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(Alliance News) - Stocks in London are set to open lower on Tuesday, following Monday's rout on Wall Street, as investors remain concerned about rising inflation and how central banks will respond.
In early news in the UK, the country's unemployment rate edged below pre-virus levels, Electrocomponents confirmed its strong annual growth and regulators have launched a probe into Deloitte's audit of Go-Ahead Group.
While in Germany, annual consumer inflation raced to 7.3%.
IG futures indicate the FTSE 100 index is to open down 50.31 points, or 0.7%, at 7,568.00. The blue chip index closed down 51.25 points, or 0.7%, at 7,618.31 on Monday.
"Sentiment hasn't been helped by the latest Covid extended lockdown measures being initiated by Chinese authorities in Shanghai, in what is likely to be a fruitless attempt to stem the spread of the more contagious Omicron variant," CMC Market analyst Michael Hewson said. "These concerns over inflation are likely to remain in focus over the next two days as we look towards today's inflation numbers from Germany and the US for March."
In the US on Monday, Wall Street ended markedly lower, with inflation and Covid-19 worries in focus. The Dow Jones Industrial Average closed down 1.2%. The S&P 500 closed 1.7% lower. The tech-heavy Nasdaq Composite closed down 2.1%.
AvaTrade's Naeem Aslam said: "Overall, the big question for traders and investors that they are exploring is if the most popular sector with a strong track record of bouncing back rapidly has run out of steam. The technology-heavy Nasdaq 100 has a strong history of outperforming other indices, but now traders are wondering if the massive bubble in the tech sector, which was fuelled by the Fed's easing monetary policy, has burst. This is because the index has surpassed its losses of more than USD1 trillion, and the current momentum doesn't seem to be slowing down anytime soon."
The focus on Tuesday will be on inflation figures from the US at 1330 BST, with the UK CPI print coming on Wednesday.
CMC's Hewson said: "The main focus today will be today's US CPI number for March, which look set to push well above 8% later today. Having seen the Federal Reserve pull the trigger on its first interest rate rise since 2018 last month, much has been made of the timeline of how big the next few rate increases are likely to be with the odds increasing of more than one 50bps rate rise occurring in the coming months.
"The more important indicator is likely to be the direction of travel for PPI which is due tomorrow and already at 10% and expected to go higher towards 11%, although the gains being seen here have been more incremental in recent months compared to the big jumps we saw at the end of last year, which are now feeding into the recent CPI numbers."
In Germany, federal stats office figures showed annual consumer inflation had run to 7.3% in March, ahead of the 5.1% figure seen in February - but was in line with market forecasts, according to FXStreet.
Destatis noted March's reading saw inflation reach its highest level since German reunification - as energy prices continue to soar.
Versus the previous month, consumer prices jumped by 2.5%.
Harmonised inflation, which allows for EU-wide comparison, increased to 7.6% annually in March and 2.5% month-on-month.
In the UK, the ILO unemployment rate for the three months to February was 3.8%, falling below the 3.9% registered for the three months to January. Market forecasts - according to FXStreet - had predicted unemployment to remain steady at 3.9%.
The euro was priced at USD1.0866, down from USD1.0889. The pound was quoted at USD1.3011 early Tuesday, down from USD1.3040 at the London equities close on Monday.
UK retail sales growth slowed in March, figures on Tuesday showed, as the rising cost of living hit consumer confidence.
According to the latest British Retail Consortium-KPMG tracker, retail sales rose 3.1% annually in March, slowing markedly from a 14% hike in March 2021. It was also below the six-month average growth of 6.9%. Compared with pre-pandemic times, March 2022 sales were 5.4% higher.
In London, FTSE 100-listed Electrocomponents confirmed it expects over 25% like-for-like revenue growth for financial 2022.
The distributor of industrial and electronics products said its like-for-like revenue will jump 26% in the year ending March 2022, which follows 23% growth in the fourth quarter.
Electrocomponents noted its growth in the final quarter advanced from the third quarter's 21% growth, but was unable to match its performance in either the second or first quarters.
