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(Alliance News) - London's FTSE 100 is set for another downbeat start to the day, with more hawkish comments from US central bankers and tepid data out of China doing little to lift the mood.
China slipped back into deflation in October, highlighting the work officials have in reviving still-sluggish demand in the world's number two economy.
The consumer price index, the main gauge of inflation, fell 0.2% on-year, according to the National Bureau of Statistics. The index had been unchanged year-on-year in September and edged up 0.1% in August.
On Wednesday, a senior US monetary policymaker said the Federal Reserve is likely done raising interest rates to tackle inflation but probably won't cut them "in the short term".
Philadelphia Fed President Patrick Harker told a conference in Evanston, Illinois, that he felt holding interest rates at their current, restrictive, level was the right course of action.
The US bond market will likely be of some concern for the Fed soon enough, Swissquote analyst Ipek Ozkardeskaya commented. The yield on the 10-year Treasury has eased markedly recently and now sits around 4.50%.
"That's disquieting; the US 10-year yield has now fallen more than 50bp in less than 2 weeks. Yes, a part of it is a correction of the accelerated rise that we observed starting from September. But that rise partly explains why the Fed members decided to refrain from announcing another rate hike at the latest policy meeting. As such, the recent fall in long-term yields will certainly get them back to a high-alert level," Ozkardeskaya explained.
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 0.3% at 7,382.32
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Hang Seng: down 0.2% at 17,535.76
Nikkei 225: closed up 1.5% at 32,646.46
S&P/ASX 200: closed up 0.3% at 7,014.90
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DJIA: closed down 40.33 points, or 0.1%, at 34,112.27
S&P 500: closed up 0.1% at 4,382.78
Nasdaq Composite: closed up 0.1% at 13,650.41
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EUR: flat at USD1.0706 (USD1.0707)
GBP: down at USD1.2282 (USD1.2300)
USD: up at JPY150.91 (JPY150.83)
GOLD: down at USD1,949.92 per ounce (USD1,954.55)
OIL (Brent): up slightly at USD80.10 a barrel (USD80.05)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
08:10 GMT EU ECB Executive Board Member Philip Lane speaks
13:30 GMT US unemployment insurance weekly claims report
13:30 GMT US FRB Atlanta and Richmond presidents speak
16:00 GMT US Fed St. Louis Interim President Kathleen O'Neill Paese speaks
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The pace of UK house price falls may be steadying as the end of the year approaches, according to surveyors. A net balance of 63% of property professionals reported house prices falling rather than increasing in October, edging down from a balance of 67% in September, the Royal Institution of Chartered Surveyors said. Its report said the latest house price reading "suggests the pace of decline, from a national perspective, has levelled off in recent weeks. Nonetheless, the house price metric remains deeply negative across most parts of the UK, even if the latest readings have moved off the lows hit over the past couple of months in the majority of cases". Rics said "bucking the aggregate picture", survey participants continue to cite a steady increase in prices across Northern Ireland. Sales activity remained weak, with a net balance of 25% of property professionals reporting a decline in sales rather than a rise in October. Sentiment suggests there is unlikely to be any significant turnaround in sales through the remainder of 2023, Rics said. However, looking 12 months ahead, property professionals' sales expectations suggest there will be a more stable outlook in the coming year, the report said.
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BROKER RATING CHANGES
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Barclays raised Unilever to 'overweight' (equal-weight) - price target 4,600 (4,300) pence
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Peel Hunt raises Persimmon to 'hold'
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COMPANIES - FTSE 100
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Drugmaker AstraZeneca lifted its outlook after "strong momentum in the year to date". Total revenue in the third quarter of 2023 rose 4.6% on-year to USD11.49 billion from USD10.98 billion. Pretax profit was 79% higher at USD1.65 billion from USD922 million. "Our company continued its strong growth trajectory in the third quarter with total revenue from our non‑Covid-19 medicines up 13% compared to last year," Chief Executive Officer Pascal Soriot said. AstraZeneca reported core earnings per share growth of 4% to US1.73. It now expects full-year core EPS growth in the "low double-digit to low-teens percentage" range at constant currency. It had previously predicted "high single-digit to low double-digit percentage" growth. AstraZeneca said it has also landed a pact focused on an obesity drug. It has entered into an exclusive licence agreement for ECC5004 with biopharmaceutical firm Eccogene. Eccogene gets USD185 million upfront and could receive an additional USD1.83 billion in future "clinical, regulatory, and commercial milestones and tiered royalties on product net sales".
