23rd Apr 2020 07:45
(Alliance News) - Stocks in London are set for minor gains at the open on Thursday with markets having stabilised following a dramatic week for oil.
In early UK company news, Unilever withdrew its guidance due to Covid-19, while Computacenter said its full-year outlook remains unchanged. Vodafone raised EUR400 million via a placing of shares in an Italian mobile towers owner, and Meggitt said first quarter trading was good but the last few weeks have seen a "softening" in its civil aerospace business.
IG says futures indicate the FTSE 100 index of large-caps to open 1.27 points higher at 5,771.90 on Thursday. The FTSE 100 index closed up 129.60 points, or 2.3%, at 5,770.63 on Wednesday.
"With nascent signs the extreme selloff in oil prices earlier this week is abating, it's as if someone triggered the quick-release valve on the pressure cooker as the market is starting to feel so much more comfortable in its own skin," said Stephen Innes, chief global markets strategist at AxiCorp.
Brent oil was trading at USD22.96 a barrel early Thursday, up from USD20.44 late Wednesday - having dipped as low as USD15.97 this week, its worst level since 1999.
This was prompted by WTI for May delivery on Monday collapsing to an unprecedented low of minus USD40.32 as traders scrambled to sell it before the contract expired Tuesday.
Helping oil's rebound was a tweet from US President Donald Trump on Wednesday, who has instructed the US navy to fire on Iranian boats harassing US ships.
"I have instructed the US Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea," the president wrote.
The US military said last Wednesday that 11 Iranian Islamic Revolutionary Guard Corps Navy boats had repeatedly approached US warships in the Persian Gulf in a "dangerous and harassing" manner.
"One of the reasons I like 'Oil' right now including the basket of WTI, CAD AUD, and oil majors is that Congress has yet to disappoint and when considering the immense importance of the oil industry in the US market, credit risk notwithstanding, its illogical to think they won't come through after US Treasury Secretary Mnuchin 'spend what it takes' comments," said Innes.
In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 2.0%, the S&P 500 up 2.3% and Nasdaq Composite up 2.8%.
In early UK company news, Unilever said underlying sales growth was flat in the first quarter as it withdrew its guidance due to Covid-19.
The consumer goods firm reported no underlying sales growth in the first three months of 2020, with volumes up 0.2% but prices down 0.2%. Developed markets underlying sales growth was 2.8% but emerging markets sales declined 1.8%.
On a reported basis, quarterly turnover was up 0.2% to EUR12.44 billion.
Unilever said Covid-19 has led to "extensive changes" in the operating environment in its markets.
Most major markets, outside China, saw normal sales patterns in January and February with Covid-19 hitting in March. Lockdowns have seen little out-of-home consumption of ice cream and food, the firm said, but initial household stocking of both hygiene and food products led to increased volume in some markets.
"We will continue to adapt throughout this crisis. However, the unknown severity and duration of the pandemic, as well as the containment measures that may be adopted in each country, mean that we cannot reliably assess the impact across our markets and our business. We are therefore withdrawing our previous growth and margin outlook for 2020," said Chief Executive Alan Jope.
Vodafone said it has raised EUR400 million via the placing of 41.7 million shares in Infrastrutture Wireless Italiane.
The shares, representing 4.3% of the Italian mobile towers owner's share capital, were sold at EUR9.60 each. Vodafone said the proceeds will be used to reduced leverage.
As a result of this transaction, Vodafone and TIM's ownership will decrease from 37.5% each to 33.2%, retaining joint control.
Compass said it will not be recommending an interim or final dividend for its financial year ending September due to the "exceptional circumstances" brought about by Covid-19.
The contract caterer for travel and events said that around 55% of its business is currently closed due to lockdowns, and it is "working hard" to protect cash flow.
Net capital expenditure in the first half was around GBP400 million, and Compass expects spending to be lower in the second half.
Compass has put in place an additional revolving credit facility of GBP800 million and also said it has qualified for the Bank of England's Covid Corporate Financing Facility and drew down GBP600 million in March.
The firm does not expect to pay out a dividend this year due to Covid-19.
