(Alliance News) - European energy market worry, UK fiscal policy concern, and interest rate hike and inflation fear were piling up on markets on Wednesday morning.
Western nations suspect foul play after leaks were found in gas pipelines connecting Europe and Russia, heightening tensions with the Kremlin and hitting investor sentiment.
The market mood was already sour.
"It goes without saying that everywhere you look right now there is bad news," analysts at Rabobank commented.
In the UK, Chancellor Kwasi Kwarteng is under pressure to respond to concern about his recently announced tax and borrowing plans, after the International Monetary Fund joined in on the criticism. He meets with City bankers on Wednesday, PA reported.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 0.8% at 6,931.39
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Hang Seng: down 2.6% at 17,390.39
Nikkei 225: down 1.5% at 26,173.98
S&P/ASX 200: down 0.5% at 6,462.00
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DJIA: closed down 125.82 points, or 0.4%, at 29,134.99
S&P 500: closed down 7.75 points, or 0.2%, at 3,647.29
Nasdaq Composite: closed up 26.58 points, or 0.3%, at 10,829.50
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EUR: down at USD0.9564 (USD0.9596)
GBP: down at USD1.0677 (USD1.0756)
USD: soft at JPY144.70 (JPY144.79)
GOLD: down at USD1,621.72 per ounce (USD1,633.10)
OIL (Brent): down at USD85.06 a barrel (USD86.44)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
1100 BST Ireland retail sales index
1330 BST US goods trade balance
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UK Chancellor Kwarteng will step up efforts to reassure the City about his economic plans after the International Monetary Fund criticised the measures and the Bank of England signalled sharp interest rate rises could be on the way. The chancellor will meet investment banks on Wednesday, following days of turmoil which saw the pound buffeted and government borrowing costs increase after his mini-budget spooked the markets with its package of tax cuts and increased borrowing. In an extraordinary statement, the IMF said it was "closely monitoring" developments in the UK and was in touch with the authorities, urging the chancellor to "reevaluate the tax measures".
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UK Trade Secretary Kemi Badenoch will hail the "special relationship" with the US when she travels to New York for her first overseas visit in the post. The visit will see Badenoch bid to boost trade links between the UK and the US, days after Prime Minister Liz Truss admitted during her own recent visit to New York that a much-coveted post-Brexit free trade deal may remain out of reach for several years to come. The trip also comes amid ongoing unease in the Biden administration over the UK's ongoing row with the EU over the Northern Ireland protocol, a set of concerns that have threatened to sour relations between the UK and the US amid American concern about the impact on the peace process.
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UK food inflation has hit its highest rate on record, with shoppers now paying just under 11% more than they were a year ago. Overall UK shop price inflation accelerated to 5.7% in September, quickening from 5.1% in August, to mark another record since the British Retail Consortium-Nielsen IQ index began in 2005. Food price inflation soared to just shy of 11%, from the past last month's 9.3%, driven by the war in Ukraine continuing to push up the price of animal feed, fertiliser and vegetable oil, particularly affecting products such as margarine. Fresh food products are now a record 12% higher than last year, up from just under 11% in August – the highest inflation rate for the category on record.
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BROKER RATING CHANGES
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Credit Suisse reinitiates Imperial Brands with 'outperform' - price target 2,550 pence
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Berenberg starts Honeycomb Investment Trust with 'buy' - price target 1,070 pence
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COMPANIES - FTSE 100
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Spirax-Sarco Engineering said it has agreed a deal to acquire privately-owned custom electric thermal solutions specialist Durex International for USD342.2 million. The thermal energy management and pumping systems firm will acquire the Illinois-based firm on a cash- and debt-free basis. "The transaction will be financed through acquisition bank facilities and will be accretive to group earnings in 2023," it said. "Durex provides [original equipment manufacturers] with custom-designed precision thermal solutions with embedded electric heating, cooling and sensing technologies."
