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(Alliance News) - London's FTSE 100 is set to open lower on Monday, in a risk-off start to the week following an escalation in the conflict in the Middle East, with lingering US interest rate worries also hurting enthusiasm.
Iran on Saturday launched a wave of missiles and attack drones at Israel. The latter said the vast majority were repelled by air defences.
Israel and Iran accused one another Sunday at the United Nations of being the main threat to peace in the Middle East, each calling on the Security Council to impose sanctions on their sworn enemy.
"If all you focus on is Brent oil, 10-year US Treasury yields, and the US dollar, relax: they are roughly where they were at the close on Friday before Iran unleashed over 300 suicide drones, cruise missiles, and ballistic missiles at Israel: the geopolitical shock in markets today is aluminium up 6% after the London Metal Exchange banned Russian metals. However, if you think financial metrics tell you what’s going to happen in the Middle East, you don’t have a prayer," Rabobank analysts commented.
"What just happened between Iran and Israel was not the start of WW3. However, neither was it 'geopolitical theatre' with fake violence. It was deadly serious, has huge implications for markets, and is likely not over yet."
This week's economic calendar has a UK inflation reading on Wednesday, after an unemployment report on Tuesday. The next Bank of England decision is on May 9.
In the US, eyes on Monday will be on a retail sales reading. The US data comes in the wake of a loftier than expected US consumer price index reading, which hit market sentiment. It may have ensured the Federal Reserve will not reduce rates three times this year, despite its most recent projections suggesting an hat-trick of cuts could be in the offing in 2024.
In early UK corporate news, Mitie announced a new buyback, Inchcape disposed of its UK retail offering and Balanced Commercial Property Trust is mulling a potential sale.
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 7,970.78
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Hang Seng: down 0.7% at 16,603.86
Nikkei 225: down 0.7% at 39,232.80
S&P/ASX 200: down 0.5% at 7,752.50
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DJIA: closed down 475.84 points, 1.2%, at 37,983.24
S&P 500: closed down 1.5% at 5,123.41
Nasdaq Composite: closed down 1.6% at 16,175.09
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EUR: up at USD1.0659 (USD1.0643)
GBP: up at USD1.2473 (USD1.2451)
USD: up at JPY153.83 (JPY153.09)
GOLD: down at USD2,357.63 per ounce (USD2,396.43)
(Brent): down at USD89.99 a barrel (USD91.05)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
1000 BST eurozone industrial production
12:15 BST UK Bank of England Deputy Governor Sarah Breeden speaks
13:30 BST US retail sales
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Leaders of the G7 have warned an "uncontrollable regional escalation" in the Middle East must be prevented amid simmering tensions after Iran's unprecedented attack on Israel. In a joint statement following an urgent call on Sunday, countries including the UK and US said they "stand ready to take further measures now and in response to further destabilising initiatives". UK Prime Minister Rishi Sunak earlier confirmed that British RAF jets shot down a number of Iranian drones after the country announced it had launched retaliatory action against its long-standing enemy. The statement released shortly after the talks on Sunday afternoon said: "We, the leaders of the G7, unequivocally condemn in the strongest terms Iran's direct and unprecedented attack against Israel." It expressed "full solidarity" with Israel and said Tehran had "further stepped toward the destabilisation of the region and risks provoking an uncontrollable regional escalation" which "must be avoided". The leaders of the Group of Seven advanced economies also referred to Gaza, where an Israeli offensive, sparked by Hamas's October 7 attack that claimed the lives of 1,200 people, has caused widespread devastation and killed more than 33,000 Palestinians.
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UK Chancellor Jeremy Hunt has declared he is ready to "cut taxes and bet on growth" after the nation's gross domestic product grew again in February. GDP was estimated to have risen 0.1% in February, according to figures from the Office for National Statistics. The previous estimate for January was also revised upwards to 0.3% growth from 0.2%. Writing in the Daily Express, the Chancellor said Britain "has done the hard yards" and the economy is "bouncing back". "Today, it was confirmed that the economy grew in January and February. And the positive economic data we've been seeing recently shows that Britain is back in business," Hunt said. "Already, the progress we have made has meant I've been able to cut taxes – rewarding work and helping get more people into employment. "Britain has done the hard yards on inflation, now we are ready to cut taxes and bet on growth."
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BROKER RATING CHANGES
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Exane BNP raises Mondi to 'neutral' (underperform) - price target 1,330 (1,190) pence
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UBS raises Crest Nicholson to 'buy' (neutral) - price target 225 (215) pence
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COMPANIES - FTSE 100
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DIY-focused retailer Kingfisher said Andrew Cosslett will step down as chair in June, after seven years in the role. Cosslett will be succeeded by Claudia Arney, who has served as the B&Q owner's independent non-executive director since November 2018. Cosslett will not stand for re-election at the company's June 20 annual general meeting, Kingfisher explained. Arney "brings a wealth of experience of business transformation and building digital capabilities to the board having previously held non-executive roles", Kingfisher said. Arney has held the role of non-executive director for grocer Ocado and is also currently the chair of food delivery firm Deliveroo.
