(Alliance News) - Stocks in London were called to open higher on Thursday, as investors in Europe kept their cool, despite hawkish US central bankers and a weak finish on Wall Street.
Sentiment in New York was undermined by the latest comments by a Federal Reserve official, seeming to indicated high interest rates could persist for "a few years".
In comments reported by Bloomberg, Fed Vice Chair John Williams advocated for a "sufficiently restrictive stance of policy", adding that interest rates were "barely into restrictive territory".
"We're going to need to maintain that for a few years to make sure we get inflation to 2%, and then eventually over time we'll get interest rates presumably back to more normal levels," Williams said.
Fed Governor Christopher Waller added: "It might be a long fight, with interest rates higher for longer than some are currently expecting."
Meanwhile, Minneapolis Fed President Neel Kashkari warned there was "not yet much evidence, in my judgment, that the rate hikes that we've done so far are having much effect on the labour market".
"We need to bring the labour market into balance, so that tells me we need to do more."
"So, the message is clear. The Fed is not done yet. This means that the rate hikes will continue, and that will continue pressuring the US yields higher as well," said Swissquote Bank's Ipek Ozkardeskaya.
Meanwhile, Europe's largest economy saw inflation speed up slightly at the beginning of the year, according to preliminary figures released early Thursday.
Destatis said consumer prices in Germany rose 1.0% in January from the month before, reversing a 0.8% monthly decline in December. Annual inflation ticked up to 8.7% from 8.6% at the end of 2022.
On a harmonised basis - which allows for EU-wide comparison - prices rose 0.5% on a monthly basis, compared to a 1.2% fall in December. Harmonised annual inflation eased to 9.2% from 9.6% a month before, however.
In early corporate news, AstraZeneca saw double-digit annual sales growth in 2022, despite a weaker fourth quarter, while Unilever said a fall in annual sales volumes is likely to persist into the first half of 2023.
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 22.7 points, 0.3%, at 7,907.87
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Hang Seng: up 1.5% at 21,592.60
Nikkei 225: closed down 0.1% at 27,584.35
S&P/ASX 200: closed down 0.5% at 7,490.30
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DJIA: closed down 207.68 points, or 0.6%, at 33,949.01
S&P 500: closed down 46.14 points, or 1.1%, at 4,117.86
Nasdaq Composite: closed down 203.27 points, or 1.7%, at 11,910.52
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EUR: up at USD1.0738 (USD1.0734)
GBP: up at USD1.2097 (USD1.2084)
USD: flat at JPY131.28 (JPY131.29)
GOLD: up at USD1,880.75 per ounce (USD1,878.10)
OIL (Brent): up at USD85.17 a barrel (USD84.01)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
08:30 EST US unemployment insurance weekly claims report
08:30 EST US weekly export sales
16:30 EST US Foreign Central Bank holdings
16:30 EST US federal discount window borrowings
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UK house prices are starting to reflect the shift in demand in the market, according to surveyors. Agreed sales, house prices and new instructions to sell homes remained on a downward trend in January, the Royal Institution of Chartered Surveyors said. Property professionals' expectations suggest this picture is likely to remain in place for a while longer as the market adjusts to higher interest rates, Rics' report added. A net balance of 47% of surveyors reported seeing a fall rather than an increase in new buyer inquiries, deteriorating from a balance of 40% who saw this the previous month.
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Civil servants working in the UK government's biggest department start 20 days of strikes as part of the long-running dispute over pay, jobs, pensions and conditions. Members of the Public & Commercial Services union working for the Department for Work & Pensions in a number of jobcentres and other offices will be involved in the action. The PCS said around 500 of its members in Bolton and Stockport and 170 in jobcentres in Liverpool will strike in the coming weeks.
