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(Alliance News) - Stocks in London were called to a lower open on Tuesday, after a shock move by the Bank of Japan shook Asian markets.
Japan's central bank tweaked its longstanding monetary easing programme on Tuesday, in a surprise decision that saw the yen strengthen quickly against the dollar, while the Tokyo stock market fell.
The change marks a rare shift for the dovish central bank, which has largely left its policy intact even as counterparts in other major economies hike rates to tackle inflation.
After a two-day policy meeting, the bank said it will widen the band in which it would allow rates for 10-year Japan government bonds to move, saying it would "improve market functioning".
"The bank will expand the range of 10-year JGB yield fluctuations from the target level: from between around plus and minus 0.25 percentage points to between around plus and minus 0.5 percentage points," it said in a statement.
Few had anticipated the shift, with all 47 of the economists surveyed by Bloomberg ahead of the decision saying they expected no change in policy.
Meanwhile, the World Bank slashed its economic forecast for China, as the pandemic and weaknesses in the property sector hit the world's second largest economy.
In a statement, the institution slashed its growth forecast for 2022 to 2.7% from 4.3% predicted in June. It also revised its forecast for next year from 8.1% down to 4.3%.
Both figures are well below the central government's gross domestic product growth target of around 5.5% for the year, a figure many analysts believe is now unattainable.
"Even before this morning's events, it seemed improbable given the uncertain rate backdrop that we were likely to get any sort of so-called Santa rally this late in the day. The reality is that anyone who's made any money this year will be content to hang onto their winnings, while the rest are unlikely to want to compound their 2022 misery with more potential losses," said CMC Markets' Michael Hewson.
In early corporate news, Bunzl, Eurowag and AG Barr all announced acquisitions.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 44.8 points, 0.6%, at 7,316.51
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Hang Seng: down 1.6% at 19,042.55
Nikkei 225: closed down 2.5% at 26,568.03
S&P/ASX 200: closed down 1.5% at 7,024.30
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DJIA: closed down 162.92 points, or 0.5%, at 32,757.54
S&P 500: closed down 34.70 points, or 0.9%, at 3,817.66
Nasdaq Composite: closed down 159.38 points, or 1.5%, at 10,546.03
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EUR: lower at USD1.0598 (USD1.0608)
GBP: lower at USD1.2130 (USD1.2160)
USD: down sharply at JPY133.21 (JPY137.00)
Gold: higher at USD1,792.66 per ounce (USD1,787.77)
Oil (Brent): higher at USD80.11 a barrel (USD79.85)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
10:00 CET EU balance of payments
16:00 CET EU flash consumer confidence indicator
08:30 EST US housing starts and building permits
08:55 EST US Johnson Redbook retail sales index
16:30 EST US API weekly statistical bulletin
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Factory gate inflation in Europe's largest economy slowed on an annual basis in November, with prices dropping from the month before, new data showed on Tuesday. According to Destatis, the German producer price index fell 3.9% month-on-month in November, compared to a 4.2% fall in October from September. This was a sharper fall than expected, with FXStreet-cited consensus of a 2.6% fall. This was mostly down to a 9.6% monthly fall in energy costs, Destatis said, as prices for natural gas fell the most, followed by electricity. On an annual basis, producer price inflation slowed to 28.2% in November, from 34.5% in October. This marks the second month in a row of a marked slowing in inflation, with annual producer inflation of 45.8% back in September. FXStreet-cited consensus had been expecting November's figure to come in at 30%.
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A wave of early retirement following the pandemic is the "biggest cause of labour shortages" across the UK, according to the House of Lords Economic Affairs Committee. The committee said the labour outlook for the UK was "bleak" and it was critical for the government to consider how inactivity across the labour market can be addressed to help support the economy. A report by the influential committee has examined the jump in economic inactivity – the number of people not in work or looking for work – and rising vacancies since 2020. Economic activity has increased by 565,000 people since the start of the pandemic, according to the analysis. The report highlighted that retirement, increased sickness, changes to migration and the UK's ageing population have all contributed to the current tightness in the labour market.
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BROKER RATING CHANGES
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Goldman starts Ithaca Energy with 'buy' - price target 284 pence
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Jefferies starts Ithaca Energy with 'buy' - price target 245 pence
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COMPANIES - FTSE 100
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BHP and Oz Minerals have extended the exclusivity period by a week to Tuesday next week to finalise terms of the proposed takeover of Oz by BHP. Late last month, the two companies entered into a confidentiality and exclusivity deed after BHP increased its non-binding indicative takeover offer for Oz to AUD28.25 per share in cash, representing a premium of 49% to Oz's closing price of AUD18.92 per share on August 5, when BHP tabled its initial offer. Back in August, BHP had offered AUD25.00 per share in cash for Sydney-listed Oz, but the Oz board rejected it at the time. But in November the board of Oz signalled its intention to recommend the improved takeover offer, which values Oz at AUD9.6 billion. Under the confidentiality and exclusivity deed entered into in November, Oz granted BHP four weeks to undertake exclusive due diligence and negotiate a binding scheme implementation deed. BHP confirmed on Tuesday it had completed a due diligence on Oz.
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Bunzl said it has agreed on four acquisitions, as well as the sale of its UK healthcare division. It acquired a New Zealand-based opthamology product distributor, and agreed to acquire a Aussie distributor of medical technology devices, as part of its expansion of its healthcare business in the region. It also completed the acquisition of a Czech personal protection equipment distributor, and a Danish packaging products distributor. It said it has agreed to sell its UK healthcare division to Mediq. No financial details for the deals were provided. "Together, these transactions are expected to be profit neutral to the group and will generate a small cash inflow. They reflect Bunzl's ongoing discipline around returns-focused capital allocation and portfolio optimisation," the distribution services company said.
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COMPANIES - FTSE 250
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WAG Payment Solutions, known as Eurowag, said it has agreed to acquire the remaining 30% interest in Sygic for around EUR14.4 million. It bought a 70% stake in the Slovak automotive navigation systems firm back in 2019. The transport-focused payment services firm also provided an update on its proposed purchase of Grupa Inelo, noting it has received approvals in North Macedonia and Slovenia. The Polish anti-trust authority also has given the nod to the deal. Eurowag will send out a circular in early 2023, and expects completion in the first quarter of 2023.
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Soft drink maker AG Barr said it has acquired the remaining 38.2% stake in Moma Foods from its founder Tom Mercer alongside other minority shareholders, for GBP3.4 million. It had acquired 61.8% back in December of last year, as well as an option deed outlining a path to full ownership over the following three years. Moma will remain as a standalone, supported business unit within the firm. "We are delighted to bring forward the planned full ownership of the Moma business. This allows us to fully support the Moma business and brand, such that we can leverage the increased growth potential sooner than allowed for under the original acquisition structure," said AG Barr CEO Roger White.
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OTHER COMPANIES
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Nano-materials firm Nanoco said trading has been "comfortably" in line with its expectations in the first four months of its financial year. "We have a high level of confidence that we will receive sensing-application production orders in calendar year 2023, based on our visibility of customer final validation plans," the nanomaterials firm said. It expects its trial in Texas against Samsung for intellectual property infringement to last one working week, starting from January 6. "The board remains confident that both the organic business and the litigation are sources of potentially significant shareholder value that will be transformative for the group's prospects," Nanoco said.
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By Elizabeth Winter, Alliance News senior markets reporter
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