17th Nov 2021 07:46
(Alliance News) - London stock index futures were pointing to a lower open on Wednesday as investors digest a sharp uptick in UK consumer prices last month.
In early UK company news, manufacturers Spirax-Sarco Engineering and Tyman cautioned on global supply chain issues. Software firm Sage posted a fall in full-year profit, but sees organic recurring revenue growth accelerating in the year ahead.
IG says futures indicate the FTSE 100 index of large-caps to open down 17.17 points, or 0.2%, at 7,309.80 on Wednesday. The FTSE 100 closed down 24.89 points, or 0.3%, at 7,326.97 on Tuesday.
Released early Wednesday, data from the Office for National Statistics showed the annual UK inflation rate surged to 4.2% in October from just 3.1% in September. Consensus, according to FXStreet, had been anticipating a figure of 3.9%.
This was the highest 12-month inflation rate since November 2011, when it was 4.8%.
"This was driven by increased household energy bills due to the price cap hike, a rise in the cost of second-hand cares and fuel as well as higher prices in restaurants and hotels," said Grant Fitzner, chief economist at the ONS.
The release follows numbers on Tuesday which showed the UK unemployment rate has eased by more than expected to 4.3%.
"Today's UK CPI numbers for October are likely to be the next piece of the puzzle especially if the Bank of England doesn't dial back market expectations on a December rate increase in the coming weeks," said Michael Hewson, chief market analyst at CMC Markets.
Sterling was quoted at USD1.3453 early Wednesday following the data, up on USD1.3430 at the London equities close on Tuesday.
In early UK company news, Spirax-Sarco Engineering said it continues to see strong demand but it is "not immune" to global supply chain disruptions. Order books across all three of its businesses expanded in the four months to the end of October, above its expectations.
However, the industrial engineering firm cautioned: "Although we have a diversified and resilient supply chain, we are not immune to current disruptions being experienced globally and across all sectors. While all three businesses were somewhat impacted by shipment delays, the effects have been greater within Watson-Marlow and Electric Thermal Solutions."
Rising material and freight costs are being broadly offset by "internal efficiencies and price management practices".
Spirax-Sarco added that it has seen foreign exchange headwinds, and if current exchange rates were to persist for the remainder of the year, it expects close to a 4% hit to full-year sales and profit compared with 2020.
Accounting software firm Sage posted a fall in profit but said it sees organic recurring sales growth accelerating in the year ahead while margins should improve.
Full-year revenue fell 3% to GBP1.85 billion. However, organic recurring revenue grew 5% to GBP1.64 billion, which Sage said was underpinned by Sage Business Cloud growth of 19%.
Pretax profit for the financial year, which ended September 30, dipped to GBP347 million from GBP373 million.
Looking ahead, Sage expects organic recurring revenue growth to accelerate in its new financial year, seen in the region of 8% to 9%. Organic operating margin is "expected to trend upwards in FY22 and beyond", after dipping 2.7 percentage points to 19.3% in the recently ended financial year.
Glencore is set to receive AUD1 billion, around USD730 million, from the sale of its Ernest Henry Mining copper-gold mine in Queensland, Australia.
The sale is being made to Evolution, a local Australian company which has worked with Glencore over the past five years at Ernest Henry. Evolution will assume full ownership and operational control of the mine and will enter into a copper concentrate offtake agreement and separate ore tolling agreement with Glencore.
Of the consideration, AUD800 million is due when the deal closes and the remaining AUD200 million 12 months after closing.
Tyman warned that while positive trading momentum has continued into the second half, full-year profit is now expected below consensus due to supply-chain challenges for the supplier of door and window components.
Revenue was up 12% to GBP529 million in the ten months to October 31 on a reported annual basis and by 19% on a like-for-like one. Compared with 2019, like-for-like revenue was up 8%.
However, Tyman warned: "As indicated at the time of the interim results in July, strong market demand and market share gains have continued despite global supply chain challenges, notably material and labour availability, as well as global freight disruption. The group now expects that full year adjusted operating profit will be marginally below consensus."
Tyman placed consensus at GBP91.5 million.
In contrast, there was a guidance upgrade from self-storage firm Safestore after a "record breaking year".
Fourth quarter revenue was up 19% year-on-year to GBP51.1 million and year-to-date revenue 15% higher at GBP186.8 million. Earnings for the year ended October 31 are now seen slightly ahead of previous guidance of 39.5p to 40p of adjusted diluted EPRA earnings per share.
European stocks will be following a weaker Asian session.
The Nikkei 225 index in Tokyo ended down 0.4%. In China, the Shanghai Composite ended up 0.4%, while the Hang Seng index in Hong Kong was down 0.5% in late trade. The S&P/ASX 200 in Sydney ended down 0.7%.
This was despite gains in New York on Tuesday, with the Dow Jones Industrial Average ending up 0.2%, the S&P 500 up 0.4% and the Nasdaq Composite up 0.8%
The euro traded at USD1.1315 early Wednesday, slipping from USD1.1347 late Tuesday ahead of the eurozone's own inflation print at 1000 GMT.
"EUR/USD continued lower yesterday, following strong US data. In addition to relative macro surprises being USD positive, the more outspoken views by the Biden administration to act against inflation can equally be implied to be a USD-positive," said Danske Bank.
Against the yen, the dollar climbed to JPY114.89 versus JPY114.50.
Gold was quoted at USD1,857.04 an ounce early Wednesday, lower than USD1,858.07 on Tuesday. Brent oil was trading at USD81.96 a barrel, down from USD82.00 late Tuesday.
By Lucy Heming; [email protected]
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