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(Alliance News) - Global markets were defying a hotter-than-expected US inflation reading to push higher on Friday.
Annually, the consumer price index rose 8.2% in September, slowing from the 8.3% rise recorded in August. Market consensus, according to FXStreet however, had predicted inflation would ease in September to 8.1%.
"It could be argued that yesterday's hotter-than-expected CPI reading may well have been partially priced in as far as stock markets were concerned," CMC Markets analyst Michael Hewson commented.
In another reading on global price inflation, out Friday, China's consumer price index grew 2.8% year-on-year in September, picking up speed from 2.5% in August, for the most sizeable jump since April 2020.
The pound was supported early Friday by hopes that the UK government will reverse some of the measures outlined in last month's mini-budget.
UK Chancellor Kwasi Kwarteng has according to the BBC cut short a US trip to return home for talks with Prime Minister Liz Truss.
The pound traded lower than levels from late Thursday, but markedly above a weekly low.
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 up 1.3% at 6,937.97
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Hang Seng: up 2.6% at 16,817.11
Nikkei 225: closed up 3.3% at 27,090.76
S&P/ASX 200: closed up 1.8% at 6,758.80
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DJIA: closed up 827.87 points, 2.8%, at 30,038.72
S&P 500: closed up 92.88 points, 2.6%, at 3,669.91
Nasdaq Composite: closed up 232.05 points, 2.2%, at 10,649.15
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EUR: up at USD0.9795 (USD0.9772)
GBP: down at USD1.1324 (USD1.1340)
USD: up at JPY147.42 (JPY147.19)
GOLD: up at USD1,670.84 per ounce (USD1,665.31)
OIL (Brent): up at USD94.73 a barrel (USD94.07)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
1000 BST EU foreign trade
1330 BST US import and export prices
1330 BST US retail sales
1430 BST US IMF and World Bank annual meetings continue
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Liz Truss is expected to be forced to scrap parts of her mini-budget in the days to come, amid growing pressure on the UK prime minister to reassure markets and rescue her administration. According to the BBC, Chancellor Kwasi Kwarteng has now cancelled planned meetings in the US and is leaving a day early for "crunch talks in the UK" over the mini-budget. In the early hours of Friday morning, the national broadcaster as well as The Times and the Financial Times began reporting that Kwarteng had cancelled appointments at the IMF meetings and was flying home. The prime minister's key pledge to scrap the planned increase in corporation tax from 19% to 25% is widely seen as a likely casualty in the coming days, as Truss seeks to save her embattled premiership. It comes amid reports that senior Tories are plotting the possibility of replacing Truss with a joint ticket of Rishi Sunak and Penny Mordaunt, with the Times newspaper also reporting that party grandees are considering replacing her with a "unity candidate".
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Labour has pledged to ban fracking "once and for all" as it hit out at suggestions that the UK government could move to ban solar farms from much of England's farmland. The party intends to work with MPs who oppose fracking to force the government to maintain the ban, one of several issues to divide the Conservatives since Truss became leader. Ed Miliband, Labour's shadow climate secretary, will visit Bassetlaw on Friday to meet with the party's candidate Jo White and local residents to listen to concerns about the potential for fracking in their area. Labour is working to bring forward an opposition day motion to maintain the current ban, Miliband is expected to tell locals during his visit. Hitting out at what he called Truss's "unjust charter for earthquakes", he said Labour would stand up to her plan to "outsource decisions about local consent to fracking companies".
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BROKER RATING CHANGES
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Barclays starts Safestore with 'overweight' - price target 1,000 pence
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Barclays starts Big Yellow with 'overweight' - price target 1,200 pence
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SocGen cuts IMI to 'sell' (hold) - price target 1,100 (1,400) pence
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Deutsche Bank cuts boohoo to 'hold' (buy) - price target 36 (140) pence
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COMPANIES - FTSE 100
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Packaging firm Mondi said volume and price growth is more than offsetting inflationary pressure. In the third quarter of 2022, its underlying earnings before interest, tax, depreciation and amortisation surged 55% year-on-year to EUR450 million from EUR290 million. The figures do not include Russian operations. "Higher average selling prices and overall volume growth more than offset significant cost pressures," it said. "While significant geopolitical and macroeconomic uncertainties remain and we anticipate continued inflationary pressures on our cost base as we enter the fourth quarter, we are confident that the group will continue to demonstrate its resilience and deliver a year of good progress."
