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(Alliance News) - Stocks in London are set to extend recent gains on Thursday as investors look ahead to remarks from central banking figures.
In early UK company news, Rentokil Initial is confident in its ability to mitigate inflationary pressures, Rank Group cut full-year guidance, and THG revealed it has rebuffed a number of takeover approaches.
IG says futures indicate the FTSE 100 index of large-caps to open up 11.58 points, or 0.2%, at 7,640.80 on Thursday. The index closed up 27.94 points, or 0.4%, at 7,629.22 on Wednesday.
Both US Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde will be panellists at an IMF seminar on the global economy. Meanwhile, Bank of England Governor Andrew Bailey will speak at the the Peterson Institute for International Economics as part of its annual Macro Week event.
"Lagarde's comments will be closely scrutinised after yesterday's comments from Latvian Governing Council member Martin Kazaks said that a rate rise in July was possible, and that tightening measures needn't have to wait for evidence of wages growth...Sterling traders will be looking for clues from Bank of England governor Andrew Bailey on the central banks intentions at its May meeting when some form of rate hike is expected," said Michael Hewson, chief market analyst at CMC Markets.
Powell's comments will come after the Fed's latest Beige Book survey of business conditions showed US firms are seeing increased business as Covid-19 cases decline across the world's largest economy, even as they struggle with rising prices and scarce staff.
The survey depicted an environment that remains challenging for industries as they seek a return to normal following the pandemic downturn, in an economy that has grown too hot. The central bank's contacts "noted steep increases in raw materials, transportation, and labor costs," while prices for farm goods, metals and fuel rose following Russia's invasion of Ukraine, and the spike in Covid-19 cases in China, which has caused the country to impose lockdowns.
Ahead of the central banking speeches, sterling was quoted at USD1.3063 early Thursday, higher than USD1.3045 at the London equities close on Wednesday.
The euro traded at USD1.0873 early Thursday, firm against USD1.0860 late Wednesday. Against the yen, the dollar was quoted at JPY128.05, up from JPY127.70.
In early UK company news, Rentokil Initial said 2022 has started well, with first quarter revenue growth of 1.8%, or 12% when excluding the disinfection business that got a Covid-19 boost last year.
Organic growth, excluding disinfection, was 8.0%. The pest control and hygiene firm said it has experienced inflationary pressures in the period, but it has managed to mitigate this squeeze on margins via annual price increases.
"Total price increases achieved in Q1 have entirely offset input cost inflation in the quarter and we remain confident that we will be able to continue to counter rising inflation through APIs during the course of the year," said Rentokil.
The FTSE 100-listed company said it is performing in line with expectations. Though it will lap strong disinfection revenue in the first half amid a backdrop of macro economic uncertainty, it expects to deliver "good operational and financial progress" in the coming year.
Miner Anglo American reported a 10% decline in output in its "normally slower" first quarter amid Covid-related absences, high rainfall in South Africa and Brazil, and operational challenges at metallurgical coal and iron ore operations.
"This challenging start to the year highlights the importance of adhering to our operating model to stabilise performance after the necessary disruptions of the last two years as we adapted to - and now learn to live with - Covid. As a result, we are updating our platinum group metals, iron ore and metallurgical coal volume guidance for the full year, and our unit cost guidance for most product groups to also reflect up to date exchange rates and the inflationary pressure on many input prices, particularly diesel," said Chief Executive Mark Cutifani.
Copper production was down 13% year-on-year, platinum group metals production was down 6%, metallurgical coal production dropped by 32% and iron ore production decreased by 19%. The only category to see an increase was diamonds, with output up by a quarter.
Full year cost guidance has increased by 9%, with a 4% hit from stronger producer currencies and 3% from inflationary pressures. At the same time, Anglo America reduced output guidance for its PGM, iron ore and metallurgical coal operations.
Mining peer BHP cut annual guidance for copper production as well as nickel output, as the miner grapples with Covid-19-related labour market woes. Its outlook for iron ore, metallurgical coal and energy coal for the year ending June 30 were unchanged, however.
In the third quarter ended March 31, copper production fell 6% annually to just under 370,000 tonnes. Quarter-on-quarter it rose 1%. For the year, however, BHP now expects total copper output between 1.57 million and 1.62 million tonnes, lowered from the previous guidance range of 1.59 tonnes and 1.76 million tonnes.
This means that at worst it expects copper output to fall 2.8% from 1.64 million tonnes in financial 2021.
