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(Alliance News) - London's FTSE 100 is called to open lower on Wednesday, but the pound perked up following a hotter-than-expected UK inflation report.
The pace of annual consumer price inflation topped forecasts, spiking to 3.5% in April, and putting focus on the Bank of England.
"The spike could cause a bit of a stink at the Bank of England, which cut interest rates just a couple of weeks ago only to see inflation smash through the 2% target. Two members of the MPC wanted to leave rates unchanged, and may well feel vindicated by today's number. Higher core inflation will be particularly concerning - since this measure of domestically generated inflation should be easier for the bank to influence," Wealth Club analyst Nicholas Hyett commented.
"The net effect of all this is a greater squeeze on the consumer, together with the probability of fewer interest rate cuts in the near term. Neither of those is good news for the government's growth agenda - which, despite surprisingly strong GDP growth in recent months, risks getting bogged down before the structural reforms to underpin future growth are in place."
In early UK corporate news, M&S warned of a profit hit from the cyber incident the retailer has been grappling with. Currys plans to reinstate its dividend.
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 0.3% at 8,757.32
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Hang Seng: up 0.4% at 23,780.18
Nikkei 225: down 0.6% at 37,315.54
S&P/ASX 200: up 0.5% at 8,386.80
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DJIA: closed down 114.83 points, 0.3%, at 42,677.24
S&P 500: closed down 0.4% at 5,940.46
Nasdaq Composite: closed down 0.4% at 19,142.72
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US 10-year Treasury yield: 4.52% (4.48%)
US 30-year Treasury yield: 5.01% (4.97%)
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EUR: higher at USD1.1339 (USD1.1258)
GBP: higher at USD1.3456 (USD1.3363)
USD: lower at JPY143.56 (JPY144.62)
GOLD: higher at USD3,320.04 per ounce (USD3,276.82)
OIL (Brent): higher at USD66.03 a barrel (USD65.09)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
17:00 BST eurozone European Central Bank Governor Philip Lane speaks
15:30 BST US EIA crude oil stocks
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UK consumer price inflation was hotter-than-expected last month, spiking to the loftiest level since the start of last year, numbers from the Office for National Statistics showed Wednesday. The pace of annual consumer price inflation accelerated to 3.5% in April, from 2.6% in March, topping the FXStreet cited consensus of 3.3%. The last time the rate of inflation was higher was back in January 2024, when it stood at 4.0%. On a monthly basis, consumer prices shot up 1.2% in April, after a 0.3% hike in March. The ONS said the on-year consumer price inflation surge was driven by "housing and household services, transport, and recreation and culture". It said overall prices in transport were up 3.3% on-year in April, an acceleration from 1.2% in March. The ONS said airfare prices were higher due to the Easter holidays. Service price inflation picked up to 5.4% in April, from 4.7% in March. Excluding energy, food, alcohol and tobacco, the annual core consumer price inflation rate was 3.8% in April, quickening from 3.4% in March.
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The UK Work & Pensions Secretary will stand firm on Labour's GBP5 billion plans for welfare cuts on Wednesday, arguing that reform is needed to make sure the system survives. Liz Kendall is expected to say there is a "risk" the welfare state would collapse without the proposed changes, which include tightening the eligibility criteria for the main disability benefit in England, the personal independence payment, Pip. Restricting Pip would slash benefits for about 800,000 people, while the sickness-related element of universal credit is also set to be cut. The package of measures is aimed at reducing the number of working-age people on sickness benefits, which grew during the pandemic and has remained high since. The government hopes the proposals can save GBP5 billion a year by the end of the decade. "Unless we ensure public money is focused on those with the greatest need and is spent in ways that have the best chance of improving people's lives, the risk is the welfare state won't be there for people who really need it in the future," she is expected to say in a speech to the Institute for Public Policy Research think tank.
