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(Alliance News) - Stock prices in London were called to open lower on Thursday with the European Central Bank and US inflation figures taking centre stage while hope for peace in Ukraine emerges.
In early corporate news in London, DS Smith is trading in line with expectations, National Express is considering its options, and Balfour Beatty is hiking its dividend after beating expectations.
IG futures indicate the FTSE 100 will open down 35.82 points, or 0.5%, at 7,154.90 on Thursday. The blue-chip index closed up 226.61 points, or 3.3%, at 7,190.72 on Wednesday.
In Asia on Tuesday, the Japanese Nikkei 225 index closed up 3.9%. In China, the Shanghai Composite closed up 1.2%, while the Hang Seng index in Hong Kong was up 0.8% in late trading. The S&P/ASX 200 in Sydney closed up 1.1%.
"Across-the-board commodity price declines are supporting risk sentiment more broadly," SPI Asset Management's Stephen Innes said.
Brent oil was quoted at USD114.34 a barrel on Thursday morning in London, down from USD121.55 late Wednesday.
Gold stood at USD1,980.80 an ounce early Thursday, sliding from USD2,000,80 late Wednesday.
CMC Markets Michael Hewson said: "Oil prices dropped sharply after an aide to Ukraine President Zelenskiy said the country is open to Russia's demand of neutrality just as long as its gets cast iron security guarantees.
"This still seems like a huge leap of faith on the part of markets, particularly where Russia is concerned where there is scant evidence that they can be trusted on anything, after yesterday’s horrific bombing of a hospital in Mariupol, and the indiscriminate bombing of civilian targets. Nonetheless the pressure on the Russian economy continues to ramp up as more global brands suspend their operations in the country, with Coca-Cola the latest to pull out."
The Russian and Ukrainian foreign ministers will Thursday hold face-to-face talks in southern Turkey in the first high-level contact between Kyiv and Moscow since Russia invaded its neighbour two weeks ago.
President Recep Tayyip Erdogan, who has pushed for Turkey to play a mediation role, has expressed hope the talks can avert tragedy and even help agree a ceasefire.
But analysts fear there are only the lowest chances of a breakthrough at the meeting in Antalya between Russian Foreign Minister Sergei Lavrov and his Ukrainian counterpart Dmytro Kuleba.
Senior Ukrainian officials, including the defence minister, have held a sequence of meetings with a Russian delegation in Belarus largely devoted to humanitarian issues, but Moscow has not sent any government ministers to the talks.
In London, packaging maker DS Smith said its trading in the third quarter in been in line with expectations, with the momentum seen in the first half carrying into the second.
In the period since November 1, the London-based firm said volume growth and packaging price increases have "more than" offset ongoing input cost increases, leading to "good progress" in profitability and cash generation.
The company noted continued like-for-like volume growth in its fast-moving consumer goods unit, and expects mid single-digit percentage like-for-like volume growth for the year to April 30.
DS Smith said its production in Ukraine and Russia is currently suspended, but said its involvement is a "minority investment" in a Ukrainian business, which serves customers predominantly in Ukraine with "limited" sales in Russia.
Chief Executive Miles Roberts said: "Despite the increasing macro-economic and geo-political uncertainty, the outlook for the year remains unchanged by recent events with the second half of the year continuing to show good momentum.
"Our geographic footprint, secure supply chain and customer offering focussed on innovative sustainable packaging solutions remains compelling to our resilient customer base of FMCG multi-national companies and has driven continued good volume growth, despite the strong comparatives."
Spirax-Sarco Engineering's annual profit was sharply higher after an "excellent performance" beat pre-pandemic sales in 2019.
In 2021, pretax profit surged 31% to GBP314.5 million from GBP240.1 million, on revenue growth of 13% to GBP1.34 billion from GBP1.19 billion - and was ahead of GBP1.24 billion sales in 2019.
The Steam Specialties business - which accounts for 56% of revenue - saw sales rise 9% thanks to increased demand, while Electric Thermal Solutions sales increased 2% year on year. Watson-Marlow sales jumped 27%.
Spirax-Sarco declared an annual dividend of 136.0 pence, up 15% from 118.0p in 2020.
