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Alliance News) - Stocks in London are called higher on Wednesday ahead of a busy day for readings on the health of the economy in the US, as the country gears up for its Thanksgiving holiday.
In early UK company news, chemicals firm Johnson Matthey fell to a first half loss, while consumer-facing companies Britvic and Mulberry benefited as the UK emerged from pandemic-induced lockdowns to see trading grow.
IG says futures indicate the FTSE 100 index of large-caps to open 18.21 points, or 0.3%, higher at 7,284.90 on Wednesday. The blue-chip index closed up 11.23 points, or 0.2%, at 7,266.69 on Tuesday.
"The price action of the past two days has been particularly fickle, with tech stocks feeling the biggest downdraught as surging US yields, and the prospect of tighter coronavirus restrictions in Europe, weighing on economic activity through December, knocked some of the stuffing out of investor confidence," CMC Markets analyst Michael Hewson said.
"The weaker tech theme continued in US trading with the Nasdaq sliding back, even as the Dow closed higher, and the S&P 500 finished the day flat. This rally off the lows could well see markets here in Europe open higher later this morning."
In the US on Tuesday, the Dow Jones continued to power ahead on further gains for financial stocks, along with support from higher oil prices. After a wobbly session, the S&P 500 ended in positive territory. The tech-heavy Nasdaq Composite finished off intraday lows, but still firmly in the red, with Zoom Video Communications amongst the worst performers in the index, as shares tanked 15%.
The Dow closed up 0.6% and the S&P 500 up 0.2%, but the Nasdaq Composite ended down 0.5%.
AvaTrade's Naeem Aslam said: "Investors should understand that the main reason for the tech sell-off is a rise in treasury yields, and these yields are surging due to the Fed's more hawkish stance, as evidenced by Chair Powell's nomination. This move was most likely interpreted by Treasury markets as an indication of a faster-than-expected rise in interest rates."
In London, Johnson Matthey has approved a GBP200 million share buyback while its sales in the first half benefited from higher average precious metal prices.
The FTSE 100-listed speciality chemicals company sank to a pretax loss of GBP9 million in the six months to September 30, compared to a profit of GBP26 million a year earlier. Johnson booked GBP314 million in major impairment and restructuring charges in the period, sharply higher from GBP78 million a year before - largely attributed to its intention to exit its Battery Materials business.
Revenue surged 23% to GBP8.59 billion from GBP6.98 billion, with sales excluding precious metals 15% higher to GBP1.94 billion from GBP1.68 billion.
Johnson has declared an interim dividend of 22.0 pence, up from 20.0p a year earlier, and it has approved a GBP200 million share buyback - expected to start in 2022.
"We delivered a resilient trading performance in what has been a challenging environment, given the supply chain volatility which has affected a number of our end markets," outgoing Chief Executive Robert MacLeod said.
MacLeod is set to be replaced by Liam Condon.
Separately, Johnson said it has agreed to sell its Advanced Glass Technologies business to Fenzi Holdings SPV SpA for GBP178 million on a cash free debt free basis.
Water works United Utilities said it has continued its "great" progress with profit aided by its digital transformation and investment in long-term sustainable performance.
In the six months to September 30, pretax profit improved 5.8% to GBP212.7 million from GBP201.1 million a year before.
Revenue in the first half rose 4.2% to GBP932.3 million from GBP894.4 million. United noted it has reduced typical water bills for households by 6%.
United declared an interim dividend of 14.50 pence, up 0.6% from 14.41p a year before.
Chief Executive Steve Mogford said: "We've continued with the great start that we've made to AMP7, benefiting from the acceleration of our capital programme and investment in Systems Thinking. Our strong operational performance delivers efficiency gains and improvements to outcome delivery incentives, and is enabling us to drive further value for our shareholders."
Soft drinks maker Britvic said its trading has recovered "strongly" from a first half that was battered by the pandemic and pointed to encouraging trading with volumes in first six weeks of the new financial year ahead of financial 2021 and 2020.
