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(Alliance News) - Stocks in London were called lower on Wednesday, ahead of UK Prime Minister Liz Truss' keynote speech at the Conservative Party conference, and a key meeting of the world's oil-producing nations.
Truss will say the "disruption" from her plans to revive the country's economy will be worth it as she battles to save her premiership after just a month in the job.
The prime minister will insist there can be no more "drift and delay" in the effort to boost economic growth in her first Tory conference speech as leader.
She will defend her "new approach" which will "unleash the full potential of our great country".
But the prime minister will face a tough task restoring Tory morale after a conference which has seen a U-turn over a totemic tax policy, Cabinet dissent and the threat of another major split over the level of benefits.
Alongside measures to boost growth, the prime minister will insist she will keep an iron grip on the nation's finances, with a leaner state offering value for taxpayers' money. She will say: "This is a great country. But I know that we can do better and we must do better.
Meanwhile, crude oil prices stayed above the USD90-mark ahead of a meeting of the world's oil-producing nations.
The 13 members of the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and their 10 allies headed by Russia will hold their first in-person meeting since March 2020 at the group's headquarters in Vienna.
Collectively known as OPEC+, reports indicate they were mulling an output cut of up to two million barrels per day in a bid to prop up slumping prices.
After soaring close to USD140 per barrel in the aftermath of Russia's invasion of Ukraine in late February, oil has recently been trading below the USD90 mark.
In local corporate news, Tesco reported growth in interim revenue, but pretax profit shrank 64% year-on-year due to an impairment charge, due to an increase in discount rates. The grocer said it now expects annual adjusted retail operating profit towards the lower end of the previous guidance range.
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 down 25.5 points, 0.4%, at 7,060.96
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Hang Seng: up 5.9% at 18,083.03
Nikkei 225: closed up 0.5% at 27,120.53
S&P/ASX 200: closed up 1.7% at 6,815.70
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DJIA: closed up 825.43 points, or 2.8%, at 30,316.32
S&P 500: up 112.50 points, or 3.1%, at 3,790.93
Nasdaq Composite: closed up 360.97 points, or 3.3%, at 11,176.40
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EUR: down at USD0.9964 (USD0.9970)
GBP: up at USD1.1478 (USD1.1438)
USD: down at JPY144.17 (JPY144.40)
Gold: down at USD1,718.87 per ounce (USD1,725.92)
Oil (Brent): flat at USD91.75 a barrel (USD91.77)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
10:00 CEST EU services PMI
11:00 CEST EU balance of payments
09:30 BST UK official reserves
09:30 BST UK services PMI
07:00 EDT US mortgage applications survey
08:30 EDT US international trade
09:45 EDT US services PMI
15:00 CDT US FRB Atlanta President Raphael Bostic delivers lecture
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Japan's private sector returned to growth in September, as stronger service sector growth offset a slowdown in manufacturing. The S&P Global au Jibun Bank composite purchasing managers' index rose to 51.0 points in September from 49.4 in August, back above the 50.0 mark that separates growth from contraction. This was slightly above the previous flash estimate of 50.9 in September. "The increase in business activity was driven by the service sector as goods production declined for a third straight month. Overall, the pace of growth was modest despite being the quickest in three months," S&P Global said. Services activity also improved, with the services PMI improving to 52.2 in September from 49.5 in August.
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IMF chief Kristalina Georgieva said the Bank of England correctly moved swiftly in reaction to Britain's budget proposal late last month – a plan which included a now-scrapped tax cut for the wealthy and send the pound dramatically lower. She said it is important to avoid a contradiction between government and central bank policies. "We cannot have fiscal policy working against monetary policy by providing untargeted policy support. It has to go to the most vulnerable segments of society," she said in an interview with Al Arabiya.
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UK Home Secretary Suella Braverman broke with government policy to call for the UK to leave the European Convention on Human Rights as she urged a crackdown on illegal migration. She said it was her personal view and acknowledged government policy was to work within the boundaries of the convention, which is interpreted by the European Court of Human Rights. But it is another sign of indiscipline within Liz Truss' administration at the Tory conference in Birmingham. A senior government source told the PA news agency: "As Suella acknowledged, her personal views are contrary to government policy and if she wishes to make those views known within government she should do so in a more appropriate setting."