Gambling operator Rank Group cut its earnings guidance after a soft end to financial third-quarter trading.
Like-for-like net gaming revenue in the three months to March 31 jumped to GBP156.4 million from just GBP48.7 million a year before. Rank noted its UK venues were closed for the entirety of the prior-year period. When compared against the most recent non-Covid-affected third quarter, Rank said Grosvenor venues NGR was down 14% and Mecca venues down 25%.
"For both our UK venues businesses there was a softness in visits at the end of the quarter consistent with the rise in new Covid-19 cases reported across the UK," said Rank.
The company anticipates an improvement in performance after April, but cautioned it "remains to be seen how the trends in the rate of return of office workers to city centres and overseas customers to London will develop towards the summer." As such, it lowered its full-year earnings before interest and tax guided range to between GBP47 million and GBP55 million from a prior range of GBP55 million to GBP65 million.
"We recognise the pressures on UK consumers but are confident that the improvements we are continuing to make to the customer proposition and the investments in our venues, alongside the gradually reducing impact of the pandemic and, with it, the return of overseas customers, position us well for the year ahead," said Chief Executive John O'Reilly.
THG said it has received indicative takeover proposals from "numerous parties" in recent weeks, but rejected them all on the grounds the offers failed to reflect the full value of the firm.
The online beauty products platform confirmed it is not currently in receipt of any approaches.
"We continue to focus on delivering our exciting growth strategy across a number of large global sectors, and prepare to step up to the premium segment of the LSE at the appropriate time," said Chief Executive Matthew Moulding.
The update came alongside THG's annual results, which showed revenue in 2021 jumped 35% to GBP2.18 billion from GBP1.61 billion the year before. Its pretax loss slimmed to GBP186.3 million from GBP534.6 million.
On more recent trading, THG said the first quarter of 2022 saw "very encouraging" consumer demand against a challenging comparable lockdown period in 2021, and added that the second quarter has started in line with expectations.
"The group is fully aware of the significant impact of short-term cost inflation on both global consumers and supply chains alike. THG intends to limit the impact of cost pressures on our consumers by maximising efficiencies in our operating model, absorbing some of the pricing pressures, and raising prices at a lower rate to underlying input costs," THG said, adding that it believes the inflationary environment is largely transitory.
Card Factory said it has successfully completed a refinancing, removing a commitment to raise funds.
The greeting cards retailer has agreed revised terms on reduced facilities of GBP150 million, previously GBP225 million. As part of this, Card Factory will reduce its government-backed Coronavirus Large Business Interruption Loan Scheme element to GBP20 million from the original GBP50 million.
Restrictions on dividends will continue to apply until the CLBILS facilities and the GBP11.3 million term loan are repaid, which is expected in January 2024, subject to the leverage ratio being 1.5 times or less.
"The best efforts commitment given by Card Factory to its banks, to raise net equity proceeds of GBP70 million by 30 July 2022 has been removed from the revised facilities. The board has no current intention of completing an equity raise," it added.
The modestly higher call for the London market follows a mixed end on Wall Street on Wednesday, with Netflix's 35% slump weighing on the S&P 500 and Nasdaq Composite indices. The Dow Jones Industrial Average ended up 0.7%, the S&P 500 down 0.1%, and the Nasdaq Composite down 1.2%.
Tesla shares fell 5.0%, but rebounded 5.5% after-hours after the firm reported a sharp rise in first-quarter earnings as demand for electric vehicles continued, though the Elon Musk-led firm flagged supply chain issues ahead.
For the three months to March 31, total revenue was up 81% to USD18.76 billion from USD10.39 billion in the first quarter last year. Tesla posted first-quarter net income of USD3.74 billion, or USD3.22 per diluted share, up sharply from USD1.05 billion, or USD0.93 diluted EPS, the year before.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.2%. In China, the Shanghai Composite was down 2.0%, while the Hang Seng index in Hong Kong was down 1.8%. The S&P/ASX 200 in Sydney closed up 0.3%.
Gold was quoted at USD1,952.56 an ounce early Thursday, flat from USD1,952.11 on Wednesday. Brent oil was trading at USD108.46 a barrel, higher than USD107.55 late Wednesday.
The economic events calendar on Thursday has eurozone inflation data at 1000 BST and the latest US jobless claims numbers at 1330 BST.
By Lucy Heming; lucyheming@alliancenews.com
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