Mid-cap budget airline easyJet said its first half loss is expected to narrow despite headwinds gathering in the period.
"First half losses have reduced year on year, outperforming expectations, as self-help measures including network optimisation, ancillary products, and a continued cost focus deliver. This result is despite ongoing challenges from Covid-19, rising fuel prices, the removal of furlough support and incremental costs associated with ramping up operations," Luton-headquartered easyJet explained.
For the first half to March 31, the airline expects to report revenue of GBP1.50 billion, with headline costs around GBP2.05 billion. It has guided for a headline pretax loss in the range of GBP535 million to GBP565 million, which would be narrowed from GBP701 million year-on-year.
Flights in the second quarter jumped sharply year-on-year to 82,247 from 11,672. As a result, passengers rose to 11.5 million from 1.2 million. Load factor improved to 78% from 60%.
easyJet expects its third quarter capacity to be about 90% of the same period in 2019, while capacity in the fourth quarter should "remain near" the level seen in the final quarter of 2019.
The firm added: "easyJet has flown 94% of the planned schedule in the last seven days with daily flight volumes around 1,500 per day being 4x higher than the same point last year. This is despite the recent increase in the number of crew testing positive for Covid-19, together with normal operational disruption such as weather and ATC delays."
Online trading platform Plus500 said its revenue in the first quarter jumped a third despite the firm seeing a 62% drop in new customers.
Revenue for the three-month period to March 31 rose 33% year-on-year to USD270.9 million from USD161.1 million, with earnings before interest, tax, depreciation and amortization also rising 33% to USD161.6 million from USD70.9 million.
Plus500 recorded a 62% year-on-year drop in new customers in the first quarter to 33,740 from 89,406, but noted a 2% rise from the fourth quarter of financial 2021.
Active customers were down 35% to 176,642 from 269,743, but, again, were up on the fourth quarter - rising 3%. Average revenue per user more than doubled year-on-year to USD1,534 from USD753.
"At the current time, the board anticipates that revenue for financial 2022 will be ahead of current market expectations and continues to expect that Plus500 will deliver sustainable growth from all of the group's product offerings over the medium to long term," Plus500 added.
Price comparison website Moneysupermarket.com Group said it was "pleased" with the performance of its Money and Travel businesses in the first quarter - as the firm's total revenue increased on the year before.
In the three months to March 31, total revenue rose 8% to GBP92.3 million from GBP85.5 million, with its Money business seeing 37% growth and Travel jumping sharply. The firm's largest business - Insurance - saw a flat revenue performance.
Chief Executive Peter Duffy said: "With cost-of-living increases adding pressure to consumer budgets, our distinctive brands remain well positioned to help households save money in a broad range of areas."
Elsewhere, UK regulators have flagged rail and bus operator's Go-Ahead Group's financial statements from 2016 to 2021.
The Financial Reporting Council said it has opened an investigation into the audits conducted by Deloitte, covering the financial statements for the years ended July 2021, June 2020, June 2019, June 2018, July 2017, and July 2016.
The publication of Go-Ahead's financial 2021 results was delayed to February from December to allow auditor Deloitte to consider the implications of a review of the London & South Eastern Railway franchise, operated by Go-Ahead. The UK government found that "serious errors" were made by LSER in its dealings with the Department for Transport over several years.
In Asia on Tuesday, the Japanese Nikkei 225 index closed down 1.8%. In China, the Shanghai Composite was 1.4% higher, while the Hang Seng index in Hong Kong was up 1.2%. The S&P/ASX 200 in Sydney ended down 0.4%.
Against the yen, the dollar was trading at JPY125.71 in London, higher from JPY125.52.
Brent was quoted at USD101.52 a barrel early Tuesday, up from USD98.80 a barrel Monday evening. Gold stood at USD1,957.70 an ounce, higher against USD1,952.48 late Monday.
Oil prices rebounded overnight after slipping below USD100, hurt by continued demand worries amid lockdowns in China. China has stuck to a policy of "zero Covid", aiming to eliminate infections through rigid lockdowns, mass testing and travel restrictions.
By Paul McGowan; paulmcgowan@alliancenews.com
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