"We recognise the importance of a dividend to our shareholders. However, we need to balance this with the exceptional circumstances that the Covid-19 pandemic represents. As a result, the board has decided not to recommend an interim or a final dividend for the year ending 30 September 2020," said Compass.
Meggitt said trading in the first quarter was ahead of a year ago, but in the last few weeks it has started to see a "softening" in its civil aerospace business.
Revenue was up 5% on an organic basis in the first quarter, with strong growth in defence more than offsetting a weaker performance in civil aerospace and energy.
To mitigate any weakening in demand due to Covid-19, Meggitt has reduced variable costs and has cut the size of its workforce by 15%. It will freeze all new hiring, cut operation costs and remove annual salary increases.
The implementation of these measures will reduce cash expenditure levels by around GBP400 million to GBP450 million in 2020.
Looking ahead, Meggitt said it is "too early" to give forward guidance at this time.
Aston Martin Lagonda Global Holdings plans to re-open its St Athan manufacturing facility in May.
The luxury car maker said it has been working closely with suppliers to make sure supply is aligned to this timing. Gaydon's manufacturing operations are planned to resume later, "taking the learnings" from the St Athan reopening.
Computacenter said first quarter trading was "pleasing" given current conditions, adding that its full-year expectations remain unchanged.
First-quarter revenue was down slightly on a year ago, but profitability remained in line.
"Current trading has been more robust than we anticipated at the start of this crisis. There has been a marked difference in need from customer to customer dependent upon which sector their business is in. There has been a surge in demand from many of our customers to enable business continuity particularly around homeworking and network resilience," the IT services firm said.
In order to preserve cash, Computacenter will no longer propose a final dividend at its annual general meeting.
"Given the factors on the business, mentioned above, we are confident in the short-term outlook and the board believes that the pre-tax profit performance in the first half of 2020 will be broadly in-line with, or slightly ahead of, that of the first half of 2019. The second half of the year is more difficult to predict but currently our full year expectations remain unchanged," Computacenter said.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite is up 0.2%, while the Hang Seng index in Hong Kong is up 0.6%. Â
Released overnight, the Japanese service and manufacturing sectors slumped sharply in April as the Covid-19 pandemic "crippled the economy", the flash au Jibun-IHS Markit purchasing managers' index showed.
The flash composite output index - a weighted average of the service and manufacturing readings - dropped to 27.8 in April from 36.2 in March.
Any reading below the no-change mark of 50 indicates a contraction of the sector, and one above expansion.
"PMI data for Japan tell us that the crippling economic impact from the global coronavirus pandemic intensified in April," IHS Markit Economist Joe Hayes said.
Against the yen, the dollar was quoted at JPY107.78, flat versus JPY107.81.
To come are PMI readings from France, Germany, the eurozone and UK at 0815 BST, 0830 BST, 0900 BST and 0930 BST respectively.
There are US initial jobless claims at 1330 BST and a PMI reading at 1445 BST.
Sterling was quoted at USD1.2360 early Thursday ahead of the data, higher than USD1.2323 at the London equities close on Wednesday.
The euro traded at USD1.0826 early Thursday, flat on USD1.0829 late Wednesday.
On Wednesday, European Central Bank governors agreed that banks could put up so-called "junk" bonds as collateral when borrowing from the Frankfurt institution, in case eurozone governments and firms see their credit ratings downgraded as they grapple with the coronavirus pandemic.
As well as massively expanding its so-called "quantitative easing" bond-buying programme to EUR1.1 trillion, the ECB is offering banks access to vast amounts of cash via low-interest loans.
The aim is to keep credit flowing to the real economy to cushion the financial blow from coronavirus-fighting shutdowns.
But in order to access that liquidity, banks must still put up collateral, often in the shape of government or other debt on their books. Normally, that debt must be rated above a certain level by private-sector ratings agency like Moody's or Standard & Poor's.
But the eligibility of collateral will now be "grandfathered", effectively disregarding possible downgrades until September 2021.
Gold was quoted at USD1,714.20 an ounce early Thursday, higher than USD1,708.20 on Wednesday.
By Lucy Heming; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
UnileverVodafoneComputacenterMGGT.LAston Martin Lagonda