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(Alliance News) - Stocks are expected to retreat at Wednesday's market open in London, with investors hesitant to take risks ahead of key market catalysts later this week.
On Thursday, US inflation figures will be released which will give weight to the debate over the pace of interest rate cuts this year.
Additionally, investors are also anticipating the latest earnings from US banks, with earnings from Bank of America, Wells Fargo, Citigroup and JPMorgan due on Friday.
"The impact of the Federal Reserve's rate hike policy, cautious consumer behaviour, macro uncertainty, and signs of economic contraction in Q4 have raised concerns about the forthcoming fourth-quarter corporate earnings season. High valuations and thoughts of a broader economic slowdown may cast a shadow on corporate earnings, even if profits exceed expectations," said SPI Asset Management's managing partner, Stephen Innes.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 26.6 points, 0.4%, at 7,657.36
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Hang Seng: down 0.9% at 16,050.17
Nikkei 225: closed up 2.0% at 34,441.72
S&P/ASX 200: closed down 0.7% at 7,468.50
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DJIA: closed down 157.85 points, 0.4%, at 37,525.16
S&P 500: closed down 0.2% at 4,756.50
Nasdaq Composite: closed up 0.1% at 14,857.71
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EUR: up at USD1.0929 (USD1.0923)
GBP: down at USD1.2690 (USD1.2703)
USD: up at JPY144.93 (JPY144.35)
Gold: down at USD2,025.39 per ounce (USD2,029.09)
Oil (Brent): up slightly at USD77.92 a barrel (USD77.81)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
11:00 GMT Ireland unemployment
07:00 EST US MBA mortgage applications
10:00 EST US wholesale inventories
10:30 EST US EIA crude oil stocks
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Jeremy Hunt has said that taxes will not return to pre-pandemic levels in "one go". The UK chancellor, who will deliver a spring budget in March, signalled that he would like to cut taxes further, but only when it is "affordable and responsible". The chancellor said: "After a period in which taxes have gone up in order to pay for the costs of the pandemic or the GBP3,500 of help we gave people in the cost of living crisis to a typical family, we now want to bring that tax burden back down. "Now we can't get all the way back to where we were pre-pandemic in one go, but we can make a start...But we would like to go further as and when it's affordable and responsible to do so."
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BROKER RATING CHANGES
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RBC cuts DCC to 'sector perform' (outperform) - price target 5,700 (5,500) pence
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Berenberg starts Wise with 'buy' - price target 1,140 pence
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RBC cuts Capita Group to 'sector perform' (outperform) - price target 23 (42) pence
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COMPANIES - FTSE 100
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J Sainsbury said it continued to outperform the market over the festive period. In the third quarter to January 6, grocery sales rose 9.3% year-on-year, with Christmas grocery sales rising 8.6%. General Merchandise sales fell 0.6% in the quarter, but rose 1.5% when excluding the hit from Argos's closure in Ireland. Total retail sales excluding fuel grew 6.5% over the quarter as a whole, and 4.9% over the six-week Christmas period. The grocer reiterated annual guidance for underlying pretax profit between GBP670 and GBP700 million. "We've worked hard to really deliver for our customers this quarter and have grown grocery volumes ahead of the market for the fourth Christmas in a row," said Chief Executive Simon Roberts.
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COMPANIES - FTSE 250
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Greggs reported double-digit sales growth in 2023, with total sales rising 20% to GBP1.81 billion from GBP1.51 billion. The bakery chain said company-managed shop like-for-like sales rose 14% over the year, but slowed to 9.4% in the final quarter. It opened a "record" 220 new shops in the year, resulting in net new shop openings of 145, and 2,473 shops trading at the end of 2023. It continues to expect a full-year outcome in line with its previous expectations. "As expected, inflationary pressures are reducing and with good forward cover on food, packaging and energy we anticipate a more stable cost base in the coming year. Wage inflation remains, although higher rates of pay across the economy will also provide support to consumer incomes," Greggs said.
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Pennon Group said it has acquired Sumisho Osaka Gas Water UK Ltd - the holding company for Sutton & East Surrey Water and other ancillary businesses - for GBP89 million. It acquired the business from Sumitomo Corp and Osaka Gas, with a total enterprise value of GBP380 million. "SES Water is a fantastic fit for Pennon as we further expand our presence in water supply across Southern England, building on our successful similar acquisitions of Bournemouth Water and Bristol Water alongside the adoption of water supply in the Isles of Scilly," said Susan Davy, Pennon CEO. In order to maintain its gearing range of 55-65%, it plans to issue up to GBP180 million in new shares, at a price to be determined in due course.
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OTHER COMPANIES
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Belvoir Group and Property Franchise Group said they have agreed the terms of an all-share merge "to create a leading property franchise business". The combined group would have over 930 property franchise locations, managing around 150,000 tenanted properties across the UK, will over 28,000 in expected annual property sales. Belvoir shareholders would hold 48.25% of the resulting group, with PFG shareholders to hold 51.75%.
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Marks Electrical said in the nine months to December 31, revenue rose 22% year-on-year to GBP88.9 million. However, its gross margin did not see the rise it had expected, due to "a challenging trading environment where consumers remain highly price conscious", despite controlling other costs. Consequently, it now expects revenue for the financial year ending in late March to be between GBP115 million to GBP118 million, with earnings before interest, tax, depreciation and amortisation to be between GBP5 to GBP6 million. "Whilst I am personally frustrated about our expected margin progression in the second half, I remain confident about our long-term growth prospects and continue to be impressed by our ability to deliver market share gains profitably, against a fiercely competitive backdrop, whilst maintaining the highest levels of customer service standards in the industry," said CEO Mark Smithson.
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By Elizabeth Winter, Alliance News deputy news editor
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