(Alliance News) - Stocks in London were called slightly higher on Monday, as sentiment recovered from a shock US inflation print at the end of last week.
"The week starts on a cautious note, as the Federal Reserve rate hike expectations intensify the sell-off in global stocks and bonds, while pushing the US dollar higher against most majors," said Swissquote Bank analyst Ipek Ozkardeskaya.
Equities had come under pressure after a hotter-than-expected inflation reading from the US.
According to the US Bureau of Economic Analysis, the personal consumption expenditures index increased 5.4% on-year in January. The rate of PCE inflation quickened from 5.3% in December and came in markedly ahead of the FXStreet cited consensus of a slowdown to 4.9%.
Core PCE inflation, the Federal Reserve's preferred price gauge, quickened to 4.7% on-year in January, from 4.6% in December. The figures suggest inflationary pressures are proving stickier than ideal.
"[The PCE data] fuelled the Fed hike expectations, because a slower-than-expected easing in inflation is one thing, but a rebound in inflation is another thing. And the latter is much less cool for the Fed, and the Fed expectations. A rebound in inflation is the worst nightmare for the Fed," Ozkardeskaya continued.
In early corporate news, Primark owner AB Foods raised expectations for its financial year as consumer spending proved resilient during its first-half, and Dechra Pharmaceuticals warned annual profit would be at the lower end of expectations.
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 26.2 points, 0.3%, at 7,904.86
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Hang Seng: down 0.3% at 19,951.85
Nikkei 225: closed down 0.1% at 27,423.96
S&P/ASX 200: down 1.2% at 7,224.80
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DJIA: closed down 336.99 points, 1.0%, at 32,816.92
S&P 500: closed down 1.1% at 3,970.04
Nasdaq Composite: closed down 1.7% at 11,394.94
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EUR: down at USD1.0537 (USD1.0545)
GBP: down at USD1.1931 (USD1.1947)
USD: up at JPY136.39 (JPY136.31)
Gold: down at USD1,808.12 per ounce (USD1,811.07)
Oil (Brent): up at USD82.61 a barrel (USD81.83)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
10:00 CET EU monetary developments
11:00 CET EU economic sentiment indicator
09:30 GMT UK capital issuance statistics
10:00 EST US pending home sales index
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UK Prime Minister Rishi Sunak will hold face-to-face talks in the UK with the European Commission President Ursula von der Leyen on Monday, as he looks to finalise a deal to fix issues with the Northern Ireland protocol. In a joint statement from Downing Street and the European Commission, they confirmed Sunak and von der Leyen will meet to discuss the "range of complex challenges around" the Brexit treaty. It comes after speculation mounted that a deal could be announced imminently, with Deputy Prime Minister Dominic Raab saying Britain and the EU were on the "cusp" of striking an agreement.
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BROKER RATING CHANGES
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Peel Hunt cuts Howden Joinery to 'add' (buy) - price target 770 (700) pence
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Citigroup cuts Hargreaves Lansdown to 'sell' - price target 730 pence
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Citigroup cuts Quilter to 'sell' - price target 75 pence
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COMPANIES - FTSE 100
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Bunzl hailed "another excellent year" in 2022, as it announced two further acquisitions. The London-based distribution services company said annual revenue rose 17% year-on-year to GBP12.04 billion from GBP10.29 billion. Pretax profit increased 12% to GBP634.6 million from GBP568.7 million. It increased its dividend by 10% to 62.7 pence from 57.0p. It left guidance for 2023 unchanged from its December trading statement. Back then, it said it expects a "resilient" adjusted opearing profit, with its operating margin "slightly higher than historical levels". Separately, Bunzl said it has agreed to acquire a German distributor of workwear and person protection equipment, and completed the acquisition of Canadian packaging company.
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Associated British Foods said it expects interim sales to be over 20% ahead of the last year at actual exchange rates, or over 16% ahead in constant currency. It now expects adjusted operating profit to be "broadly" in line with the previous year. Primark interim sales are expected to be GBP4.2 billion, or 19% higher than the year before. The retail group is still facing "significant" cost pressures, but has seen more resilient consumer spending than previously forecast. It raised expectations for its full year, now expected adjusted operating profit and adjusted earnings per share to be in line with the previous year. AB Foods ends its financial year in September. While input costs have eased somewhat, it notes the continuing presence of macro-economic headwinds which could weigh on consumer spending in the months ahead.
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COMPANIES - FTSE 250
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Dechra Pharmaceuticals reported "unpredictable" trading patterns in 2023 so far, with wholesalers destocking. The veterinary pharmaceutical company now expects full year underlying operating profit to be at the lower end of analyst expectations. Dechra said revenue in the six months to December 31 rose 14% to GBP377.4 million from GBP332.4 million a year before. "The global companion animal healthcare market has returned to more normalised levels of growth following the extraordinarily high rates seen during the Covid-19 pandemic, and against that context our performance has been robust," the firm said. Pretax profit fell sharply to GBP29.7 million from GBP53.4 million.
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OTHER COMPANIES
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CentralNic proposed a maiden dividend of 1.0p per share for 2022, after significant increases in revenue and profit. The internet services holding company said revenue was up 77% to USD728.2 million from USD410.5 million in 2021, as pretax multiplied to USD14.8 million from USD1.6 million. "Whilst early into the new financial year, we anticipate 2023 will see yet another year of robust growth and shareholder returns," said Chief Executive Michael Riedl.
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Britishvolt, the company which failed to build a battery factory in the north-east of England, has been bought by Australian firm Recharge Industries, Recharge's boss confirmed. The start-up was founded in 2019 but collapsed just three years later, laying off most of its 200 staff. The company had high ambitions of building a nearly GBP4 billion battery plant in Cambois, outside Blyth in the north-east, but was unable to secure sufficient funding for the project. It emerged earlier this month that Recharge had been selected by auditors as the preferred bidder to take over the majority of the business. In an interview with the BBC, Recharge's Chief Executive David Collard said the deal had now been finalised.
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By Elizabeth Winter, Alliance News senior markets reporter
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