8th Jul 2021 07:47
(Alliance News) - Stocks in London are set for a lower open on Thursday as markets digest minutes from the US Federal Reserve's last meeting.
"Fed officials remained unclear as to the timing of the pullback in asset purchases given the economic uncertainty although some officials felt the need to prepare for the eventual exit should economic data support such a move," economists at ING summarised.
In early UK company news, housebuilder Persimmon said it plans to accelerate a 110 pence per share surplus capital return to shareholders following a strong first half performance. Retailer WH Smith reported improving trading trends and highlighted a strong North America performance. Takeaway food company Deliveroo raised its gross transaction value guidance.
IG says futures indicate the FTSE 100 index of large-caps to open down 30.62 points, or 0.4%, at 7,120.40 on Thursday. The FTSE 100 closed up 50.14 points, or 0.7%, at 7,151.02 on Wednesday.
Released late Wednesday, the Fed minutes showed rising prices amid the recovery from the pandemic shutdown were predicted, but the recent jump in US inflation was higher than officials had expected.
Given a risk that prices will remain higher for some time, officials stressed the central bank will need to be ready to pull back on its massive bond-buying program, but offered no concrete hints as to when that will happen.
In the mid-June meeting, the policy-setting FOMC left the US benchmark interest rate unchanged in the range of 0.00% to 0.25% and also maintained its quantitative easing programme.
While temporary factors had been expected to boost inflation and then recede, the minutes showed "the actual rise in inflation was larger than anticipated".
The dollar slipped. Sterling was quoted at USD1.3784 early Thursday, firming on USD1.3770 at the London equities close on Wednesday.
The euro traded at USD1.1802 early Thursday, up from USD1.1793 late Wednesday. Against the yen, the dollar was quoted at JPY110.28, down versus JPY110.70.
Gold was quoted at USD1,797.70 an ounce early Thursday, lower than USD1,801.50 on Wednesday. Brent oil was trading at USD73.22 a barrel, up from than USD73.00 late Wednesday.
Wall Street ended higher in the wake of the minutes, but Asian stocks moved lower overnight.
The Dow Jones Industrial Average closed up 0.3% on Wednesday, the S&P 500 up 0.3% and the Nasdaq Composite marginally higher.
But in Asia on Thursday, the Japanese Nikkei 225 index closed down 0.9%. In China, the Shanghai Composite was down 0.7%, while the Hang Seng index in Hong Kong dived 2.5%. The S&P/ASX 200 in Sydney ended up 0.2%, however.
The Hang Seng extended losses into Thursday's session following a Chinese crackdown on technology firms. The Cyberspace Administration of China on Sunday ordered the removal of the Didi app after investigations found its user data collection in "serious violation" of regulations.
In early UK company news, B&M European Value Retail said it is on track for full-year targets after growth in the first quarter of its financial year.
Revenue in the 13 weeks to June 26 was up 3.1% on a constant currency basis, after a 28% jump for the same period a year ago. Core B&M UK fascia delivered two-year like-for-like sales growth of 21%, and this moderated to minus 4.4% on a one-year basis.
"The group has made a strong start to the new financial year and sales remain significantly above pre-pandemic levels. As expected, trading throughout the first quarter was volatile as we annualised against the high comparatives from last year," said Chief Executive Simon Arora.
The discount retailer said it is on track with its plans for the year and expects the two-year like-for-like showing from the core B&M UK business to remain strong.
Persimmon said it performed well in the first half of 2021, with revenue beating pre-pandemic levels.
Total revenue of GBP1.84 billion for the period is above both the GBP1.19 billion reported a year ago and the GBP1.75 billion registered for the same period in 2019. While the housebuilder delivered 7,406 new homes to customers in the half, below 2019's figure of 7,584, the average selling price jumped to GBP236,200 from GBP216,942.
"UK housing market fundamentals remain supportive with low interest rates, improving levels of mortgage availability, ongoing government support and strong customer demand," Persimmon said.
The housebuilder said it intends to return 110p per share of surplus capital as a single additional interim dividend payment in relation to the 2020 financial year. Previously, it had intended to split up the dividend into two payments, one made in August this year and one in December.
However, the single 110p dividend will be paid on August 13, "accelerating and consolidating the previously indicated payments, and returning the group to distributing two capital return payments every 12 months, a year earlier than originally envisaged." There will be no further dividend payments in relation to 2020, it added.
Chief Executive Dean Finch said: "Persimmon is well placed for the future with a strong balance sheet and healthy liquidity. As such, we are pleased to announce the accelerated payment of the surplus capital distribution."
WH Smith said it has been encouraged by improving trading trends as it unveiled new business wins across a number of UK airports.
The books and magazines retailer said it has won places for 18 technology and accessories stores across a number of significant UK airports, including London Heathrow, Manchester and Birmingham. They will trade under the InMotion brand, its tech and accessories business in North America.
The wins are expected to incur spending and investment costs of GBP15 million, though in a fully recovered travel market the stores are expected to deliver sales of GBP60 million per year.
Turning to recent trading, WH Smith said revenue in the first quarter represents 59% of 2019 levels, unchanged in the second quarter at 58% - though improving to 62% in the 18 weeks to July 3, driven by the travel business.
The retailer highlighted its North American performance, where the business has continued its encouraging recovery, with recent sales, in June, at 88% of 2019 levels.
"Following the stronger than anticipated performance from our North America business, we anticipate a small improvement to management's expectations for the current financial year," said WH Smith.
Food delivery platform Deliveroo lifted full-year gross transaction value guidance after a better-than-expected second quarter - though does expect a slowdown in growth in the second half.
Gross transaction value for the second quarter of 2021 was up 76% year-on-year to GBP1.74 billion, with orders rising 88% to 78 million.
"Deliveroo has seen continued strong growth and consumer engagement in H1, and as a result of that plus increased expectations for H2 is increasing the guidance for full year annual GTV growth from between 30% to 40% to between 50% to 60%," it said.
The firm also confirmed its full-year gross profit margin guidance, though expects this to be in the lower half of its previously communicated range.
Gross transaction value of GBP3.39 billion, up 99% year-on-year, for the first half implies a result of GBP2.93 billion for the second half at the midpoint of guidance, which would mark a slower annual growth rate of 24%.
The economic calendar on Thursday has German trade balance data at 0700 BST, Irish consumer price index at 1100 BST, and US initial jobless claims at 1330 BST. The ECB will announce the results of its strategy review at 1200 BST and hold a press conference at 1330 BST.
"Yesterday, comments from ECB 'sources' indicated that ECB will change its inflation goal from 'below, but close to 2%' to a symmetric inflation target of 2%...Such a new goal where inflation is allowed to overshoot 2% would foster the continuation of expansionary monetary policy and thus we expect a positive reaction in bond markets to the announcement," said Danske Bank.
By Lucy Heming; [email protected]
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