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(Alliance News) - The FTSE 100 index in London was set to open flat on Monday, failing to benefit from Wall Street's rally on Friday.
"Financial markets appear to have a rising conviction that central banks are on the cusp of a significant pivot on monetary policy sometime later this year, a view that appears to be getting additional traction now that a number of Fed policymakers appear comfortable with the idea of another step down in the central banks rate hiking cycle to 25 [basis points] next week," said CMC Markets' Michael Hewson.
Federal Reserve Governor Christopher Waller on Friday said there is ample evidence that a steep climb in interest rates has damped demand and economic activity, and suggested the US central bank can further slow its rate hikes.
The Fed had been raising rates a pace of three quarters of a percentage point at a go before slowing this to half a percentage point at its December policy meeting.
Alongside recent data showing a slowing in US economic activity, inflation moderated to 6.5% in December from the 40-year high seen in June last year.
Waller warned that US policymakers have "a considerable way to go" towards their 2% inflation goal, noting that the recent cooling was largely led by the drop in energy prices.
CMC's Hewson commented on Monday: "As we look ahead to a new week most of the attention is set to remain on the latest set of earnings reports, as investors look to decide whether the current strong run of gains can continue, and how much further central banks are prepared to go to get a handle on inflation."
In early corporate news, construction firm Balfour Beatty announced a GBP1.2 billion contract to build a tunnel under the Thames, while funeral services provider Dignity has accepted a takeover offer.
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 2.5 points at 7,773.09
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Nikkei 225: up 1.3% at 26,906.04
S&P/ASX 200: closed up 0.1% at 7,457.30
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DJIA: closed up 330.93 points, 1.0%, at 33,375.49
S&P 500: closed up 1.9% at 3,972.61
Nasdaq Composite: closed up 2.7% at 11,140.44
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EUR: higher at USD1.0899 (USD1.0837)
GBP: higher at USD1.2417 (USD1.2379)
USD: higher at JPY130.14 (JPY129.88)
Gold: lower at USD1,922.58 per ounce (USD1,925.41)
Oil (Brent): higher at USD87.38 a barrel (USD86.55)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
Chinese New Year public holiday. Financial markets in Shanghai and Hong Kong closed.
16:00 CET EU flash consumer confidence
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Japan Prime Minister Fumio Kishida said his country faces the severest security environment in the region since the end of the Second World War as he outlined his government's priorities. In a speech opening this year's parliamentary session, he pledged to push a military build-up under a new security strategy over the next five years and beyond, as well as tackling rapidly declining births so the country can sustain national strength. Kishida's government adopted key security and defence reforms in December, including a counter-strike capability that marks a departure from the country's exclusively self-defence-only post-war principle.
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BROKER RATING CHANGES
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HSBC cuts St James's Place to 'hold' (buy)
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Morgan Stanley cuts Shell to 'equal-weight' (overweight)
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Jefferies reinitiates Pendragon with 'buy' - price target 25 pence
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COMPANIES - FTSE 250
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National Express said it has won a contract worth over EUR1 billion to operate the RE1 and RE11 Rhein-Ruhr-Express lines in Germany until 2033. The transport provider had already taken over the operation of the lines last February, via an emergency contract award. "The award of this contract establishes National Express as the second largest rail transport company in the region," the firm said. National Express will also benefit from operational synergies, given its existing Rhine Munster Express operation in the region.
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Edinburgh Worldwide Investment Trust said net asset value per share - cum income with debt at fair value - fell 40% over the year to October 31. This is compared with the 6.8% negative return from S&P Global Small Cap Index during the same period. The investment trust - which invests in companies with a market capitalisation of less than USD5 billion at the time of first investment - finished the period with a NAV per share of 197.70 pence, down from 331.03p a year before. It said the underperformance was due to markets shifting away from growth stocks into value stocks.
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Balfour Beatty has won a GBP1.2 billion contract to dig a tunnel called the Lower Thames Crossing under the River Thames. The infrastructure construction firm said the contract is for the 'Roads North of the Thames' package and was awarded by National Highways. The project at Tilbury in Essex aims to ease congestion and boost capacity in the south of England, with Balfour Beatty to design and delivery over 10 miles of new highways, and build 49 structures including bridges and "major" viaducts. Balfour will put the full value of the contract into its order book in 2024 after an 18-month design and pre-construction planning period. The project is expected to be completed in 2029 or 2030.
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OTHER COMPANIES
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Over-50s travel operator Saga confirmed it is in talks to sell its in-house insurance underwriting business. This follows a Sunday Times report that the firm was hoping to raise GBP90 million via a potential sale, to pay down debt. The newspaper noted that Saga would continue to offer home and motor insurance to its customers, but would move the risk associated with those policies elsewhere. The Times said Saga is being advised on the potential sale by City broker and investment bank Numis Corp PLC. Saga confirmed it was still committed to providing its insurance offering.
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Online clothing retailer Sosandar said it will start selling a collection of its products via Sainsbury's. The contract will begin online only before expanding to select stores later in the year. The partnership marks Sosandar's first in-store presence, allowing it to become a "truly omnichannel retailer". This will "[further diversify] its route to market and [increase] brand awareness across its target demographic, whilst driving growth sales and [profit before tax]," the firm said.
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Funeral provider Dignity said its director will unanimously recommend a 550p per share takeover offer to shareholders. The GBP281 million offer comes from a consortium including SPWOne V, Castelnau and Phoenix Asset Management Partners, who already own a 29% stake in the firm. In a separate trading update, Dignity said it expects underlying revenue to have shrunk to no more than GBP275 million in 2022 from GBP312.0 million the year before. Underlying operating profit is expected to be no more than GBP20 million, less than half of GBP55.8 million in 2021. The poor performance was due to changes in pricing strategy and consumers opting for lower-priced products, in addition to an increase in Dignity's cost base.
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By Elizabeth Winter, Alliance News senior markets reporter
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