11th Sep 2024 07:53
(Alliance News) - Stocks in London are called to open higher on Wednesday, despite a slide in Asian equities, ahead of a US inflation reading in the afternoon.
The FTSE 100 had been called to open lower, before futures turned as the morning progressed.
"Today, all eyes are on the US [consumer price index] data," Swissquote analyst Ipek Ozkardeskaya commented.
"I would say that the direction for consumer prices looks somewhat clear. In numbers, core inflation - that excludes food and energy prices - is expected to have steadied near the 3.2% level but headline inflation which includes food and energy is expected to have eased from 2.9% to 2.5%."
The analyst continued: "If that's the case, we will see the headline inflation drop significantly below the 3% level for the first time since last summer. That would be another reason for the Federal Reserve to stop worrying about inflation and to worry more about the weakening jobs market. Would that justify a 50bp cut instead of a 25bp cut in September? Hardly. Because announcing a 50bp cut in September would suggest that the Fed accepts to have fallen behind the curve, and they probably want to avoid that."
In early UK data, numbers showed the UK economy stalled in July, underperforming forecasts.
In UK corporate news, Rightmove rejected a takeover approach from Australia's REA Group. Dunelm reported an annual earnings rise and WH Smith hailed a decent end to its financial year, and announced a buyback.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called 0.1% higher at 8,219.78
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Hang Seng: down 0.8% at 17,102.23
Nikkei 225: down 1.5% at 35,619.77
S&P/ASX 200: down 0.3% at 7,987.90
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DJIA: closed down 92.63 points, 0.2%, at 40,736.96
S&P 500: closed up 0.5% at 5,495.52
Nasdaq Composite: closed up 0.8% at 17,025.88
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EUR: higher at USD1.1044 (USD1.1021)
GBP: higher at USD1.3089 (USD1.3060)
USD: lower at JPY141.41 (JPY142.55)
GOLD: higher at USD2,525.43 per ounce (USD2,515.08)
(Brent): higher at USD70.09 a barrel (USD69.20)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
13:30 BST US CPI
15:30 BST US EIA crude oil stocks
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The UK economy tread water in July, the second-successive month of no growth, in an outcome that underperformed expectations, according to numbers on Wednesday. The Office for National Statistics said the UK economy registered no growth on-month in July. It had also made no progress in June. It had been expected to advance 0.2% in July from June, according to FXStreet cited consensus. In the three months to July, gross domestic product is expected to have risen by 0.5% compared with the three months to April. The ONS put this down to "widespread growths in the services sector in this period". Industrial production also fell short of expectations. It declined 0.8% in July from June, having been expected to rise 0.3%, according to FXStreet. In June, it had risen 0.8% from May. On-year, output fell 1.2%, easing from June's 1.4% slide, but shy of expectations of a lesser 0.2% slip.
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A new Labour pressure group aiming to "take on the Nimbys" is set to launch on Wednesday. The Labour Infrastructure Forum said it would challenge the government to "push through the pain" to meet the party's manifesto commitment to get Britain building again. Describing itself as a "group of senior policymakers, industry experts and stakeholders from across the Labour movement", the LIF is backed by former shadow roads minister Bill Esterson and three new Labour MPs – Luke Murphy, Kirsteen Sullivan and Mike Reader. It is also supported by Blair-era cabinet minister Ruth Kelly, who now chairs Water UK, and Paul Addison, an executive at engineering firm Arup who worked on Labour's infrastructure review before the election. Gerry McFall, director of public affairs at consultancy Bradshaw Advisory and the LIF's director, said the LIF was "committed to supporting the government" with "evidence-based policy recommendations" to "get the country building again". He added: "The government's first year is a critical time to lay down a marker for the rest of the Parliament. "Before it is captured by 'events', it must make meaningful progress on its mandate to take on the Nimbys and rebuild our country – from transport to water, energy to housing.
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Iran has been hit with sanctions by the UK and US after the two countries formally accused Tehran of supplying ballistic missiles to Russia. The announcement came after UK Foreign Secretary David Lammy and US counterpart Antony Blinken said they would make a joint visit to Ukraine later this week to show support for Kyiv. On their joint mission they will listen to Kyiv's calls for permission to use Western long-range weapons to strike Russian territory, with US President Joe Biden and Keir Starmer set to discuss the issue in Washington on Friday. Lammy hailed the Kyiv trip as "the first of its kind in a decade", at a press conference alongside his American counterpart on Tuesday. Ukraine's Volodymyr Zelensky has repeatedly pushed for permission to use Western missiles to strike at targets within Vladimir Putin's Russia. At a joint press conference with Lammy, Blinken said: "One of the purposes of the trip we will be taking together is to hear directly from the Ukrainian leadership including… President Zelensky about exactly how the Ukrainians see their needs in this moment, toward what objectives and what we can do to support those needs."
