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(Alliance News) - Stocks in London are called to open higher on Wednesday, after some positive earnings from large-cap listings, though tepid data from China kept a lid on sentiment in Asia.
China slipped into deflation territory as consumer prices contracted annually last month, for the first time in more than two years, as slowing domestic spending weighs on the country's post-Covid economic recovery.
The consumer price index fell 0.3% on-year in July, the National Bureau of Statistics said, having flatlined in June. Analysts polled by Bloomberg had anticipated a 0.4% decline in the index for July.
"This morning headline CPI inflation in China followed the PPI measure into outright deflation for the first time in 28 months, increasing fears that for all the promises of further stimulus measures, Chinese authorities may be facing limitations in the type of stimulus they can implement when it comes to kick starting domestic demand," said CMC Markets analyst Michael Hewson.
In corporate news, Flutter swung to a profit in the first half of 2023, whilst Hiscox saw its profit surge.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.5% at 7,566.9
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Hang Seng: down 0.2% at 19,153.27
Nikkei 225: down 0.5% at 32,204.33
S&P/ASX 200: up 0.4% at 7,338.00
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DJIA: closed down 158.64 points, or 0.5%, at 35,314.49
S&P 500: closed down 19.06 points, 0.4%, to 4,499.38
Nasdaq Composite: closed down 110.07 points, 0.8%, to 13,884.32
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EUR: up at USD1.0976 (USD1.0947)
GBP: up at USD1.2763 (USD1.2718)
USD: down at JPY142.12 (JPY143.29)
Gold: up at USD1,931.41 per ounce (USD1,925.90)
(Brent): up at USD85.95 a barrel (USD84.92)
(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 IST Ireland industrial production and turnover
07:00 EDT US MBA weekly mortgage applications survey
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The UK economy will witness "stuttering growth" over the next two years amid pressure from higher interest rates and increased unemployment, according to a think tank. The National Institute of Economic & Social Research said in its main forecast that the economy will avoid a recession – defined by two or more quarters of falling gross domestic product in a row – in 2023 but there is still a "60% risk" of a recession at the end of 2024. It predicted that UK GDP will increase by 0.4% in 2023, representing a marginal improvement on its previous forecast in May. But Niesr also downgraded previous predictions of 0.6% growth next year down to 0.3% after pressure from higher-than-expected borrowing costs. As a result, the think tank has predicted it will be another year until UK GDP recovers to where it was before the coronavirus pandemic struck in early 2020.
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Growing demand for electric vehicles has driven a surge in used car sales, figures show. Some 1.83 million cars changed hands in the UK between April and June, the Society of Motor Manufacturers & Traders said. That represented a 4.1% increase on the same period in 2022, and followed a near-identical year-on-year growth during the previous three months. The SMMT said this is partly a result of sustained growth in the new car market leading to improving availability. Sales of used battery electric cars rose by 82% year-on-year to take a market share of 1.7% with 31,000 transactions. However, despite the overall increase in used car sales, the total remained 9.9% below pre-pandemic levels.
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BROKER RATING CHANGES
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Jefferies raises Domino's Pizza to 'hold' (underperform) - price target 410 (240) pence
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Goldman cuts abrdn price target to 195 (200) pence - 'neutral'
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Credit Suisse cuts abrdn price target to 195 (210) pence - 'underperform'
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COMPANIES - FTSE 100
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Flutter Entertainment reported that revenue in the first half of 2023 rose by 42% on-year to GBP4.81 billion from GBP3.39 billion. It swung to a pretax profit of GBP83 million in the period from a loss of GBP51 million. Earnings before interest, tax, depreciation and amortisation rose by 76% to GBP765 million from GBP434 million. It noted that its US arm reached a "profitability inflection point". Its US arm swung to an adjusted Ebitda of GBP49 million, from a loss of GBP132 million a year prior. Looking ahead, it said the second half of 2022 has started in line with expectations. Assuming normalised sports results for the second half, its anticipates full year adjusted Ebitda to be "broadly in line with market expectations." Chief Executive Peter Jackson said: "The first half of 2023 marks a pivotal moment for the group, with our US business now at a profitability inflection point, helping transform the earnings profile of the Group and significantly enhance our financial flexibility."
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Hiscox said that pretax profit in the first six months of the year surged to USD264.8 million, from USD25.4 million a year earlier. It explained that this is a combined effect of the insurance service result of USD221.4 million, up 58% on the prior period, and the improved investment result of USD121.8 million, as higher bond reinvestment yields begin to earn through. Insurance revenue rose to USD1.94 billion from USD1.88 billion. Hiscox declared an interim dividend of 12.5 US cents per share, up from 12.0 cents a year ago. CEO Aki Hussain said: "Our business has delivered growth in revenues and profits in every business unit, as our proactive and disciplined underwriting and favourable market conditions come together. Our portfolio of businesses, our people and innovation to meet the changing needs of our customers position us well to continue delivering high-quality growth and earnings."
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Coca-Cola HBC reported that revenue in the six months to June 30 rose to EUR5.02 billion, from EUR4.21 billion in the six months ended July 1, 2022. Pretax profit more than doubled to EUR527.6 million from EUR234.4 million. It said that it delivered a "better-than expected" performance in the first half of 2023, led by price and mix improvements, despite headwinds. Looking ahead, the soft drink bottler upped its full-year guidance. It expects mid-teens full-year organic revenue growth, previously it had expected growth between 5% to 6%. It left its Ebit growth target unchanged in the range of 9% to 12%.
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COMPANIES - FTSE 250
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CLS Holdings reported that revenue in the first half of 2023 fell to GBP72.3 million from GBP68.3 million a year earlier. It swung to a pretax loss of GBP106.4 million from a profit of GBP21.3 million. CLS said that is "principally" due to valuation declines on investment properties of GBP132.9 million, compared to a GBP5.1 million decline year-on-year. It left its interim dividend unchanged at 2.60p. Looking ahead, CLS said that the economic backdrop for the property market has been challenging, and it expects it to remain so until interest rates have definitively peaked.
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Interdealer broker TP ICAP Group reported that revenue in the first half of 2023 rose to GBP1.13 billion from GBP1.08 billion a year earlier. Pretax profit jumped to GBP91 million from GBP72 million. On the back of the results, TP ICAP upped its interim dividend to 4.8p from 4.5p. It also said that it is launching a GBP30 million share buyback programme. TP ICAP noted that the GBP100 million of cash it targeted in the first half last year has been freed up six months ahead of schedule. It will be used to pay down debt, it added. Looking ahead, TP ICAP said that it remains on track to meet its full year 2022 guidance.
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OTHER COMPANIES
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Bank of Cyprus reported that total income in the first half of 2023 rose to EUR511 million from EUR282 million a year earlier. It noted that net interest income alone surged to EUR358 million from EUR145 million. Pretax profit climbed to EUR263 million from EUR64 million. Despite uncertainty in the global and European economic outlook, Bank of Cyprus said the Cypriot economy remains "robust" with economic growth of 3.4% in the first quarter of 2023.
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By Sophie Rose, Alliance News reporter
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