw Pill said the rate of UK consumer price inflation is likely to be "close to or even slightly above 5%" early next year. As a result, the decision at the Monetary Policy Committee's November 4 meeting "is finely balanced", he told the newspaper, adding: "I think November is live."
The comments less than a week after BoE Governor Andrew Bailey cautioned that the central back will have to act to ease inflationary pressures.
Data on Wednesday showed the UK annual inflation rate eased to 3.1% in September from August's 3.2% growth. Analysts had been expecting the September reading to remain stable at 3.2%, according to FXStreet.
The economic events calendar on Friday has PMI readings from Germany, the eurozone, the UK and the US at 0830 BST, 0900 BST, 0930 BST and 1445 BST respectively.
By Lucy Heming;Â [email protected]
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