Last checked at 
(Alliance News) - Stock prices in London are set to open higher on Thursday amid relief that the US and Iran appear to be avoiding an escalation of their conflict, while China confirmed it will sign the phase one trade accord with the US next week.
In early UK company news, Tesco reported a fall in sales over the Christmas period though saw growth in the UK, Marks & Spencer saw improved momentum though said it was held back by "disappointing" one-off issues, and Dunelm reported growth in both sales and margin in the second quarter.
IG says futures indicate the FTSE 100 index of large-caps to open 29.17 points higher 7,604.10 on Thursday. The FTSE 100 index closed 1.08 points higher at 7,574.93 on Wednesday.
"It is a quiet day on the economic data front ahead of the US non-farm report tomorrow, which leaves the geopolitical crisis between Iran and the US in the spotlight. Given yesterday's communication from both sides investors are likely to extend bets that the conflict can be contained with limited risk of further escalation short term," said Danske Bank.
Fears of a larger conflict between the US and Iran eased on Wednesday following an address from US President Donald Trump in which he called for peace.
While he promised to immediately impose "punishing" new economic sanctions against Iran, Trump welcomed signs that Iran "appears to be standing down" in the tit-for-tat confrontation, signalling that the US did not plan a new military riposte.
Trump closed his remarks by addressing Iranians directly, saying that he was "ready to embrace peace with all who seek it".
However, the US president, facing both an impeachment trial in Congress and a tough re-election in November, also touted his decision to order the killing of top Iranian general Qasem Soleimani last Friday – the operation that prompted Tehran's missile strike.
Foreign Minister Mohammad Javad Zarif seemed to indicate that Iran was satisfied for now. "Iran took and concluded proportionate measures in self-defense," Zarif said on Twitter.
Danske Bank commented: "Trump did announce new sanctions on Iran but for markets this falls in the camp of possible retaliatory measures that indicate that the US is also backing away from an all-out conflict."
Safe-haven asset gold lost some of its recent gains. The precious metal was quoted at USD1,546.55 an ounce early Thursday, down from USD1,573.70 at the London equities close on Wednesday.
Brent oil also slipped, quoted at USD65.40 a barrel early Thursday, soft against USD65.80 at the London equities close on Wednesday. The US-Iran tensions had caused Brent to surge to over USD70 earlier in the week.
Equities firmed. Wall Street ended in the green on Wednesday, with the Dow Jones Industrial Average ending up 0.6%, the S&P 500 up 0.5% and Nasdaq Composite up 0.7%.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 2.3%. In China, the Shanghai Composite ended up 0.9%, while the Hang Seng index in Hong Kong is up 1.3% in late trade.
In data overnight, Chinese consumer inflation stabilised at an eight-year high in December as the rise in the cost of pork slowed after authorities dipped into the nation's reserves to battle the impact of African swine fever.
The consumer price index, a key gauge of retail inflation, has been consistently rising over the past year as the disease ravages pig herds across China, leading to the price of pork – the country's staple meat – to more than double. However, with the Lunar New Year break at the end of January a peak time for pork consumption, Beijing has released more than 100,000 tons since the middle of last month to ease the strain on supplies.
The CPI came in at 4.5% last month, the same as November and slightly below the 4.7% economist forecast in a survey by Bloomberg News.
Meanwhile, Chinese Vice Premier Liu He will travel to Washington on Monday to sign the so-called phase one trade deal with the US, the commerce ministry said Thursday.
Liu, China's top negotiator in the trade war, will be in the US capital from Monday to Wednesday, the ministry said, a week after US President Donald Trump said the agreement would be signed on January 15.
In early UK company news, Tesco said it performed well in a "subdued market" over Christmas.
Third quarter total sales - covering the 13 weeks to November 23 - were down 1.4%, with like-for-like sales down 0.9%. Over Christmas - or the 6 weeks to January 4 - total sales were down 1.7% and like-for-likes 0.8% lower, though UK like-for-like sales were up 0.1%.
Together, total sales were down 1.5% over the 19 week period, and like-for-like sales down 0.9%.
Dragging sales down in the period was central Europe, with total sales down 14% in the 19 weeks and like-for-like sales 10% lower. The UK & Ireland saw a 0.2% rise in total sales, up 0.4% like-for-like, while wholesaler Booker reported 4.1% like-for-like growth.
