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(Alliance News) - London stocks are set to start September on a downbeat note Thursday, after a hot inflation print in the eurozone on Wednesday raised tightening expectations ahead of the European Central Bank's next meeting.
"Since the August inflation data for the euro zone surprised on the upside at 9.1% year-on-year, the likelihood has risen that the ECB might really take action, rather than just talk, and might hike its key rate by an impressive 75bp next week – in particular following the numerous hawkish comments by some ECB board members over the past days," said Commerzbank.
Attention now turns to a raft of PMIs on Thursday to gauge the health of the European economy.
IG says futures indicate the FTSE 100 index of large-caps to open down 46.05 points, or 0.6%, at 7,238.10 on Thursday. The FTSE 100 closed down 77.48 points, or 1.1%, at 7,284.15 on Wednesday.
In early UK company news, Reckitt Benckiser said its chief executive is departing after three years, Rio Tinto has agreed a higher price to buy out the remainder of Mongolian mine owner Turquoise Hill, and Barclays has offloaded its remaining stake in Johannesburg-listed lender Absa.
Reckitt Benckiser said Chief Executive Laxman Narasimhan, who was appointed in September 2019, is stepping down to relocate back to the US. He will step down from the role at the end of this month.
"Laxman has decided for personal and family reasons to relocate back to the United States and has been approached for an opportunity that enables him to live there," Reckitt explained.
He will be replaced by Senior Independent Director Nicandro Durante while the company "evaluates and selects" the future leadership. Durante has previous experience heading up a FTSE 100 listing, having been the boss of British American Tobacco for eight years before leaving in 2019.
"The chairman and the Nomination Committee have begun the process to identify the best long-term candidate to take Reckitt on the next phase of its growth and transformation journey," said Reckitt.
Durante was appointed to the Reckitt board in December 2013.
Rio Tinto said it has reached a new agreement to take full ownership of Turquoise Hill, owner of the Oyu Tolgoi copper-gold project in Mongolia, at an improved price of CAD43, around USD32.64, per share.
In August, Turquoise Hill said it was no longer considering Rio Tinto's takeover offer of CAD34 per share, flagging that conditions in both equity and copper markets had "changed significantly" since the March offer.
Rio Tinto returned last week with an improved offer of CAD40 per share, which Turquoise Hill acknowledged. On Thursday, the two said they have reached agreement in principle on a CAD43-per-share deal, valuing the Turquoise Hill minority share capital at USD3.3 billion.
"The transaction is the result of extensive negotiations between the special committee of independent directors of Turquoise Hill and Rio Tinto that took place following the receipt on August 24, 2022 of an improved non-binding proposal from Rio Tinto of CAD40 per share. These discussions ultimately culminated in the CAD43 per share consideration offered pursuant to the transaction, which has the unanimous support of the special committee," Turquoise Hill explained.
This further increased offer represents a premium of 67% to Turquoise Hill's closing price of CAD25.68 on March 11. The stock closed at CAD36.12 in Toronto on Wednesday, give the entire company a CAD7.27 billion, about USD5.52 billion, market capitalisation.
Rio Tinto currently holds a 51% stake in Turquoise Hill. If the deal is successful - it needs approval from just under 67% of Turquoise Hill shareholders - Rio Tinto will have increased its stake in the Oyu Tolgoi project to 66%, with the government of Mongolia holding the remaining 34%.
Barclays said it has agreed to sell its entire 7.4% stake in South African lender Absa for ZAR10.66 billion, around GBP538 million.
Barclays sold 63.1 million shares at a price of ZAR169.0 each, being a 5.1% discount to Absa's closing price of ZAR178.02 in Johannesburg on Wednesday.
Kainos backed market forecasts for its current financial year with trading since the start of April strong across both its business areas. It placed consensus at GBP62.7 million to GBP66.5 million in adjusted pretax profit on GBP335.7 million to GBP373.4 million in revenue.
"While we are cognisant of the global macroeconomic landscape, our robust pipeline, strong balance sheet and significant contracted backlog underpin our confidence in our outlook. As a result, we believe that we are well-positioned for further growth and remain confident in our strategy," the software company said.
Jet2, ahead of Thursday's annual general meeting, said it is on track to meet market expectations with customer bookings "consistently strong".
The airline and tour operator said airport disruption has "abated significantly" after a bumpy start to the summer season "due to the lack of planning and investment by many airports and associated suppliers".
Customer bookings are being made a bit later than normal, but remain strong. Winter forward bookings are "satisfactory", it added, matching the winter 2019-20 season at the same point despite a 2% increase in capacity.
"With some way still to go in the Leisure Travel winter booking cycle, we are currently on track to achieve current market expectations for group profit before foreign exchange revaluations and taxation for the year ending 31 March 2023," said Executive Chair Philip Meeson.
Looking to later in the morning, purchasing manager's index readings are due from Germany at 0855 BST, the eurozone at 0900 BST, and the UK at 0930 BST. There is a US S&P Global manufacturing PMI at 1445 BST, followed by the ISM index at 1500 BST.
Ahead of this, the pound slipped to USD1.1583 early Thursday from USD1.1638 at the London equities close on Wednesday. The euro traded at USD1.0015, down from USD1.0064 late Wednesday.
"As we start a new month and meteorological autumn, the question now being asked is where we go next for equity markets, after Powell's comments at the end of last week, and subsequently hawkish comments from more Fed officials this week," said Michael Hewson, chief market analyst at CMC Markets.
Another Fed official signalled the bank was determined to keep lifting borrowing costs, mirroring comments by head Jerome Powell last week that there would be no let-up in the fight against inflation.
"My current view is that it will be necessary to move the Fed funds rate up to somewhat above four percent by early next year and hold it there," said Cleveland Fed President Loretta Mester in remarks prepared ahead of an event for the Dayton Area Chamber of Commerce.
"I do not anticipate the Fed cutting the Fed funds rate target next year."
Wall Street ended lower on Wednesday, with the Dow Jones Industrial Average down 0.9%, the S&P 500 down 0.8% and the Nasdaq Composite down 0.6%
In Asia on Thursday, the Japanese Nikkei 225 index ended down 1.5%. Against the yen, the dollar was quoted at JPY139.44, up from JPY138.75.
In China, the Shanghai Composite was down 0.4%, while the Hang Seng index in Hong Kong was down 1.8%. The S&P/ASX 200 closed down 2.0%.
China's manufacturing sector slipped into contraction in August, according to new figures on Thursday, as power cuts and temporary factory closures hindered growth.
Caixin's manufacturing purchasing managers' index slipped past the no-change mark of 50.0, as the reading fell to 49.5 points in August from 50.4 in July, indicating a marginal decline. Consensus, as cited by FXStreet, had been expecting a reading of 50.2.
Gold was quoted at USD1,703.81 an ounce early Thursday, lower than USD1,720.40 on Wednesday. Brent oil was trading at USD94.91 a barrel, down from USD97.05 late Wednesday.
Alongside the PMI data, there are eurozone unemployment figures at 1000 BST, followed by initial jobless claims in the US at 1330 BST.
By Lucy Heming; lucyheming@alliancenews.com
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