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Standard Chartered has bought into London-based fintech Algbra Group Sky News reported. The Asia-focused lender will use Algbra's technology to build Shoal, a new digital banking venture that Standard Chartered announced in 2021, aimed at combating climate change. StanChart's investment in Algbra, via the bank's Singapore-based platform SC Ventures, will be for a minimum USD10 million, Sky reported, citing unnamed city sources.
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COMPANIES - FTSE 250
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Facilities management and professional services firm Mitie hailed "record revenue and operating profit" and it has kicked off a further share buyback. Mitie expects to report an 11% rise in revenue to GBP4.50 billion for the year to March 31, from GBP4.06 billion. Operating profit of GBP200 million is expected, a 23% surge from GBP162 million. "We are pleased with the performance of the business in FY24, having delivered record revenue and operating profit, and an operating margin of 4.5%. Free cash flow generation has been strong, supporting our ongoing commitment to the return of surplus funds to shareholders via share buybacks," Chief Executive Officer Phil Bentley said. It announced a further GBP50 million share buyback programme. A share repurchase programme of the same size had been completed last month.
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Inchcape announced a deal to sell its UK retail operations of GBP346 million, following a review of strategic options it kicked off earlier this year. It will sell the assets to New York-listed automotive retailer Group 1 Automotive. Inchape said: "The disposal of the group's UK Retail operations will complete Inchcape's transformation into a substantially distribution-focussed business. This is in fulfilment of Inchcape's strategic decision to focus on its higher margin, capital-light, high returns, cash generative global distribution business. The distribution value chain includes such elements as product planning, logistics, channel management and aftersales, while retail is specifically focused on car dealerships." Inchcape plans to return GBP100 million of the disposal proceeds to shareholders through a buyback. "The remaining proceeds will be used to invest in future growth, through organic investment and value-accretive acquisitions," it added.
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Balanced Commercial Property Trust has put itself up for sale, noting "significant challenges with a difficult near-term economic and property market backdrop". The investor in UK commercial property said it will explore all the "various strategic options" it has available, a potential sale included. It noted it is not in talks with any possible bidder at the moment, however. BCPT said it has an "attractive investment proposition". However, it added: "The board also recognises that the company currently faces significant challenges with a difficult near-term economic and property market backdrop in a higher interest rate environment and the current dislocation in capital markets. Despite the manager delivering steady portfolio performance over recent years, and the share price discount having narrowed, the company's shares continue to trade at a material discount to their net asset value, which the board does not believe reflects the current value of the underlying property assets, nor the longer-term prospects of the portfolio."
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OTHER COMPANIES
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Nutritional products maker Glanbia will acquire a "leading flavour platform" in the US for USD300 million. Glanbia will buy Flavor Producers from Aroma Holding , "and related entities", in a move that will expand its existing offering. "Glanbia will operate Flavor Producers within its Glanbia Nutritionals, Nutritional Solutions business," it said. "The Transaction is consistent with Glanbia's strategy of acquiring complementary businesses to grow its Better Nutrition platforms. Flavor Producers significantly expands NS's flavours offering, bringing new capabilities in the attractive and growing natural and organic flavours market which are aligned with long term consumer trends." The deal includes a USD55 million deferred consideration based on performance in 2024.
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Renold expects its annual profit to top market expectations, with the supplier of industrial chains and power transmission products hailing a margin improvement. Revenue for the year to March 31 is expected to have increased 0.9% at constant exchange rates to GBP241.5 million. That outcome would represent a 2.3% fall, however, if currency headwinds are factored in. Renold added: "The results for the full year are now expected to be materially ahead of current market expectations," it said. Adjusted operating profit approximately 20% higher than GBP24.2 million in the prior year, that would take it to around GBP29.0 million, topping the company compiled analyst consensus of GBP26.5 million. Its revenue outcome will fall short of consensus of GBP244.3 million, however.
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Energy and metals firm Mytilineos is exploring a London listing, according to a report from Sky News. The Athens-listed firm has picked Citigroup and Morgan Stanley to prepare it for a potential switch in its primary listing to London from Athens later this year, Sky News reported. Mytilineos, which has a market capitalisation in Athens of more than EUR5 billion, still intends to retain a listing in Greece even after it floats in London.
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By Eric Cunha, Alliance News news editor
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