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(Alliance News) - Stocks in London are expected to start the week on a more optimistic note, as investors look ahead to central bank decisions and weigh up the potential risk from developments in the Middle East.
Central bank decisions will be in focus this week, with a decision from the BoJ due on Tuesday, the Federal Reserve on Wednesday, and the Bank of England to follow on Thursday.
The BoJ is expected to enact no change. However, investors will be keen to see if the yen's recent historic lows will prompt the bank to make any indication of its intent to move away from its ultra-loose monetary policy. Meanwhile, the Fed and the BoE are widely expected to leave interest rates unchanged, meaning all eyes will be on their forward guidance.
Meanwhile, commodity prices remain somewhat susceptible to volatility, as investors attempt to assess the latest events in the Middle East, as Israel makes further ground incursions into Gazan territory.
"Demand for safe-haven assets [eased] after Israel's military action in Gaza took a more cautious approach than initially anticipated," said SPI Asset Management's Stephen Innes.
"Nonetheless, there is growing concern about the possibility of financial conditions over-tightening amid heightened risk aversion driven by geopolitical factors. The intersection of these two dynamics could have significant implications for financial markets and global stability."
In company news, HSBC saw its third-quarter profit rocket, though it fell shy of market expectations. The bank announced a USD3 billion buyback. Pearson upgraded annual guidance after a strong third quarter.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 22.3 points, 0.3%, at 7,313.58
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Hang Seng: down 0.2% at 17,371.34
Nikkei 225: closed down 1.0% at 30,696.96
S&P/ASX 200: closed down 0.8% at 6,772.90
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DJIA: closed down 1.1%, at 32,417.59
S&P 500: closed down 0.5% at 4,117.37
Nasdaq Composite: closed up 0.4% at 12,643.01
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EUR: down at USD1.0564 (USD1.0594)
GBP: down at USD1.2129 (USD1.2149)
USD: down at JPY149.47 (JPY149.59)
Gold: up at USD1,996.63.34 per ounce (USD1,981.94)
Oil (Brent): up at USD89.47 a barrel (USD87.63)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
11:00 CET EU economic sentiment indicator
10:00 CET Germany gross domestic product
14:00 CET Germany CPI
09:30 GMT UK effective interest rates - September 2023
09:30 GMT UK lending to individuals
09:30 GMT UK monetary and financial statistics
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An offshore energy trade body has welcomed the announcement of 27 new oil and gas licences as a "boost for UK energy security". Announcing the licences, the North Sea Transition Authority said they have been awarded in areas prioritised because they have the potential to go into production more quickly than others. It said the licences in the central and northern North Sea and west of Shetland were awarded first to let operators press ahead with their plans to explore and develop oil and gas resources. However, climate activists hit out at the licensing as "backward" and warned that the UK would be "fuelling the climate crisis rather than helping to fix it".
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The number of UK restaurant companies becoming insolvent has risen by 46% in the past year, research suggests. The total increased from 1,517 in 2021/22 to 2,214 in 2022/23, amid rising costs of servicing debt and the squeeze on consumer spending, according to advisory firm Mazars. Associate Director Paul Maloney said people were still being hit by rate rises and inflation so were cutting back on spending such as dining out. Many restaurant groups have relied on debt finance to fund expansion and renovation, he said. The hospitality sector was also being affected by a continued shortage of staff which has driven up wages.
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BROKER RATING CHANGES
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Jefferies cuts NatWest to 'underperform' (buy) - price target 150 (370) pence
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Liberum starts Renishaw with 'buy' - price target 3,900 pence
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Berenberg raises Rightmove to 'buy' (hold) - price target 605 pence
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COMPANIES - FTSE 100
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HSBC reported that quarterly profit more than doubled, but fell short of market expectations, as it prepared to launch a USD3 billion share buyback. Asia-focused, London-based HSBC said third-quarter pretax profit soared to USD7.71 billion from USD3.23 billion a year before, which HSBC said reflected the positive impact of a higher interest rate environment. However, the figure fell short of company-compiled analyst estimates of USD8.10 billion. Net interest income rose 15% to USD9.25 billion from USD8.01 billion, as net fee income increased 5.3% to USD3.00 billion from USD2.85 billion. Net operating income climbed 45% to USD15.09 billion from USD10.44 billion, which was short of analyst estimates of USD16.24 billion. Net interest margin rose to 1.70% from 1.51% a year prior, but slipped from 1.72% in the prior quarter. For the period, it will pay out an interim dividend of USD0.10 per share. HSBC also announced its intention to begin a further share buyback of up to USD3.0 billion, which will begin "shortly" and complete at the time of its full-year results announcement on February 21.
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Pearson upgraded its profit guidance for 2023, after its "strong operational momentum and financial performance" continued into the third quarter. The education publisher said revenue in the third quarter rose 2% year-on-year on an underlying basis. It now expects group revenue growth, excluding OPM and strategic review businesses to be at the higher end of its existing low-to-mid-single-digit guidance, and upgraded guidance for adjusted operating profit to a range of GBP570 million to GBP575 million, which is around GBP20 million higher than prior guidance. "This third quarter performance illustrates the continuing momentum across our businesses, led by Pearson VUE and Pearson Test of English. Our Higher Education business reported as expected and remains on plan to return to growth next year," said Chief Executive Andy Bird. Pearson also confirmed its new chief executive, Omar Abbosh, will start on January 8th, when Bird will leave after leading the London-based firm since 2020.
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Glencore reported production at most of its operations fell for the first nine months of 2023, and the diversified mining group cut its annual guidance for nickel and ferrochrome. The Barr, Switzerland-based miner and commodity trader left forecasts in other commodities unchanged. "We are pleased to report a solid production performance from our underlying base business over the first nine months of the year, where our key copper, coal and zinc assets performed in line with expectations and previously communicated guidance," Glencore Chief Executive Gary Nagle said.
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COMPANIES - FTSE 250
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Computacenter said its third-quarter performance was in line with its expectations. The computer services firm saw a continued strong performance in Germany and the US, while the UK "remained difficult". "Following the exceptional growth achieved in the first half, as anticipated, Technology Sourcing volumes normalised during the quarter as some of our high revenue, low margin projects were completed. We remain encouraged by the sales pipeline for Q4. Services revenue continued to grow during the quarter and while inflationary pressures persist, we continue to manage our margin recovery effectively," the firm said. Computacenter continues to expect "another year of progress" in 2023, with profit to grow, but notes that the fourth quarter is its largest and "much remains to be done".
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OTHER COMPANIES
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The Telegraph said that Asos is in talks to sell the Topshop brand to Authentic Brands Group. Authentic Brands is the US company behind brands such as Ted Baker, Reebok and Forever 21. The Telegraph said that Authentic Brands is plotting its acquisition of Topshop after a failed attempt to buy the business in 2020. In February 2021, Asos acquired four brands from beleaguered Arcadia Group, including UK high street staples Topshop and Topman. It paid GBP265 million for the four brands - including Miss Selfridge and HIIT as well.
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BATM Advanced Communications said it won a new cyber security order worth GBP3 million, with a "long-standing government defence department customer" which it left unnamed. The contract for the provision of its advanced hardware and software-based cyber solution. "As we ramp up delivery under our existing orders and continue to receive new orders for our best-in-class cyber solution, we remain very confident in the prospects for this business and we look forward to reporting further progress," said CEO Moti Nagar.
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By Elizabeth Winter, Alliance News senior markets reporter
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