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(Alliance News) - Stock trading in London was set for a muted open on Tuesday as investors look towards upcoming monetary policy decisions from the US Federal Reserve and the Bank of England on Wednesday and Thursday.
In early UK company news, oil major BP unveiled a fresh USD1.25 billion buyback after improved commodity prices boosted third-quarter profit. betting firm Flutter Entertainment revealed a hit from unfavourable sports results in October. Service office provider IWG is mulling splitting off its digital and technology assets into a separate business.
IG says futures indicate the FTSE 100 index of large-caps to open down 6.92 points, or 0.1%, at 7,281.70 on Tuesday. The FTSE 100 closed up 51.05 points, or 0.7%, at 7,288.62 on Monday.
Kicking off another central bank heavy week, Australia's central bank on Tuesday said an interest rates lift-off could occur in 2023, as it also dropped the yield target for a security which matures in 2024, following a recent spike.
The RBA had previously not expected an interest rate lift off before 2024. However, Governor Philip Lowe said it may now happen sooner.
Michael Hewson, chief market analyst at CMC Markets, said: "This neatly tees us up for the conclusion of tomorrow's Federal Reserve policy decision when the central bank is set to sketch out its timetable to taper its own USD120 billion bond buying program, followed by the Bank of England on Thursday, where it's almost certain there could also be a modest tweak to the policy settings."
The pound underperformed overnight as the BoE meeting loomed. Sterling was quoted at USD1.3663 early Tuesday, slipping from USD1.3675 at the London equities close on Monday
The euro traded at USD1.1607 early Tuesday, higher than USD1.1589 late Monday.
In focus for the euro on Tuesday are manufacturing PMI readings from Germany and the eurozone at 0855 GMT and 0900 GMT, respectively.
Against the yen, the dollar fell to JPY113.67 versus JPY114.02.
In early UK company news, BP's quarterly profit soared on improved oil prices as it plans a fresh USD1.25 billion share buyback.
Underlying replacement cost profit for the third quarter of 2021 rose to USD3.32 billion from just USD86 million year-on-year.
"This has been another good quarter for BP - our businesses are generating strong underlying earnings and cash flow while maintaining their focus on safe and reliable operations. Rising commodity prices certainly helped," said Chief Executive Bernard Looney.
However, BP's reported loss for the quarter was USD2.54 billion, widening from USD450 million a year ago. This was due to "significant adverse fair value accounting effects of USD6.1 billion pre-tax, primarily due to the exceptional increase in forward gas prices towards the end of the quarter."
Nonetheless, the oil company plans a further share buyback worth USD1.25 billion. It expects to complete this before announcing its fourth-quarter results, and will outline plans for the final tranche of buybacks for 2021 surplus cash flow when releasing the results.
It said: "On average, based on BP's current forecasts, at around USD60 per barrel Brent and subject to the board's discretion each quarter, bp continues to expect to be able to deliver buybacks of around USD1.0 billion per quarter and have capacity for an annual increase in the dividend per ordinary share of around 4% through 2025."
Brent oil was trading at USD85.10 a barrel on Tuesday, up from USD84.65 late Monday.
Lender Standard Chartered reported a jump in third-quarter profit amid "further progress".
Operating income rose to USD3.77 billion in the third quarter, up 7% year-on-year. Pretax profit jumped 44% to USD1.08 billion, helped as StanChart's credit impairment charge was reduced to USD107 million from USD353 million.
"We delivered a return to top-line growth in the third quarter and achieved further progress against our strategic priorities, with strong performance in our Financial Markets and Trade businesses and ongoing positive momentum in Wealth Management," said Chief Executive Bill Winters.
The emerging markets-focused bank said it continues to expect full-year income "similar" to that achieved in 2020 on a constant currency basis. It expects credit impairment to remain at low levels in the fourth quarter.
Its CET1 ratio at the full-year is seen around the top of the 13% to 14% range. This compares with 14.6% as at September 30.
Flutter Entertainment lowered its full-year earnings guidance range after a string of punter-friendly sports results in October.
Total revenue for the third quarter of the year was GBP1.44 billion, up 9% on GBP1.33 billion a year ago. Online revenue growth of 13% at constant currency was driven by Australia, up 20%, and the US, up 85%.
However, the betting operator noted that it has seen unfavourable sports results in first 24 days of October. This has hit earnings before interest, tax, depreciation and amortisation by around GBP60 million.
Combined with an expected GBP10 million hit from a temporary Netherlands exit, it now expects adjusted Ebitda for 2021, for its operations excluding the US, in a range of GBP1.24 billion to GBP1.28 billion, versus prior guidance of GBP1.27 billion to GBP1.37 billion.
In the US, net revenue guidance was unchanged but Flutter now expects an adjusted Ebitda loss of between GBP250 million and GBP275 million, versus a prior range of GBP225 million to GBP275 million. This includes a GBP15 million hit from adverse sports results in October.
Chief Executive Peter Jackson stressed: "While a run of customer-friendly results in October have resulted in win margins being below expected levels in the quarter to date, the underlying strength of our business is clear; we have grown our online recreational player base by 46% in just two years. With more international jurisdictions and US states on the path to regulation, we look forward to sustainably growing our global player base further in 2022."
IWG said September saw its best monthly performance to date of 2021 as it revealed it is mulling splitting off its digital and technology assets.
The office workspace provider reported revenue of GBP550.8 million for the third quarter of 2021, down from GBP571.8 million year-on-year.
"The momentum in trading performance has accelerated during the third quarter, with demonstrable progress in all major territories and the outlook for the remainder of the year remains encouraging. The order book for 2022 is building and, if market conditions remain favourable, continued progress is expected," said IWG.
While there remains macroeconomic uncertainty, the FTSE 250-listed firm said its confidence in achieving 2021 results in line with internal expectations is underpinned - and the stage is set for a stronger recovery in 2022.
IWG also said it has undertaken a preliminary review to assess the "strategic and commercial rationale" for separating its digital and technology assets into a separate business. These assets include systems and processes to originate sales demand, manage inventory, and deliver services in an "efficient and cost-effective" manner.
It added: "Similarly, the potential to more broadly leverage the intellectual property of the group, together with the ownership structure of the property portfolio, is the subject of further review to fully assess the options available to reorganise the assets of the group."
In Asia on Tuesday, the Japanese Nikkei 225 index ended down 0.4%. In China, the Shanghai Composite closed down 1.1%, while the Hang Seng index in Hong Kong was down 0.5%. The S&P/ASX 200 in Sydney closed down 0.6%.
In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.3%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.6%. The Dow briefly jumped above 36,000 points for the first time in early trade as all three major averages set fresh record closes. The index closed at 35,913.84 points.
"With 80% of companies in the S&P 500 so far beating expectations on earnings, concerns about rising prices impacting company profit margins are for now being set aside," said CMC's Hewson.
However, the market commentator added: "Whether this trend can continue is obviously a moot point, with central banks seemingly intent on starting the withdrawal process of some of their stimulus measures, however for now the path of least resistance would appear to be for further gains for stock markets, as long as central banks don't overplay their hand."
Gold was quoted at USD1,795.03 an ounce early Tuesday, higher than USD1,790.75 on Monday.
By Lucy Heming; lucyheming@alliancenews.com
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