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(Alliance News) - Stocks in London were called to open lower on Tuesday as Europe continues to face an energy crisis, while sterling strengthened as Liz Truss starts work as the new prime minister of the UK.
Truss will enter Downing Street on Tuesday after her triumph in the Tory leadership contest as she prepares to roll out an emergency support package to deal with the energy crisis.
Following her victory over Rishi Sunak, the new Conservative party leader will fly to Balmoral on Tuesday where she will be formally invited by the Queen to form a government.
She will then return to Westminster where she is expected to address the nation for the first time as prime minister before getting down to the business of appointing her ministerial team.
"The pound managed to recover off its intraday lows yesterday in the aftermath of yesterday's news; however the key test will be on how markets view the government's next steps when it comes to dealing with the current crisis. Opinion appears mixed on whether all of the bad news is currently priced in to the pound, however it does appear to have squeezed quite a bit higher after the lows of yesterday," CMC Markets analyst Michael Hewson said.
The Reserve Bank of Australia carried out another 50 basis points interest rate hike on Tuesday as it flagged a "very tight" labour market.
The RBA increased the cash rate target by half a percentage point to now stand at 2.35% from 1.85% previously.
This was the central bank's fourth consecutive 50 basis point rate hike.
The RBA has raised rates aggressively to tackle inflation, on Tuesday reiterating its commitment to rein in annual price growth to its 2% to 3% target range.
The European Central Bank announces its own latest interest rate decision on Thursday.
Brent prices were softer on Tuesday morning, despite the OPEC+ oil cartel agreeing to cut production for the first time in more than a year as it seeks to lift prices that have tumbled due to recession fears.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explained: "In reality, OPEC is not happy to see oil prices ease with the recession talk, and cutting supply suddenly dwarfs the demand side of the problem and should, in theory, reverse the trend back to bullish. If, of course, we forget about the Iran leg of the equation.
"Because if the US reaches a nuclear deal with the US, and bring around 4 million extra barrels per day, the 100,000 cut from OPEC will look ridiculous. The problem is, the Iranians are now selling drones to Russians, and that could complicate the already complex talks between the US and Iran, and delay, or even block the deal."
The move by OPEC could irk the US, as it has pressed the group to increase output in order to bring down energy prices that have fuelled decades-high inflation.
While analysts had expected another modest increase at Monday's ministerial meeting, OPEC+ said in a statement that it decided to reduce output by 100,000 barrels per day in October, returning to the production level of August.
Here is what you need to know ahead of the London market open:
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FTSE 100: called down 19.93 points, or 0.3%, at 7,267.50
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Hang Seng: down 0.2% at 19,185.49
Nikkei 225: closed up just 6.90 points at 27,626.51
S&P/ASX 200: closed down 0.4% at 6,826.50
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New York was closed for the US Labor Day holiday on Monday. Markets re-open on Tuesday.
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EUR: up at USD0.9961 (USD0.9919)
GBP: up at USD1.1588 (USD1.1507)
USD: up at JPY140.90 (JPY140.53)
GOLD: up at USD1,718.50 per ounce (USD1,710.56)
OIL (Brent): down at USD95.06 a barrel (USD95.49)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
0930 BST UK S&P Global/CIPS UK construction PMI
0945 EDT US S&P Global services PMI
1000 EDT US ISM services PMI
1000 EDT US employment trends index
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Growth in UK retail sales slowed in August as the cost-of-living crisis caused consumers to reign in spending. The latest British Retail Consortium-KPMG sales monitor shows retail sales increased 1.0% year-on-year in August, above the three-month average growth of 0.7%, but below the 12-month average of 2.5%. Sales had grown 2.3% in July following a heatwave-related boost to clothing and picnic food sales.
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BROKER RATING CHANGES
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Berenberg cuts BT Group to 'hold' ('buy') - price target 190 pence (220p)
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Jefferies cuts J Sainsbury to 'hold' ('buy') - price target 210 pence (300p)
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Jefferies cuts Tesco to 'hold' ('buy') - price target 260 pence (350p)
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COMPANIES - FTSE 100
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Housebuilder Berkeley says its trading in the first four months of its new financial year was ahead of financial 2022. "The good level of demand continues to support pricing above business plan levels, which is sufficient to cover cost increases on a blended basis across Berkeley's developments," it adds. Notes it is on track to meet profit guidance, guiding for financial 2023, ending April 30, pretax profit of GBP600 million and GBP625 million for financial 2024. Reports pretax profit of GBP551.5 million in financial 2022. Sees forward sales "marginally above" GBP2.17 billion at April 30.
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DS Smith says its overall trading in its first quarter, ended June 30, was in line with management expectations. Notes corrugated box volumes in the quarter declined "slightly" on a like for like basis, as expected. Expects corrugated box volume growth of "at least" 2% for financial 2023. Separately, says Finance Director Adrian Marsh to retire from role once a successor is in place. Process to find Marsh's replacement underway, and will announce his retirement date "in due course".
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Industrial equipment rental company Ashtead says it has made a strong start to the new financial year, with profit and revenue both up 25%. In the quarter ended Jul 31, pretax profit rose to USD527 million from USD416 million, with revenue up to USD2.26 billion from USD1.85 billion. Chief Exexecutive Brendan Horgan adds: "The business is performing strongly, with revenue and operating profit ahead of our previous expectations. This performance is offset by increasing interest costs and therefore, we expect adjusted profit before taxation for the year to be in line with our previous expectations and the board looks to the future with confidence."
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COMPANIES - FTSE 250
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Capricorn Energy's interim loss narrows, as it continues to progress its merger with peer Tullow Oil but is "exploring a number of expressions of interest relating to alternative transactions". Believes Tullow merger will "deliver significant long-term value". In six months to June 30, pretax loss narrows to USD48.7 million from USD87.4 million loss the year prior. Unsuccessful exploration costs rise to USD28.7 million from USD14.9 million and administrative & other expenses rises to USD33.5 million from USD24.6 million. Also books one-off USD24.5 million impairment on exploration assets. In better news, revenue jumps to USD137.4 million from USD500,000, as production tops 35,500 boepd from its recently acquired Egyptian asset.
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Manchester-based cybersecurity firm NCC Group reports record annual profit and revenue on increased demand. In financial year ended May 31, pretax profit doubles to GBP31.0 million from GBP14.8 million, as revenue rises 16% to GBP314.8 million from GBP270.5 million. Leaves final dividend unchanged at 3.15 pence. "I am pleased to report another year of strong progress in which NCC Group capitalised on accelerating demand throughout the year to achieve record revenue and profits," Chair Chris Stone says.
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OTHER COMPANIES
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Public transport operator Go-Ahead Group says it is "currently managing a cyber security incident" after finding "unauthorised activity" on Monday. "Upon becoming aware of the incident, Go-Ahead immediately engaged external forensic specialists and has taken precautionary measures with its IT infrastructure whilst it continues to investigate the nature and extent of the incident and implement its incident response plans," it adds. Confirms seen no impact to UK or international rail services, which it says are operating normally.
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By Paul McGowan; paulmcgowan@alliancenews.com
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