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(Alliance News) - London's FTSE 100 is called to open in the red on Tuesday, following Asian equities lower, as the good feeling in equity markets after the softer US jobs data on Friday gives way to some caution.
Data from Asia largely disappointed, while there was also an interest rate hike from the Reserve Bank of Australia.
China's exports fell at a faster pace than predicted in October, as the world's second-largest economy is buffeted by faltering global demand and a sluggish domestic recovery.
Beijing has sought to boost business activity in a country grappling with a major property crisis and weaker consumption since officials abolished their strict zero-Covid policy at the end of last year.
Exports – long a key driver of the growth – sank 6.4% year-on-year last month, according to the General Administration of Customs. Imports, however, rose 3.0%, bucking a forecast drop of 5.0% and notching the first month of on-year growth since late last year.
Australia's central bank, meanwhile, raised the key interest rate to a near 12-year high on Tuesday to tame stubbornly high inflation.
The Reserve Bank of Australia lifted the cash rate by a quarter of a percentage point to 4.35%, its highest level since December 2011.
It was the first tightening in five months and also the first under the stewardship of Michele Bullock, who took over as central bank governor in September.
Swissquote analyst Ipek Ozkardeskaya commented: "The RBA hike came as a sour reminder that there is no rule that says that a bank can't hike rates after pausing for four meetings."
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 0.2% at 7,403.96
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Hang Seng: down 1.5% at 17,696.27
Nikkei 225: down 1.3% at 32,271.82
S&P/ASX 200: closed down 0.3% at 6,977.10
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DJIA: closed up 34.54 points, or 0.1%, at 34,095.86
S&P 500: closed up 7.64 points, or 0.2%, at 4,365.98
Nasdaq Composite: closed up 40.50 points, or 0.3%, at 13,518.78
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EUR: down at USD1.0693 (USD1.0736)
GBP: down at USD1.2312 (USD1.2385)
USD: up at JPY150.45 (JPY149.75)
GOLD: down at USD1,968.58 per ounce (USD1,982.98)
(Brent): down at USD84.15 a barrel (USD86.00)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
UK King's Speech at State Opening of Parliament
10:00 GMT EU PPI
13:30 GMT US international trade in goods and services
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UK Prime Minister Rishi Sunak will seek to make law and order a key election battleground with a series of measures in the King's Speech promising tougher sentences for killers, rapists and grooming gang ringleaders. With a general election expected next year, the PM has put a series of criminal justice laws at the heart of the King's Speech, in an attempt to draw dividing lines with Keir Starmer's Labour. The plan will deliver on already-announced proposals for killers convicted of the most horrific murders to expect whole life orders, meaning they will never be released, while rapists and other serious sexual offenders will not be let out early from prison sentences. Other measures in the speech – being delivered by the King for the first time as monarch – include giving police the power to enter a property without a warrant to seize stolen goods, such as phones, when they have reasonable proof that a specific stolen item is inside.
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UK house prices increased in October, ending a six-month streak of declines, according to mortgage lender Halifax. The average house price increased 1.1% in October from September. Prices had fallen 0.3% in September from August. On an annual basis, prices were 3.2% lower, easing from September's 4.5% decrease. Halifax Mortgages Director Kim Kinnaird said: "Prospective sellers appear to be taking a cautious attitude, leading to a low supply of homes for sale. This is likely to have strengthened prices in the short-term, rather than prices being driven by buyer demand, which remains weak overall. While many people will have seen their income grow through wage rises, higher interest rates and wider affordability pressures continue to be challenges for buyers."
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UK retail sales growth fell short in October by recent standards, numbers from the British Retail Consortium showed Tuesday. According to the latest BRC-KPMG tracker, retail sales increased 2.5% on-year last month, picking up speed from a 1.6% rise in October 2022, but shy of the three-month average rise of 3.1%. Food sales increased 7.9% in the three months to October, below the 12-month average rise of 8.5%. Non-Food sales decreased 1.0%, falling short of the 12-month average climb of 0.6%. BRC Chief Executive Helen Dickinson commented: "Retail sales growth slowed as high mortgage and rental costs further shook consumer confidence. Many households are also delaying their Christmas spending in the hopes they can grab a bargain in the upcoming Black Friday sales. The cost-of-living squeeze meant more was spent on lower-price indulgences, such as beauty products – the so-called 'Lipstick Effect'. Meanwhile, the arrival of some colder weather helped to boost fashion sales, particularly for outdoor wear."
