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(Alliance News) - Equity prices in London are set to advance at the open on Thursday ahead of this week's two key risk events: an interest rate decision from the European Central Bank and the US inflation print for May.
In early UK company news, Altice revealed it has bought a 12% stake in BT Group, Auto Trader resumed its payout even as full-year profit slipped, and Amigo said it is mulling all options as it faces insolvency.
IG says futures indicate the FTSE 100 index of large-caps to open up 11.09 points, or 0.2%, at 7,092.10 on Thursday. The FTSE 100 closed down 14.08 points, or 0.2%, at 7,081.01 on Wednesday.
"This week's price action in equity markets appears to have been more or less dictated by how big a rise we might see in today's US CPI report for May, as well as how the European Central Bank sees the current outlook for the economy in Europe over the next few months," said Michael Hewson, chief market analyst at CMC Markets.
The European Central Bank announces its latest policy decision at 1245 BST on Thursday. This will be followed by a press conference with President Christine Lagarde at 1330 BST.
No change in policy is expected from the central bank, with focus lying on any mention of the 'T' word - tapering.
The euro traded at USD1.2171 early Thursday ahead of the decision, down from USD1.2186 late Wednesday.
"Some of the ECB's problems are outside of its control, namely a possible rebound in US yields if today's US May CPI number shows a big gain, but for the here and now the central bank doves need to convince the hawks that now is not the time to start contemplating a hawkish shift in stance," said CMC's Hewson.
US inflation data is due at 1330 BST. Consensus, according to FXStreet, expects the consumer price index to rise 4.7% year-on-year in May, picking up pace from 4.2% in April. A reading over 5% would spark fears that the US Federal Reserve, which meets next week, could start to mull monetary policy tightening sooner than expected.
Alongside this, the latest weekly US initial jobless claims figures are due.
Sterling was quoted at USD1.4113 early Thursday, lower than USD1.4120 at the London equities close on Wednesday. Against the yen, the dollar eased to JPY109.49 versus JPY109.60.
In early UK company news, Patrick Drahi's Altice UK revealed it has taken a 12.1% stake in telecommunications firm BT Group, a total of 1.2 billion shares.
Altice is an owner and operator of telecom and broadband networks internationally, having built and developed significant networks in the US, France, Portugal and Israel. Billionaire Drahi founded Altice in 2002.
Altice UK has been established for the purpose of holding the shares in BT.
Altice said it "holds the board and management team of BT in high regard and is supportive of their strategy." It has told the board it does not intend to make a takeover offer.
Based on BT's Wednesday closing price of 183.15p, the Altice's stake is worth around GBP2.2 billion.
"Altice UK has made this significant investment in BT as it believes that it has a compelling opportunity to deliver one of the UK government's most important policies, namely the substantial expansion of access to a full-fibre, gigabit-capable broadband network throughout the UK," it said.
BT, in response, said it welcomes all investors who recognise the long-term value of the business.
"We are making good progress in delivering our strategy and plan," the FTSE 100 constituent said.
Online automotive marketplace Auto Trader Group reported a fall in annual revenue and profit, though reinstated its dividend.
Revenue fell 29% to GBP262.8 million for the financial year that ended March 31, with trade revenue down 31% to GBP225.2 million following a decision to provide free advertising to retailer customers in April, May, December and February and at a discounted rate in June.
Auto Trader's pretax profit slumped 27% to GBP157.4 million.
However, the company has decided to reinstate its capital allocation policy and proposed a final dividend of 5.0 pence, versus no payout a year ago. With no interim dividend, this 5p will be the total dividend for the year, up from 2.4p the year before.
Auto Trader has started the new financial year in a strong position, it said, and expects to deliver deliver high single digit growth on the average revenue per retailer achieved in the 2020 financial year - meaning two years prior - with operating profit margins in line with 2020 levels.
Average revenue per retailer for the recently ended financial year was GBP1,324, down 32% on GBP1,949 in the 2020 financial year. The operating profit margin fell to 61% from 70%.
Hazard detection and life protection technologies firm Halma bumped up its dividend as it reported full-year profit growth.
Revenue dipped 2% in the financial year that ended March 31, to GBP1.32 billion from GBP1.34 billion, but pretax profit jumped 13% to GBP252.9 million.
Halma noted a 5% decline in revenue over the first half improved to 2% growth in the last six months of the year. Profit, meanwhile, benefited from the disposal of Fiberguide Industries.
Given the performance in the year, the total dividend was increased by 7% to 17.65p. This marks the 42nd consecutive year of dividend per share growth of 5% or more, Halma noted.
"For the year ahead, we expect our markets to continue to recover, albeit at varying rates, while acknowledging that there are potential headwinds including currency, inflation, and supply chain constraints," said Chief Executive Andrew Williams.
He noted that organic constant currency revenue for the five months to the end of May was up 10% year-on-year. For the recently ended financial year, organic constant currency revenue was down 6%, with an 11% decline in the first half improving to a flat performance in the second.
"We have made a good start to the year, order intake is currently ahead of revenue and the same period last year, and we also have a good pipeline of potential acquisition opportunities," said Williams. "We currently expect to deliver full year low double-digit percentage organic constant currency profit growth (prior to any IAS 38 impact) and a more normal level of return on sales."
Amigo Holdings said it continues to mull all options after the UK High Court rejected its scheme to settle compensation claims.
The provider of guarantor loans confirmed that, based on the expected volumes of complaints from current and past customers, without a scheme of arrangement to deal with complaints, the value of its assets are less than the amount of its liabilities, resulting in an insolvent balance sheet.
Amigo said it continues to engage with the UK Financial Conduct Authority, which raised objections over Amigo's scheme to the court, over an "appropriate way forward". This could result in a revised scheme of arrangement or insolvency.
In the US on Wednesday, Wall Street ended in the red, with the Dow Jones Industrial Average ending down 0.4%, the S&P 500 down 0.2% and Nasdaq Composite down 0.1%.
US President Joe Biden on Wednesday revoked executive orders from his predecessor Donald Trump seeking to ban Chinese-owned mobile apps TikTok and WeChat over national security concerns, the White House said.
A statement said that instead of banning the popular apps, the Biden administration would carry out a "criteria-based decision framework and rigorous, evidence-based analysis to address the risks" from internet applications controlled by foreign entities.
Meanwhile, Biden has stressed the need for the world's democracies to stand together as he arrived in the UK on his first overseas trip as US president.
Biden will meet UK Prime Minister Boris Johnson in Cornwall on Thursday ahead of the G7 summit and is expected to deliver a warning not to let the Brexit trade dispute "imperil" the Northern Ireland peace process.
In Asia on Thursday, the Japanese Nikkei 225 index ended up 0.3%. In China, the Shanghai Composite was up 0.6%, while the Hang Seng index in Hong Kong was up 0.2%. The S&P/ASX 200 in Sydney closed up 0.4%.
Gold was quoted at USD1,886.08 an ounce early Thursday, lower than USD1,890.50 on Wednesday. Brent oil was trading at USD71.79 a barrel, lower than USD72.36 late Wednesday.
By Lucy Heming; lucyheming@alliancenews.com
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