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Kwasi Kwarteng has stressed his attachment to "compassionate conservatism" while refusing to comment on the row over raising benefits in line with inflation. The chancellor also told a Conservative Party conference fringe event that things were going "very well" since he took on the job, and suggested his party could win the next general election despite Labour's massive lead in the polls. Amid bitter infighting at the annual gathering, members of the Cabinet were publicly urging Liz Truss to raise benefits in line with inflation rather than the lower measure of wages. In a possible hint of his opinion on the matter, Kwarteng said: "Compassionate conservatism I thought was a good phrase and it's something that I always think about in terms of policy and I think we do have a duty to look after very vulnerable people."
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BROKER RATING CHANGES
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Deutsche Bank cuts Ascential to 'hold' (buy) - price target 230 (360) pence
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Jefferies cuts Watkin Jones price target to 225 (329) pence - 'buy'
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berenberg starts Dechra Pharmaceuticals with 'hold' - price target 2,850 pence
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COMPANIES - FTSE 100
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Tesco reported steady growth in interim trading, but profit was stung by a hefty impairment charge. For the 26 weeks ended August 27, the supermarket said revenue rose 6.7% to GBP32.46 billion from GBP30.42 billion a year before. Fuel sales surged 39%. Excluding fuel sales and VAT, revenue rose 3.1%. Pretax profit, however, shrunk 64% to just GBP413 million from GBP1.14 billion. It recognised a GBP626 million non-cash non-current asset impairment charge "related to an increase in discount rates this year", it explained. The grocer proposed an interim dividend of 38.5 pence per share, a 20% increase from 3.20p a year before. "We saw significant cost inflation and some impact from a step up in own brand sales vs branded ranges as customers took steps to manage the pressure on their household budgets," Tesco said. It said the acceleration of its Save to Invest programme contributed to the improved performance. It maintains annual profit guidance provided in April, "albeit towards the lower end". It expects retail adjusted operating profit between GBP2.4 to GBP2.5 billion in its full year.
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Anglo American reported De Beers diamond sales of around USD500 million in cycle 8, compared to USD638 million in cycle 7. Year-on-year, diamond sales were up from USD492 million in cycle 8. "Demand for our rough diamonds during sales cycle 8 was in line with expectations at what is a traditionally quieter time of year for the diamond industry as polishing factories in India prepare for closures ahead of the Diwali holidays. The steady overall demand for De Beers Group rough diamonds is reflected in the ongoing consumer demand for diamond jewellery ahead of the key holiday sales season in the US," said De Beers Chief Executive Officer Bruce Cleaver.
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COMPANIES - FTSE 250
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Property firm Assura said its first half ended September 30 was "a period of good progress", with its portfolio now standing at 603 properties with an annualised rent roll of GBP139.3 million. "Together with the strength of our portfolio and the expertise of our teams, we are well placed to take advantage of the opportunities ahead. That said, we recognise the current macro-economic uncertainty and industry-wide inflationary pressure and will continue to monitor and take a cautious approach to capital investment to ensure long-term success," said CEO Jonathan Murphy.
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Hill & Smith said it completed the acquisition of the business and assets of National Signal Inc, for USD25.3 million in cash. National Signal designs, manufactures and supplies off-grid solar lighting solutions for the US market. It also completed the buy of Widnes Galvanising, to expand its presence in the north west of the UK. The infrastructure firm said trading has been robust since its half year, with current foreign exchange rates "providing potential outperformance".
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OTHER COMPANIES
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Global events firm Hyve Group said it delivered revenue of around GBP122 million in its financial year, compared to GBP22 million a year before, "after excluding revenues from discontinued operations in respect of Russia, Ukraine and Turkey". It said the speed of its recovery has "surpassed expectations", and it has returned to a positive headline earnings before interest, tax, depreciation and amortisation without insurance proceeds. It has agreed to sell its Turkish business for up to GBP8 million, as it continues to "streamline" its portfolio. "It is clear that our business has now almost fully recovered from the turbulence of the last two years, and in many cases, we are pleased to have delivered significant growth compared to pre-Covid performance," said CEO Mark Shasoua, adding: "Looking ahead, we must of course remain vigilant/mindful of macroeconomic challenges, however we are optimistic about the next 12 months and this optimism is underpinned by strong forward bookings and an increase in like-for-like customer spend."
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By Elizabeth Winter; elizabethwinter@alliancenews.com
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