Chief Executive Nicholas Anderson said: "For 2022 we currently anticipate strong sales growth, driven by record order books and continued global industrial production growth. While adjusted operating profit growth will be reduced by the full-year impact of revenue investments in 2021, we currently anticipate the adjusted operating profit margin in 2022 will still be comfortably above pre-pandemic levels."
A day after seeing its merger with smaller peer Stagecoach collapse, National Express reported a narrowed annual loss. In 2021, its pretax loss was cut to GBP84.9 million from GBP444.7 million in 2020. Revenue increased 11% to GBP2.17 billion from GBP1.96 billion.
The midcap transport firm recorded GBP123.4 million in free cash flow in 2021 compared to the GBP196.0 million loss in 2020.
National Express noted it has a current pipeline of GBP1.5 billion, and said it plans to reinstate its dividend in 2022.
Turning to the Stagecoach deal, National Express said it is "considering its options and will update the market in due course". On Wednesday, Stagecoach accepted a new cash takeover offer, and the board no longer recommends the all-share merger previously agreed with National Express.
"I anticipate further strong recovery in demand over the coming year, and I am excited about what lies ahead, with 'evolve' providing greater clarity of both the significant growth opportunities and the path towards it. Based on current projections, it is our intention to reinstate consistent dividend payments starting with a dividend for full year 2022," National Express Chief Executive Ignacio Garat said.
FTSE 250-listed construction firm Balfour Beatty said its annual results were ahead of expectations, and it has upped its 2022 share buyback to GBP150 million.
For 2021, pretax profit nearly doubled to GBP87 million from GBP48 million in 2020, but revenue slipped 3.8% to GBP8.26 billion from GBP8.59 billion.
Underlying profit from operations from earnings-based businesses more than doubled to GBP181 million from GBP75 million, and was ahead of the GBP172 million seen in 2019.
Balfour declared an annual dividend of 9.0 pence per share, up from just 1.5p in 2020.
Balfour ended 2021 with an order book of GBP16.1 billion, down slightly from GBP16.4 billion at the same point the year prior.
Chief Executive Leo Quinn said: "In 2021, despite the challenges presented by Covid-19, we have delivered operating profits ahead of expectations. Balfour Beatty emerges from the last two years with capabilities intact and a higher quality order book. Together these provide the visibility to deliver profitable managed growth and sustainable cash generation."
Later Thursday, market focus will be dragged away from Ukraine, as the latest European Central Bank interest rate decision is due at 1245 GMT, followed by a press conference with ECB President Christine Lagarde at 1330 GMT.
Soaring inflation has put the ECB under pressure to follow its peers in the US and UK by moving to end its economic stimulus and raise interest rates soon. However, the conflict in Ukraine has threatened to derail the eurozone's recovery, given the continent's reliance on Russian oil and gas.
Global head of Macro at ING, Carsten Brzeski said: "The war in Ukraine has made the economic outlook for the eurozone extremely uncertain. No one would want to make any assumptions on how the war will evolve and end, and no one would currently want to quantify the economic implications for the eurozone.
"This has more than complicated the ECB's position for this week's meeting. A meeting, which roughly two weeks ago, was considered to deliver the starting signal for the ECB's policy normalisation."
Focus will then quickly shift to February's US consumer inflation print at 1330 GMT.
CMC's Hewson said: "In January, [US] headline CPI jumped to 7.5%, a few weeks ago up from 7% in December, with core prices tipping the scales at 6%, as markets started to assign a much higher probability that the Federal Reserve might raise rates by 50bps when they are due to meet next week.
"With PPI also showing little sign of slowing down in January today’s February CPI is expected to see a further increase to 7.8%, or possibly higher at 8%, and go some way to sealing the deal on a 25bps rate hike next week."
In the US on Wednesday, stocks ended higher. The Dow Jones Industrial Average closed up 2.0%, the S&P 500 up 2.6%, and the Nasdaq Composite up 3.6%.
The pound was quoted at USD1.3184 early Thursday, higher on USD1.3165 at the London equities close Wednesday.
The euro was priced at USD1.1061, down from USD1.1070. Against the yen, the dollar was trading at JPY115.97, up from JPY115.77.
The economic events calendar on Thursday also has the latest weekly jobless claims numbers at 1330 GMT.
By Paul McGowan; paulmcgowan@alliancenews.com
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