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(Alliance News) - Stocks in London are expected to edge lower on Thursday, after Wednesday's outperformance following the cooler-than-expected UK inflation data.
Stocks had rallied after a shock UK inflation print, which showed consumer prices rose 7.9% annually in June, cooling from 8.7% the month before, and below estimates of 8.2%.
Meanwhile, US stocks closed slightly higher, amid largely positive corporate results. However, Netflix shares dropped 8.3% in after-hours trade.
After the closing bell, the streaming company reported its second quarter results, boasting higher-than-expected subscriber growth, after its password-sharing crackdown. However, revenue missed market estimates, sending its shares lower.
"Netflix had its second best quarter since the heart of the pandemic, yet, its sales and revenue fell short of expectations due to price cuts in some markets and the unfavourable exchange rate, while [third quarter] forecast disappointed," explained Swissquote Bank's Ipek Ozkardeskaya.
In early company news, Anglo American reported a double-digit rise in quarterly production. International Distributions Services named a new CEO, alongside reporting fairly flat trading. Babcock said annual profit plunged, mostly due to a loss-making contract. Meanwhile, Lookers said a shareholder has withdrawn its support for the takeover offer from Global Auto.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 10.0 points, 0.1%, at 7,578.20
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Hang Seng: down 0.1% at 18,940.30
Nikkei 225: closed down 1.2% at 32,490.52
S&P/ASX 200: closed up 1.30 points at 7,325.00
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DJIA: closed up 109.28 points, or 0.3%, at 35,061.21
S&P 500: closed up 10.74 points, or 0.2%, at 35,061.21
Nasdaq Composite: closed up 4.38 points at 14,358.02
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EUR: up at USD1.1218 (USD1.1197)
GBP: up at USD1.2938 (USD1.2890)
USD: down at JPY139.35 (JPY139.65)
Gold: up at USD1,980.86 per ounce (USD1,975.43)
Oil (Brent): down at USD79.44 a barrel (USD80.39)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
10:00 CEST EU balance of payments
16:00 CEST EU FCCI flash consumer confidence indicator
08:30 EDT US Philadelphia Fed business outlook survey
08:30 EDT US unemployment insurance weekly claims report
08:30 EDT US weekly export sales
10:00 EDT US home sales
10:00 EDT US leading indicators
16:30 EDT US federal discount window borrowings
16:30 EDT US foreign central bank holdings
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Banks could lose their UK licences if they close customers' accounts over their political views, it has been reported. According to The Times, UK ministers are considering making new laws that stop banks turning customers away in an effort to protect free speech. The Treasury will also reportedly announce plans as soon as next week to extend the notice time given to customers to close their accounts from one month to three months. Banks will also have to give an explanation of why the accounts are being closed and customers will be able to appeal the decision. It comes after Nigel Farage's bank accounts were closed by Coutts because his views "did not align with" the bank's values.
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UK rail passengers are being warned of disruption to services from Thursday because of fresh industrial action by train drivers and other workers in long running disputes over pay, jobs and conditions. Members of the Rail, Maritime & Transport union will strike on July 20, 22 and 29 while drivers in Aslef are banning overtime this week. RMT members including station staff, train managers and catering staff will be involved in the action.
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BROKER RATING CHANGES
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Morgan Stanley cuts Diageo to 'underweight' (equal weight) - price target 3,000 (3,700) pence
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COMPANIES - FTSE 100
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Anglo American said production rose 11% year-on-year in the second quarter, which reflects the ramp-up of its new Quellaveco copper mine in Peru. The mine has now reached commercial production levels. It also noted a strong showing from its Minas-Rio iron ore operation in Brazil, and higher production from its Australian open-cut operations in steelmaking coal. Copper production rose 56% year-on-year to 209,000 tonnes, iron ore rose 8.3% to 15.6 million tonnes, and steelmaking coal rose 28% to 3.4 million tonnes. Meanwhile, nickel fell 3.9% to 9,900 tonnes, while platinum group metals fell 8.6%, diamonds fell 3.8% and manganese ore fell 1.0%. "Our focus remains resolutely on safely achieving our full year production guidance through the seasonally stronger second half of the year," said Chief Executive Duncan Wanblad.
