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(Alliance News) - All eyes will be on the pound when traders in Europe return to desks on Monday, after the UK currency fell to an all-time low during the Asian session.
Sterling fell to an intraday low of USD1.0349 earlier Monday, its worst ever level against the dollar, bucking a wider downward trend for global equities.
The weaker pound means the FTSE 100 index of big international companies was called to open higher on Monday.
Sterling has struggled since UK Chancellor Kwasi Kwarteng announced a series of tax cuts and spending plans in a 'fiscal event' on Friday. The mini-budget caused "mega upset", analysts at Liberum commented.
"With income tax cuts, stamp duty reductions, scrapped corporate tax increases and bankers' bonus caps, investors are worried about the government's ability to finance these initiatives without incurring massive debt as the cost of borrowing is continuing to increase," the investment bank explained.
The UK chancellor hinted more tax cuts would follow those he announced last week.
Kwarteng, who has launched a review of all tax rates ahead of a formal budget, is reportedly considering abolishing a charge for parents who earn more than GBP50,000 and claim child benefit, increasing the annual allowances on pension pots, and a tax break for people who stay at home to care for children or loved ones.
On the UK corporate front, there were a series of M&A and director moves to distract attention from the pound and politics.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called up 0.5% at 7,055.60
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Hang Seng: down 1.0 % at 17,749.72
Nikkei 225: down 2.7% at 26,431.55
S&P/ASX 200: down 1.6% at 6,469.40
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DJIA: closed down 486.27 points, 1.6%, at 29,590.41
S&P 500: closed down 64.76 points, 1.7%, at 3,693.23
Nasdaq Composite: closed down 198.88 points, 1.8%, at 10,867.93
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EUR: down at USD0.9646 (USD0.9691)
GBP: down at USD1.0608 (USD1.0869)
USD: up at JPY143.92 (JPY143.28)
GOLD: down at USD1,637.66 per ounce (USD1,643.77)
OIL (Brent): up at USD84.56 a barrel (USD86.34)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
09:00 BST Germany IFO business climate index
14:45 BST US Fed Boston President Susan Collins speaks
17:00 BST US Fed Atlanta President Raphael Bostic live event
21:00 BST US Fed Cleveland President Loretta Mester speaks
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The average UK house price tag increased by 0.7% month-on-month in September, according to property website Rightmove. Across Britain, the average asking price of a property coming to market is GBP367,760. Rightmove said the price increase is in line with the average September rise of 0.6% over the last 10 years. Prices had fallen 1.3% in August from July. Rightmove added that price growth this month is being driven predominantly by the middle and high-end market sectors. On an annual basis, growth quickened to 8.7% in September from 8.2% in August.
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Ireland's ambassador to the UK has stressed the need to find a negotiated solution to the problems surrounding Northern Ireland's post-Brexit arrangements. Martin Fraser said he was an optimist about the chances of resolving the issues around the Northern Ireland protocol but the situation was currently in the "words phase" and had to move to the "actions phase". The UK government is legislating to effectively tear up parts of the agreement, which sets out how goods flowing from Great Britain to Northern Ireland are treated. Fraser, speaking at a fringe event at the Labour Party conference in Liverpool, said the protocol was the only way to resolve the problems caused by Brexit.
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Ukrainian President Volodymyr Zelensky says he takes Russia's nuclear threats seriously and does not believe Russian President Vladimir Putin is bluffing. "Maybe yesterday it was a bluff. Now, it could be a reality," Zelensky told US broadcaster CBS News in a Sunday interview. "He wants to scare the whole world. These are the first steps of his nuclear blackmail. I don't think he's bluffing," Zelensky said, pointing to Russian shelling at Ukraine's Zaporizhzhya nuclear power plant.
