10th Mar 2021 07:57
(Alliance News) - Stocks in London are set for a downbeat start to Wednesday's session, with momentum in New York failing to flow through to Asia overnight as investors await US inflation data.
In early UK company news, insurer Legal & General said it is on track for its five-year targets after its 2020 financial performance. Spirax-Sarco Engineering raised its 2020 dividend. Restaurant Group revealed plans for a GBP175 million capital raise.
IG says futures indicate the FTSE 100 index of large-caps to open 34.94 points lower, or 0.5%, at 6,685.80 on Wednesday. The FTSE 100 index closed up 11.21 points, or 0.2%, at 6,730.34 on Tuesday.
"Today's price action signals that all eyes are on the US CPI data and the US bond auction tonight. If the Nasdaq's overnight rally looked more grasping at straws than finding its feet, the risks are definitely weighted towards its retreat resuming this evening," said Jeffery Halley at Oanda.
In New York on Tuesday, stock indices closed higher, with tech shares bouncing back. The Dow Jones Industrial Average ended up 0.1%, the S&P 500 rose 1.4% and the tech-heavy Nasdaq Composite shot up 3.7%.
Tech names have been out of favour recently amid concerns over valuations in an environment of potentially higher inflation and interest rates. The sector got some respite on Tuesday with Apple shares climbing 4.1% and Tesla rallying 20%.
US President Joe Biden's massive relief fiscal plan has been one of the reasons for worry about an overheating economy, and it is on the verge clearing Congress with a final vote scheduled for Wednesday.
Democratic leaders said the USD1.9 trillion package, broadly popular with Americans and approved by the Senate at the weekend, heads to the House for likely passage days before a crucial deadline, and culminating a weeks-long negotiation over the cost and scope of the measure. If it makes it to his desk, Biden – who made the American Rescue Plan his top legislative priority – could sign the historic bill into law by the week's end.
But the plan - which funds Covid vaccines, preserves unemployment benefits for millions, and sends relief checks of up to USD1,400 to most Americans - can afford very few Democratic defections. With all Republicans appearing in lockstep against the package, and Democrats enjoying the smallest majority in years in the 435-seat House of Representatives, Biden's party can afford a maximum of four Democratic 'no' votes.
In early UK company news, Legal & General Group reported a "resilient" performance in 2020 and a good start to its five-year plan.
Operating profit for 2020 edged down to GBP2.22 billion from GBP2.29 billion the year before, with pretax profit attributable to equity holders down 15% to GBP1.79 billion.
The provider of investment management, life assurance and pension services delivered financial metrics in line with its five-year targets despite the pandemic. Cash generation of GBP1.54 billion and capital generation from continuing operations of GBP1.5 billion were both consistent with L&G's goals of GBP8 billion to GBP9 billion over five years.
"Supporting this robust financial performance, our new business and balance sheet have again proven to be resilient against shocks, with LGRI's US business achieving record PRT volumes and LGI new business annual premiums up 10% year on year," the company said.
Legal & General's full-year payout was flat at 17.57p, on track for its five-year cumulative dividend ambition of GBP5.6 billion to GBP5.9 billion.
"Legal & General delivered a robust and resilient performance for all stakeholders, providing stability to our people, customers and shareholders. Our balance sheet remains strong, with the Solvency II coverage ratio currently over 190%, and trading remains consistent with delivering our growth ambitions which are supported by six long term growth drivers," said Chief Executive Nigel Wilson.
Spirax-Sarco Engineering said its fourth quarter was better than expected, with full-year profit nudging up.
Revenue for 2020 fell 4% to GBP1.19 billion, though pretax profit edged up 1% to GBP240.1 million, as the thermal energy management and pumping firm's operating profit margin improved to 20.9% from 19.7%.
"Following a stronger-than-anticipated fourth quarter, we are very pleased with the group's performance in 2020, given the unprecedented circumstances caused by the Covid-19 pandemic," said Chief Executive Nicholas Anderson.
Spirax-Sarco reported strong organic sales and profit growth in Watson-Marlow, while organic sales for Steam Specialties declined broadly in line with industrial production across its global markets. In Electric Thermal Solutions, organic sales fell 12%. The latter two divisions still performed robustly given challenging market conditions, the company said.
"The excellent growth in Watson-Marlow was driven by the Pharmaceutical & Biotechnology sector, where demand accelerated due to Covid-19 vaccine development and production. The improved outlook for industrial production growth, strong order book, robust prospects for Watson-Marlow and continued investments leave us well-placed for 2021," said CEO Anderson.
Spirax-Sarco raised its dividend for the year by 7% to 118.0p.
Just Eat Takeaway.com posted a sharp revenue hike for 2020 but was unable to stave off a widened loss during what was an "exceptional year" for the new food delivery tie-up.
The company was formed after Just Eat and Takeaway.com merged in 2020.
