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(Alliance News) - Stocks in London are set to open lower on Wednesday, as markets saw any prospect of a dovish pivot from the US Federal Reserve dashed on Tuesday after its chair said rates would likely remain high.
In remarks to the Senate, Fed Chair Jerome Powell said US interest rates will likely peak at a higher level than previously anticipated due to economic data coming in stronger than recent trends suggested.
"His comments that the pace of rate hikes may need to be accelerated, and that the likely rate peak could well be higher than expected were not well received by markets, but given the strength of recent data, the change of tone shouldn’t have been surprising," said Michael Hewson, chief market analyst at CMC Markets.
Wall Street ended sharply lower in the wake of Powell's first day of testimony, and the dollar rose against rivals as higher-for-longer US interest rates were priced in.
Powell's testimony to the US Congress continues on Wednesday, this time presenting his semi-annual monetary report to the House of Representatives.
In the UK on Wednesday, construction materials firm Breedon boasted record annual results as it laid out plans to move to the London Main Market from AIM, while several large insurers reported 2022 results as well.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 24.28 points, or 0.3%, at 7,895.20
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Hang Seng: down 2.5% at 20,027.33
Nikkei 225: closed up 0.5% at 28,444.19
S&P/ASX 200: closed down 0.8% at 7,307.80
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DJIA: closed down 1.3% at 11,530.33
S&P 500: closed down 1.5% at 3,986.37
Nasdaq Composite: closed down 1.3% at 11,530.33
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EUR: down at USD1.0539 (USD1.0577)
GBP: down at USD1.1822 (USD1.1861)
USD: up at JPY137.59 (JPY136.87)
Gold: down at USD1,813.93 per ounce (USD1,818.73)
Brent: down at USD83.08 a barrel (USD83.83)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
09:30 GMT UK BOE MPC Member Swati Dhingra speaks
07:00 EST US MBA mortgage applications survey
08:15 EST US ADP national employment report
08:30 EST US international trade
10:00 EST US labour turnover survey
10:00 EST US Fed Chair Powell reports to House Financial Service Committee
14:00 EST US Fed Beige Book
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The European Commission wants more electricity traded through long-term contracts to protect business and households from volatile power prices, in a reform draft seen by dpa. Electricity in the EU is mainly generated from fossil fuels, nuclear power or renewable energy sources. After Russia cut supplies to the bloc, wholesale prices for gas in the EU soared, ultimately leading to skyrocketing electricity prices and calls for a reform of the EU's electricity market. To tackle price volatilities, the commission wants to promote long-term electricity contracts which provide power at a stable price to consumers and boost investments into generation capacities.
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BROKER RATING CHANGES
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Credit Suisse cuts Taylor Wimpey price target to 149 (152) pence - 'outperform'
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Jefferies cuts John Wood to 'hold' ('buy') - price target 237 (190) pence
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JPMorgan raises Kingspan to 'overweight' ('neutral') - price target 83 (62) EUR
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COMPANIES - FTSE 100
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Vodafone announced it has completed the sale of half of its German Fibre-to-the-Home company to telecommunications and mass media firm Altice Europe NV. The joint venture, FibreCo, will deploy fibre-to-the-home to up to 7 million homes in Germany over a 6-year period and intends to invest up to EUR7 billion of this same period. Vodafone said it expects to receive cash proceeds from Altice "in excess of its share of equity contributions over time".
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Legal & General reported a solid increase in annual profit and a record solvency II ratio in 2022, as the company upped its full-year dividend. In 2022, the life insurance and pension provider reported pretax profit of GBP2.66 billion, up 7% from GBP2.49 billion the previous year. Operating profit in the year climbed 12% to GBP1.26 billion from GBP1.15 billion. Total new business came in at GBP9.54 billion, up from GBP7.18 billion. L&G said it achieved a record a solvency II coverage ratio of 236%, up sharply from 187% in 2021. At March 3, L&G estimates its coverage ratio was 240%. Its return on equity was 20.7%, up slightly from 20.5%. It declared a full-year dividend per share of 19.37 pence, up 5.0% from 18.45p a year prior.
