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(Alliance News) - Stock prices in London are seen opening lower on Thursday as investors grow increasingly fearful that sharp interest rate hikes to rein in soaring inflation will spark a recession.
This is despite the UK economy's pace of growth in the first quarter being confirmed early Thursday.
In early company news, distribution firm Bunzl raised its guidance for the year. British Airways parent International Consolidated Airlines Group converted 14 Airbus jet options into orders. Ad agency WPP made an acquisition.
IG futures indicate the FTSE 100 index will open 66.62 points lower at 7,245.70. The index closed down 11.09 points, or 0.2%, at 7,312.32 Wednesday.
Bunzl said it expects to deliver "very strong" growth over the six period to June 30, reflecting the "resilience and strength" its business model.
Bunzl said revenue in the first half is expected to increase year-on-year by 16% at actual exchange rates and by 12% to 13% at constant exchange rates, with inflation continuing to drive underlying revenue growth and acquisitions further supplementing growth.
Adjusted operating margin for the first half is expected to be slightly higher than historical annual levels, it noted.
Bunzl upgraded its guidance for the year on the basis of the strong revenue growth to date and announced acquisitions, though no actual figures were provided.
At constant exchange rates, Bunzl now expects "very good" revenue growth in 2022, driven by good organic revenue growth and the positive contribution of acquisitions announced over the past year.
Growth of the base business is expected to be only partially offset by the further normalisation of sales of Covid-19 related products, albeit these are expected to remain ahead of 2019 levels, the company said.
Bunzl also continues to expect its operating margin in 2022 to be slightly higher than historical levels.
"Bunzl has delivered another period of strong growth. We continue to demonstrate the strength of our business model, supported by the depth and resilience of our supply chains and the agility of our people who have responded to the inflationary environment so successfully. Our acquisition momentum remains strong, with our active pipeline supported by a strong balance sheet," said Chief Executive Officer Frank van Zanten.
IAG said it is converting 14 A320neo family airplane options, announced in back in 2013, into firm orders for 11 A320neos and three A321neos.
IAG said this was in addition to the conversion of eight A320neo family options which IAG exercised in March 2022 for six A320neos and two A321neos.
These aircraft will be delivered in 2024 and 2025 and will be used to replace A320ceo family aircraft in airline group's short-haul fleet, said IAG, which owns British Airways, Iberia, Aer Lingus and other airlines.
WPP said it has agreed to acquire the business of Bower House Digital, a marketing technology services agency in Australia, for an undisclosed sum.
WPP said the acquisition is aligned with its accelerated growth strategy and focused M&A approach to build on existing digital experience capabilities.
Rose Herceg, WPP president of Australia & New Zealand, said: "Companies are seeking one integrated communications solution that combines creativity, technology and data. Bower House Digital's knowledge in marketing technology will further strengthen our digital expertise in Australia and New Zealand. I'm excited to welcome the Bower House Digital team and clients to WPP."
Ascential said it has acquired Intrepid E-Commerce Services, a provider of e-commerce execution services to brands in South East Asia.
The acquisition is for an initial USD57 million in cash, plus deferred consideration payable over four years, contingent on meeting financial targets. This results in an estimated total of between USD100 million and USD197 million, it said.
"Intrepid's strong presence in South East Asia, alongside its proven expertise operating across the major marketplaces in this important region, further enhances the capabilities and global reach of our Digital Commerce business. We look forward to welcoming our new colleagues into the Ascential family and continuing to expand our digital commerce capabilities together," said CEO Duncan Painter.
The European Central Bank on Wednesday said it will move gradually to combat soaring consumer prices with interest rate hikes in July and September, but it will keep its options open to "stamp out" inflation if it surges faster than expected.
President Christine Lagarde used strong terms as policymakers aim to tame inflation, currently running at a record 8.1% in the 19 countries using the euro.
The ECB is set to enact its first interest rate hike in 11 years at its meeting next month. It also will raise rates in September but is leaving the option open for a bigger hike than the quarter-point increase in July, in case inflation keeps spiking.
"European [futures] fell heavily overnight as a hawkish Lagarde and increasing recession fears eroded confidence. Nothing has happened overnight to materially change that outlook, and they are set for another weak opening," said Oanda analyst Jeffery Halley.
The pound was quoted at USD1.2154 early Thursday, up from USD1.2126 at the London equities close Wednesday.
The UK economy grew at the same pace as previously estimated in the first quarter, data from the Office of National Statistics showed, as the Bank of England cautioned over rising levels of inflation.
On an annual basis, UK gross domestic product expanded an unrevised 8.7% in the first quarter, picking up pace from 6.6% growth in the final quarter of 2021.
On a quarterly basis, the UK economy grew an unrevised 0.8% in the first quarter, slowing from a 1.3% expansion in the fourth quarter.
Soaring inflation will hit Britain harder than any other major economy during the current energy crisis, the Bank of England has warned.
Governor Andrew Bailey on Wednesday said the UK economy would likely weaken earlier and be more intense than others as a result of the energy price shock that all European economies face.
The euro was priced at USD1.0465, down from USD1.0470. Against the yen, the dollar was trading at JPY136.27, down from JPY136.69.
Brent oil was quoted at USD116.04 a barrel Thursday morning, down sharply from USD118.78 late Wednesday. Gold stood at USD1,815.47 an ounce, down from USD1,816.73.
In Asia on Thursday, the Nikkei 225 index in Tokyo closed down 1.5%. In China, the Shanghai Composite was up 1.6%, while the Hang Seng index in Hong Kong was down 1.2%. The S&P/ASX 200 in Sydney ended down 2.0%.
China's factory and services activity picked up in June, official data showed, fuelled by the easing of Covid-19 restrictions in major cities such as Shanghai and Beijing.
The non-manufacturing purchasing managers' index, a key gauge of activity in the world's second-biggest economy, defied expectations and surged to 54.7 points in June after three months of sluggish performance.
It was the first time since February that the reading was above the 50-point mark separating growth from contraction. The PMI sat at 47.8 in May.
In particular, business activity in industries severely hit by the pandemic such as rail and air transport picked up in June, the statement said. Construction activity also helped fuel the PMI boost.
But the "surprisingly rapid recovery in services" likely reflects a one-off boost from reopening, said Julian Evans-Pritchard, senior China economist at Capital Economics.
Thursday's economic calendar has German unemployment at 0855 BST and eurozone unemployment at 1000 BST, before US jobless claims at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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