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Luxury fashion brand Burberry has named Daniel Lee as its new creative chief, starting on Monday next week, after incumbent Riccardo Tisci stepped down from the post. Tisci was in the role for five years. The company hailed Tisci for improving the brand's fortunes, including offering it much-needed relevance with younger shoppers. Tisci will leave the company at the end of September. Lee has had roles with Italian fashion brand Bottega Veneta, as well as Balenciaga and Donna Karan. His first runway collection will be presented at London Fashion Week in February 2023.
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COMPANIES - FTSE 250
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Aston Martin Lagonda said its four-for-one rights issue received acceptances for 94% of the shares on offer. It received acceptances for 527.3 million new shares, meaning there are 31.7 million remaining which were not taken up by exiting shareholders. The luxury carmaker announced the rights issue earlier in September, hoping to raise GBP575.8 million.
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OTHER COMPANIES
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Online clothing retailer boohoo swung to a first-half loss with earnings hurt by weak consumer confidence and a staggering number of clothing returns. Return rates were "up significantly year-on-year", the fast-fashion firm explained. In the six months to August 31, revenue fell 10% year-on-year to GBP882.4 million from GBP975.9 million. Revenue was up 56% from pre-virus levels, however. boohoo swung to a GBP15.2 million pretax loss from a GBP24.6 million profit a year earlier. Margins weakened markedly. Its adjusted earnings before interest, tax, depreciation and amortisation margin fell to 4.0% from 8.7%. "As a result of the impact that the macro-economic and consumer backdrop has had on the group's revenues in the first half, our expectation is for a similar rate of revenue declines to persist over the remainder of the financial year if these conditions continue," boohoo cautioned. It lowered its margin outlook. boohoo now expects an annual adjusted Ebitda margin between 3% and 5%, trimmed from its previous 4% to 7% guidance range. While sales have jumped post-Covid, its margins have weakened. In the six months to the end of August 2019, its adjusted Ebitda margin was 10.8%.
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Healthcare software provider Emis, expected to soon leave the London Stock Exchange, reported stronger interim revenue. Revenue in the six months to June 30 rose 4.5% to GBP87.3 million from GBP83.5 million a year earlier. Pretax profit, however, fell 6.1% to GBP15.4 million from GBP16.4 million. Staff costs rose by 0.7% to GBP37.1 million and "other operating expenses" increased by 46% to GBP19.9 million. Emis also booked GBP4.3 million in exceptional costs, against none last year. These related to expenses stemming from a technology transformation programme as it transitions to cloud software, as well as corporate transaction costs. Emis in June backed a GBP1.24 billion takeover offer from Minnesota, US-based healthcare and insurance company UnitedHealth. "The process is moving forwards well," Emis said on Wednesday. The company maintained a 17.6 pence interim payout.
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Amigo said it is finalising planning for a pilot scheme as it looks to return to lending. It will wants to secure GBP40 million from a capital raise, a mandated part of a customer redress scheme, come May next year. Amigo said it expects to meet the initial redress scheme contribution of GBP97 million. It noted it currently has unrestricted cash of GBP125 million. Amigo also will look to raise debt to support growth. "The [UK Financial Conduct Authority] has yet to approve our return to lending, however following a long period of review and discussion, we are finalising details with regards our proposals to commence a lending pilot. During the pilot, we will be undertaking significant testing to ensure that we are lending affordably. We continue to discuss our approach and implementation with the FCA to achieve these goals as soon as possible," Amigo explained.
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Cinema chain Everyman said its outlook for the rest of 2022 is promising, despite economic concerns. Revenue in the six months to June 30 jumped to GBP40.7 million from GBP7.7 million in Covid-hit first half of 2021. Everyman's pretax loss narrowed annually to GBP798,000 from GBP9.2 million. "The first half of the financial year has been a period of progress on all fronts, with healthy admissions growth and robust spend per head, suggesting we are now back on track following the turbulence of recent years," Chief Executive Alex Scrimgeour said. "We have started the second half of 2022 in line with expectations and the outlook for the remainder is promising."
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By Eric Cunha; ericcunha@alliancenews.com
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