15th Jan 2020 07:45
(Alliance News) - Stock prices in London are set to open slightly lower on Wednesday as the US and China prepare to sign a 'phase one' trade deal, with the prospect of a follow-up deal seeming far off as November's US presidential election looms.
In early UK company news, housebuilder Persimmon said it traded well in 2019 despite revenue dipping and peer Vistry - the rebranded Bovis Homes - said it expects to report profit slightly ahead of market consensus, while Tullow Oil said the recruitment of a new chief executive is underway.
IG says futures indicate the FTSE 100 index of large-caps to open 1.15 points lower at 7,621.20 on Wednesday. The FTSE 100 index closed up 4.75 points, or 0.1%, at 7,622.35 on Tuesday.
"Risk appetite retreated overnight with equities and bond yields sliding. Some scepticism around the US-China phase one deal crept into the markets following a period with very strong performance of equities and other risk assets," said Danske Bank.
The world's two dominant economic powers, the US and China, are poised to sign a trade truce Wednesday.
Although tariffs on hundreds of billions of dollars of two-way trade will remain in place, likely at least until after President Donald Trump faces re-election in November, some of the uncertainty for business will go away - as it takes the threat of new tariffs off the table, for now.
"The small set-back was fuelled by a Bloomberg report that Trump would not reduce tariffs on China further on this side of the election in November," Danske Bank continued. "Some commentators also expressed scepticism that China would be able to buy the large amount of goods they are committing to in the phase-one deal. As we've said before, while the trade war has peaked we should still expect a bumpy road [for] trade talks, but overall we expect the talks to move a bit to the background for now."
The phase two talks will likely be "more complicated", Danske Bank added.
In the US on Tuesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average ending up 0.1% but the S&P 500 ending down 0.2% and Nasdaq Composite also closing down 0.2%.
In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.5%. In China, the Shanghai Composite is down 0.5%, while the Hang Seng index in Hong Kong is down 0.5% as well. Â
In early UK company news, housebuilder Persimmon said it "traded well" in 2019.
Revenue for the year is expected to be GBP3.65 billion, down 2.4% on 2018, reflecting actions taken to ensure "improved levels of quality and service". Completions fell to 15,855 from 16,499 a year ago, with an average selling price broadly unchanged year-on-year at GBP215,700.
Pretax profit for the year is expected in line with market consensus, Persimmon said.
Looking at 2020, the company said it has a "solid platform" with total forward sales of GBP1.36 billion as at the end of December. Persimmon said it is in a strong market position heading into the spring season.
Peer Vistry said it expects to record profit slightly ahead of market consensus for 2019. Vistry changed its name from Bovis Homes following its recently completed acquisition of Galliford Try's Linden Homes and Partnerships & Regeneration units. It said it will take GBP15 million in exceptional costs in 2019 related to the acquisition.
Vistry completed a total of 3,867 new homes in 2019, up 3% from 3,759 the year before. The total average selling price was GBP279,000 versus GBP273,200.
A "significant step-up" in the group's sale rate was maintained in the year, with an average sales rate per outlet per week of 0.58 versus 0.50.
Vistry said it expects another "record year" for profit.
"Whilst it is early in the year to comment on 2020 trading, we have a strong forward sales position and trading to date has been very positive, with consumer confidence returning and industry fundamentals remaining strong," the housebuilder said.
SSE said it will complete the sale of SSE Energy Services Group to OVO Energy for an enterprise value of GBP500 million.
This comes after the UK Competition & Markets Authority announced in December its decision not to proceed to a phase 2 investigation into the deal.
Ovo was named as a potential buyer back in August and, once the deal is complete, will become one of the UK's largest retail energy suppliers. SSE said the proceeds will be used to reduce debt.
"SSE enters the new decade as a more focused group, even better positioned to lead the low carbon transformation required to achieve the UK's vital net zero commitment in the years to come," said Chief Executive Alistair Phillips-Davies.
Travis Perkins said it has appointed Non-Executive Christopher Rogers as chair designate of Wickes.
The builders' merchant announced in July plans to demerge consumer-facing retailer Wickes as part of its plan to focus on trade customers and simplify the business. The appointment of Rogers is "another milestone" in the process, with good progress being made on completing the Wickes board. The demerger is on track for completion in the second quarter, Travis Perkins said.
Rogers will not stand for re-election as a Travis Perkins non-executive and will step down following the group's AGM in April.
Tullow Oil said it has been working hard on a "major review" and the appointment of a new chief executive is "well under way".
Tullow in December "reset" its future production guidance, suspended its dividend and said chief executive officer Paul McDade and exploration director Angus McCoss had resigned with immediate effect by mutual agreement.
The oil & gas firm said it ended 2019 with average production of 86,700 barrels of oil per day, in line with expectations. Revenue for the year is at expected to be around USD1.7 billion and gross profit USD700 million.
Tullow expects to report pre-tax impairments and exploration write-offs of around USD1.5 billion, largely due to a USD10 per barrel reduction in its long-term accounting oil price assumption and a reduction in TEN 2P reserves.
Meanwhile, the firm's business review - covering all areas of Tullow's operations, cost-base and reporting - is "progressing well". The recruitment of a new CEO is "well under way" with the assistance of an executive search firm.
Provident Financial said it expects to report a 2019 profit in line with expectations and said it is well place entering 2020.
The subprime lender said it delivered results in line with board forecasts during the fourth quarter of the year, with Vanquis Bank slightly ahead of expectations and Moneybarn below forecasts asa a result of higher impairment.
Provident said it has agreed a bilateral securitisation facility with NatWest Markets to fund Moneybarn business flows. This will provide up to GBP100 million of initial funding and is anticipated to grow to GBP275 million over the next 18 months.
"I am very pleased that the group has continued to perform well in the final quarter and we expect to report full-year results in line with market expectations," said Chief Executive Malcolm Le May.
"I am also delighted to announce that we have now agreed a bilateral securitisation facility to fund Moneybarn's business flows, further diversifying our funding sources, reducing the group's funding costs and supporting the group's medium-term growth ambitions," he added.
In the economic calendar on Wednesday, there is UK inflation at 0930 GMT, with eurozone trade and industrial production at 1000 GMT. US producer prices are at 1330 GMT.
Sterling was quoted at USD1.3031 early Wednesday, higher than USD1.3003 at the London equities close on Tuesday.
"The pound enjoyed a welcome rebound yesterday, after five days of losses against the US dollar, sent it below the 1.3000 level for the first time this year. Speculation over an interest rate reduction at the end of this month, along with recent weak economic data has helped to undermine sentiment in the UK currency in recent days," said Michael Hewson at CMC Markets.
He added: "Today's headline CPI numbers for December are likely to show that price pressures remained steady at 1.5%, with core prices at 1.7%. On the RPI measure prices are above 2%, expected to come in at 2.3%, which would suggest that all told there is little risk of deflation, and that it would probably be sensible to wait and see further December data, as well as what the new government intends to do on the fiscal side, before cutting rates."
The euro was quoted at USD1.1135 early Wednesday, firm on USD1.1127 late Tuesday. Against the yen, the dollar was quoted at JPY109.93 versus JPY110.07.
Gold was quoted at USD1,551.00 early Wednesday, higher than USD1,542.80 at the London equities close on Tuesday. Brent stood at USD64.34, lower than USD64.70 late Tuesday.
By Lucy Heming; [email protected]
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