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(Alliance News) - London stocks are set to bounce higher Monday, seeking to resume last week's rally and propelled by some upbeat Chinese data.
In early UK company news, Vodafone said it delivered a "resilient" first half performance. Diploma's annual profit slipped 20%, but the firm still lifted its payout. Kainos reported a sharp rise in interim profit.
IG says futures indicate the FTSE 100 index of large-caps to open 64.81 points, or 1.0%, higher at 6,381.20 on Monday. The FTSE 100 closed 0.4%, or 22.55 points lower, at 6,316.39 on Friday - though ended the week 7.0% higher.
"The optimism of last week appears to be rolling into this week, with markets in Asia seeing another positive session, helped by the weekend news of a signing of a new Asia Pacific trade deal, and the latest China data," said Michael Hewson, chief market analyst at CMC Markets.
China's retail sales continued a general recovery in October, official data showed Monday, on the back of a national holiday and policies aimed at boosting spending.
Although China has largely brought the coronavirus under control, spending has been slower to recover as the world still grapples with the impact of the pandemic.
Beijing's National Bureau of Statistics said Monday that retail sales in the world's second-largest economy had risen 4.3% on-year last month.
The figure is lower than the 5% growth expected by analysts polled by Bloomberg, but still continued an upward trend as spenders gradually began to open their wallets again, particularly around the October 1 national holiday.
Industrial production growth in October remained the same as the month before, but continued to rise more than expected at 6.9%, according to the NBS.
In China, the Shanghai Composite ended up 1.1% on Monday, while the Hang Seng index in Hong Kong is up 0.5%.
The Japanese Nikkei 225 index closed up 2.1%. Against the yen, the dollar softened to JPY104.50 versus JPY104.65.
In further encouraging data from Asia, Japan's economy exited recession in the third quarter, growing a better-than-expected 5.0%.
The positive figures come after three quarters of contraction in the world's third-largest economy, with revised data showing the economy shrank 8.2% in the second quarter, more than the previously estimated 7.9%.
Meanwhile, Asia-Pacific nations signed the world's biggest free-trade agreement on Sunday at a virtual summit hosted in Hanoi. The accord covers 2.2 billion people and 29% of global economic output.
The world's biggest trade agreement includes 10 ASEAN member states - Vietnam, Thailand, the Philippines, Laos, Cambodia, Myanmar, Malaysia, Singapore, Indonesia and Brunei - along with Australia, China, Japan, New Zealand, and South Korea.
In early UK company news, Vodafone said its first-half performance was in line with expectations as it swung to profit.
Revenue for the first half to September 30 fell 2.3% to EUR21.43 billion, though the telecommunications company swung to a pretax profit of EUR2.05 billion from a EUR511 million loss a year ago.
"Losses were recognised in the comparative period relating to Vodafone Idea Ltd, which outweighed a EUR1.1 billion profit recorded on the disposal of Vodafone New Zealand. The current period includes a gain of EUR1.0 billion arising on the merger of Vodafone Hutchison Australia into TPG Telecom Ltd," the firm noted.
Adjusted earnings before interest, taxes, depreciation and amortisation fell 1.9% organically to EUR7.02 billion.
"Today's results underline increased confidence in our full-year outlook. We are reporting a resilient first half performance, and we continue to see good commercial momentum across the group," said Chief Executive Nick Read.
Vodafone said full-year adjusted Ebitda is expected to be between EUR14.4 billion and EUR14.6 billion in the 2021 financial year, and it expects free cash flow - pre-spectrum and restructuring - to be at least EUR5 billion.
Read said: "Covid-19 and the reduction in roaming revenues, through the significant reduction in international travel, is currently obscuring our underlying commercial progress, with Q2 service revenue growing by 1.5% excluding roaming. We are now two years into our longer-term strategy to transform Vodafone into a business that enables a digital society, generating both sustainable growth and attractive returns. We are executing at pace, but there remains more to be
done to achieve our goals."
Defence and medical technology company Smiths Group said it delivered a "good" performance in the first quarter.
Revenue for the three months to October 31 for continuing operations was down 2% on an underlying basis, a figure which it said "underpins" confidence in meeting market expectations for the full-year.
