12th Jan 2022 07:49
(Alliance News) - Stock prices in London are seen opening higher on Wednesday after US Federal Reserve Chair Jerome Powell pledged to maintain a healthy recovery in the world's top economy in testimony to Congress on Tuesday.
Likely to lend further support, UK retailers J Sainsbury and JD Sports early Wednesday raised annual profit guidance. Meanwhile, Swiss Re exited its shareholding in Phoenix Group.
IG futures indicate the FTSE 100 index is to open 44.63 points higher at 7,536.00. The blue-chip index closed up 46.12 points, or 0.6%, at 7,491.37 on Tuesday.
Supermarket chain Sainsbury's said its investment in value, new products and service drove volume market share gains, trading ahead of the overall UK market through its financial third quarter and the key Christmas period.
For the 16 weeks to January 8, total retail sales - excluding fuel - was down 5.3% following 6.8% growth in third quarter of financial 2021.
However, Sainsbury's said Groceries Online sales grew by 92% versus two years ago, with weekly orders increasing again in recent weeks to over 700,000 per week. Orders in Christmas week were up 41% year-on-year.
Looking ahead, Sainsbury said it is raising annual profit guidance, reflecting strong grocery sales, cost savings delivery and improved Bank outlook.
For the financial year that ends in March, it expects to report underlying pretax profit of at least GBP720 million, having posted underlying pretax profit of GBP356 million in financial 2021.
Chief Executive Officer Simon Roberts said: "I am really pleased with how we delivered for customers this Christmas. More people ate at home and our significant investment in value, innovation and service led to market share growth."
JD Sports Fashion said it delivered an "extremely robust" performance against a backdrop of disruption of the supply chain operations of some of its key brand partners.
The sports and outdoor clothing retailer said total revenue for the 22 week period that ended January 1 in its like-for-like businesses was more than 10% ahead of the same period in 2020 with an equally positive performance across the Black Friday and Christmas period. Gross margins for the second half were in line with the prior year.
JD Sports said that due to strong consumer demand, it was confident pretax profit for the year to January 29 will be ahead of market forecasts. It expects headline pretax profit of at least GBP875 million. It posted pretax profit of GBP324.0 million in financial 2021.
"Looking ahead, management are cognisant of the ongoing challenges with operational restrictions from the COVID-19 pandemic across Europe and Southeast Asia combined with the well-publicised short-term constraint in the supply of inventory from certain brands. However, the group, with its buying and merchandising capabilities, its breadth in brands and product assortment and a deep multichannel connection with the consumer, is well placed to manage these challenges," JD Sports said.
Swiss Re sold 66.2 million shares in Phoenix Group at 664 pence each, raising GBP440 million. Following the placing run by Merrill Lynch, which was first announced late Tuesday, Swiss Re has fully exited its holding in Phoenix Group, an insurance company.
The positive start in London comes following well-received comments from the Fed's Powell before Congress on Tuesday.
In the US on Tuesday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.5%, S&P 500 up 0.9%, and Nasdaq Composite up 1.4%.
Minutes from the Fed's December meeting revealed a hawkish tilt by officials spooked by months of stubbornly high price rises that many fear could hit consumers and ruin the economic rebound in the US. It showed showed Fed policymakers wanted to speed up their cycle of monetary tightening, including multiple interest rate hikes and the shrinking of the bond holdings on its balance sheet.
However, Powell managed to soothe some of those fears Tuesday during his Senate reconfirmation hearing.
He said the US economy was on a strong footing, and with inflation rising and employment recovering, "the economy no longer needs or wants the very highly accommodative policy".
Inflation was "very near the top of the list" of risks to the economic outlook, he said, adding that the current rate is "very far above target".
The Fed expects a "return to normal supply conditions" in the coming months, Powell said, but "if we see inflation persisting at high levels longer than expected...we will use our tools to get inflation back".
Asian markets rose on Wednesday. The Nikkei 225 index closed up 1.9% in Tokyo on Wednesday. The Shanghai Composite ended up 0.8%, while the Hang Seng index in Hong Kong was up 2.6%. The S&P/ASX 200 in Sydney closed up 0.7%.
Consumer inflation in China nudged down in December, official data showed Wednesday, on the back of easing food and energy costs.
The consumer price index, a key gauge of retail inflation in the world's second-biggest economy, rose 1.5% on-year, slowing from 2.3% in November and slightly below analysts' expectations. Meanwhile, factory inflation came in lower than expected on-year as well at 10% in December, following a 13% rise in November.
Following the inflation reading from China, investors were looking ahead to inflation data from the US at 1330 GMT.
The US consumer price index print for December is expected to be the highest in 40 years at 7.0% annually, following a 6.8% rise in November.
CMC Markets analyst Michael Hewson explained: "Powell's calm tone would appear to have resonated with the concerns that came out of last week's Fed minutes, when markets reacted to the prospect that balance sheet reduction would be done in such a way that might be destabilising. Yesterday's rebound suggests that some of these concerns may have been allayed.
"Because of yesterday's US rebound, and a decent Asia session, which was helped by some softer China inflation numbers, markets in Europe look set to open higher, as we look ahead to today's US CPI report for December, which could well once again spark volatility, if we get a number well north of 7%."
The pound was quoted at USD1.3628 early Wednesday, up from USD1.3617 at the London equities close Tuesday.
UK Prime Minister Boris Johnson is to face members of Parliament amid furious demands to come clean over his attendance at a reported 'bring your own booze' party in the No 10 garden in breach of Covid lockdown rules.
Johnson will make his first public appearance since the leak on Monday of an email from his principal private secretary Martin Reynolds inviting Downing Street staff to the gathering in May 2020.
The euro was priced at USD1.1360, higher against USD1.1327. Against the Japanese yen, the dollar was trading at JPY115.32, down from JPY115.37.
Brent oil was quoted at USD83.72 a barrel Wednesday morning, rising from USD83.44 late Tuesday. Gold stood at USD1,819.10 an ounce, up from USD1,816.01.
Wednesday's economic calendar has eurozone industrial production figures at 1000 GMT.
By Arvind Bhunjun; [email protected]
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Phoenix Group HoldingsSainsbury'sJD Sports