"Our overall sales performance in Central Europe reflects the ongoing significant transformation of our business, fundamentally changing our approach in Poland and re-sizing, simplifying and improving the relevance of our businesses in the Czech Republic, Hungary and Slovakia," said Tesco.
In Asia - where Tesco is mulling the possible sale of its Thai and Malaysian operations - total sales were flat in the 19 weeks and down 1.6% like-for-like.
Fellow UK retailer Marks & Spencer reported improved momentum in the third quarter, though said "disappointing one-off issues" held the retailer back from delivering a stronger result.
Total group sales were down 0.7% in the 12 weeks to December 28, with International down 2.3% and the UK down 0.6%. Like-for-like sales in the UK, though, edged up 0.2%.
Among UK divisions, Food sales rose 1.5%, or 1.4% like-for-like, while Clothing & Home sales were down 3.7%, or 1.7% lower like-for-like.
The Food business maintained its first-half momentum with positive like-for-like revenue and further improvement in volumes, while Clothing & Home saw an improved run-rate with signs of continuing recovery in core Womenswear.
M&S held its annual guidance, though noted that gross margins are expected to be around the lower end of guidance but largely offset by its cost reduction programme.
"We delivered an improved performance in Q3 across both main businesses. The Food business continued to outperform the market and Clothing and Home had a strong start to the quarter, albeit this was followed by a challenging trading environment in the lead up to Christmas," said Chief Executive Steve Rowe.
"As we drive a faster pace of change, disappointing one-off issues - notably waste and supply chain in the Food business, the shape of buy in Menswear and performance in our Gifting categories - held us back from delivering a stronger result," he continued. "However, the changes we made earlier in the year in Clothing have arrested the worst of the issues of the first six months and we are progressively building a much stronger team for the future."
Home furnishings retailer Dunelm reported both an improvement in sales and margin for the second quarter.
Total like-for-like sales were up 5.0% in the 12 weeks to December 28 against a comparative of 11% growth. Total sales were up 6.2%.
At the same time, the FTSE 250 constituent's gross margin improved by 110 basis points due to sourcing gains and lower product markdowns during the period. Dunelm added that it did not participate in Black Friday or additional pre-Christmas discounting.
For the first half as a whole, like-for-like sales were up 5.6%, with total sales 6.0% higher.
"We are really pleased with our performance in the first half, building on the strong growth and profitability delivered last year. The second quarter was particularly strong in terms of sales and margin growth, on both one-year and two-year bases," said Dunelm Chief Executive Nick Wilkinson.
Card Factory said the Christmas trading period was "challenging" as it softened its outlook.
Sales for the eleven months to December 31 were up 3.6%, though like-for-like sales fell 0.6%.
Card Factory said adjusted underlying earnings before interest, tax, depreciation and amortisation is now expected to be around GBP81.0 million to GBP83.0 million for the current financial year. Underlying Ebitda in the previous financial year amounted to GBP89.4 million.
Looking further out, the company said issues such as declining high street footfall and high cost inflation are expected to continue.
"To date there has been significant success in mitigating in large part the Ebitda impact of these external factors through a combination of offer improvements and business efficiencies. These efforts will continue, but the opportunity for efficiencies within the current business model is finite," said Card Factory.
The net hit from this is expected to be GBP5 million to GBP10 million in the 2021 financial year.
Recognising the long-term nature of these issues, management has been undertaking a review of strategy, Card Factory said. While this is not yet complete, the board is "confident that it will yield a number of attractive medium term growth opportunities across both new and existing channels, albeit there may be a requirement for additional strategic investment in FY21 to support this future growth."
Meanwhile, Card Factory said it remains committed to its dividend policy but not does anticipate a special payout for the 2021 financial year. The level of ordinary dividend in 2021 will be reviewed, the company added
The economic events calendar on Thursday has the eurozone unemployment rate at 1000 GMT.
Sterling was quoted at USD1.3106 early Thursday, higher than USD1.3088 at the London equities close on Wednesday.
The euro was quoted at USD1.1113 early Thursday, flat on USD1.1114 late Wednesday. Against the yen, the dollar was quoted at JPY109.25 versus JPY108.70.
By Lucy Heming; lucyheming@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
