(Alliance News) - Stock prices in London were called to open slightly higher on Friday, while new data showed UK retail sales performed better than expected last month.
According to the Office for National Statistics, on an annual basis, retail sales fell 6.1% in October, compared to a 6.8% fall in September. The figure was better than the market had expected, with consensus of a 6.5% decline cited by FXStreet.
On a monthly basis, sales grew 0.6% in October, compared to a 1.5% fall in September. Sales were expected to remain flat.
Meanwhile, UK Chancellor Jeremy Hunt faces criticism over the credibility of his autumn budget.
Hunt on Thursday set out his plans for GBP55 billion of tax hikes and spending cuts against the backdrop of a bleak set of economic forecasts from the Office of Budget Responsibility, underlining the damage wreaked by the war in Ukraine.
Institute for Fiscal Studies director Paul Johnson questioned whether spending cuts due to kick in after 2025 could be delivered, with services such as the police, the courts and local government facing "a very difficult few years".
"Delaying all of the difficult decisions until after the next general election does cast doubt on the credibility of these plans. The tight spending plans post-2025, in particular, may stretch credulity," he said.
The Resolution Foundation think tank said such cuts were "likely to be undeliverable" as they would require "years of holding down public sector wages below those in the private sector".
"What was really scary for sterling traders yesterday was the gloomy growth forecast," considered Swissquote Bank's Ipek Ozkardeskaya
Hunt said the OBR concluded the UK "like other countries" is now in recession and was facing an increase in unemployment.
While growth in gross domestic product was expected to be 4.2% in 2022, in 2023 the economy was forecast to shrink by 1.4% before growth of 1.3%, 2.6%, and 2.7% in the following three years.
"Jeremy Hunt said that the UK is already in recession – stating the obvious. But he also said that growth will fall 1.4% next year, versus a 1.8% expansion printed previously, and recession will last over a year, while the Bank of England will probably be raising rates to fight inflation during this period. Even though it will probably be raising less than what it should to really fight inflation," Ozkardeskaya commented.
In early corporate news, Legal & General reiterated annual profit guidance, and Biffa's chief financial officer will depart for DS Smith.
Here is what you need to know ahead of the London market open:
----------
MARKETS
----------
FTSE 100: called up 15.0 points, 0.2%, at 7,361.54
----------
Hang Seng: down 0.5% at 17,960.31
Nikkei 225: closed down 0.1% at 27,899.77
S&P/ASX 200: closed up 0.2% at 7,151.80
----------
DJIA: closed down 7.51 points to 33,546.32
S&P 500: closed down 0.3% at 3,946.56
Nasdaq Composite: closed down 0.4% at 11,144.96
----------
EUR: higher at USD1.0367 (USD1.0326)
GBP: higher at USD1.1892 (USD1.1779)
USD: down at JPY139.94 (JPY140.61)
GOLD: higher at USD1,763.32 per ounce (USD1,758.92)
OIL (Brent): flat at USD90.09 a barrel (USD90.02)
(changes since previous London equities close)
----------
ECONOMICS
----------
Friday's key economic events still to come:
17:15 GMT UK BoE MPC Member Jonathan Haskel speaks
10:00 EST US existing home sales
----------
UK consumer confidence rose slightly in November in a probable "collective sigh of relief" after the chaos of the mini-budget but remains at a near-historic low. GfK's long-running consumer confidence index increased three points to minus 44 with improvements across all measures registering the financial and economic mood of the nation. Confidence in the general economic situation over the next 12 months improved by three points to minus 58 but remains 35 points lower than this time last year.
----------
Japanese inflation accelerated faster than expected in October, according to Japanese government statistics. On an annual basis, the national consumer price index rose 3.7% in October, speeding up from a 2.7% rise in September. The reading came in higher than the FXStreet-cited consensus of 3%. CPI excluding food and energy costs rose 2.5% during the month, compared to 1.9% in September. Excluding fresh food, CPI hit 3.6% compared to 3% a month before.
----------
Talks at a UN climate conference enter their final day on Friday, gridlocked by a make-or-break tussle between rich and developing nations over money for countries in the crosshairs of increasingly intense and costly impacts of global warming. Representatives from nearly 200 countries have gathered at the COP27 in Egypt for two weeks with the aim of driving forward action on climate change as the world faces a worsening onslaught of extreme floods, heat waves and droughts. The daunting list of urgent tasks includes finding agreement – and funds – for the emissions cuts needed to limit average warming to 1.5 degrees Celsius from pre-industrial levels, which scientists say is a safer guardrail to avoid the most dangerous impacts. For many developing countries – and small island states most threatened by sea level rise – the defining issues at the conference is money for the "loss and damage" caused by climate change impacts.
