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(Alliance News) - Stocks in London were called lower on Tuesday, as investors looked ahead to critical US debt talks, set to resume later in the day, while the UK jobless rate rose unexpectedly and Vodafone plans to cut jobs in the UK and abroad.
US President Joe Biden will reconvene crunch debt talks Tuesday with senior Republican leaders including House Speaker Kevin McCarthy in another attempt to avert a costly US default.
The talks have a lot of ground to cover, with the two parties still sharply divided on the terms under which they will agree to lift the government's borrowing cap to pay for existing spending commitments.
Meanwhile, in local economic news, UK unemployment unexpectedly ticked up in the three months to March, as wage inflation remained sticky.
In early company news, telecommunication provider Vodafone said it would cut 11,000 jobs as part of a transformation plan, amid stagnant revenue. Fast-fashion retailer boohoo posted a double-digit fall in annual revenue, and expects sales to fall further in the next half.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 6.5 points, 0.1%, at 7,771.2
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Hang Seng: down 0.2% at 19,927.86
Nikkei 225: closed up 0.7% at 29,842.99
S&P/ASX 200: closed down 0.5% at 7,234.70
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DJIA: closed up 47.98 points, 0.1%, at 33,348.60
S&P 500: closed up 0.3% at 4,136.28
Nasdaq Composite: closed up 0.7% at 12,365.21
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EUR: flat at USD1.0872 (USD1.0871)
GBP: soft at USD1.2511 (USD1.2515)
USD: down at JPY135.90 (JPY136.07)
Gold: down at USD2,013.24 per ounce (USD2,015.35)
Brent: firm at USD75.47 a barrel (USD75.26)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
11:00 CEST EU foreign trade
11:00 CEST EU gross domestic product
11:00 CEST EU flash employment
11:00 CEST Germany ZEW indicator of economic sentiment
08:55 EDT US Johnson Redbook retail sales index
09:15 EDT US industrial production
10:00 EDT US NAHB housing market index
16:30 EDT US API weekly statistical bulletin
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UK unemployment ticked up in the three months to March, figures from the Office for National Statistics showed. The UK jobless rate unexpectedly edged up to 3.9% for the three months to March. Market consensus, as cited by FXStreet, had expected it to remain unchanged from 3.8% in the three months to February. "The increase in unemployment was largely driven by people unemployed for over 12 months," ONS said. In the three months to March, annual growth in average total pay, including bonuses, slowed to 5.8% from 5.9% in the previous three-month period. It still topped market consensus estimates of 5.1%, however. Excluding bonuses, average earnings rose 6.7%, compared to 6.6% last month. This was below the consensus of 6.8%.
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One in five UK taxpayers will be paying higher-rate income tax by 2027, as frozen thresholds bite households, according to the Institute for Fiscal Studies. Over recent decades, higher rates of income tax have gone from being reserved only for the richest to something that a far more substantial proportion of the population, including some teachers, nurses and electricians, can expect to encounter, it said. By 2027-28, 7.8 million people are projected to be paying income tax at 40% or above.
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BROKER RATING CHANGES
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Panmure starts International Personal Finance with 'buy' - price target 200 pence
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RBC raises Associated British Foods to 'outperform' (sector perform) - price target 2,250 (2,150) pence
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COMPANIES - FTSE 100
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Vodafone said its annual performance slowed in line with its expectations. In the financial year to March 31, the telecoms firm said revenue was virtually flat year-on-year, up just 0.3% to EUR45.71 billion from EUR45.58 billion. Pretax profit jumped to EUR12.82 billion from EUR4.10 billion, largely due to a gain on the disposal of Vantage Towers. Total dividends for the year were unchanged at 9 euro cents, including a 4.5 cents final dividend. Following a five-month strategic review, Vodafone announced an "action plan" to focus on "customers, simplicity and growth". "Our performance has not been good enough. To consistently deliver, Vodafone must change," said CEO Margherita Della Valle. The simplicity element of the plan will involve cutting 11,000 jobs in the next three years. In financial 2024, Vodafone guides for adjusted earnings before interest, tax, depreciation and amortisation after leases to be broadly flat at around EUR13.3 billion, with adjusted free cash flow to be around EUR3.3 billion.
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Imperial Brand reported a "resilient" half-year, with the cigarette maker's revenue edging up 0.3% to GBP15.41 billion from GBP15.36 billion a year before. Pretax profit rose to GBP1.44 billion from GBP1.26 billion. The performance came despite "temporarily increased volume declines" against a strong comparator, the firm said. "As expected, this reflects a return to pre-Covid buying patterns as well as our decision to exit Russia last year," said Stefan Bomhard. Imperial backed its previous guidance for adjusted operating profit growth in its full year. It declared an interim dividend of 43.18p per share, up 1.5% from 42.54p a year before.
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COMPANIES - FTSE 250
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Bakery chain Greggs reported a strong performance in the first 19 weeks of 2023. Like-for-like sales in company-managed shops jumped 17% year-on-year, though this partly reflects the Omicron virus outbreak in 2022. In the 10 weeks to May 13, like-for-like sales growth has averaged 16%. The company backed its annual outlook, confident of making further progress despite continuing challenges. "Although we expect to see ongoing material cost inflation, we have good forward cover on key commodities. Consumer disposable incomes are likely to stay under pressure, but we remain confident that our outstanding value proposition continues to be compelling," Greggs said.
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OTHER COMPANIES
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Online fast fashion retailer boohoo said annual revenue fell 11% year-on-year to GBP1.77 billion from GBP1.98 billion, in the financial year to February 28. It swung to a pretax loss of GBP90.7 million from a profit of GBP7.8 million. "The group's focus for the year ahead is on rebuilding profitability and getting back to growth," boohoo said. In financial 2023, it expects revenue to be flat or to fall by as much as 5% from the prior year. The decline will be steeper in the first half, as the company increases its emphasis on making profitable sales. boohoo expects adjusted Ebitda to improve, driven by operational gains, lower costs, and cost efficiencies. Capital expenditure is expected between GBP80 and GBP90 million. "Looking ahead, we are investing for the future growth of this business with automation, local fulfilment capacity in the US and building global brand awareness. We will deliver sustainable returns on these investments," said CEO John Lyttle.
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By Elizabeth Winter, Alliance News senior markets reporter
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