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(Alliance News) - Stock prices in London are seen opening slightly higher on Thursday following a positive close in New York on Wednesday amid hopes of US government stimulus.
In early UK company news, jet engine maker Rolls-Royce said it will raise GBP2 billion via a fully underwritten, but heavily discounted, rights issue in a bid to shore up its balance sheet. Medical devices maker Smith & Nephew said it expects to post a revenue decline in the third quarter. DIY retailer Kingfisher sold a business in Russia.
IG futures indicate the FTSE 100 index is to open 18.20 points higher at 5,884.30. The blue-chip index closed down 31.40 points, or 0.5%, at 5,866.10 Wednesday.
Rolls-Royce Holdings said it intends to raise gross proceeds of around GBP2 billion by way of a fully underwritten 10 for 3 rights issue of 7.4 million new shares at 32 pence each. The stock closed down 7.4% at 130.00p on Wednesday.
The Covid-19 pandemic has sapped demand for air travel and emptied skies, depriving Rolls-Royce of vital maintenance revenue it generates when planes fly.
Last week, the company moved to distance itself from a media report which said it was in talks with the Kuwait Investment Office over it backing a GBP2.5 billion fundraising.
In conjunction with the rights issue, Rolls-Royce said it intends to commence a bond offering to raise gross proceeds of at least GBP1 billion. The Trent 1000 engine maker also agreed commitments for a new two-year term loan facility of GBP1 billion and received an indication of support from UK Export Finance for an extension of its 80% guarantee to support a potential increase of the existing GBP2 billion five-year term loan of up to GBP1 billion.
Rolls-Royce said the measures will provide the company with "improved financial resilience" and a more appropriate balance sheet structure in order to weather macro-economic risks before "we return to strong cash generation", which is expected in 2022.
"The capital raise announced today improves our resilience to navigate the current uncertain operating environment. By raising additional capital now, we will improve our liquidity headroom and reduce our level of balance sheet leverage, while supporting disciplined execution and investment to ensure we maximise value from our existing capabilities," said Chief Executive Warren East.
Smith & Nephew said it expects a third-quarter underlying revenue decline of around 4% when it reports results for the period on October 29.
The medical devices maker said all three of its franchises showed significant recovery following an overall underlying revenue decline of 29% for the second quarter.
"The improvement was strongest in our Orthopaedics franchise, as global levels of elective surgery continued to recover. Monthly group growth rates were broadly stable through the quarter, with some seasonality and monthly variation across both franchises and regions, reflecting the continuing impact of Covid-19," the company said.
Kingfisher said that it has completed the sale of its Castorama Russia business to Russian home improvement company Maxidom for around GBP73 million.
In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average up 1.2%, S&P 500 up 0.8% and Nasdaq Composite up 0.7%.
US Treasury Secretary Steven Mnuchin said on Wednesday he was hopeful that a "reasonable compromise" could be reached with Democrats on additional stimulus spending for the battered economy.
President Donald Trump's administration and Democratic leaders have been deadlocked for weeks over a follow-up to the USD2.2 trillion CARES Act passed as the coronavirus pandemic intensified in March, after key provisions of the law that have been credited with bolstering the economy expired.
Following weeks of faltering negotiations, Mnuchin and Democratic House Speaker Nancy Pelosi spoke on both Monday and Tuesday and agreed to continue talking.
"Markets will be vulnerable to headline surprises. In this case, though, the highest risk, I believe, is a positive one. If an announcement that a US fiscal stimulus deal has been reached. If that should occur, and we all deserve some good news for a change, it should be strongly positive for equity markets," said Oanda Markets analyst Jeffery Halley.
The pound was quoted at USD1.2938 early Thursday, firm from USD1.2928 at the London equities close Wednesday.
The euro stood at USD1.1745, flat from USD1.1744 at the European equities close Wednesday. Against the yen, the dollar was trading at JPY105.45, flat compared to JPY105.46.
Brent oil was quoted at USD42.32 a barrel Thursday morning, up from USD41.92 at the London equities close Wednesday. Gold was trading at USD1,892.32 an ounce, lower from USD1,898.89.
In China, the Shanghai market is closed for a week from Thursday for the National Day Golden Week holiday, but the market in Hong Kong will only be shut for Thursday and Friday, re-opening on Monday.
Trading on the Tokyo Stock Exchange, among the world's biggest, was halted for the whole day Thursday after the system was hit by one of its worst-ever glitches.
A technical problem involving the delivery of market information was flagged to the operator of the Tokyo Stock Exchange, and business was stopped less than half an hour before the opening bell. The decision not to open for the rest of the day was taken around noon, with Japan Exchange Group giving no further details on the cause.
Meanwhile, the Japanese manufacturing sector moved another step closer to stabilisation, helped by the slowest fall in new orders since January.
The headline au Jibun Bank Japan manufacturing purchasing managers' index rose slightly to 47.7 in September from 47.3 in August - hitting a seven month high.
In Thursday's economic calendar, there are manufacturing PMIs for Germany, eurozone and UK at 0855 BST, 0900 BST and 0930 BST respectively. In the afternoon there are US personal consumption expenditure figures and initial jobless claims at 1330 BST, followed by a Markit manufacturing PMI at 1445 BST and a manufacturing report from the ISM at 1500 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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