25th May 2022 07:59
(Alliance News) - Stock prices in London were seen opening higher on Wednesday, with the mood in markets largely positive ahead of the release of minutes from the most recent US Federal Reserve meeting.
IG futures indicate the FTSE 100 index will open 42.7 points higher, 0.6%, at 7,527.05. The blue-chip index closed down 29.09 points, or 0.4%, at 7,484.35 on Tuesday.
In early UK corporate news, utility SSE posted an annual earnings rise. Retailer Marks & Spencer posted decent annual results, but warned it is starting the new financial year on a "lower adjusted profit base".
Fresh food producer Bakkavor expects annual results in line with expectations despite uncertainty stemming from China's zero-Covid policy.
In economic data, the German economy expanded 0.2% quarter-on-quarter in the first quarter of 2022, in line with a prior estimate, figures from Destatis showed. In the fourth quarter of 2021, Germany's economy had shrunk by 0.3%.
Adjusting for price and calendar effects, German GDP was 4.0% higher year-on-year in the first quarter, quickening from a 1.8% hike in the fourth quarter of 2021. First-quarter GDP was 0.9% lower than three years earlier, before the onset of the pandemic.
"War in Ukraine and the continuing Covid-19 pandemic have intensified existing distortions, including interruptions in supply chains and rising prices," Destatis analyst Georg Thiel said.
"Despite difficult framework conditions in the global economy, the German economy started 2022 with a slight growth."
Later Wednesday, market focus will be on minutes from the US Federal Reserve's latest meeting, released at 1900 BST. The Fed earlier in May lifted interest rates by 50 basis points, as expected.
This was the first time the US central bank had hiked rates by a half-point since 2000, and it took the federal funds rate to a range of 0.75% to 1.00%.
The Fed also decided to start reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at the start of June.
For Treasury securities, the cap will initially be set at USD30 billion per month and after three months will increase to USD60 billion per month. For agency debt and agency mortgage-backed securities, the cap will initially be set at USD17.5 billion per month and after three months will increase to USD35 billion per month. It gives an initial total balance sheet reduction of USD47.5 billion.
Ahead of the release of the minutes, the dollar was mixed.
Against the greenback, the pound rose to USD1.2537 early Wednesday from USD1.2518 at the London equities close on Tuesday. However, the euro faded to USD1.0697 from USD1.0725. Against the yen, the dollar advanced to JPY126.98 from JPY126.67.
In London, SSE reported rising earnings and lifted its payout.
In the financial year that ended March 31, revenue climbed 42% to GBP16.91 billion from GBP11.87 billion. Pretax profit rose 44% to GBP3.48 billion from GBP2.42 billion.
Adjusted earnings per share grew by 22% to 95.4 pence, within guidance, from 78.4p. The adjusted EPS figure has been tipped to rise to "at least" 120p for the new year. For the five-year period to financial 2026, it expects compound annual adjusted EPS growth of between 7% and 10%.
SSE hiked its payout by 5.8% to 85.7p from 81.0p.
SSE recently kicked off plans for a sales process for its SSEN Transmission arm. This is expected to formally begin in the summer. SSE plans to sell a 25% stake in the electricity transmission network unit.
Clothing, homewares and food retailer M&S reported a swing to profit for the year ended April 2, but cautioned on profit in the year ahead, amid the war in Ukraine and investment plans.
Revenue for the recently ended financial year climbed 19% to GBP10.89 billion from GBP9.17 billion.
M&S swung to a pretax profit of GBP391.7 million from a GBP209.4 million loss. Adjusted pretax profit jumped to GBP522.9 million from GBP50.3 million.
Like last year, M&S did not declare a dividend.
Trading in the first six weeks of the new financial year has improved annually.
Looking ahead, the retailer cautioned: "This year the business will not receive business rates relief and International will not have the profit contribution from Russia. As we invest in capacity growth at Ocado Retail, we anticipate a minimal contribution of share of net income to group results.
"Consequently, we start 2022-23 from a lower adjusted profit base. The business is now much better positioned and has had an encouraging start to the year. However, given the increasing cost pressures and consumer uncertainty we do not currently expect to progress from this lower profit base in 2022-23."
M&S said it is preparing for an "adverse impact on volumes due to price inflation". It said price inflation will slow "the rate of sales growth".
It expects capital expenditure to increase to around GBP400 million in the coming year, from GBP300.2 million.
Elsewhere among London-listed mid-caps, IT services firm Softcat expects yearly profit to top expectations.
In the third quarter ended April 30, it saw "double-digit year-on-year growth in revenue, gross profit and operating profit".
"Growth was broad-based across all technology segments, reflecting strong and stable customer demand. The supply chain situation remains challenging but consistent with the first half," Softcat said.
"The board is pleased with the progress and, because of the strong income performance in the period, now expects that operating profit for the full year will be slightly ahead of its previous expectations."
Fresh food producer Bakkavor said revenue climbed 12% annually to GBP485.4 million in the first quarter ended March 26.
UK revenue rose 8.7%, US revenue surged 41%, while in China, growth was more muted at 5.5%.
"In China, regional restrictions have significantly impacted performance from March onwards," Bakkavor cautioned.
It cautioned that more price increases in the UK will hit volumes, while in China, it said the "near-term outlook" amid the nation's strict Covid-19 eradication policy.
Bakkavor still forecasts a full-year outturn in line with management expectations, however.
In Tokyo on Wednesday, the Nikkei 225 closed down 0.3%. The Shanghai Composite was up 0.9%, while the Hang Seng in Hong Kong was 0.2% higher. The S&P/ASX 200 ended 0.4% higher.
In New York on Tuesday, the Dow Jones Industrial Average closed up 0.2%, the S&P 500 index ended down 0.8%, while the Nasdaq Composite tumbled 2.4%.
Brent oil rose to USD114.30 a barrel early Wednesday from USD113.97 late Tuesday. Gold stood at USD1,858.03 an ounce, down from USD1,866.09.
The economic events calendar on Wednesday has US durable goods orders at 1330 BST.
By Eric Cunha; [email protected]
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