In 2020, Just Eat Takeaway.com's revenue surged almost five-fold to EUR2.04 billion from the EUR416 million Takeaway.com alone registered in 2019. Revenue was largely boosted by the merger, though Just Eat Takeaway.com was also helped by increased demand for its services as lockdowns meant restaurants, pubs and bars were unable to provide in-person dining for much of 2020.
The company posted a widened loss, however. Its pretax loss stretched to EUR147 million from the EUR88 million incurred by Takeaway.com in 2019.
Combined revenue - adjusted to assume the merger was sealed at the start of 2019 - was up 54% to EUR2.40 billion and its adjusted earnings before interest, tax, depreciation and amortisation rose 18% to EUR256 million.
Infrastructure group Balfour Beatty reported a fall in profit for 2020, though did propose a final dividend.
Revenue for 2020 rose to GBP8.59 billion from GBP8.41 billion, though pretax profit tumbled to GBP48 million from GBP138 million. The company said the significant fall in profit was due to a combination of the pandemic, a reassessment of end-of-contract forecasts in Construction Services, and the decision to defer any disposals from Infrastructure Investments, given prevailing market conditions.
Balfour added that it will repay the GBP19 million claimed under the UK government's furlough scheme.
The company recommended a dividend of 1.5p per share for 2020, having paid no interim dividend. This compares to 2.1p paid for 2019. Balfour has also decided to extend its share buyback programme to GBP150 million for 2021.
Balfour said its operations recovered steadily through the second half of 2020, and expects that Construction Services and Support Services will deliver underlying profit from operations in 2021 in line with 2019.
Casual dining chain owner Restaurant Group said its performance was encouraging in 2020 when its outlets were allowed to trade, but its loss for the year deepened substantially.
Separately, the company unveiled plans for a GBP175 million capital raise.
Revenue for 2020 more than halved to GBP459.8 million from GBP1.07 billion in 2019, while the owner of pan-Asian brand Wagamama posted a pretax loss of GBP127.6 million, widened from a GBP37.3 million loss the year before.
"Our reported results reflect that we have been closed for 'dine-in' in many of our restaurants for a very significant proportion of 2020," said Restaurant Group.
Positively though, in the periods when the company was allowed to trade for dine-in, Wagamama continued to deliver "exceptional" like-for-like sales growth, trading well ahead of management expectations.
The company said that the pandemic and associated restrictions are likely to hit its ability to reduce leverage organically or support selective growth opportunities in the medium term. As a result, it proposed a GBP175 million capital raise.
The proceeds will be used to improve liquidity headroom, accelerate deleveraging and strengthen the company's ability to capitalise on site expansion for Wagamama and its Pubs businesses.
The funds will be raised via a firm placing of 95.3 million shares and a placing and open offer of 79.7 million shares. The fundraise will be priced at 100 pence per share, which the company said marked an 11% discount to Tuesday's closing middle market price of 111.7p.
"The capital raising, announced today, will significantly strengthen the group's balance sheet and provides TRG with the flexibility to invest in growing our business. Whilst the sector outlook remains uncertain, and we are mindful of continuing restrictions across the UK, we are confident that the actions announced today will allow us to emerge as one of the long term winners," said Chief Executive Andy Hornby.
In Asia on Wednesday, the Japanese Nikkei 225 index closed flat.
In China, the Shanghai Composite also closed flat, while the Hang Seng index in Hong Kong is 0.3% higher in late trade. Â
Factory prices in China rose in February at the fastest pace in more than two years, official data showed Wednesday, as the country's vast industrial sector recovered from a coronavirus-induced slump.
The producer price index, which measures the cost of goods at the factory gate, rose 1.7% last month according to data from the National Bureau of Statistics, exceeding analysts' expectations. China's PPI had risen for the first time in a year in January, and February's rate was the fastest since November 2018.
Gold was quoted at USD1,715.77 an ounce early Wednesday, up slightly on USD1,713.01 on Tuesday. Brent oil was trading at USD66.79 a barrel, sinking from USD68.20 late Tuesday.
The economic events calendar on Wednesday has US inflation figures at 1330 GMT.
"US inflation data will be an important input for trader mood for the second part of this week, especially given that investors lack a clear direction since the beginning of this week, rushing in and out of tech stocks," said Ipek Ozkardeskaya, senior analyst at Swissquote.
"High volatility is not good no matter the direction," said Ozkardeskaya. "Therefore, the inflation read could inspire the reflation traders to move away from the growth stocks yet again. Therefore, the downside risks prevail for risk assets; the storm hasn't passed just yet."
The dollar was stronger ahead of the data.
Against the yen, the dollar rose to JPY108.79 versus JPY108.70.
Sterling was quoted at USD1.3874 early Wednesday, falling from USD1.3900 at the London equities close on Tuesday. The euro traded at USD1.1882 early Wednesday, soft on USD1.1888 late Tuesday.
By Lucy Heming; [email protected]
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