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(Alliance News) - A strong finish on Wall Street overnight is set to provide some support to the FTSE 100 on Thursday, while oil prices edged higher ahead of an OPEC+ meeting later in the day.
In early UK company news, distiller Diageo said it is seeing a slow return to on-trade consumption in mainland China as it withdrew guidance for 2020, Mondi said it had a good first quarter despite earnings falling, and Restaurant Group raised nearly GBP60 million in a share placing.
IG says futures indicate the FTSE 100 index of large-caps to open 111.62 points higher at 5,736.80 on Thursday. The FTSE 100 index closed down 26.72 points, or 0.5%, at 5,677.73 on Wednesday.
The higher call comes after a solid session in the US overnight. The Dow Jones Industrial Average ended up 3.4%, the S&P 500 also 3.4% higher and the Nasdaq Composite advancing 2.6%.
"While European markets struggled to make gains yesterday, markets in the US had no such trouble, finishing the day strongly higher," commented Michael Hewson at CMC Markets.
Hopes for a turnaround in reported infection cases after this week, as well as further stimulus, helped to boost Wall Street, said Hewson.
"The latest Fed minutes reinforced the positive tone as it showed that there was little appetite amongst any of the FOMC to move rates from their current position, just above 0%. The overall concern amongst Fed policymakers was of significant concern about a rapid deterioration in financial conditions," Hewson noted.
The uncertainty around the global coronavirus pandemic's duration and severity creates "major downside risks" to the US economy, the Federal Reserve said Wednesday.
The US is sure to take a hit in the near-term as businesses are forced to close and consumers are confined to their homes, the Fed said in the minutes of the March 15 emergency policy meeting, when the central bank slashed the benchmark interest rate to zero.
But while the shutdowns imposed to contain the virus create hardship for businesses and households, they should not have the lasting impact that was seen in the wake of the global financial crisis in 2008, Fed officials said.
The minutes were released as the US saw nearly 2,000 coronavirus deaths for a second day running as the toll soared again in Europe.
The US reported the highest one-day toll on record, with 1,973 deaths over a 24-hour period – reaching nearly 2,000 for the second day in a row.
Italy and Spain are still recording hundreds of deaths a day, and the situation is also deteriorating in the UK, which saw a record 938 fatalities Wednesday as Prime Minister Boris Johnson spent a third day in intensive care.
In the Chinese city of Wuhan, where the novel coronavirus first emerged in December, there was cause for celebration, however, as a ban on outbound travel was lifted.
In Asia on Thursday, the Japanese Nikkei 225 index ended flat. In China, the Shanghai Composite is up 0.5%, while the Hang Seng index in Hong Kong is up 0.8%. Â
In London, Diageo said the widespread closure of bars and restaurants due to Covid-19 is having a "significant impact" on its performance.
In mainland China, the distiller and brewer said it is beginning to see "a very slow return" of on-trade consumption. In Europe and North America, there has been some pick-up in retail stores amid the closure of bars, but it is "unclear whether this will be sustained".
The Smirnoff vodka maker stressed that it has a strong balance sheet, and added that it will not initiate the next phase of its three-year buyback programme during the remainder of 2020.
"Given the global nature of the Covid-19 pandemic, and the uncertainty around the severity and duration of the impact across multiple markets, we are not in a position to accurately assess the impact of this on our future financial performance. We are therefore withdrawing our guidance on group organic net sales growth and organic operating profit growth for fiscal 2020," said Diageo.
Packaging firm Mondi said it delivered a "robust" performance in the first quarter of 2020.
Underlying Ebitda of EUR385 million was 18% below a year ago, hurt by lower pricing that was mitigated somewhat by lower input costs and cost reduction programmes. The figure was in line with the fourth quarter of 2019.
Turning to Covid-19 uncertainty, Mondi said it has postponed non-essential capital expenditure and slowed down some of its major capital projects. It also will no longer propose 2019's final dividend at its upcoming annual general meeting.
"The group is financially strong with a robust liquidity position and capital structure. However, in these unprecedented times we are taking appropriate actions to ensure we remain well-placed to withstand an extended period of uncertainty," said Chief Executive Andrew King.
Trainline said it has a "secure" liquidity position and has paused marketing and other discretionary spend in order to mitigate the fallout from Covid-19.
Since listing in June 2019, the transport ticketing platform said it has delivered "strong growth" in net ticket sales, revenue and earnings while significantly reducing net debt.
"Given a significant fall in industry passenger numbers over the past month as a result of the COVID-19 lockdown, we have taken quick and decisive measures to reduce operating costs and cash outflows," the firm said.
These actions include pausing marketing and other discretionary spend, introducing a recruitment freeze, deferring bonus payments and pay reviews for staff and revising payment terms with some of the company's suppliers.
As a result, Trainline's cash outflow from operating costs and capital expenditure has reduced to around GBP8 million to GBP9 million per month.
"We remain confident we can operate through an extended downturn period if required, without any further cost mitigation," the company said. "We forecast that Trainline's liquidity headroom will be about GBP150 million by the end of May 2020. By this time, the group expects to have fully completed the working capital outflow arising from settling pre-existing bookings to train and coach operators as well as processing refunds to customers."
Restaurant Group said it has placed 98.2 million shares with investors, with another 100,000 subscribed by directors, at a price of 58.00 pence each, raising around GBP57 million.
The placing price represents a 3.2% discount to Wednesday's closing price of 59.90p. The new shares represent about 20% of the total before the placing.
In commodities, gold was quoted at USD1,650.41 an ounce early Thursday, flat on USD1,650.50 on Wednesday.
Brent oil was trading at USD33.44 a barrel early Thursday, up from USD31.56 late Wednesday.
Oil prices rose Thursday after Russia said it was ready to slash output, fuelling hopes that key producers are poised to seal a deal aimed at boosting coronavirus-hit energy markets.
Exporting group OPEC and allies including Russia as well as other major producers will hold a teleconference later in the day with expectations growing that they will agree to reduce output to support the struggling market.
Prices are at near-two-decade lows with travel restrictions and lockdowns imposed to halt the spread of the virus throttling demand, and Riyadh and Moscow locked in a vicious price war.
Elsewhere in the economic events calendar for Thursday, Germany's trade balance at 0800 BST, Irish inflation at 1100 BST and ECB minutes at 1230 BST. US producer prices are at 1330 BST, with initial jobless claims due at the same time.
Rabobank said the focus lies firmly on US jobless claims.
"A further 5.5 million people are expected to join the jobless queue. Given the last two weeks have both seen prints far worse than the already terrible consensus, one fears for what this latest data-point will reveal," said Rabobank.
Already released, data showed the UK economy contracted in February even before the Covid-19 situation intensified in Europe.
For the month of February, gross domestic product fell by 0.1% month-on-month after a 0.1% rise in January. Consensus had seen February's growth rate matching that of January.
Sterling was quoted at USD1.2379 following the data, down from USD1.2390 at the London equities close on Wednesday.
The euro traded at USD1.0847 early Thursday, down on USD1.0869 late Wednesday.
Against the yen, the dollar was quoted at JPY108.95 versus JPY108.80.
By Lucy Heming; lucyheming@alliancenews.com
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