26th Jan 2021 07:47
(Alliance News) - Stocks in London are set for a subdued start on Tuesday as markets monitor US fiscal stimulus talks and digest UK jobs data.
In early UK company news, retailer JD Sports Fashion confirmed it is mulling an equity raise to fund "future strategic opportunities", jet engine maker Rolls-Royce said new coronavirus strains and tightened borders are creating near-term uncertainty, and housebuilder Crest Nicholson laid out plans to reinstate its dividend.
IG says futures indicate the FTSE 100 index of large-caps to open 2.95 points lower at 6,635.90 on Tuesday. The FTSE 100 index closed down 56.22 points, or 0.8%, at 6,638.85 on Monday.
"European markets got off to a disappointing start to the week on a combination of concerns about another lockdown in France, the threat of tighter restrictions for longer across Europe, slower vaccine rollout, as well as disruption to vaccine supply," said Michael Hewson, chief market analyst at CMC Markets.
Hewson also cited negotiations in Congress over US President Joe Biden's fiscal stimulus plans.
Biden said Monday that talks with Republicans in Congress over his USD1.9 trillion Covid economic relief plan could take another two weeks, rejecting calls to scale down the proposal.
"I don't expect we'll know whether we have an agreement and to what extent the entire package will be able to pass or not pass until we get right down to the very end," Biden told reporters at the White House.
Republicans in Congress are signalling strong reluctance to go along with the Democratic bill, which seeks to boost funding for vaccinations, add USD400 to weekly unemployment benefits, and issue Americans USD1,400 in cash payments.
Hewson said: "This uncertainty around the timing, as well as the amount of a new package appears to driving an element of uncertainty amongst investors, with Asia markets slipping back, while European stocks look set for a mixed open, following on from yesterday's negative session, as partisan bickering once again returns to the fore."
In the US on Monday, Wall Street ended mixed, with the Dow Jones Industrial Average ending down 0.1%, S&P 500 up 0.4%, and Nasdaq Composite down 0.7%.
In Asia on Tuesday, the Japanese Nikkei 225 index closed down 1.0%. In China, the Shanghai Composite ended down 1.5%, while the Hang Seng index in Hong Kong is down 2.5%. Â
Sydney was closed on Tuesday for Australia Day.
In the UK on Tuesday, early focus will be on the latest unemployment figures.
The unemployment rate for the three months to November came in at 5.0%, up from 4.9% in the three months to October but beating consensus, according to FXStreet, of a steeper rise to 5.1%.
Early estimates for December indicate that the number of payrolled employees fell by 2.7% compared with a year ago, marking a fall of 793,000 employees, the ONS said. Since February - being the month before the coronavirus pandemic gripped the UK - 828,000 fewer people were in payrolled employment.
Sterling remained lower from a day before following the labour market update, quoted at USD1.3635 early Tuesday against USD1.3655 at the London equities close on Monday.
In early UK company news, JD Sports confirmed it is mulling an equity placing.
Sky News on Monday reported the sportswear retailer was in talks over an around GBP400 million share sale to fund its expansion. JD confirmed Tuesday it is exploring additional funding options with a view to "increasing its flexibility to invest in future strategic opportunities", and this may involve a non pre-emptive equity placing. The company didn't put a figure on the potential raise.
Rolls-Royce said new coronavirus strains and the tighter travel restrictions introduced in their wake is creating short-term uncertainty.
Trading in December was broadly in line with expectations across all business units, the jet engine maker said, and there was "good progress" on its restructuring programme. Full-year free cash outflow was in line with previous guidance, the firm added.
While continued progress on vaccine roll-outs is encouraging for the medium-term recovery of air traffic and economic activity, new virus variants are creating uncertainty in the near-term.
"Enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to our prior expectations, placing further financial pressure on our customers and the wider aviation industry, all of which are impacting our own cash flows in 2021," said Rolls-Royce.
The FTSE 100 constituent said its current forecasts indicate free cash outflow in the region of GBP2 billion in 2021. This is based on widebody engine flying hours for this year at around 55% of 2019 levels, compared to a base case of 70% presented in October.
"We continue to expect to turn cash flow positive at some point during the second half, reflecting our forecasted profile of flying hours as they recover from today's low base," the company said.
Housebuilder Crest Nicholson beat its own profit guidance and set out plans to reinstate its dividend.
Revenue for the financial year to October 31 was GBP677.9 million, down from GBP1.09 billion the year before due to Covid-19 disruption.
The company swung to a pretax loss of GBP13.5 million versus a profit of GBP102.7 million the year prior. Adjusted pretax profit of GBP45.9 million, though down from GBP121.1 million, was ahead of Crest's GBP35 million to GBP45 million guidance range.
Crest said it has entered the new year with a strong forward order book and "enhanced" balance sheet. It had net cash of GBP142.2 million on October 31, up from GBP37.2 million a year before and ahead of its November guidance.
"Looking forward, through 2021 and 2022, the next phase of Crest Nicholson's recovery will be improving operating margins to be in line with industry peers. Gross profit margins in 2021 will continue to be impacted by some of our more complex legacy sites and we will also need to invest the necessary capital to complete these. However, the group still expects to deliver strong profit growth and cash flow generation," the company said, adding that this backdrop supports the reinstatement of its dividend.
Crest plans to reinstate its dividend at two and a half times cover, effective from its half-year results.
The euro was soft early Tuesday, at USD1.2121 versus USD1.2125 late Monday. Against the yen, the dollar was quoted at JPY103.76 versus JPY103.81.
Gold was quoted at USD1,853.75 an ounce early Tuesday, higher than USD1,848.02 at the London equities close on Monday. Brent oil was trading at USD55.60 a barrel, firming on USD55.50 late Monday.
The economic events calendar on Tuesday sees the World Economic Forum's Davos Agenda continue, featuring keynote speeches from European Commission President Ursula von der Leyen and Germany Chancellor Angela Merkel.
By Lucy Heming; [email protected]
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