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BROKER RATING CHANGES
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Berenberg raises Unilever to 'buy' ('hold') - price target 4,800 (4,000) pence
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JPMorgan cuts BP to 'neutral' ('overweight') - price target 520 (530) pence
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Berenberg raises Close Brothers to 'buy' ('hold') - price target 1,250 (1,100) pence
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Bernstein raises Aston Martin to 'outperform' (market-perform) - price target 180 (460) pence
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RBC resume Hunting with 'outperform' - 400 pence price target
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COMPANIES - FTSE 100
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Unilever said Chief Executive Alan Jope will step down at the end of next year, after five years in the post. The consumer goods company will kick off a formal search for Jope's replacement. "As I approach my fifth year as CEO, and after more than 35 years in Unilever, I believe now is the right time for the board to begin the formal search for my successor. Growth remains our top priority, and in the quarters ahead I will remain fully focused on disciplined execution of our strategy, and leveraging the full benefits of our new organisation," Jope said. The Dove soap maker added prominent shareholder Nelson Peltz to its board in May, rasing expectations of a shake-up at the company. Jope came under pressure earlier in 2022 after Unilever's failed takeover of GSK's consumer health business.
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GSK said Chief Financial Officer Iain Mackay will step down at the start of May 2023. GSK has named Julie Brown, Burberry Group PLC's chief operating & financial officer, to succeed Mackay. Brown has "extensive experience in the biopharma and medtech sectors", having had stints at AstraZeneca and Smith & Nephew. "Julie will join GSK in April 2023 and will work with Iain to transition responsibilities," GSK added.
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Retailer Frasers Group has made a mandatory takeover offer for AIM-listed online retailer MySale Group. Frasers said it now has just under a 49% interest in MySale, after receiving the backing from former MySale chair Carl Jackson. Jackson stepped down earlier in September. At 2 pence per share, the offer puts a GBP19 million valuation on all of MySale's equity. Frasers had owned just under 29% of MySale. "Frasers now intends to seek to acquire additional MySale Shares by means of market or other purchases and in accordance with the takeover code," Frasers explained. Earlier in September, MySale hit out at the 2p per share valuation for being too low. MySale operates e-commerce sites with a focus on the southern hemisphere, including nations such as Australia and New Zealand. Frasers owns retailers such as Sports Direct, House of Frasers and Evans Cycles.
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COMPANIES - FTSE 250
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Moneysupermarket.com Group named Niall McBride as its chief financial officer, subject to regulatory approval. McBride is currently the CFO of Ocado Group and Marks & Spencer joint-venture Ocado Retail. His start date is expected to be no later than April 3. He replaces Scilla Grimble who joins Deliveroo by no later than June 2023, the food delivery outfit said earlier this year.
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Babcock International left annual guidance unchanged, despite the aerospace and defence firm seeing "inflation and supply chain stress". Babcock said revenue and profit in the first five months of its financial year were in line with expectations. Babcock's financial year ends in March. "The market backdrop remains dynamic. Ongoing geopolitical uncertainty is leading to increased national defence requirements and potentially more opportunities, while macro factors such as inflation and supply chain stress increase delivery challenges," Babcock explained.
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OTHER COMPANIES
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Professional services firm RPS Group backed a GBP636 million takeover offer from Tetra Tech and withdrew its recommendation for a bid by Toronto-listed consultancy firm WSP Global. Nasdaq-listed consultancy and engineering services firm Tetra will pay 222 pence in cash for each RPS share, a 7.8% premium to the 206p offered by WSP. The WSP deal valued RPS at GBP591.1 million. "In light of the superior proposal per RPS share from Tetra Tech as compared to the WSP offer, the RPS directors, who have been so advised by Gleacher Shacklock and AEC Advisors as to the financial terms of the acquisition, consider the terms of the acquisition to be fair and reasonable," RPS said. WSP urged RPS shareholders to take no action.
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Car dealer Pendragon said it has received a takeover approach from vehicle showrooms operator Hedin Mobility Group. Hedin has offered 29p per Pendragon share, giving it an equity valuation of around GBP405 million. The bid is a 28% premium to Pendragon's 22.7p closing price on Friday. Pendragon has a market capitalisation of GBP317.1 million. "The board of Pendragon is currently considering the proposal together with its financial and legal advisers. Shareholders are urged to take no action at this time. There can be no certainty that any firm offer will be made," Pendragon added. Hedin has a 'put up or shut up' deadline of October 24. In March, Sky News reported that Pendragon had rejected a GBP400 million takeover approach from Hedin. In August, Pendragon said a "large international corporate" bidder for the car dealership chain decided against pursuing takeover talks, following due diligence.
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By Eric Cunha; ericcunha@alliancenews.com
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