9th Nov 2021 07:48
(Alliance News) - Stock prices in London are seen opening slightly lower on Tuesday after the Federal Reserve warned of the risk that China's real estate sector poses to the US economy.
In early company news, Primark owner Associated British Foods declared a special dividend following a robust annual performance. Irish support services firm DCC raised its interim dividend after similarly strong results. Housebuilder Persimmon continued to benefit from favourable market conditions.
IG futures indicate the FTSE 100 index is to open 10.70 points lower at 7,289.70. The blue-chip index closed down just 3.56 points at 7,300.40 on Monday.
Associated British Foods said it delivered a resilient annual performance with its Primark fast-fashion store chain holding up well against pressures from the Covid-19 pandemic.
For the 53 weeks ended September 18, revenue was GBP13.88 billion, down slightly from GBP13.94 billion in financial 2020, but pretax profit rose by 6% to GBP725 million from GBP686 million.
AB Foods posted adjusted operating profit of GBP1.01 billion, down 1% from GBP1.02 billion last year. Operating profit of GBP808 million was in line with GBP810 million the year before.
Its Retail unit, which houses the Primark fashion chain, delivered adjusted operating profit of GBP415 million, up 15% from GBP362 million in financial 2020.
However, AB Foods said sales at Primark, including a 53rd week this financial year, were 5% below last year at both actual and constant currency exchange rates and down 12% on pre-pandemic level due to Covid-19 restrictions.
AB Foods said it will press ahead with its Primark expansion in growth markets. In the US it will open a store on Jamaica Avenue, Queens, and it has signed four further leases to expand its reach in the greater New York area, as well as a lease for a store in Tyson's Corner, near Washington DC.
AB Foods declared a 20.5 pence final dividend, alongside a 13.8p special dividend, bringing total dividends for the year to 40.5p.
"Given the strength of our balance sheet and our confidence in the future we are setting out today a new capital cash allocation policy that provides the group with the capital it needs both for investment and financial stability while allowing for enhanced returns to shareholders when appropriate. We are announcing a special dividend for shareholders today as a result," said Chief Executive Officer George Weston.
Fellow FTSE 100 constituent DCC said it delivered a strong performance in the first half with all divisions delivering growth, despite the global volatility in commodity pricing, supply chains and inflation.
For the six months to September 30, revenue rose 27% to GBP7.52 billion from GBP5.93 billion last year and adjusted operating profit increased 11% to GBP195.8 million from GBP176.1 million.
DCC declared an interim dividend of 55.85p, up 7.5% from 51.95p paid last year.
Looking ahead, DCC said it expect that the year ending March 31, 2022 to be another year of "strong operating profit growth and continued development activity" and in line with current market consensus expectations.
Chief Executive Officer Donal Murphy said: "I am pleased to report a strong performance in the seasonally less significant first half, which builds on the growth recorded during the first half of the prior year. Each of our four divisions has delivered good growth, underlining the resilience of our business model and our ability to adapt to the very volatile macro environment. Sustainability is core to how we do business, and we continue to make good progress across each of our four sustainability pillars, including within energy transition.
"During the period we have developed a number of new partnerships with energy suppliers, bringing innovative and lower-carbon solutions to our customers. DCC is well positioned to lead our customers through their energy transition."
Housebuilder Persimmon said it continued to perform well through the period against a backdrop of healthy demand, with private sales reservation rates per site remaining ahead of 2019, as sales followed a more normal seasonal pattern as expected when compared to 2020.
For the period July 1 to Monday, average private new home sales reservation rate per site was 16% ahead of the same period in 2019.
Persimmon said demand for newly built homes continues to underpin positive pricing conditions in the housing market.
"With GBP1.15 billion of forward sales reserved beyond the current year and a quality pipeline of new developments coming on stream, Persimmon has a robust platform to support its continued high quality growth and the delivery of superior long-term sustainable returns for the benefit of all stakeholders," said CEO Dean Finch.
In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.3%, S&P 500 up 0.1% and Nasdaq Composite up 0.1%.
The Japanese Nikkei 225 index closed down 0.8% on Tuesday. In China, the Shanghai Composite ended up 0.2%, while the Hang Seng index in Hong Kong was up 0.2%. The S&P/ASX 200 in Sydney finished 0.2% lower.
The US Federal Reserve on Monday warned in its financial stability report that the rally across markets could quickly reverse if there was another Covid surge or the recovery stalls, while it also raised concerns about the possible contagion from China's property crisis.
"Given the size of China's economy and financial system as well as its extensive trade linkages with the rest of the world, financial stresses in China could strain global financial markets through a deterioration of risk sentiment, pose risks to global economic growth, and affect the US," the report said.
All three main indices in New York hit record highs on Monday helped by news that US lawmakers had passed President Joe Biden's USD1.2 trillion infrastructure overhaul and as the country reopened to vaccinated visitors from more than 30 countries.
CMC Markets analyst Michael Hewson commented: "Markets in Europe got off to fairly subdued start to the week yesterday, while US markets once again finished in the green, with the Dow setting a new record high, after some big gains for US construction giant Caterpillar, which was boosted after US lawmakers finally signed off on a new USD1 trillion infrastructure bill. The new funds are expected to be used to improve roads, bridges, and other transportation projects, as well as upgrading broadband infrastructure.
"Some of the edge was taken off the positive mood just as markets were closing by the Federal Reserve who warned that prices of risky assets were becoming vulnerable to significant declines in its latest financial stability report. As a result, today's European market open looks set to be a slightly negative one."
The pound was quoted at USD1.3572 early Tuesday, up from USD1.3558 at the London equities close Monday.
The euro was priced at USD1.1598, up from USD1.1590. Against the Japanese yen, the dollar was trading at JPY112.83, down from JPY113.18.
Brent oil was quoted at USD83.34 a barrel Tuesday morning, down from USD83.60 late Monday. Gold stood at USD1,823.84 an ounce, flat against USD1,823.51.
The economic calendar on Tuesday has US producer prices at 1330 GMT. Fed Chair Jerome Powell and Bank of England Governor Andrew Bailey will speak virtually at the Conference on Diversity and Inclusion in Economics, Finance, & Central Banking.
By Arvind Bhunjun; [email protected]
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