5th Aug 2021 07:59
(Alliance News) - Stocks in London are expected to pull back on Thursday after a positive few sessions, with traders awaiting the Bank of England's latest interest rate decision and a US jobs report at the end of the week.
In early UK company news, Frasers Group unveiled a full-year drop in profit and said Chief Executive Mike Ashley plans to step aside to let the retailer's head of elevation, Michael Murray, assume the top role.
Meanwhile, WPP lifted its outlook after a strong start to the year, and Rolls-Royce swung to an interim profit.
The BoE releases its decision at midday on Thursday. Analysts expect the central bank's policy-setting committee will unanimously back leaving interest rates at the current record low levels, but there could be minor dissent over its asset purchasing programme.
"Despite rising inflation and some hawkish comments from [Monetary Policy Committee] members, BoE is expected to keep its benchmark interest rate and its bond-buying target unchanged. Our base case is that BoE will gradually turn more hawkish and end [quantitative easing] this year (perhaps even prematurely), but not hike until H2 22," said Danske Bank.
Sterling was quoted at USD1.3884 ahead of the BoE decision, lower than USD1.3905 at the London equities close on Wednesday.
IG says futures indicate the FTSE 100 index of large-caps to open down 16.56 points, or 0.2%, at 7,107.30 on Thursday. The FTSE 100 closed up 18.14 points, or 0.3%, at 7,123.86 on Wednesday.
"Overall, I expect markets across asset classes to enter a holding pattern today, with only headline risk moving volatility intra-day, as the street awaits the week's main event tomorrow, the US non-farm payrolls," said Jeffery Halley, senior market analyst at Oanda.
Friday's jobs report follows ADP employment data on Wednesday that fell well short of forecasts. Employment in the US increased by 330,000 jobs in July, below both the 680,000 jobs added in June and consensus forecasts, according to FXStreet, of 695,000.
Analysts look for a figure of 880,000 for Friday's non-farm print, which would be up from 850,000 in June.
In the US on Wednesday, Wall Street ended lower. The Dow Jones Industrial Average lost 0.9% and the S&P 500 0.5%, but the Nasdaq Composite closed up 0.1%.
Stocks in New York slipped after comments from Federal Reserve Vice Chair Richard Clarida raised the prospects of the US central bank scaling back its huge bond-buying programme and lifting interest rates as soon as 2023.
"There are risks to any outlook, and I believe that the risks to my outlook for inflation are to the upside," said Clarida.
In early UK company news, Frasers Group said its founder, Mike Ashley, will be stepping aside as CEO to an executive director role, paving the way for future son-in-law Michael Murray to become the company's new boss.
The House of Fraser and Sports Direct owner said it is in talks over transitioning the CEO role from Asley to Murray over the course of the 2022 financial year. It is currently proposed that Murray will assume the role on May 1 next year and that Ashley would step down as CEO but remain on the board as an executive director.
Murray is currently Frasers's "head of elevation", meaning upgrading stores.
"The group's elevation strategy is transforming the business and receiving positive feedback from consumers and our brand partners, especially on projects such as the new Oxford Street Sports Direct which opened in June 2021," Frasers said, adding: "The board consider it appropriate that Michael leads us forward on this increasingly successful elevation journey."
Also on Thursday, Frasers reported a huge drop in full-year profit, down to GBP8.5 million in the 52 weeks to April 25 from GBP143.5 million the year before. This was on revenue that fell 8.4% to GBP3.63 billion.
"We are a resilient business, but the Covid-19 pandemic has resulted in some significant non-cash accounting impairments to our asset base," Frasers explained.
Ad agency WPP hailed a return to pre-virus trading levels a year ahead of plan.
Revenue for the first half of 2021 rose 9.8% to GBP6.13 billion, while WPP swung to a pretax profit of GBP394 million from a loss of GBP3.18 billion a year ago. Revenue less pass-through costs rose 16% on a like-for-like basis, and the firm noted the second-quarter growth of 19% was its highest on record.
"We have returned to 2019 levels in 2021, a year ahead of our plan, with good momentum into 2022," said Chief Executive Mark Read.
Full-year like-for-like revenue less pass-through costs growth is now expected to be around 9% to 10%, returning to 2019 levels a year ahead of plan.
WPP declared an interim dividend of 12.5 pence, up 25% from 10p a year ago. It added that it has GBP350 million in share buybacks planned for the second half after GBP248 million was completed in the first.
Rolls-Royce Holdings unveiled a swing back to profit and said it is on track to turn free cash flow positive in the second half after a "good" start to the year
Revenue for the first half of 2021 fell to GBP5.16 billion from GBP5.67 billion a year ago, but the jet engine maker swung to a pretax profit of GBP114 million from a loss of GBP5.21 billion.
Rolls-Royce reported negative free cash flow of GBP1.15 billion for the period, an improvement on the outflow of GBP2.80 billion recorded a year ago. It is targeting turning free cash flow positive during the second half 2021, and aims to improve the full-year figure to negative GBP2.0 billion from negative GBP4.2 billion in 2020.
"This leaner cost base together with a strong liquidity position gives us confidence in our ability to withstand uncertainties around the pace of recovery in international travel and benefit from the eventual rebound," said Chief Executive Warren East.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite was down 0.3%, while the Hang Seng index in Hong Kong was down 1.0%. The S&P/ASX 200 in Sydney was up 0.1%.
The euro traded at USD1.1837 early Thursday, flat on USD1.1835 late Wednesday. Against the yen, the dollar nudged up to JPY109.67 versus JPY109.65.
Gold was quoted at USD1,810.08 an ounce early Thursday, firm on USD1,808.00 on Wednesday. Brent oil was trading at USD70.36 a barrel, lower than USD71.22.
Outside of the Bank of England at noon, the economic events calendar on Thursday has a UK construction PMI reading at 0930 BST and the latest US jobless claims figures at 1330 BST.
By Lucy Heming; [email protected]
Copyright 2021 Alliance News Limited. All Rights Reserved.
Related Shares:
WPPRolls-RoyceFrasers Group