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(Alliance News) - Stock prices in London are seen opening higher on Thursday with the FTSE 100 finding some support from pound weakness, though investors continue to fret that rising inflation will lead to interest rate hikes.
In early company news, distiller Diageo said it was pleased with current trading, private equity investor 3i Group named a new chair, and online fashion retailer boohoo warned on cost pressures.
IG futures indicate London's large-cap index is to open 33.64 points higher at 7,141.80. The FTSE 100 closed up 80.06 points, or 1.1%, at 7,108.16 Wednesday.
The pound was quoted at USD1.3454 early Wednesday, up from USD1.3434 at the London equities close Wednesday. Sterling fell to its lowest level since January against the dollar on Wednesday.
boohoo said it delivered an "excellent operational and robust financial performance" during the first half, which saw the online fashion retailer generate record levels of revenue but less profit.
For the six months to August 31, revenue was GBP975.9 million, up 20% from GBP816.5 million last year, but pretax profit fell to GBP24.6 million, down 64% from GBP68.1 million.
Looking ahead, boohoo expects full-year sales growth of 20% to 25%, which implies second half sales growth of 20% to 30%.
However, annual adjusted earnings before interest, tax, depreciation, and amortisation margins are now expected to be 9% to 9.5%, lower than 9.5% to 10% as previously guided. This reflects ongoing investments across technology, offices and infrastructure, boohoo noted.
boohoo warned elevated short-term cost pressure experienced in the first half is expected to continue in the second half alongside recent freight cost inflation in the supply chain and wage inflation within its distribution centres.
"The pandemic is still adversely affecting consumer demand globally, both online and on the high street. We are pleased all our brands have continued to grow robustly across the two-year period, with growth being strongest in the UK and US, the rest of Europe being less strong and the rest of world declining slightly. The weaker international growth, the group believes, is driven by Covid-related factors, such as continued lockdowns and significantly extended delivery times," boohoo said.
Guinness brewer Diageo said it has made a strong start to financial 2022, with organic net sales momentum across all regions. The spirits and beer company said this reflected "excellent execution" as it benefited from resilience in off-trade and continued recovery in the on-trade. However, Diageo said it expects near-term volatility to remain, including the potential future waves of Covid-19.
Diageo said its North American business was performing strongly, despite some supply chain constraints, reflecting resilient consumer demand. Further, its business in Europe was recovering ahead of expectations, it added.
"We expect organic operating margin to benefit from a further recovery in sales volumes, positive channel mix and premiumisation trends, while we are continuing to invest in our marketing and commercial capabilities. As previously indicated, we are managing rising inflationary pressures, which are partly due to supply chain constraints," said Chief Executive Officer Ivan Menezes.
3i Group said Chair Simon Thompson will not seek re-election the company's 2022 annual general meeting.
3i Group said David Hutchison, currently senior independent director and chair of 3i's valuations committee, will become non-executive chair following the announcement of its half-year results, which is expected to take place on November 11.
The euro was priced at USD1.1600, down from USD1.1618. Against the yen, the dollar was trading at JPY111.9, up from JPY111.85.
The Japanese Nikkei 225 index closed 0.3% lower on Thursday. In China, the Shanghai Composite was up 0.8%, while the Hang Seng index in Hong Kong was down 0.6%. The S&P/ASX 200 in Sydney ended up 1.9%.
The internationally exposed FTSE 100 has been buoyed partly by a weaker pound on fears of stagflation - a mix of high inflation and low economic growth.
CMC Markets analyst Michael Hewson commented: "European markets and US markets managed to stage a modest rebound yesterday, however it all felt a little bit half hearted, when compared to the steep falls seen on Tuesday. The FTSE 100 managed to stand out, more than reversing its Tuesday losses as investors continued to balance the risks of surging energy prices, supply chain disruptions, and concerns about more persistent inflation.
"Fears over stagflation do appear to be rising; after all, how could they not be when you see the sorts of increases being seen in energy prices, a trend that will eat into people's disposable income, thus reducing their capacity to spend on other incidentals. That said it's still set to be a negative month for the DAX, only its second one this year, while the FTSE 100 has barely moved, as we look towards today's European open, and another positive start."
China's manufacturing activity was steady in September, according to the latest Caixin purchasing managers' index figures.
The manufacturing PMI registered 50.0 points in September, improved from 49.2 points in August. The 50 point threshold is what separates growth from decline, so the latest figure suggests operating conditions in the Chinese manufacturing sector were stable in September.
The September reading was the second-lowest over the past 17 months, Caixin added. Inflationary pressures gathered pace, with input costs accelerating. It was the quickest rate of inflation seen in four months, the survey said.
Brent oil was quoted at USD78.66 a barrel Thursday morning, down from USD79.09 a barrel late Wednesday in London. Gold stood at USD1,728.41 an ounce, lower against USD1,732.75.
Thursday's economic calendar has German unemployment at 0855 BST. The same from the eurozone is out at 1000 BST, followed by German inflation at 1300 BST. US GDP is out at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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