----------
BROKER RATING CHANGES
----------
Goldman Sachs raises Tritax Big Box to 'buy' (neutral) - price target 170 (140) pence
----------
Berenberg cuts International Distributions Services target to 370 (480) pence - 'buy'
----------
RBC raises Burberry price target to 2,070 (1,800) pence - 'sector perform'
----------
COMPANIES - FTSE 100
----------
BHP said the board of Oz Minerals intends to recommend an improved takeover offer that values Oz at AUD9.6 billion. Oz is a gold, copper and nickel miner. It owns and operates the Prominent Hill and Carrapateena mines in South Australia. It also has an interest in the Pedra Branca copper-gold mine in Brazil. BHP, a Melbourne-based diversified miner, said it increased its non-binding indicative offer to AUD28.25 per Oz share in cash, representing a premium of 49% to Oz's closing price of AUD18.92 per share on August 5, when BHP tabled it initial offer. Back in August, BHP offered AUD25.00 per share in cash for Sydney-listed Oz, but the Oz board rejected it at the time. On Friday, Oz confirmed that its board intends to unanimously recommend BHP's revised offer to its shareholders. It said the takeover approach was in the best interest of its shareholders in the absence of a superior proposal.
----------
Rio Tinto said it is terminating disputed agreements it had made with PentWater Capital Management and SailingStone Capital Partners in relation to its offer to buy all of Turquoise Hill and announced at the beginning of November. This follows a consideration of concerns raised by minority shareholders of Turquoise Hill Resources Ltd relating to dissent and dispute resolution provisions within the agreements. "Rio Tinto in good faith has been negotiating with the special committee of Turquoise Hill on comparable provisions for other minority shareholders. However, notwithstanding the parties best efforts, those negotiations have been unsuccessful," the miner said. It confirmed that its offer to the remaining 49% of Turquoise Hill will proceed, and it is seeking a new shareholder meeting date so the transaction "can be voted on by minority shareholders as soon as practicable".
----------
Legal & General said it welcomed the UK chancellor's references to Solvency II reform in Thursday's autumn statement. "We believe the proposals, as outlined in the corresponding policy document, represent positive progress and will allow us greater flexibility to make appropriate investments, including ones which: develop new infrastructure, contribute to the UK government's levelling-up agenda, and support positive climate outcomes," the financial services firm said. It said its pension risk transfer business has continued to "perform strongly" with recent new business wins. Year-to-date, Legal & General Retirement Institutional has transacted or is in exclusive negotiations on GBP9.3 billion of global PRT business, exceeding the 2021 figure of GBP7.2 billion of global PRT secured. It reiterated annual profit guidance, still expecting operating profit growth in its full year to be in line with the 8% delivered in the first half, with annual capital generation expected at GBP1.8 billion.
----------
COMPANIES - FTSE 250
----------
Bodycote said it is trading in line with market expectations for 2022. The supplier of heat treatments and specialist thermal processing services said revenue from July 1 to October 31 amounted to GBP258 million, a 29% increase year-on-year. Revenue grew by 18% in Automotive year-on-year in constant currency, by 25% in General Industrial, and by 19% in Aerospace & Defence.
----------
Waste management firm Biffa said its chief financial officer, Richard Pike, has resigned to become finance director at packaging firm DS Smith. Pike's departure date is "expected to be no later than April 30, 2023". Back in September, Biffa agreed to a GBP1.3 billion takeover offer from private equity firm Energy Capital Partners.
----------
OTHER COMPANIES
----------
UK mortgage lender Nationwide Building Society reported pretax profit of GBP969 million in the half year that ended September 30, up from GBP853 million a year before, benefiting from higher interest rates. Its net interest margin improved to 1.48% in the recent half-year from 1.24% a year before. "Nationwide is not immune to the current economic challenges and it's important to maintain financial strength," said Chief Executive Debbie Crosbie. "Our strategy is focused on growing the membership base, increasing value to members, and becoming simpler and more efficient in the way we operate."
----------
Bank of Cyprus said total income in the first nine months of 2022 rose year-on-year to EUR471 million from EUR427 million. Profit before tax and non-recurring items rose to EUR131 million from EUR67 million. "We reported a strong performance in the third quarter of 2022, delivering tangible results against our strategic targets, and confirming the sustainability of our business model with well-diversified revenues and tight cost control," the bank said.
----------
By Elizabeth Winter; elizabethwinter@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