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BROKER RATING CHANGES
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Citigroup raises Phoenix Group Holdings to 'buy' (neutral) - price target 730 (537) - pence
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Morgan Stanley raises AIB to 'equal-weight' (underweight) - price target 7.5 (7.0) EUR
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COMPANIES - FTSE 100
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Marks & Spencer warned of a GBP300 million to hit to profit in its new financial year following a cyber incident, marring "strong" annual earnings. The retailer said pretax profit in the year March 29 declined 24% to GBP511.8 million from GBP672.5 million the year prior. Excluding adjusting items, however, pretax profit climbed 22% to GBP875.5 million from GBP716.4 million. Revenue increase 6.0% to GBP13.82 billion from GBP13.04 billion. Profit was hurt by a GBP248.5 million impairment charge recognised in relation to the value of the investment in Ocado Retail, the grocery joint-venture it owns alongside Ocado PLC. "Overall, last year was another year of strong performance, and there are so many opportunities still ahead of us," Chief Executive Stuart Machin said. "Our Food business had another strong year as more customers chose to fill their trolleys with M&S food, more often. Our continuous investment in quality, value and innovation is paying off." The CEO continued: "In Fashion, Home & Beauty, our authoritative lead in quality and value perception and much improved style credentials has broadened appeal and grown market share. This renewed strength in product gives us the foundation to drive future growth through transforming our end-to-end supply chain and accelerating online." M&S upped its final dividend by 30% to 2.6 pence per share from 2.0p. The total dividend was 20% higher at 3.6p from 3.0p. M&S said it entered the new year "with both Food and Fashion, Home & Beauty trading ahead of budget", prior to the cyber incident. M&S said: "Since the incident, Food sales have been impacted by reduced availability, although this is already improving. We have also incurred additional waste and logistics costs, due to the need to operate manual processes, impacting profit in the first quarter. In Fashion, Home & Beauty, online sales and trading profit have been heavily impacted by the necessary decision to pause online shopping, however stores have remained resilient. We expect online disruption to continue throughout June and into July as we restart, then ramp up operations. This will also mean increased stock management costs in the second quarter." It expects a roughly GBP300 million to operating profit this year stemming from the incident, before that figure is reduced by "management of costs, insurance and other trading actions".
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JD Sports reported an increase in annual revenue but a decline in profit. It said the new year has started in line with expectations despite a "volatile" market. In the year to February 1, the athleisure retailer's pretax profit declined 11% to GBP715 million from GBP811 million the year prior. Revenue rose 8.7% to GBP11.46 billion from GBP10.54 billion. CEO Regis Schultz said: "Overall trading in the first quarter of the new financial year has been in line with our expectations in a volatile market. Despite this volatility, and uncertainty surrounding the impact of US tariff changes, we look forward into the medium term with confidence that we can continue to outperform the market, improve our profit margin and create significant value for our shareholders." JD Sports lifted its final dividend by 12% to 0.67p per share from 0.6p a year prior. It upped its total payout by 11% to 1.0p from 0.9p. JD Sports said sales in the 13 weeks to May 3 rose 3.1% on an organic basis. "All regions achieved organic sales growth in the quarter. In line with our JD First strategy, the JD segment drove group sales growth* through our store rollout programme across Europe and North America, achieving growth of 4.7% in the quarter. North America saw organic sales growth of 1.4%, reflecting in part a shift in the product launch schedule compared with last year. Europe delivered organic sales growth of 6.5% and we are seeing an improving trend in the UK, helped in part by good weather," it added.
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COMPANIES - FTSE 250
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Currys slightly lifted its annual profit outlook and said it will resume its dividend. The electronics retailer now expects to report adjusted pretax profit for the year to May 3 of GBP162 million, up 37% on-year, its outlook raised from GBP160 million. "We finished another year of strengthening performance on a high note with encouraging momentum and accelerating sales growth in both the UK&I and the Nordics. In both, we've grown profits by delivering sales growth, market share gains and gross margin increases. In the Nordics, we've also shown especially strong cost discipline in a still-challenging market," CEO Alex Baldock said. "Cashflow was very healthy. This further strengthening of our balance sheet ensures our resilience and allows the resumption of dividends." Its last dividend was an interim payout for financial 2023. Currys plans to release annual results on July 3.
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OTHER COMPANIES
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Central Asia Metals has struck an agreement to acquire Sydney-listed New World Resources, in a USD119 million deal that would add the Antler copper deposit in Arizona to its portfolio. Central Asia, a base metals producer with operations in Kazakhstan and North Macedonia, has entered into a "definitive scheme implementation deed" with New World. Central Asia said: "The acquisition of NWR will add to CAML's portfolio a 100% interest in the Antler project, a high-grade copper deposit located in Arizona in the US. In 2024, NWR released a prefeasibility study and maiden probable ore reserve estimate for the Antler project. The PFS demonstrated a post-tax net present value of USD498 million at a 7% discount rate." Central Asia Metals said it will fund the buy with existing cash reserves and a new USD120 million credit facility from a syndicate of "leading international lending banks". CEO Gavin Ferrar said: "The addition of this high-grade copper project in a tier-one jurisdiction will significantly strengthen our portfolio. We have been impressed by the strength of NWR's team and aim to work with them to integrate the Antler project, complete the DFS and work towards a construction decision. In addition, the manageable capital expenditures of the Antler project would provide us the opportunity to fund its development whilst ensuring we maintain a strong financial position."
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By Eric Cunha, Alliance News news editor
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