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Housebuilder Taylor Wimpey hailed a "resilient" performance and now expects yearly profit at the top end of guidance. Taylor Wimpey, which ended its first half on July 2, said its net private sales rate per outlet per week in the second half to date was unmoved year-on-year at 0.51. Taylor Wimpey said: "The market continues to be impacted by weak consumer confidence influenced by high mortgage rates and cost of living pressures which are negatively affecting affordability for our customers. However, we have attractive and resilient locations which, combined with our enhanced customer and marketing tools, has enabled us to deliver a good performance against a challenging backdrop." It expects to deliver on its 10,000 to 10,500 homes volumes guidance for the full year. Due to "cost discipline", it predicts operating profit to be at the top end of a guidance range of GBP440 million to GBP470 million.
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Paddy Power owner Flutter Entertainment posted third-quarter revenue growth, but it noted it has faced pressure from "adverse sports results". Total revenue in the third-quarter of 2023 was 7.6% higher at GBP2.04 billion from GBP1.89 billion a year prior. CEO Peter Jackson said: "The group had another strong quarter in Q3 and even in this seasonally quieter period, the power of our diversified business is clear with revenue growth of 13% to over GBP2 billion. We remain the number one choice for sports betting and gaming customers globally, and our 16% growth in average monthly players augurs well for our continued growth and market leadership." Looking ahead to the rest of 2023, it sharpened its earnings outlook. It now expects US revenue of GBP3.75 billion, around the middle of its previous GBP3.6 billion to GBP3.9 billion range. US adjusted earnings before interest, tax, depreciation and amortisation of GBP140 million are expected, around the middle of its GBP90 million to GBP190 million range. Excluding the US, it expects group revenue at the bottom of its GBP1.44 billion to GBP1.6 billion range. Looking further ahead, Flutter expects to list on the New York Stock Exchange in the first quarter of 2024. It will delist from Euronext Dublin "simultaneously or shortly prior to this".
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COMPANIES - FTSE 250
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Retailer WH Smith hailed "another year of significant progress". Revenue in the year ended August 31 rose 26% to GBP1.79 billion from GBP1.40 billion a year prior. Pretax profit jumped 75% to GBP110 million from GBP63 million. CEO Carl Cowling said: "This has been another year of significant progress for the group. Our Travel divisions have all seen strong growth with Travel UK total revenue up 36%, North America up 32% and [Rest of World] up 99%, and I am very pleased with the start to the new financial year. WHSmith is a highly cash generative business. In 2024, we expect to invest a further GBP140 million which will drive further growth and at the same time we expect our leverage to fall within our target range. We have started the new financial year well with total revenue in Travel UK up 13%, North America up 15%, and ROW up 27%." WH Smith declared a final dividend of 20.8 pence, more than doubled from 9.1p a year prior. Its full-year dividend totalled 28.9p. It had only paid a final dividend in the financial year prior.
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Automotive-focused engineering firm Dowlais backed annual guidance, despite counting the costs of US strikes. In the four months to October 31, it reported adjusted revenue growth of 4.7% to GBP1.8 billion. "The full year financial impact of the United Auto Workers strike action on the group is expected to be in the range of GBP30 million - GBP45 million of adjusted revenue and GBP10 million - GBP15 million of adjusted operating profit. Despite this, strong operational execution within the businesses has resulted in the strikes not impacting our ability to deliver on our full-year expectations," Dowlais said.
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OTHER COMPANIES
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Advertising firm S4 Capital reported a decline in third-quarter revenue as clients were cautious "to commit and extended sales cycles". Revenue in the three months to September 30 fell 18% to GBP245.9 million from GBP300.1 million a year prior. Executive Chair Martin Sorrell said: "Trading in the third quarter was difficult, reflecting the global macroeconomic conditions with continued client caution to commit and extended sales cycles, particularly for larger projects and to some extent clients in the Technology sector." For the full-year, it now expects an operational Ebitda margin of around 10% to 11%, the guidance cut from a range of 12% to 13.5%. Sorrell added: "We remain confident our strategy, business model and talent, together with scaled client relationships position us well for above average growth in the longer term, with an emphasis on deploying free cash flow to dividends and share buybacks, especially as in 2024 will have no further merger payments."
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By Eric Cunha, Alliance News news editor
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