In the year to September 30, pretax profit increased to GBP142.9 million from GBP111.2 million.
Revenue was flat on a year before at GBP1.41 billion. The constrained full-year revenue was blamed on a poor first-half performance that saw Britvic's Out-of-Home business take a hit from the UK lockdowns.
Britvic declared an annual dividend of 24.2 pence, up from 21.6p the year before.
Chief Executive Simon Litherland said: "This year we have recovered strongly from the effects of the pandemic, with underlying revenue, margin, and profit all in growth. Our disciplined cash management enabled us to pay down debt and to increase our dividend by 12.0%, reflecting our confidence in the business."
Luxury fashion designer Mulberry swung to a profit in the first half of its financial year, with trading returning to pre-Covid levels.
"Sales in the UK recovered strongly once our stores re-opened. The sales lost from the absence of tourists in the UK and the rationalisation of stores in Europe were replaced by strong growth in Asia," the handbag maker explained.
Pretax profit in the 26 weeks to September 25 improved to GBP10.2 million versus a GBP2.4 million loss a year before, as revenue surged to GBP65.7 million from GBP48.9 million.
Mulberry noted its retail revenue in the 8 weeks to November 20 increased 35% compared to the same period last year.
The Nikkei 225 in Tokyo shed 1.6% on Wednesday after returning from a holiday on Tuesday.
Growth in Japan's private sector accelerated in November, according to early survey results from IHS Markit on Wednesday. It was the second successive month of growth.
The latest au Jibun Bank flash composite purchasing managers' index rose to 52.5 points in November from 50.7 points in October, further above the 50.0 neutral mark.
"Flash PMI data indicated that activity at Japanese private sector businesses rose for the second month running in November. Growth in output quickened from October and was the quickest recorded since October 2018," Markit analyst Usamah Bhatti said.
The composite figure is a weighted average of the manufacturing and services readings. The flash manufacturing PMI rose to 53.5 points in November from 50.6 in October. The flash services figure increased to 52.1 in November from 50.7 in October.
Against the yen, the dollar was soft at JPY114.94 versus JPY114.96 late Tuesday in London.
The Shanghai Composite closed up 0.1% on Wednesday, while the Hang Seng index was marginally higher in late trade. The S&P/ASX 200 in Sydney closed down 0.2%.
Sterling was quoted at USD1.3377 early Wednesday, higher than USD1.3363 at the London equities close on Tuesday. The euro traded at USD1.1242 early Wednesday, lower on USD1.1262 late Tuesday.
Gold was quoted at USD1,792.70 an ounce early Wednesday, higher than USD1,784.01 on Tuesday. Brent oil was trading at USD82.44 a barrel, up from USD81.49.
US President Joe Biden announced Tuesday that he has ordered the release of 50 million barrels of oil from the US strategic reserves in a coordinated attempt with other countries to tamp down soaring fuel prices.
"The price of gasoline in the wholesale market has fallen by about 10% in the last few years but the price at the pump hasn't budged a penny," Biden said at the White House.
"In other words, gas supply companies are paying less and making a lot more," he said, accusing companies of "pocketing the difference" between wholesale and retail prices.
Last week, he urged the Federal Trade Commission to look into the causes of the nationwide spike in gasoline, saying oil companies have increased prices at the pump even as their expenses decline and profits soar.
Looking ahead to later in the session, CMC's Hewson said: "With the US absent on Thursday for the Thanksgiving holiday, today will see a tsunami of economic announcements, as well as positioning tidying ahead of the weekend, culminating in the release of the latest Fed minutes."
Wednesday's economic calendar has the German Ifo business climate indicator at 0900 GMT and US durable goods orders and gross domestic product at 1330 GMT. At 1900 GMT are the latest Federal Reserve minutes.
US initial jobless claims, usually out on Thursdays, are due at 1330 GMT on Wednesday with US markets shut on Thursday for Thanksgiving. At 1500 GMT, there is core personal consumption expenditure and new home sales.
By Paul McGowan; paulmcgowan@alliancenews.com
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