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COMPANIES - FTSE 250
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Defence firm Babcock International reported a year of modest profit growth, though profit took a hit due to a loss-making contract. In the year ended March 31, Babcock said revenue rose 8.2% to GBP4.44 billion from GBP4.10 billion year-on-year, though pretax profit shrunk to GBP6.2 million from GBP182.3 million. This was due to a loss on disposal and related items, as well as the GBP100.1 million type 31 loss related to a contract with the UK Ministry of Defence that Babcock had communicated in April. "With circa GBP2.8 billion of revenue under contract at 1 April 2023 and around GBP700 million of framework orders expected to be delivered in [financial 2024] we are confident of another year of organic revenue growth and further underlying margin expansion. We also expect to reinstate a dividend in [financial 2024], as indicated in the April trading update," Babcock said.
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International Distributions Services named Martin Seidenberg as its new CEO. Seidenberg previously headed up GLS since June 2020, and previously spent 15 years at Deutsche Post DHL. He will appoint CEOs for Royal Mail and GLS in due course, IDS said. IDS also updated on its first quarter trading, from April to June. Royal Mail revenue fell 4.0% year-on-year, "as expected". Addressed letter volume was more robust than expected, but still 30% behind pre-pandemic levels. This highlights "the need for Ofcom and government to take urgent action to reform the Universal Service", IDS said. Overall, group revenue was up just 0.3% annually to GBP3.01 billion, which was 15% higher than 2019 levels.
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OTHER COMPANIES
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Lookers said one its shareholders has withdrawn a letter of intent given to Global Auto Holdings, which made a takeover offer for the car dealer group. Last month, Global Auto Holdings, an operator of auto retail dealerships across North America, said it will pay 120 pence per Lookers share. Cinch Holdco UK has now withdrawn its letter of intent, and intends to vote against the acquisition. "Lookers is re-engaging with other shareholders to understand whether the resolutions required to effect the scheme of arrangement in order to implement the acquisition are capable of being passed," Lookers said. On Wednesday, Global Auto's offer had 30.5% acceptances.
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BHP Group reported higher annual production across the board, meeting its guidance and ending the fourth quarter on a "strong" note. In an operation review, the Melbourne-based diversified mining group said copper production for the financial year that ended June 30 rose 9% to 1.7 million tonnes from 1.6 million tonnes a year earlier. BHP said it met its annual production guidance for copper, iron ore and metallurgical coal. The diversified mining group said average realised prices for copper, iron ore and metallurgical coal products were lower in the 2023 financial year compared to the prior year. But nickel prices remained stable, while thermal coal prices were stronger, predominantly in the first half. Chief Executive Mike Henry said the company finished the year with a strong fourth quarter, increasing annual production across the board and achieving annual records at Western Australia Iron Ore, Olympic Dam in Australia and Spence in Chile.
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ABB said orders were down slightly in the second quarter from a year before, but revenue was up strongly, as the Swiss engineering firm worked through its backlog. Zurich-based ABB focuses on electrification and automation. Orders declined by 1.6% to USD8.67 billion in the three months that ended June 30 from USD8.81 billion a year before, though ABB noted they increased by 2% on a comparable basis. Revenue performance was more clearly positive, rising by 13% to USD8.16 billion from USD7.25 billion and by 17% on a comparable basis. Net income attributable to ABB was USD906 million in the quarter, more than doubled from USD379 million a year before, lifting basic earnings per share to USD0.49 from USD0.20. For all of 2023, ABB expects comparable revenue growth of at least 10% and operational Ebita margin above 16%.
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By Elizabeth Winter, Alliance News senior markets reporter
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