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(Alliance News) - The FTSE 100 is called to open higher, with focus on Thursday on inflation readings from the eurozone and US.
Cooler readings will lessen the need for the European Central Bank and US Federal Reserve to keep interest rates at lofty territory for longer. Hotter-than-expected readings could hit equities, however.
"Today, all eyes on the US [personal consumption expenditures] index – the Fed's favourite gauge of inflation. The headline PCE may have eased from 3.4% to 3.0% in October, and core PCE is seen down from 3.7% to 3.5%. A softer-than-expected figure could further fuel expectations of an early Fed cut, while a stronger-than-expected set of figures should, in theory, calm down the dovish enthusiasm and call for a rebound in the yields. Presently, activity on Fed funds futures gives almost 80% chance for a Fed rate cut in May, and the probability of a March cut is 50-50," Swissquote analyst Ipek Ozkardeskaya commented.
Focus is also on oil prices, with a meeting of the Opec+ group of producing nations ahead. Brent was on the up ahead of the meeting.
In early UK corporate news, Mitchells & Butlers reported an annual revenue hike but a swing to loss. Dr Martens posted weaker half-year earnings and warned its bounce in the US will take longer to materialise than initially expected. Lender Metro Bank announced job cuts.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.2% at 7,439.46
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Hang Seng: up 0.2% at 17,034.80
Nikkei 225: up 0.5% at 33,486.89
S&P/ASX 200: up 0.7% at 7,087.30
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DJIA: closed little changed at 35,430.42
S&P 500: closed down 0.1% at 4,550.58
Nasdaq Composite: closed down 0.2% at 14,258.49
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EUR: flat at USD1.0966 (USD1.0966)
GBP: up at USD1.2689 (USD1.2674)
USD: down at JPY147.14 (JPY147.59)
GOLD: up at USD2,044.87 per ounce (USD2,041.08)
OIL (Brent): up at USD83.00 a barrel (USD81.80)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
10:00 GMT EU CPI
10:00 GMT EU unemployment
16:00 GMT UK BoE Monetary Policy Committee Member Megan Greene speaks
13:30 GMT US personal consumption expenditures index
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Car production in the UK has increased for the eighth month in a row, with more than 91,000 vehicles built in October, new figures show. The total was almost a third higher than the same month last year, and the best October performance since 2019, said the Society of Motor Manufacturers and Traders. Production for the home and overseas markets grew by 23.9% and 33.4% respectively, with exports driving output. More than four in five cars were shipped abroad, with export growth driven by a 58% increase in shipments to the EU, which remains the UK's largest market by far, accounting for almost two-thirds of exports.
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BROKER RATING CHANGES
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Morgan Stanley initiates B&M with 'equal weight' - price target 600 pence
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Berenberg starts Workspace with 'buy' - price target 643 pence
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Deutsche Bank starts Alphawave IP Group with 'buy' - price target 150 pence
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COMPANIES - FTSE 250
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Pub operator Mitchells & Butlers reported growth in annual revenue and said it has kicked off the new year strongly. Revenue in the year to September 30 increased 13% to GBP2.50 billion from GBP2.21 billion a year earlier. However, it swung to a GBP13 million pretax loss, from profit of GBP8 million. Operating costs were 17% higher at GBP2.15 billion from GBP1.84 billion. "We are delighted by the continued strength of our trading performance, and resilience in the face of unprecedented cost headwinds. We have achieved good growth in underlying profit, excluding government support, with like-for-like sales growth across all of our brands, and record outperformance against the market," Chief Executive Phil Urban said. In the eight weeks since the end of its financial year, like-for-like sales have risen 7.8% on-year. M&B added: "Cost headwinds presented a significant challenge in FY 2023 but we are seeing clear evidence that these are starting to abate. We now know that the national living wage will increase by 9.8%, and be extended to everyone over 21, from April next year, but a reduction in energy prices and slowing food inflation, in particular, mean that anticipated overall cost headwinds for the year ahead are expected to reduce to GBP65 million. This should allow us to start to rebuild margins back towards pre-pandemic levels."
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Boot maker Dr Martens reported a fall in half-year earnings and it said a recovery in the key US market will take longer than it first expected. In the half-year ended September 30, revenue declined 5.4% to GBP395.8 million from GBP418.6 million 12 months earlier. Pretax profit fell by 55% to GBP25.8 million from GBP57.9 million. CEO Kenny Wilson said: "We saw a mixed trading performance in the first half of the year. We made good progress with our strategic priorities, continuing to invest in the business and our people to drive sustainable long-term growth. During the period we focused on controlling the controllables: we delivered significant supply chain savings, successfully transformed our North America distribution network, opened 25 new stores, and launched a Dr. Martens UK repair service." Wilson added that its direct-to-consumer performance in Europe, Middle East & Africa and the Asia Pacific regions was "strong". But Dr Martens grappled with "an increasingly difficult consumer environment" in the US, however. "We have strengthened the Americas leadership team and they are taking action, including refocusing marketing and improving our ecommerce trading capabilities. It is likely, however, that given the challenging backdrop it will take longer to see an improvement in USA results than initially anticipated. Notwithstanding the clear challenges we face in the USA market we remain very confident in our iconic brand and the significant growth opportunity ahead of us," the CEO added. Dr Martens maintained its half-year payout at 1.56 pence per share.
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ME Group International, a provider of instant-service equipment such as photo booths, laundry units and digital printing kiosks, expects to report a mixed outcome to its recently-ended financial year. For the year ended October 31, revenue is expected to amount to GBP298 million, up 15% from GBP259.8 million, but below its GBP300 million and GBP320 million guidance. Earnings before interest, tax, depreciation and amortisation are expected to be in line with its GBP100 million and GBP110 million expectation range. It expects Ebitda "significantly above" GBP100 million. Pretax profit is expected at the top end of its GBP64 million and GBP67 million. In financial 2022, Me Group's Ebitda amounted to GBP92.2 million and its pretax profit totalled GBP53.4 million. It publishes annual results in February.
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OTHER COMPANIES
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Metro Bank said it will cut 20% of its workforce and is reviewing its policy of keeping branches open seven days a week. The lender said that while it is "committed to stores and the high street" it will look to improving its digital channels. "The company is reviewing seven day opening and extended store hours across the store network and is in discussions with the FCA about the customer implications of any such changes. The company continues to seek sites in the North of England for new stores as previously communicated. Metro Bank will also take action to simplify its operations and selectively streamline lending to focus on relationship banking and maximise risk-adjusted returns on regulatory capital," it added. These measures will trim its workforce by 20%. Back in October, it said it planned cut costs by GBP30 million per year. It added on Thursday that these cost cuts will now go deeper. "After further evaluation of the cost base, Metro Bank has now identified potential cost savings of up to GBP50 million per year. Implementation of the cost reduction plan is expected to complete during the first quarter of 2024 and a GBP10-15 million one-off restructuring charge is expected in 2023, which is lower than previously anticipated," Metro Bank said.
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By Eric Cunha, Alliance News news editor
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