3i Infrastructure Share News (3IN)

(Alliance News) - Equities in London are set to follow Wall Street's soft close as bond yields rose ahead of President Joe Biden unveiling his USD3 trillion infrastructure plan.

Data on Wednesday showed the UK's economic slump for 2020 was revised to 9.8% from a first estimate of 9.9%, though this still marks the largest annual fall in the country's output on record.

Sterling was quoted at USD1.3746 early Wednesday, strengthening from USD1.3722 late Tuesday.

And in early company news, Deliveroo confirmed it will be worth GBP7.6 billion on admission to the London Stock Exchange on Wednesday, after pricing its IPO at the bottom of the expected range.

IG says futures indicate the FTSE 100 index of large-caps to open down 13.32 points, or 0.2%, at 6,758.80 on Wednesday. The FTSE 100 closed up 35.95 points, or 0.5%, at 6,772.12 on Tuesday.

"The implications of President Biden's build back better programme are starting to dawn on financial markets," said Jeffrey Halley, senior market analyst at Oanda.

"Overnight US yield spiked sharply higher, and although those losses were unwound by the day's end, the message is clear, another USD3 trillion of US government spending means more debt issuance even if taxes are also to rise," he said. "With the global recovery pushing prices and inflation higher, steepening yield curves seem inevitable."

In the US on Tuesday, Wall Street ended with mild losses, with the Dow Jones Industrial Average ending down 0.3%, the S&P 500 slipping 0.3%, and Nasdaq Composite edging down 0.1%.

Biden on Wednesday is set to unveil the second big offensive of his fledgling presidency: a massive infrastructure investment project, to be accompanied by tax hikes that remain to be defined but already have his political opponents up in arms.

Having already pushed an almost USD2 trillion pandemic recovery plan through Congress, the figures being bandied about for his infrastructure plan reach as high as USD3 or even USD4 trillion.

Halley said: "All eyes will now be on the US president's speech this evening in Pittsburgh, where the new infrastructure package's first details will be unveiled, notably, how it will all be paid for. Interspersed with that will be the US ADP employment release, expected to show a 550,000 increase in jobs. A higher print will likely pressure US yields again."

US ADP employment is due at 1315 BST. Before this, the economic events calendar on Wednesday has German unemployment data at 0855 BST and eurozone inflation readings at 1000 BST.

Already out, the UK's economic slump for 2020 was revised to 9.8% from a first estimate of 9.9%, according to figures from the Office for National Statistics, though this is still the largest annual fall in the country's output on record.

The ONS made larger revisions to quarterly growth figures. Gross domestic product is estimated to have risen 1.3% quarter-on-quarter in the final three months of 2020, revised up from 1.0%. Year-on-year, the decline was 7.3%, also improved on revision from 7.8%.

In early UK company news, Deliveroo unveiled the pricing of its IPO, with the company expecting to be worth GBP7.6 billion on admission to the London Stock Exchange.

The food delivery platform priced its class 'A' shares at GBP3.90 each. Last week, Deliveroo said it intended to price in a range of between GBP3.90 and GBP4.60 per share, which could have potentially valued the business up to GBP8.8 billion. At the start of this week, it narrowed that range to between GBP3.90 and GBP4.10.

Though priced at the bottom of the expected range, a valuation of GBP7.6 billion should see Deliveroo comfortably slot into the FTSE 100 in the next quarterly review.

Deliveroo's IPO comprises 384.6 million shares, equating to a total offer size of GBP1.50 billion or just over 21% of the company's share capital on admission. This includes 256.4 million new shares, raising GBP1 billion for the company, and 128.2 million existing shares, raising GBP500 million for Founder & Chief Executive Will Shu and other selling shareholders.

Deliveroo is making a further 38.5 million shares available in an over-allotment option which, if exercised in full, would increase the offer size to around GBP1.65 billion.

Conditional dealings start on Wednesday, while unconditional dealings begin in a week.

"In this next phase of our journey as a public company we will continue to invest in the innovations that help restaurants and grocers to grow their businesses, to bring customers more choice than ever before, and to provide riders with more work. Our aim is to build the definitive online food company and we're very excited about the future ahead," Shu said.

Deliveroo offered 'A' shares in its IPO, while 'B' shares are held solely by Shu. Each of Shu's B shares will have 20 votes, while A shares each will have one.

In other company news, John Laing Group said it has completed the sale of its 17% interest in the New Royal Adelaide Hospital to funds managed by AMP Capital.

The consideration received represents "a good uplift" to the GBP69 million book value as at the end of 2020.

This transaction further strengthens visibility on the 2021 special dividend, John Laing said, with total proceeds eligible to be included in the payout calculation to date amounting to GBP433 million.

3i Infrastructure said its portfolio is performing well despite the pandemic, and the company is on track to deliver its full-year dividend target.

Total income and non-income cash was GBP69 million in the six months to Tuesday, the investor in infrastructure businesses and assets said, in line with expectations though down on GBP82 million a year ago.

"During the period we have been pleased by the performance of our portfolio. Our markets remain very competitive, but we have a good pipeline of potential acquisitions and continue to focus on investments that we believe will enhance the Company's portfolio," said Phil White, managing partner and head of Infrastructure at 3i Investments, investment manager of the company.

3i Infrastructure is on track on deliver its dividend target for the year ending Wednesday of 9.80p per share, up 6.5% year-on-year.

In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.9%. In China, the Shanghai Composite was down 0.4%, while the Hang Seng index in Hong Kong was down 0.2%.  

There was positive economic data out of China overnight, showing that factory activity picked up in March.

The purchasing managers' index, a key gauge of manufacturing activity, grew more than expected to 51.9 – from 50.6 in February – according to the National Bureau of Statistics, with production accelerating after the holiday lull and major economies abroad also recovering from coronavirus slowdowns.

The non-manufacturing PMI made a significant rebound to 56.3, higher than the Bloomberg forecast of 52.0 and pointing to better performance in industries such as construction and higher expectations for hard-hit service businesses.

Meanwhile, Japan's industrial production fell at a faster monthly pace than expected in February, and a further fall in March is also on the cards.

Industrial output fell 2.1% on a monthly basis in February, following January's 4.3% growth. According to a survey of manufacturers, another monthly fall of 1.9% is forecast, the ministry said, before a 9.3% bounce in April.

Against the yen, the dollar climbed to JPY110.71 early Wednesday from JPY110.27 at the London equities close on Tuesday.

The euro traded at USD1.1719, lower than USD1.1730 late Tuesday.

Gold was quoted at USD1,686.98 an ounce early Wednesday, higher than USD1,685.50 on Tuesday. Brent oil was trading at USD64.51 a barrel, up on USD64.21 late Tuesday.

By Lucy Heming; lucyheming@alliancenews.com

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