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Admiral said it delivered "resilient" results in 2022, against a backdrop of high inflation, as it reported a steep fall in annual profit. The insurer reported a pretax profit of GBP469.0 million last year, down 39% from GBP769.0 million in 2021. Net revenue totalled GBP1.49 billion, down from GBP1.55 billion. Net insurance premium revenue rose to GBP911.0 million from GBP855.0 million. The company return on equity was 35% compared too 56% in 2021. Its solvency ratio, post dividend, was 180%, down from 195%. Admiral proposed a final dividend of 52.0p per share, down sharply from 72.0p the year prior, during which it also had paid a special dividend of 46.0p from the sale of Penguin Portals. In addition, Admiral announced that Mike Rogers will take over Annette Court's role as chair.
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Insurance provider Hiscox reported its highest underwriting profit since 2015 but a steep drop in annual profit, as its chair, Roberts Childs, announced his retirement. In 2022, Hiscox reported a pretax profit of USD44 million, down sharply from USD190.8 million in 2021. Gross premiums written totalled USD4.42 billion, up from GBP4.27 billion, while net premiums earned totalled USD2.928 billion, up slightly from USD2.919 billion. Underwriting profit totalled USD269.5 million, up from USD215.6 million. Hiscox said this was its highest since 2015, notwithstanding another year of elevated large natural catastrophe and man-made losses. Looking forward, Chief Executive Aki Hussain said the outlook for 2023 was "very positive" thanks to "favourable" market conditions in all its key markets. Separately, Hiscox announced that Childs will step down as chair during 2023. The company has began a process to identify his successor. The process will be led by Senior Independent Director Colin Keogh.
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COMPANIES - FTSE 250
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Hill & Smith reported a steep rise in annual revenue as it posted record revenue on the back of strength in its US-focused business. In 2022, the infrastructure construction company said pretax profit increased by 62% year-on-year to GBP69.3 million from GBP42.8 million in 2021. Revenue totalled GBP732.1 million, a record figure and up sharply from GBP625.2 million the previous year. Hill & Smith proposed a final dividend of 22p, a 16% increase on its 2021 payout. Executive Chair Alan Giddins noted 2022 was a year of "significant progress," particularly for its US business which now represents 64% of the company's operating profit. Giddins said Hill & Smith is "well positioned for the longer term." Separately, the firm said it completed the acquisition of the business and assets of Korns Galvanizing Co Inc for USD11.3 million. Korns is based in Johnstown in the US state of Pennsylvania. It has a single site specialising in spin galvanizing and generated revenues of USD5.5 million in 2022. Hill & Smith added that Korns' operating profit margin is "modestly below the divisional average" but said it expects this to improve as its own operating model is adopted.
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OTHER COMPANIES
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Construction materials firm Breedon said it intends to move its listing to the premium segment of the London Main Market from AIM. It said it will seek admission "in the coming months" and does not intend to raise funds in connection with change of trading venue. Breedon expects admission during the second quarter of this year. Breedon said a Main Market listing is more appropriate for it as an established company. Separately, the firm reported full-year results ahead of expectations. Pretax profit was GBP135.8 million in 2022, up 19% from GBP114.3 million in 2021. Revenue rose 13% to GBP1.40 billion from GBP1.23 billion. Breedon lifted its full-year dividend by 31% to 2.1 pence from 1.6p. Chief Executive Rob Wood said it was "another record year" with each division progressed. Wood added that, despite the uncertain economic and geopolitical landscape, 2023 has begun "positively" and that Breedon is in a strong position.
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Brick making peer Ibstock reported a 61% rise in pretax profit to GBP105 million in 2022 from GBP65 million in 2021 on a 26% increase in revenue to GBP513 million from GBP409 million. Ibstock hiked its annual payout by 17% to 8.8p from 7.5p.
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By Heather Rydings, Alliance News senior economics reporter
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