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BROKER RATING CHANGES
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Berenberg starts Ashtead Technology with 'buy' - price target 405 pence
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Barclays starts Ithaca Energy with 'underweight' - price target 140 pence
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HSBC cuts Hiscox to 'hold' (buy) - price target 1,250 (1,150) pence
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COMPANIES - FTSE 100
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British American Tobacco said revenue rose 7.7% in 2022, reaching GBP27.66 billion from GBP25.68 billion, with GBP2.89 billion coming from New Categories, which saw 41% growth. Pretax profit edged up to GBP9.32 billion from GBP9.16 billion. Looking ahead to 2023, BAT expects global tobacco industry volume to fall by around 2%. The Dunhill cigarette maker expects 3% to 5% organic constant currency revenue growth, with strong growth expected in New Categories, which includes heated and vaping products. It expects mid-single figure constant currency adjusted earnings per share growth, which will be weighted towards the second half. CEO Jack Bowles expects the macro-economic environment to "remain challenging", but is confident of delivering "long-term sustainable value" for BAT's shareholders.
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AstraZeneca said total revenue in 2022 rose by 19% to USD44.35 billion from USD37.42 billion a year before, or by 24% at constant currency. Growth came from all therapy areas, as well as the addition of Alexion. Astra swung to a pretax profit of USD2.50 billion from a loss of USD265 million, while core earnings per share jumped 26% to USD6.66. The pharmaceutical maker saw a weaker fourth quarter, however, as revenue fell by 7% to USD11.21 billion and core EPS fell by 17% to USD1.38. The lower revenue in the quarter was partly due to the decline in Vaxzevria, Astra said. Revenue excluding Vaxzevria rose 17%. Looking ahead, Astra expects revenue in 2023 to grow at low-to-mid single-digit percentages at constant currency, or by low double-digit percentages excluding Covid-19 medicines. Core EPS is expected to see high single-digit to low double-digit growth.
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Consumer goods firm Unilever said annual turnover rose 15% year-on-year to EUR60.07 billion from EUR52.44 billion, as pretax profit rose 21% to EUR10.34 billion from EUR8.56 billion. Underlying sales growth was 9.0%, driven by price growth, given that volumes fell 2.1%. In 2023, Unilever expects to deliver strong underlying sales growth and improving volume performance. It said net material inflation in the first half is expected to be around EUR1.5 billion, but will be "significantly lower" in the second half. It expects underlying price growth to remain high and volumes to fall in the first half, but said it is "too early to say" whether volumes will see positive growth in the second half. Unilever expects 2023 underlying sales growth to be at least in the upper half of a 3% to 5% range. "Despite sharp rises in material costs, we have prioritised stepping up our brand and marketing investment," said CEO Alan Jope.
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COMPANIES - FTSE 250
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Watches of Switzerland reported double-digit growth in its financial third quarter ended January 29, as revenue rose 17% year-on-year to GBP407 million from GBP348 million. This was driven by luxury watches, "where demand continues to exceed supply". The firm remains confident of delivery long-term growth. For the whole of financial 2023, Watches expects to bring in revenue of GBP1.50 billion to GBP1.55 billion, with adjusted earnings before interest and tax to be between GBP163 million to GBP175 million. The guidance is on a pre-IFRS 16 basis, with a constant exchange rate applied to the fourth quarter. CEO Brian Duffy reports the firm's expansion into Europe is seeing "positive" early trading.
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OTHER COMPANIES
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Japan's Toyota Motor left its annual forecasts unchanged despite ongoing disruption from the global chip shortage. The world's top-selling automaker, which reshuffled its executive line-up last month, is still suffering production setbacks caused by the semiconductor shortage along with other industry players. But it said it still expects net profit of JPY2.36 trillion, about USD18 billion, in the 12 months to March 2023, down 17% on-year. Toyota logged a third-quarter net profit of JPY727.9 billion, down 8% on-year, and for April-December, net profit dropped 18% to JPY1.90 trillion. Sales revenue rose 18% to JPY27.464 trillion from JPY23.267 trillion.
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By Elizabeth Winter, Alliance News senior markets reporter
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