20th Mar 2020 07:42
(Alliance News) - Stock prices in London are set to open higher on Friday, following positive trading in the US and Asia overnight, as central banks and governments deployed more financial support.
IG futures indicate the FTSE 100 index is to open 135.89 points, or 2.6%, higher at 5,287.50. The blue-chip index closed up 71.03 points, or 1.4%, at 5,151.61.
"The FTSE 100 reversed earlier losses following the BoE intervention," noted Swissquote analyst Ipek Ozkardeskaya.
The BoE on Thursday cut the UK base interest rate to 0.10% from 0.25% and raised its asset purchase programme by GBP200 million to a total of GBP645 billion. This is the bank's lowest rate since its creation in 1694.
The BoE cut the interest rate to 0.25% from 0.75% just last week.
The central bank said the spread of Covid-19 and measures being taken to contain the virus will result in an economic shock that could be "sharp and large, but should be temporary".
"Although, in theory, an interest rate cut should have a negative impact on a currency, the pound rebounded on prospects of a less dramatic economic contraction than otherwise," said Ozkardeskaya.
The pound was quoted at USD1.1660 early Friday, broadly flat from USD1.1665 at the London equities close Thursday, though well down from a week ago. The euro was at USD1.0753 early Friday, firm from USD1.0710 late Thursday.
In early company news, InterContinental Hotels Group warned that demand for hotels is currently at the lowest levels it has ever seen.
The company said global revenue per available room declined by 6% in January and February. While IHG reported a broadly flat performance in the US, the decline in Greater China reach almost 90% in February.
Looking ahead, IHG said it expects global decreases in March to be around 60%, with steeper declines in those markets most impacted by government restrictions.
"IHG has a robust business model, and the measures we are announcing today to reduce costs and preserve cash give us the capacity to manage the business through this unique environment and to support our owners during this incredibly difficult time," said Chief Executive Keith Barr.
The company noted that cost cutting measures are expected to result in a reduction of up to USD150 million in employee salaries and incentives.
JD Wetherspoon reported revenue growth of 4.9% in the 26 weeks ended January 26 to GBP933.0 million. Like-for-like sales, meanwhile, grew by 5.0% over the first half.
The pub chain achieved 15% growth in pretax profit before exceptional items and pre-IFRS 16, up to GBP57.9 million.
Post-IFRS 16 and including exceptional items, pretax profit was GBP42.0 million, down from GBP48.6 million a year ago.
Wetherspoon's said it will not be paying an interim dividend, having paid a 4.0 pence a share in the first half of its financial 2019.
"The company has decided to delay most capital projects and to reduce expenditure, where possible, including the cancellation of the interim dividend," due to the virus situtation, explained Chair Tim Martin.
Looking ahead, Wetherspoon's said in the six weeks to March 8, like-for-like sales increased by 3.2% and total sales by 2.9%.
However, in the week to March 15, sales declined by 4.5%.
"In the early part of the current week, following the prime minister's advice to avoid pubs, sales have declined at a significantly higher rate," Martin added.
Frasers Group - formerly known as Sports Direct - said it expects that Covid-19 to cause "significant" disruption to its business, including reducing customer footfall.
As a result, the sports clothing retailer said it no longer expects to achieve its previous guidance of 5% to 15% growth in earnings before interest, tax, depreciation and amortization growth - including House of Fraser but pre-IFRS 16 adjustments - previously given for the financial year ending to April 26.
Accordingly, and given the ongoing uncertainty, the company said it is no longer giving formal guidance in relation to its current financial year.
Marks & Spencer Group warned that trading over the next 9 to 12 months in its Clothing & Home and International businesses is likely to be hurt.
Turning to the retailer's Food business, it has "so far" remained strong, illustrating the resilience M&S derives from having the combination of related businesses under one umbrella.
Therefore, M&S said its full-year pretax profit could be at or below the bottom end of the range of between GBP440 million and GBP460 million, given probable very depressed trading in Clothing & Home.
The retailer also said it does not anticipate making a final dividend payment for this financial year, give "the current circumstances". This will result in cash saving of GBP130 million.
Banking & wealth management services firm Investec warned a "challenging" operating environment is going to lead to a drop in annual profit.
Anglo-South African Investec, listed in both London and Johannesburg, forecast a 7% to 14% fall in adjusted operating profit for its year ended March. Adjusted earnings per share are guided to decline by 16% to 23%.
In financial 2019, Investec posted an adjusted operating profit of GBP732 million and adjusted earnings per share of 60.9 pence.
The company blamed challenging market conditions as well as normalisation in its tax rate. The environment was particularly tough in the second half of its year, Investec said, in both the UK and South Africa.
Further, fourth-quarter operating performance is expected to have been held back by the effect of the Covid-19 pandemic on global markets.
Financial markets in Japan are closed for holiday on Friday. The Hang Seng index in Hong Kong is up 4.5% in late trade. The Shanghai Composite closed up 1.6% .
Against the yen, the dollar was trading at JPY109.97 early Friday in London, marginally down from JPY110.06 late Thursday.
The Dow Jones Industrial Average closed 1.0% higher. The S&P 500 gained 0.5% and the Nasdaq Composite 2.3%.
Senate Majority Leader Mitch McConnell on Thursday presented a USD1 trillion emergency relief package to combat the economic turmoil caused by the coronavirus pandemic in the US.
The Republican-drafted text, which if it becomes law would be one of the largest federal economic interventions in US history, must now be examined by Senate Democrats before a date for a vote can be set.
The US has 10,755 cases of people infected with the novel coronavirus while 154 people have died from the pathogen, a tracker maintained by Johns Hopkins University showed.
This makes the US sixth on the overall list behind China, Italy, Iran, Spain and Germany, and ahead of France and South Korea. Globally, there have been 229,390 cases confirmed and 9,325 deaths, the tracker said.
In commodities, gold was quoted at USD1,495.10 an ounce early Friday, higher than USD1,477.90 late Thursday. Brent oil was at USD29.19 a barrel, up from USD28.02.
The economic calendar on Friday has US existing home sales at 1400 GMT.
By Evelina Grecenko; [email protected]
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Wetherspoon (J.D)InterContinental HotelsMarks & SpencerFrasers Group