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(Alliance News) - Stocks in London are set for a muted start to Monday's session, easing off last week's advance, after a mixed session in Asia overnight.
In early UK company news, Royal Dutch Shell set out plans to simplify its share structure, CMC Markets confirmed it is in early stages of evaluating a split of its leveraged and non-leveraged divisions, and Serco boosted full-year guidance.
IG says futures indicate the FTSE 100 index of large-caps to open down 11.81 points, or 0.2%, at 7,336.10 on Monday. The FTSE 100 index closed down 36.27 points, or 0.5%, at 7,347.91 on Friday, gaining 0.6% for last week as a whole.
After a strong advance on Thursday, hitting a new post-virus high, the FTSE was tantalisingly close to the 7,403.92 mark, where it stood on February 21, 2020, just before Covid-19 worries started to batter stock prices.
"European markets saw another record-breaking week last week, with the Stoxx600 closing higher for the sixth week in succession, matching its best run of gains this year. In a week that also saw new record highs for the DAX and CAC 40, US markets finished the week lower, albeit well off their lows, amidst concern that rapidly rising inflation could crush the potential for further positive company earnings," said Michael Hewson, chief market analyst at CMC Markets.
In the US on Friday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.5%, the S&P 500 up 0.7% and the Nasdaq Composite up 1.0%
In Asia on Monday, the Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite ended down 0.2%, while the Hang Seng index in Hong Kong was down 0.2. The S&P/ASX 200 in Sydney closed up 0.4%.
However, Hewson added: "As a result of a fairly subdued Asia session, European markets look set to open in a similarly lacklustre fashion, and slightly lower from Friday's close."
Stocks in mainland China eased after data showed the economy showed signs of stabilising in October, but the outlook remains uncertain.
Industrial production grew 3.5% on-year last month, up from September, said the National Bureau of Statistics, as China worked to boost coal production and ease the energy shortage. A survey of economists by Bloomberg News tipped a 3.0% expansion. However, NBS spokesman Fu Linghui cautioned that the "international environment remains complex and severe" with many uncertainties.
Retail sales rose 4.9% on-year, according to the latest data, picking up pace from September and far exceeding forecasts for 3.7%. But observers warn that this could be bogged down by recent virus containment measures, reimposed following a fresh outbreak in mid-October that has spread to several regions.
Meanwhile, Japan's economy shrank far more than expected in the three months to September, as a surge in virus cases hit spending and supply chain issues hampered business.
The world's third-largest economy shrank 0.8% quarter-on-quarter, much worse than the 0.2% economists had forecast. The contraction was driven in part by a 1.2% dip in household consumption that tracked the imposition of a virus state of emergency over the summer, when Japan saw its worst-ever Covid surge.
Against the yen, the dollar was higher at JPY113.96, versus JPY113.88 late Friday in London.
In early UK company news, Royal Dutch Shell set out plans to simplify its share structure and along with this, expects to change its name to Shell PLC.
Instead of the current 'A'/'B' share structure, the oil major plans for a conventional single share structure. This would allow for an acceleration in distributions by way of share buybacks, reduce risk for shareholders and let Shell manage its portfolio with greater flexibility.
The company will also align its tax residence to the UK. It has been incorporated in the UK with Dutch tax residence and a dual share structure since 2005.
Shell will retain its current share listings and will still be eligible for FTSE UK indices. One change, however, will be the company's name.
Shell explained: "Carrying the Royal designation has been a source of immense pride and honour for Shell for more than 130 years. However, the company anticipates it will no longer meet the conditions for using the designation following the proposed change. Therefore, subject to shareholder approval of the resolution, the board expects to change the company's name from Royal Dutch Shell PLC to Shell PLC."
CMC Markets confirmed it is mulling a split of its leveraged and non-leveraged divisions.
After a report over the weekend from Sky News, CMC said it is in "very early stages" of separating its "two strong underlying businesses", leveraged and non-leveraged. It expects to start its review of such a move before the end of the year and complete it by June 2022.
"Both businesses have benefited from significant investment and each have strong growth prospects in sizeable markets with excellent competitive positions," said CMC.
It did warn that as talks are exploratory at this stage, a managed separation of the businesses is not guaranteed.
Cineworld reported positive cash flow for October as it has seen strong demand since reopening, driven by an "excellent" film slate.
Box office and concession revenue neared pre-virus levels, standing at 90% of 2019's result in October on a constant currency basis, improving from just 50% in July. The UK & Ireland was the standout performer last month, with revenue exceeding 2019 levels.
The cinema operator pointed to a strong movie line-up, including the latest James Bond film and Dune. Further, there are still major blockbusters to be released in 2021, including 'Ghostbusters: Afterlife' and 'Spider-Man: No Way Home'.
The revenue performance has been underpinned by cost control, though the firm did note some inflationary pressures. Nonetheless, it generated positive cash flow in October, an "important milestone in the company's recovery".
Outsourcer Serco upgraded guidance after stronger-than-expected trading in recent months.
It now expects revenue for 2021 to be around GBP4.4 billion, boosted from its previous forecast of GBP4.3 billion and further ahead of 2020's GBP3.9 billion. Underlying trading profit is seen around GBP225 million, again lifted from prior guidance of GBP200 million and soaring past 2020's GBP163 million.
However, it did caution that most the factors behind its improved performance are unlikely to repeat.
It pointed to volumes of work related to Covid-19 support in the UK and Australia, which were higher, and continued for longer, than anticipated. Some contracts across the business performed better than expected, such as immigration-related contracts again in the UK and Australia.
Looking ahead, Serco expects 2022 guidance to be broadly in line with current company-compiled analyst consensus at around GBP4.2 billion for revenue and GBP196 million underlying trading profit.
"We expect 2022 to see much lower demand for Covid-19 related services, partially offset by the impact of new work secured in 2021 and growth in our core non-Covid-19 related business," said Serco.
MJ Gleeson ahead of its annual general meeting on Monday backed full-year forecasts as it highlighted strong demand for homes and higher selling prices.
Chair Dermot Gleeson noted that the average selling price on new reservations since the start of the financial year is up 12% on a year before. Gleeson Homes should complete the sale of around 900 homes in the half-year December 31 and "not less" than 2,000 homes in the full year to June 30.
"Strong demand driven by the structural need for more low-cost, high-quality homes for first time buyers and our ability to offer attractive levels of affordability to our customers, mean that the outlook for the division remains positive," Gleeson said.
Despite challenges across the market - including supply issues and inflationary pressures - MJ Gleeson said it is pleased with progress in the year-to-date and remains confident in the full-year outcome.
Sterling was quoted at USD1.3424 early Monday, down from USD1.3413 at the London equities close on Friday. The euro traded at USD1.1455, firm on USD1.1450 late Friday.
Gold was quoted at USD1,859.14 an ounce early Monday, lower than USD1,861.52 on Friday. Brent oil was trading at USD81.56 a barrel, down from USD82.26 late Friday.
By Lucy Heming; lucyheming@alliancenews.com
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