18th Jun 2021 07:50
(Alliance News) - Stocks in London are set for a muted end to the week as markets continue to digest the US Federal Reserve's more hawkish stance.
"The reality remains that the Fed is a long way from withdrawing stimulus, it's merely seeding the ground for a slower rate, which could start towards the end of this year, data permitting," said Michael Hewson, chief market analyst at CMC Markets.
In early company news, Tesco reported modest first quarter sales growth as official statistics showed UK food stores suffered in May due to the reopening of the hospitality sector. Inchcape said it expects to beat 2021 profit forecasts and Kerry Group has agreed the EUR819 million sale of its Meats & Meals business in the UK and Ireland.
IG says futures indicate the FTSE 100 index of large-caps to open 3.63 points lower, or down 0.1%, at 7,149.80 on Friday. The FTSE 100 closed down 31.52 points, or 0.4%, at 7,153.43 on Thursday.
In the US on Thursday, Wall Street ended mixed, with the Dow Jones Industrial Average ending down 0.6%, the S&P 500 flat, and the Nasdaq Composite 0.9% higher.
The US Fed on Wednesday turned hawkish as the central bank set its sights on rising inflation, with a majority of officials on its policy setting committee predicted a rate hike in 2023. The updated dot-plot showed 11 of the 18 committee members expect at least two rate hikes in 2023 and seven expecting one as soon as next year.
The Fed decision saw Wall Street end in the red across the board on Wednesday, but Thursday's session was less in one direction.
CMC's Hewson said markets have "started to settle on a more reasoned view of what the Fed actually did on Wednesday".
In early UK company news, Tesco reported modest first-quarter sales growth as it started to lap pandemic-elevated comparatives.
Like-for-like retail sales for the 13 weeks to May 29 grew 1.0% year-on-year to GBP13.36 billion, and rose 8.1% on a two-year basis. For the financial year ended February, Tesco's like-for-like annual sales growth was 6.3%.
In March 2020, UK supermarkets began to get a pandemic-related boost as consumers stockpiled and were forced to spend more time at home due to lockdown restrictions.
In the UK, Tesco noted that two-year like-for-like growth of 9.3% includes a retained benefit of customers eating more meals at home than they were pre-pandemic. Online demand remains high, the grocer said, and there was a "particularly strong" contribution from general merchandise and clothing.
"We delivered a strong performance in the first quarter, even as we lapped the high demand of last year due to the pandemic...While the market outlook remains uncertain, I'm pleased with the strong start we've made to the year and continue to be excited about the many opportunities we have to create value over the longer term," said Chief Executive Ken Murphy.
Tesco retained its profit guidance for the full-year.
Tesco's first-quarter results came as official statistics showed UK food stores suffered in May amid the reopening of the hospitality sector.
UK retail sales volumes fell 1.4% month-on-month in May, pulling back after a 9.2% surge in April. The largest contribution to May's decline came from food stores, the Office for National Statistics noted, where sales fell by 5.7%. Evidence suggests the easing of hospitality restrictions knocked sales as people flocked to pubs and restaurants after months of eating and drinking at home, the ONS said.
In other company news, Inchcape said it expects to deliver 2021 profit substantially ahead of market consensus, amid good demand.
The automotive distribution, retail and services company said encouraging trends across the business have continued and its performance to date has exceeded internal expectations. It noted both an uptick in demand and margin resilience.
While there is still uncertainty over the second half, both in relation to the pandemic situation and also due to semiconductor shortages, it expects a strong first half performance to underpin its full-year results. It expects to "significantly" beat the market consensus figure for pretax profit, before exceptional items, of GBP216 million.
Inchcape posted pretax profit before exceptionals of GBP129 million for 2020, which was down 61% on the GBP326 million reported for 2019.
Kerry Group said it has agreed to sell its Consumer Foods' Meats & Meals business in the UK and Ireland to Pilgrim's Pride for EUR819 million. However, it confirmed that it will retain its dairy business.
The Meats business is a manufacturer of branded and private label meats, meat snacks, food-to-go and meat-free products, with its brands including Richmond, Fridge Raiders and Rollover. The Meals business primarily serves the UK market and "specialises in authentic ethnic chilled and frozen ready meals, multi-cuisine ready to cook ranges, and home delivery meals under the Oakhouse brand."
The Meats & Meals business achieved revenue of EUR828 million and pretax profit of EUR63 million for 2020.
Tralee, Ireland-based Kerry plans to use the sale proceeds for the ongoing strategic development of the Taste & Nutrition business, as well as for general corporate purposes.
The deal is expected to close in the final quarter.
"Following today's announcement, we will separate and realign the remaining dairy-related activities within the Consumer Foods Business. The strategic review of the dairy business has been completed, and there will be no disposal of the dairy business at this time," it added.
In Asia on Friday stocks were mostly higher. In China, the Shanghai Composite was up 0.2%, while the Hang Seng index in Hong Kong was up 0.8%. The S&P/ASX 200 in Sydney closed up 0.1%.
Jeffery Halley at Oanda said: "An inconclusive Wall Street session has left Asia to its own devices on a local basis, where the cyclical rotation seen overnight has prevailed to a lesser degree. That rotation probably sets Europe up for a slightly weaker opening with little data in that region to rock the boat today."
In Asia on Friday, the Japanese Nikkei 225 index was ended down 0.2% and the yen strengthened. Against the yen, the dollar fell to JPY110.04 versus JPY110.30.
The Bank of Japan kept interest rates in negative territory and also kept its loose monetary policy unchanged on Friday.
The Japanese central bank kept its key interest rate at minus 0.1%. It also extended the duration of its Covid-19 support measures by another six months, to March 2022.
The BoJ said it will continue to "expanding the monetary base" until the annual consumer price inflation rate, excluding fresh food, tops 2.0%. Figures for May showed consumer prices, stripping out only fresh food, rose 0.1% annually. The central bank expects the rate to be around 0% in the short term.
Except against the yen, the dollar was managing to extend its post-Fed gains.
Sterling was quoted at USD1.3883 early Friday, lower than USD1.3933 at the London equities close on Thursday. The euro traded at USD1.1904, down on USD1.1920 late Thursday.
Gold was quoted at USD1,785.36 an ounce early Friday, rising from USD1,768.00 on Thursday. Brent oil was trading at USD72.75 a barrel, falling against USD74.06 late Thursday.
By Lucy Heming; [email protected]
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