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BROKER RATING CHANGES
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Jefferies cuts Hikma to 'hold' ('buy') - price target 1,940 (2,125) pence
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Investec cuts Asos to 'hold' - price target 370 pence
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COMPANIES - FTSE 100
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Associated British Foods reported an annual earnings hike, shaking off "unseasonal weather" in its Primark retail arm. Group revenue in the year ended September 16 rose 16% to GBP19.75 billion from GBP17.00 billion the year prior. Pretax profit rose by a quarter to GBP1.34 billion from GBP1.08 billion. "At the outset of this financial year the group was facing very significant economic challenges caused in part by major geo-political events. Looking back on the year, it is clear to me that the group performed extremely well and is as a result now well positioned for the year ahead," Chief Executive George Weston said. "Although consumer demand remains uncertain, Primark is as well placed as it has ever been." Revenue at Primark alone rose 17% to GBP9.01 billion, though its adjusted operating profit weakened some 2.8% to GBP735 million. AB Foods said Primark's trading was weather-influenced in the second half. AB Foods, which also owns brands such as Kingsmill and Silver Spoon, posted revenue growth across the board. Its Grocery unit revenue rose 12%. Revenue in the Ingredients arm increased 18% and Agriculture revenue was 6.9% higher. Sugar revenue increased 26%. It declared a 33.1 pence per share final dividend, up 1.1% from 29.9p. It also announced a 12.7p special dividend. It means the total dividend for the year amounts to 60.0p, up 37% from 43.7p.
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Insurer Beazley said it has seen a better "claims experience" than expected. Net insurance written premiums in the nine months to September 30 surged 26% to USD3.53 billion from USD2.80 billion. Chief Executive Officer Adrian Cox said: "The insurance business is cyclical and market conditions are evolving quickly. We have chosen to exercise underwriting discipline meaning growth to date is less than we had planned at the start of the year. However, our agile underwriting and the strength of our platform strategy means we have delivered profitable growth to date and our claims experience is better than anticipated." Total natural catastrophes so far this year have been within the margins held in its reserves, Beazley said.
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Industrial and electronics products distributor RS Group reported a first-half earnings decline amid more tricky trading conditions than expected. Revenue in the half-year to September 30 inched down 0.8% to GBP1.45 billion from GBP1.46 billion. Pretax profit weakened 31% to GBP126.3 million from GBP182.5 million. "RS has delivered a resilient performance in difficult markets, which have been more challenging than anticipated at the beginning of the year. Industrial revenue has been robust despite the challenging macro and geopolitical environment but cyclical weakness in electronics has been exasperated by customer de-stocking," CEO Simon Pryce said. RS lifted its interim dividend 15%, however, to 8.3p from 7.2p.
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COMPANIES - FTSE 250
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Direct Line Insurance said its third-quarter trading in its Motor arm benefitted from "pricing actions" and it believes it is "writing profitably". The insurer said group gross written premium and associated fees in the third-quarter of 2023 rose 59% year-on-year to GBP1.28 billion. In Motor alone, they more than doubled, while in Home, they increased 3.9%. Acting CEO Jon Greenwood said: "Throughout Q3 we have continued to address our three key priorities: to restore our capital resilience, improve our performance in Motor and maintain our performance in our other businesses. In Motor, we can see the pricing actions we have taken come through in strong premium growth during the quarter and we believe we are writing profitably, consistent with a 10% net insurance margin."
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Watches of Switzerland reported an improved second-quarter, amid a "difficult consumer environment". Revenue in the second-quarter to October 29, rose around 1.3% to GBP379 million from GBP374 million. It said luxury watch demand "remains robust". For the full half-year, revenue was down around 0.5% year-on-year to GBP761 million. It still predicts full-year constant currency revenue growth of 8% to 11%. Looking further ahead, it plans to double sales and profit by financial 2028, as WoSG set out its "long range plan". CEO Brian Duffy said: "Today's long range plan demonstrates our confidence in more than doubling our sales and profits from FY23 to FY28, aiming to surpass the milestone of GBP3 billion in revenue whilst driving operational leverage and accelerating new showroom projects and M&A activity."
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OTHER COMPANIES
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AIB Group noted that the Irish Department of Finance has trimmed its stake in the company to around 41%. According to an announcement from joint bookrunner Morgan Stanley on Monday, Ireland's finance department planned to sell approximately 131 million of AIB shares, trimming its stake from around 46%. The Irish state's stake in the company fell below 50% back in June, in what AIB labelled a "milestone". The Irish government stepped in to buy a stake in AIB in 2009 amid the global financial crisis. The state pumped a total of EUR29.4 billion into AIB, Bank of Ireland Group, and Permanent TSB Group over 2009 to 2011.
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By Eric Cunha, Alliance News news editor
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