John Crane performed as expected and Smiths Detection delivered a strong performance in Aviation during the quarter, which was offset by the Other Security Systems area. Flex-Tek delivered "strong industrial sales" that more than offset Aerospace weakness, while "good momentum" continued in Smiths Interconnect.
For Smiths Medical, which is excluded from the group's continued operations, revenue was up 4% on an underlying basis.
Smiths added that its strategic restructuring programme is "progressing well" and will delivered the anticipated GBP30 million of savings in the current financial year, and the full GBP70 million benefit in the 2022 year.
Diploma's full-year profit fell by a fifth but the firm still raised its dividend and looked to the newly-started year with confidence.
Revenue for the financial year to September 30 slipped 1% to GBP538.4 million, and pretax profit fell 20% to GBP66.7 million from GBP83.5 million. Administration costs rose to GBP110.6 million from GBP100.2 million, the FTSE 250-listed manufacturer of medical diagnostic instruments, seals and cables said.
The firm lifted its total dividend for the year by 3% to 30.0 pence, paying it all as a final dividend to make up for a skipped interim dividend.
Looking to the new financial year, Diploma said it expects to deliver another "strong performance", with a return to underlying mid-single digit growth and "historic" margins.
"The group has reported a resilient financial performance with strong margins and cash flow generation. All sectors saw improving revenue momentum in Q4 which is expected to continue into 2021," said Chief Executive Johnny Thomson.
IT services provider Kainos Group reported a sharp rise in interim revenue, with profit doubling.
Revenue for the six months to September 30 rose 23% year-on-year to GBP107.2 million, and pretax profit doubled to GBP24.0 million from GBP12.0 million.
Kainos boosted its interim dividend by 83% to 6.4p, and also said it paid out a special dividend of 6.7p in September.
"As part of the Covid-19 related cost reduction measures the board had previously elected not to declare a final dividend for the year ended 31 March 2020. In light of the group's performance, during the period, a special dividend of 6.7 pence per share was approved by the board and paid on 4 September," Kainos explained.
The firm said remains confident in its outlook for the remainder of the year, which is underpinned by a "robust" pipline and "significant" contracted backlog.
"Notwithstanding the uncertainty generated by Covid-19, we believe that by concentrating on the needs of our colleagues and our customers, we are well-positioned for further growth," said Chief Executive Brendan Mooney.
Stagecoach said it has agreed an extension to its bank covenant waivers.
Back in June, it said, it took the "precautionary measure" of agreeing covenant waivers in respect of the periods ending October 31, 2020 and May 1, 2021 with its group of lending banks for facilities expiring in March 2025.
"Further waivers have now been agreed with the same group of lending banks in respect of the period to 30 October 2021. As an alternative to the covenants, we have agreed to a minimum liquidity threshold as at 30 October 2021," said Stagecoach.
The public transport provider stressed, though, that it would have complied anyway with the originally agreed bank covenants for the period ended October 31 on its latest estimates.
In the US on Friday, Wall Street ended in the green, with the Dow Jones Industrial Average up 1.4%, the S&P 500 up 1.4% and the Nasdaq Composite up 1.0%.
The US surpassed 11 million coronavirus cases Sunday, adding one million new cases in less than a week, according to a tally by Johns Hopkins University. The dizzying rise came as cities and states across the US were implementing new restrictions to try to halt the spread of the virus, with stay-at-home orders set to be imposed on Chicago Monday.
Germany warned Sunday its anti-coronavirus measures were likely to stay in place for several months while a top scientist behind vaccine efforts hoped life could return to "normal" by next winter. "We will have to live with considerable precautions and restrictions for at least the next four to five months," Economy Minister Peter Altmaier told the Bild am Sonntag newspaper.
The euro traded at USD1.1845 early Monday, rising from USD1.1824 late Friday. Sterling was quoted at USD1.3208, higher than USD1.3172 at the London equities close on Friday.
Gold was quoted at USD1,888.96 an ounce early Monday, down on USD1,891.34 on Friday. Brent oil was trading at USD43.30 a barrel, higher than USD42.88 late Friday.
By Lucy Heming; lucyheming@alliancenews.com
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