(Alliance News) - Stocks in London are set to stage a slight recovery on Wednesday, with investors encouraged by some better-than-expected Chinese factory data.
In early UK company news, Anglo American said De Beers diamond sales were stable, restaurant operator Fulham Shore said it continues to trade well despite wider economic "turmoil", and food retailer Co-op has agreed to offload its petrol forecourt business to peer Asda for GBP600 million.
The market focus for Wednesday is on eurozone inflation, ahead of the European Central Bank's interest rate decision next week.
"Headline inflation will likely rise above the 9% mark, despite policy measures to stem the rise in prices. With underlying inflation pressures still broadening and the latest increase in energy commodity still to feed through, an inflation peak in the euro area is not yet in sight, keeping the pressure on ECB to front-load monetary tightening," said Danske Bank.
IG says futures indicate the FTSE 100 index of large-caps to open up 19.07 points, or 0.3%, at 7,380.70 on Wednesday. The FTSE 100 closed down 65.68 points, or 0.9%, at 7,361.63 on Tuesday.
Miner Anglo American said De Beers' seventh rough diamond sales cycle of 2022 amounted to USD630 million, down marginally on USD638 million in the sixth cycle but up from USD522 million in the seventh cycle of 2021.
"De Beers Group rough diamond sales continued at a steady level in the seventh sales cycle of 2022. In line with normal seasonal trends, we anticipate that sales in the next few cycles will be affected by the temporary closure of polishing factories for the Diwali holidays," said Chief Executive Bruce Cleaver.
Diwali, the Hindu festival of lights, falls on October 24 this year.
Esken said it expects to take a hit after London Southend Airport's global logistics partner said it will cease to use cargo operations, effective from mid-September.
"LSA has been one of its global logistics customer's best performing aviation hubs. However, the operation has over time reduced from an original 18 flights per week to 7 since October 2021 and the global logistics partner has now advised LSA that it will cease operations in line with a change of strategic focus from air freight to road-based cargo," said Esken, which didn't name the customer.
Esken said it expects a GBP900,000 hit to earnings before interest, tax, depreciation and amortisation for the remainder of the current financial year, before exit fees. There are exit fee provisions within the contract, and the logistics customer will also pay fees related to its 60-day notice period, Esken said.
Esken's financial year runs to the end of February 2023.
In the 2024 financial year, Esken expects its Aviation arm will take a GBP2.9 million hit, prior to any further cost savings or new cargo agreements. Esken has been in talks with other logistics businesses, and it added that it is in "positive dialogue" with a range of carriers over passenger flights for the summer 2023 season.
Outside of Southend airport, Esken said its Renewables division continues to perform well and remains on track to achieve Ebitda in excess of GBP22 million in the current financial year
Restaurant operator Fulham Shore said it has continued to trade well despite UK economic "turmoil" and rail strikes.
Trading is in line with management expectations and new restaurant openings are being received well, Executive Chair David Page will say at Wednesday's annual general meeting.
"Franco Manca and The Real Greek continue to operate busy restaurants," he said.
The company has opened nine Franco Manca and one The Real Greek restaurants during its current financial year so far, taking its total number of restaurants to 90. It remains on track to deliver 18 new restaurants in the current financial year.
In other retailing news, Co-op has agreed to sell its petrol forecourt business to Asda for an enterprise value of GBP600 million.
The deal includes 129 petrol forecourt sites across the UK.
Asda was bought by the Issa brothers and UK-based private equity firm TDR Capital in February last year for GBP6.8 billion. The Issa brothers, Zuber and Mohsin, made their money through EG Group, a petrol station business that has 6,000 sites in the UK and Europe.
Co-op said the proceeds - being cash consideration of GBP438 million - will be used to reinvest into its core convenience business and pricing, as well as reducing debt. The remainder of the GBP600 million enterprise value represents IFRS 16 lease liabilities of GBP162 million.
"This transaction is in line with our strategy to move away from operating petrol forecourts and supports our vision of Co-operating for a fairer world while building our core leading convenience business," said Chief Executive Shirine Khoury-Haq.
Out early Wednesday, official data showed China's factory activity shrank in August for the second month in a row. However, the contraction was not as bad as feared.
The purchasing managers' index, a key gauge of manufacturing in the world's second-biggest economy, came in at 49.4 points, up from July's 49.0 but still below the 50-point mark separating growth from contraction, National Bureau of Statistics data showed. The figure beat the consensus forecast, according to FXStreet, of 49.2.
China's non-manufacturing PMI came in at 52.6 points in August, down from 53.8 in July, NBS data showed, but again topping consensus, which had sat at 52.2.
In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.4%. In China, the Shanghai Composite was down 0.7%, while the Hang Seng index in Hong Kong was up 0.1%. The S&P/ASX 200 in Sydney ended down 0.2%.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average closing down 1.0%, the S&P 500 down 1.1%, and the Nasdaq Composite down 1.1%.
Stocks in New York were hit by some better-than-expected US economic data, heightening fears that the Federal Reserve may have more room to tighten monetary policy.
American consumers were much happier about the state of the economy in August, as worries about surging prices eased, according to a closely watched survey released Tuesday. After three months of declines, the consumer confidence index jumped nearly eight points to 103.2 in August from 95.3 in July, the Conference Board said.
"Yesterday's improvement in US economic data appears to have reinforced the expectation that the resilience of the US economy is likely to mean that the Fed will be a lot less cautious, when it comes to further tightening monetary policy when it meets next on 21st September, when it could well go for its third successive 75bps rate hike, as it looks to drive inflation back down again," said Michael Hewson, chief market analyst at CMC Markets.
Sterling was quoted at USD1.1679 early Wednesday, higher than USD1.1662 at the London equities close on Tuesday.
The euro traded at USD1.0028 early Wednesday, edging up from USD1.0022 late Tuesday. Against the yen, the dollar eased to JPY138.48 from JPY138.75.
Gold was quoted at USD1,722.25 an ounce early Wednesday, below USD1,725.60 late on Tuesday.
Brent oil was trading at USD100.21 a barrel early Wednesday, a touch higher than USD99.99 late Tuesday but still below a peak above USD105 seen earlier this week.
The international economic calendar on Wednesday has German import prices and unemployment alongside France inflation data. At 1000 BST, there are eurozone inflation figures, then at 1315 BST there are US ADP employment data.
The next ECB rate decision is on Thursday next week.
By Lucy Heming; lucyheming@alliancenews.com
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