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(Alliance News) - Stocks in London were set to open lower on Thursday, after the US Federal Reserve paused its interest rate hikes but indicated that more will follow this year.
The US central bank left the federal funds rate range unchanged at a range of 5.00% to 5.25%.
Speaking to reporters after the decision, Fed Chair Jerome Powell said nearly all committee participants view some further hikes this year as "appropriate".
Chris Beauchamp, chief market analyst at IG, said "any lingering hope" of a rate cut this year from the Fed now seems to have gone following this meeting.
In the wake of the announcement, Wall Street ended mixed, but the dollar was stronger.
With the Fed decision made, the European Central Bank is up next. The ECB will announce its interest rate decision on Thursday at 1315 BST. A press conference with President Christine Lagarde will follow half an hour later.
In contrast to the US central bank, another 25 basis point hike by the ECB is see as a done deal by markets.
In early UK corporate news, distribution services firm Halma boasted a record annual revenue figure but lower profit. Online fashion retailer Asos said it had "restored profitability".
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 17.34 points, or 0.2%, at 7,585.40
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Hang Seng: up 1.6% at 19,715.34
Nikkei 225: closed down 0.1% at 33,485.49
S&P/ASX 200: closed up 0.2% at 7,175.30
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DJIA: closed down 232.79 points, or 0.7%, at 33,979.33
S&P 500: closed up 0.1% at 4,372.59
Nasdaq Composite: closed up 0.4% at 13,626.48
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EUR: lower at USD1.0818 (USD1.0850)
GBP: lower at USD1.2651 (USD1.2694)
USD: higher at JPY141.30 (JPY139.37)
Gold: lower at USD1,935.49 per ounce (USD1,957.97)
(Brent): lower at USD73.52 a barrel (USD74.27)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
UK BoE Deputy Governor Jon Cunliffe speaks at Politico Global Tech summit
11:00 CEST EU foreign trade
14:15 CEST EU interest rate announcement
08:30 EDT US import and export price index
08:30 EDT US Philadelphia Fed business outlook survey
08:30 EDT US unemployment insurance weekly claims report
09:15 EDT US industrial production
16:30 EDT US foreign central bank holdings
16:30 EDT US federal discount window borrowings
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China reported a series of weak economic indicators, with youth unemployment hitting a record high for the second consecutive month as the economy's post-Covid growth spurt fades. The unemployment rate for Chinese between the ages of 16 and 24 rose to 20.8%, up from what was already a record 20.4% in April, the National Bureau of Statistics said. Overall urban unemployment remained at 5.2%, the NBS said in a statement. Meanwhile, industrial production rose 3.5% in May, down from 5.6% a month earlier, as factories gradually returned to full capacity. Retail sales, the main indicator of household consumption, rose by 12.7% on-year compared with 18.4% a month earlier.
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Amid the weak economic readings, China's central bank cut a key interest rate and injected USD33 billion into financial market. The medium-term lending facility rate – the interest for one-year loans to financial institutions – was lowered 10 basis points to 2.65%, the People's Bank of China said in a statement. The PBOC also said it was offering USD33 billion of funds to banks through the medium-term lending facility, "to maintain reasonable and sufficient liquidity in the banking system". The bank also announced a surprise cut in a short-term interest rate this week, which analysts said reflected growing concern about the state of the economy among Chinese policymakers.
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A strike by junior doctors in England will continue on Thursday as new figures showed that more than half a million appointments and procedures have been postponed due to industrial action since December. Members of the British Medical Association will mount picket lines outside hospitals across the country for the second of a three-day walkout in a long-running row over pay. The action is expected to lead to tens of thousands more appointments and procedures being delayed. The dispute remains deadlocked, with no talks planned amid a standoff between the BMA and government. The BMA has urged Prime Minister Rishi Sunak to get involved in talks, but it was made clear he is not going to intervene.
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BROKER RATING CHANGES
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Goldman Sachs cuts Diageo to 'neutral' (buy) - price target 3,700 (4,500) pence
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Berstein starts AB Foods with 'outperform'
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Berenberg starts Adriatic Metals with 'buy' - price target 280 pence
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COMPANIES - FTSE 100
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Bunzl said it expects to deliver another "resilient" performance in the first half of 2023, with revenue expected to be up between 4% and 5% year-on-year at actual exchange rates, or 1% at constant exchange rates. The distribution services company said that, in 2023 as whole, revenue is expected to be "slightly" higher than in 2022. Bunzl also announced it has entered an agreement to acquire EHM, a distributor of personal protective equipment products in the UK. The company said the acquisition would be complementary to its existing safety business. The financial details were not disclosed.