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BROKER RATING CHANGES
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JPMorgan places Antofagasta on 'negative catalyst watch'
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JPMorgan raises Rotork to 'overweight' (neutral) - price target 370 (365) pence
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COMPANIES - FTSE 100
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Property portal Rightmove rebuffed a "wholly opportunistic" takeover approach from Australia's REA Group. The firm said the tilt "fundamentally undervalued" the company. Rightmove said the proposal consists of 305 pence in cash and 0.0381 of a new REA share. Based on the closing price of REA on Tuesday, the proposal valued each Rightmove share at 698p, and the issued share capital at around GBP5.5 billion. It is a 26% premium to Rightmove's closing price on August 30, the day prior to REA's possible offer announcement. "The board carefully considered the proposal, together with its financial advisers, and concluded that it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects. Accordingly, the board unanimously rejected the proposal on 10 September 2024," Rightmove explained. "Rightmove shareholders should take no action in respect of the proposal." REA, using its September 5 share price in the calculation, said the deal valued each Rightmove share at 705p, GBP5.6 billion in total. REA said: "The proposal combines certainty of value, in cash, at a significant premium to recent trading while at the same time giving Rightmove shareholders the opportunity to benefit from the future value creation of the combined business." REA said it would pursue a secondary listing in London.
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COMPANIES - FTSE 250
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Dunelm reported an increase in full-year earnings, hailing market share gains despite a "softer" industry backdrop. The home furnishings retailer said total sales in the 52 weeks to June 29 rose 4.1% to GBP1.71 billion from GBP1.64 billion. Pretax profit increased 6.6% to GBP205.4 million from GBP192.7 million. "This strong set of results is testament to the hard work of our adaptable and committed colleagues. In a period when consumers faced inflationary pressures and competing demands for their disposable income, we have continued to raise the bar on the relevance and value we offer at Dunelm. The continued delivery of volume-driven sales growth and further share gains in this softer market underlines this, and the strength and resilience of our business model," Chief Executive Officer Nick Wilkinson said. "Whilst we are gradually seeing improvements to economic indicators, we are yet to see a meaningful change in consumer spending habits in our markets. Against this backdrop, and compared to a strong first quarter last year, we have made a solid start to FY25. Our plans give us a clear pathway to reaching our next milestone of 10% market share in the medium term, and we remain very confident in our ability to deliver long-term sustainable growth as a result." Dunelm lifted its final dividend by 1.9% to 27.5p per share from 27.0p. It takes its total ordinary dividend to 43.5p, a rise of 3.6% from 42.0p. It had declared a 35.0p special dividend with its interim results, which was lower than a 40.0p special dividend from the prior year.
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WH Smith announced a GBP50 million share buyback, as the retailer hailed a "strong" end to its financial year. In the fourth-quarter ended August 31, group revenue rose 6% on-year. Like-for-like revenue rose 4%. For the full-year, revenue was 7% higher, rising 5% like-for-like. "We have ended the financial year in a strong position, delivering a performance in line with our expectations with good growth across our Travel businesses. Our UK division performed particularly well over the peak summer trading period," CEO Carl Cowling said. "We are also today announcing the launch of a GBP50 million share buyback, which reflects strong ongoing cash flow, the receipt of the pension fund buyout cash return, as well as the strength of our balance sheet, with leverage now within our target range." WH Smith said a buy-in of its defined benefit pension scheme has been sealed, resulting in a cash refund to the company of GBP75 million, and a transfer of an investment fund of GBP10 million "which will convert to cash over the next two years". It announces annual results on November 14.
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OTHER COMPANIES
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Jet2's founder and former chair has trimmed his stake in the Leeds-based airline and package holiday company in a share sale, transaction coordinator and bookrunner Jefferies said. Philip Meeson sold five million shares in Jet2 to a "limited number of institutional investors". The shares represent around 2.3% of Jet2's issued share capital. "Philip's rationale for the transaction has been driven by personal financial considerations alone. Philip believes that Jet2, as a market leader in the Holiday business and with its firm order for 146 Airbus A321 aircraft is ideally positioned to fully take advantage of a market with huge potential. He believes there is a great future for Jet2 and he expects to continue as a very substantial shareholder in Jet2 going forward," Jefferies said. Based on Jet2's closing price of 1,470.00 on Tuesday, the share sold a worth GBP73.5 million. Jet2 has a market capitalisation of around GBP3.16 billion.
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Online fashion retailer boohoo said it will now fulfil all US orders in its automated UK distribution centre in Sheffield. It is a move aimed at repositioning the firm for "sustainable, profitable growth", it said. "This move follows a recent trial of increasing the product range offered to US consumers by also fulfilling from the UK, which has led to encouraging results. Before this trial, US consumers were being offered only around 60% of the styles on sale in the UK," boohoo said. The firm will cease supplying US customers from a distribution centre in Pennsylvania. "The group remains excited about the opportunity in the US and has been developing wider routes-to-market strategies, the first of which is the recent launch of Nasty Gal in Nordstrom stores. The group is also in advanced talks with major US brands with regard to new routes to market for other brands within the group. The moves will result in a write-down on the group's balance sheet against the investments and costs associated with the US operation as well as certain one-off exceptional cash costs. Importantly, these changes will result in a significant reduction in ongoing costs over the medium term," boohoo said, adding that it will reveal more in its half-year results.
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By Eric Cunha, Alliance News news editor
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