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(Alliance News) - Stocks in London are set to open lower on Thursday, with risk-off mood returning on an escalation of tensions between the US and China.
In addition, the overseas earnings-heavy FTSE 100 is set to be hit by a stronger pound after a closely watched political poll indicated the incumbent Conservative party is set to win a comfortable majority in next month's UK general election.
In early UK company news, Phoenix Group Holdings said it has beaten its cash generation target, Virgin Money suspended its dividend on "frustrating" PPI provisions, and Ocado is to build a mini automated warehouse in Bristol.
IG says futures indicate the FTSE 100 index of large-caps to open 31.38 points lower at 7,398.40 on Thursday. The FTSE 100 index closed up 26.64 points, or 0.4%, at 7,429.78 on Wednesday.
"The optimism of the last few days has been thrown up in the air in Asia markets, after President Trump signed the bill supporting the Hong Kong protestors last night. This action sent equity markets sharply lower on concerns that China may well retaliate," said Michael Hewson at CMC Markets.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.1%. In China, the Shanghai Composite closed down 0.5%, while the Hang Seng index in Hong Kong is 0.2% lower.
China's foreign ministry summoned the US ambassador on Thursday, urging Washington to refrain from applying a bill supporting Hong Kong's pro-democracy movement to "avoid further damage" to relations.
Chinese Vice Foreign Minister Le Yucheng lodged a "strong protest" with Ambassador Terry Branstad after President Donald Trump signed the legislation into law.
Trump had seemed reluctant to sign the legislation, but came under heavy pressure from Congress, where the issue has attracted rare bipartisan support. In a statement, Trump spoke of "respect" for Chinese President Xi Jinping and said he hoped the "leaders and representatives of China and Hong Kong will be able to amicably settle their differences".
In Hong Kong, the government expressed "extreme regret" after Trump signed legislation requiring an annual review of freedoms in Hong Kong and banning the sale of crowd control equipment such as tear gas.
In the US on Wednesday, Wall Street ended in the green, with the Dow Jones Industrial Average ending up 0.2%, the S&P 500 up 0.4% and the Nasdaq Composite up 0.7%.
Markets in the US will be closed on Thursday for the Thanksgiving Day holiday. They will open on Friday for a half-day only as shoppers celebrate 'Black Friday'.
In early UK company news, life and pensions consolidator Phoenix Group said its cash generation for 2019 is ahead of target.
The FTSE 100 constituent said it has generated GBP707 million of cash in 2019, exceeding the upper end of its GBP600 million to GBP700 million target.
It also continued to meet, or exceed, customer service metrics, and remains on track to deliver the GBP1.2 billion total synergy target for its Standard Life Assurance purchase.
"This trading update further reinforces Phoenix's conviction in its business model and its capacity to generate Cash, deliver Resilience and exploit multiple avenues of Growth to deliver long-term sustainable cash generation, not just today but in the years ahead," said Chief Executive Clive Bannister.
Online grocer Ocado said it will be building its first "mini-CFC", which will be located in Bristol.
The CFC, or customer fulfilment centre, will have the capacity for 30,000 orders per week compared to approximately 85,000 orders per week expected from Ocado CFC 5, which is currently under construction at Purfleet.
The Bristol CFC is expected to go live at the end of 2020 or early 2021 and, despite its smaller size, is expected to achieve productivity close to that of standard facilities. It is being built to support the growth plans of Ocado Retail, a joint venture between Ocado and Marks & Spencer.
Virgin Money, formerly known as CYBG, said it delivered a good performance in "challenging conditions", though suspended its dividend on PPI provisions.
Net interest income for the financial year to September 30 was GBP1.51 billion, nearly double the GBP851 million achieved the year before. Total operating income was GBP1.75 billion, up from GBP1.01 billion.
The company's pretax loss deepened, however, to GBP232 million from GBP164 million.
"Our statutory result was significantly affected by additional PPI provisions, driven by the unprecedented surge in PPI information requests in August, along with anticipated Virgin Money acquisition-related costs," explained Chief Executive David Duffy.
Virgin Money said it was "frustrating" to take GBP385 million in additional PPI provisions for the fourth quarter as it looks to "close out this legacy issue". Meanwhile, acquisition costs in the period totalled GBP189 million and restructuring costs GBP156 million.
The dividend has been suspended for the recently ended financial year in light of additional PPI provisions, and the board will "reconsider" dividends for the 2020 financial year.
Transport operator Go-Ahead Group said its performance in both bus and rail have been mixed.
The performance of regional bus operations has been "slightly weaker" than expected in the period June 30 to November 27. London & International bus continued to perform well, however.
In rail, overall expectations remain unchanged with a good performance in the UK offsetting a challenging operational start to two new German contracts.
Marine services firm James Fisher & Sons said it expects profit for the full-year to be ahead of 2018, but "modestly below" board expectations.
Offshore Oil and Tankships have seen trading "well ahead" of the prior year, reflecting improved market conditions in the oil and gas sector.
Specialist Technical continued to perform broadly in line with a strong prior year comparative while Marine Support's performance improved in the period following a slow start to the year.
Marine Support experienced a "robust recovery" in ship-to-ship services, James Fisher said, but a slower-than-anticipated return from investments made in the first half resulted in a lower financial performance than planned in the period.
"The group anticipates continued good performance in its Offshore Oil and Tankships divisions for the remainder of the year. Specialist Technical is expected to perform broadly in line with the previous year and Marine Support to recover from its performance in the period," said James Fisher.
While "modestly below" board expectations, pretax profit for 2019 is expected to be above last year's GBP56.1 million.
In currencies, the dollar was firm, with better-than-expected US data on Wednesday pushing the greenback to one-month highs.
The euro was quoted at USD1.1006 early Thursday, flat on USD1.1005 late Wednesday. Against the yen, the dollar was quoted at JPY109.45, up versus JPY109.26.
"One currency [the US dollar] slipped back against was the pound which has gained an extra buoyancy in the last 24 hours after the latest MRP YouGov poll, the one that proved so accurate in 2017, showed that the Conservatives were on course for a 68-seat majority." said CMC's Hewson.
The constituency-by-constituency estimate by YouGov, published in The Times, indicates that if the election was held on Thursday, the Conservative Party would win 359 seats, 42 more than they took in 2017. It would also take 43% of the vote, and in number of seats this would be its best performance since 1987.
Labour, meanwhile, is set to lose 51 seats, falling from 262 seats in 2017 to 211 now, and taking 32% of the vote, a nine percentage point decrease. This would be the party's worst performance in seats won since 1983, YouGov said, adding that the opposition is on course to not take any new seats.
Chris Curtis, political research manager at YouGov, said the current analysis shows the Tories have a "comfortable majority", with seats coming their way at the expense of Labour in the North and Midlands.
Sterling was quoted at USD1.2940 early Thursday, up from USD1.2872 at the London equities close on Wednesday.
In commodities, gold was quoted at USD1,455.61 early Thursday, flat on USD1,455.35 at the London equities close on Wednesday.
Brent oil was quoted at USD62.78 early Thursday, soft compared to USD62.92 at the London equities close on Wednesday.
The economic events calendar on Thursday has German inflation at 1300 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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