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COMPANIES - FTSE 250
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Recently renamed International Distributions Services said its Royal Mail arm in the UK swung to a first-half loss, as it counts the cost of industrial action. For the six months to September, Royal Mail suffered a GBP219 million adjusted operating loss, swinging from GBP235 million profit a year earlier. Revenue fell 11% to GBP3.65 billion from GBP4.07 billion. IDS reported a GBP70 million profit hit from industrial action. There could be more pain to come. "[The] Communication Workers Union has threatened, but not yet formally notified Royal Mail, of a further 16 days of strikes in November and December," IDS cautioned. Should more strikes take place, it may need to cut jobs. According to current estimates, it may need to undertake 6,000 redundancies by the end of August 2023. "We will do all we can to avoid compulsory redundancies, including offering a voluntary redundancy scheme. The financial position of the business means that our legacy voluntary redundancy policy, which offered up to two years' pay, is now unaffordable," it said. What's more, it also warned of a risk of impairment of the carrying value of the Royal Mail business. The carrying value stood at GBP1.37 billion on March 27. For the full-year, it predicts a GBP350 million adjusted operating loss for Royal Mail, though the loss could stretch as far as GBP450 million. Outside the UK, the GLS business is faring better, trading in line with expectations. Royal Mail division is IDS's UK-focused arm, delivering letters and parcels, and includes Parcelforce Worldwide. GLS is an international operation, based in Oude Meer, Netherlands and working across the US, Canada and Europe. IDS said a separation remains an option should Royal Mail's trading not improve.
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Emerging markets-focused asset manager Ashmore reported a decline in assets under management. In the first quarter ended September 30, assets under management fell 13% to USD56.0 billion from USD64.0 billion at the June 30 financial year end. It reported net outflows amounting to USD5.0 billion, as well as a USD3.0 billion hit from its investment performance. "The net outflows were predominantly a result of institutional investors reducing exposure in the external debt, local currency and blended debt themes," Ashmore said. "Continued high levels of inflation and consequently more hawkish central banks around the world meant that the main emerging markets fixed-income indices declined by between 3% and 6% over the quarter, while equity indices fell by between 2% and 12%."
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OTHER COMPANIES
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Cafe, bar and restaurant operator Loungers said it has outperformed the market. Like-for-like sales over the 24 weeks to October 2 climbed 17% from three years earlier, so before the onset of the pandemic. "The continued strength of performance against a well-documented challenging macroeconomic backdrop is testament to the relevance and resilience of our brands," Loungers said. It has opened 11 new sites since the start of its financial year, taking its estate to 206.
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Inland Homes has secured planning permission for a brownfield development in Hounslow, west London. The approval was received through the housing developer and regeneration firm's asset management division, on behalf of a third-party investor. Permission for a mixed-use development consisting of 1,525 homes and about 2,700 square metres of commercial space has been achieved. "The Cavalry Barracks was the group's fifth transaction with the Ministry of Defence and its largest to date, with an estimated gross development value in the region of GBP600 million. The group identified this site in 2020 and, following close consultation with the London Borough of Hounslow, submitted the planning application in March 2021," Inland said.
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Cybersecurity company Narf Industries said it has won a "large" research & development pact with a US government agency. The deal, with the Defense Advanced Research Projects Agency begins immediately and is worth USD6.3 million. "The contract falls under DARPA's Hardening Development Toolchains Against Emergent Execution Engines programme. Narf will own and have sole responsibility for commercialising the Intellectual Property rights arising from the R&D work. The US government will retain 'right of use' access on normal commercial terms," Narf said. It is the largest contract in the company's history.
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By Eric Cunha; ericcunha@alliancenews.com
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