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Halma boasted a record annual revenue figure in the financial year that ended March 31 but lower profit. The safety equipment manufacturer posted pretax profit of GBP291.5 million, down from GBP304.4 million the year prior. Halma said the drop in profitability reflected the non-recurrence of a GBP34.0 million gain on a disposal in the year prior. Excluding this gain, pretax profit was up 8% year-on-year, it said. Revenue from continuing operations totalled GBP1.85 billion, up from GBP1.53 billion. Chief Executive Marc Ronchetti said: "We have made a positive start to the new financial year. We have a strong order book, and order intake in the year to date is broadly in line with revenue and ahead of the comparable period last year. Based on current market conditions, we expect to deliver good organic constant currency revenue growth in the year ahead, and return on sales to increase to approximately 20%."
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COMPANIES - FTSE 250
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Asos said it returned to profitability with its 'P3' adjusted earnings before interest and tax in the three months ended May 31, despite a drop in revenue. P3 adjusted Ebit was improved by more than GBP20 million year-on-year, putting the online fashion retailer on-track to deliver adjusted Ebit guidance of GBP40 million to GBP60 million in the second half of its financial year. Revenue fell 14% year-on-year, as expected by the company. Chief Executive Jose Antonio Ramos Calamonte said: "I am confident in the direction we are going, we have restored profitability in the period and made good progress in clearing through our inventory to generate cash. We retain ample balance sheet flexibility and reiterate our expectations for improved profitability, cash generation and reduction in net debt in H2 FY23 and beyond."
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Syncona reported a lower net asset value per share at the end of March amid a "challenging" backdrop for the biotechnology companies. The healthcare investor reported a net asset value per share of 186.5 pence as at March 31, down from 194.4p at the same time a year prior. Its total NAV return in the financial year that ended March 31 was negative 4.1%, compared to positive 0.3% the year prior. The company's life science portfolio is valued at GBP604.6 million as of March 31. Syncona said its performance had been driven by the continued share price declines of its listed holdings, which it said partially reflected the wider market backdrop for biotech companies and the write down of its valuation of SwanBio. Syncona has written down its holding in SwanBio to GBP58.2 million, a GBP51.0 million decline in value during the year.
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OTHER COMPANIES
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Kew Soda, also known as WE Soda, late Wednesday cancelled plans to float on the London Stock Exchange, with the soda ash producer explaining that UK investors are cautious about the initial public offering market. Chief Executive Alasdair Warren said: "Since our intention to float announcement some weeks ago, we had been encouraged by the breadth of investor engagement globally and the subsequent interest from prospective investors in our IPO. "Despite this, the reality is that investors, particularly in the UK, remain extremely cautious about the IPO market and this extreme investor caution in London meant that we were unable to arrive at a valuation that we believe reflects our unique financial and operating characteristics." WE Soda is the world's largest natural soda ash producer. It is based in London with production facilities in Turkey.
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GB Group said it was hurt by "unexpectedly deep post-pandemic corrections" in some of its end markets in the financial year that ended March 31, as it swung to an annual loss. The digital location and identity services provider explained that the corrections were largely felt in the internet economy, notably by cryptocurrency and fintech customers in its Identity business in the Americas. GB Group reported a loss of GBP119.8 million, swinging from a profit of GBP15.3 million the year prior. Revenue totalled GBP278.8 million, up from GBP242.5 million. Chief Executive Chris Clark said: "Looking ahead to FY24, since our update in February, there has been no material change in market conditions. Uncertainty remains; however, we still expect some gradual revenue acceleration in the latter part of the year. The board is confident that GBG will deliver its FY24 profit expectations assisted by a group-wide focus on efficiency. "
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Origin Enterprises said its markets in the nine months ended April 30 have been "significant" price and volume volatility, requiring "close management". The agronomy services firm said revenue in the period was up 9.3% against the year prior at EUR1.92 billion despite third quarter revenue falling 16% year-on-year. It explained that its performance in the third quarter quarter of its financial year was impacted by cautious on farm sentiment and poor northern hemisphere in-field conditions delaying key crop input applications. However, Origin noted that weather conditions and demand have improved into its fourth quarter. It expects adjusted diluted earnings per share for the full-year between 50.0 euro cents to 53.0 cents.
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By Heather Rydings, Alliance News senior economics reporter
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