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(Alliance News) - Stock prices in London are seen opening slightly higher on Wednesday despite concerns over the suspension Johnson & Johnson's Covid-19 vaccine rollout, as earnings season in the US gets underway led by banks.
In early UK company news, Tesco held its dividend but reported a drop in profit which missed market forecasts. Budget airline easyJet said it expects to post a substantial first half loss due to the lockdown restrictions that have halted global travel.
IG futures indicate the FTSE 100 index is to open 6.81 points higher at 6,897.30. The blue-chip index closed up just 1.37 point at 6,890.49 Tuesday.
Tesco reported a drop in annual profit despite "exceptionally strong" sales growth during the Covid-19 pandemic.
For the financial year ended February 27, revenue including fuel was GBP57.9 billion, down 0.4% from GBP58.1 billion in financial 2020 and pretax profit was GBP825 million, down 20% from GBP1.03 billion.
Revenue excluding VAT and fuel on a comparable 52-week basis was GBP53.45 billion, up 7.1% on GBP49.95 billion the year before but missing the company-compiled consensus forecast of GBP58.41 billion, while pretax profit missed the estimate of GBP891 million.
The UK's largest supermarket chain held its annual dividend at 9.15 pence by declaring a 5.59 final payout.
In addition, Tesco confirmed a press report that it hired Kingfisher CEO Thierry Garnier as a non-executive director. Tesco also appointed Bertrand Bodson, the chief digital officer of Swiss pharmaceutical firm, as a non-executive director. Bodson was previously chief digital & marketing officer at the Argos division of Tesco peer J Sainsbury.
Looking ahead, Tesco said it is well placed for the current year with strong improvement in profitability expected. It also anticipates a return to profit for Tesco Bank in financial 2022 from a GBP175 million operating loss in financial 2021.
"Whilst we expect some of the additional sales volumes we have gained this year in our core UK market to fall away as COVID-19 restrictions ease, we expect a strong recovery in profitability and retail free cash flow as the majority of the additional costs incurred as a result of the pandemic in the 2020-21 financial year will not be repeated," the company said.
easyJet its interim results for the year to March 31 are slightly better than expectations, and it maintains significant liquidity, while also saying second quarter cash burn was better than guidance.
easyJet said it has operated a "disciplined" flying programme over the winter months whilst continuing to deliver a major restructuring and cost reduction programme. As a result, the carrier expects a first half headline pretax loss in the range of GBP690 million to GBP730 million, which is slightly better than expectations. It posted a headline pretax loss of GBP193 million last year.
The airline said passenger numbers for the period decreased by 89% to 4.1 million, in line with a decrease in capacity to 6.4 million seats.
This led to total group revenue for the six months decreasing by 90% to GBP235 million, with passenger revenue dropping by 91% to GBP165 million and ancillary revenue shrinking by 87% to GBP70 million.
In addition, easyJet said headline costs excluding fuel for the first half decreased by 59% to GBP845 million, driven by the reduction in capacity flown and the savings achieved across many areas of the business from its restructuring programme.
"easyJet has maintained a disciplined approach to flying during the first half of our financial year, resulting in a first half loss and cash burn better than expectations. We continue to have access to significant levels of liquidity alongside easyJet's major cost-out programme which continues to deliver ongoing cost and efficiency benefits. All of this positions us well to lead the recovery," said Chief Executive Officer Johan Lundgren.
Hopes are high for the latest round of US corporate updates, starting Wednesday, as the global economy recovers and businesses reopen, with analysts saying they will be keeping an eye on outlooks and executives' views on potential US tax reform measures, among other issues.
Lenders JPMorgan Chase & Co, Wells Fargo and Goldman Sachs report first-quarter results before the market open in New York on Wednesday.
"On the back of a convincing string of economic data beats, the economic acceleration should be a powerful tailwind for stocks this quarter and ensure earnings growth," said Axi's Stephen Innes.
Wall Street has provided a healthy lead to Wednesday's trade, with the S&P closing at yet another record, shrugging off concerns that US consumer prices rose more than expected.
On Tuesday, the Dow Jones Industrial Average ended down 0.2%, but the S&P 500 rose by 0.3% and the Nasdaq Composite by 1.1%.
US traders initially sold off in response to news that US authorities had recommended pausing the Johnson & Johnson shot, owing to blood clot fears, which was then followed by the firm saying it would delay its European rollout.
US authorities are conducting a probe which could result in tough regulatory choices, such as restricting the J&J vaccine to older people.
The Japanese Nikkei 225 index closed down 0.4% on Wednesday. The Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong was up 1.4%. The S&P/ASX 200 in Sydney closed up 0.7%.
The pound was quoted at USD1.3797 early Wednesday, up from USD1.3738 at the London equities close on Tuesday.
UK Prime Minister Boris Johnson has warned that the easing of lockdown restrictions will "inevitably" lead to more infections and deaths as the NHS moved to the next stage of vaccine rollout by inviting people aged between 45 and 50 to book an appointment.
The prime minister urged people to continue to "exercise restraint" as beer gardens were packed and shoppers flocked to high streets after the latest round of the government's coronavirus restrictions were lifted in England on Monday.
Johnson said that although vaccines had helped, lockdown restrictions had done "the bulk of the work" in reducing Covid-19 infections.
The euro was priced at USD1.1964, flat from USD1.1930 late Tuesday. Against the Japanese yen, the dollar was quoted at JPY109.93, higher from JPY109.25.
Brent oil was trading at USD64.51 a barrel Wednesday morning, higher against USD63.84 at the London equities close on Tuesday. Gold was trading at USD1,741.28 an ounce, down from USD1,742.96.
Wednesday's economic calendar has eurozone industrial output figures at 1000 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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