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(Alliance News) - Equities in London are called to open flat on Wednesday, ahead of the latest Federal Reserve interest rate decision, while a host of financial markets in mainland Europe and beyond are closed for public holidays.
The Fed announces its latest interest rate decision at 1900 BST. It is expected to keep rates on hold this week, with Chair Jerome Powell likely to say that the central bank is not yet confident enough to cut as inflation remains lofty.
Powell is expected to sound hawkish in a subsequent press conference following the decision.
"With the markets so bearishly positioned, there's a chance stocks could surge higher on Wednesday if the Fed sticks to their steady state, more so if investors are prepared to engage in a 'buy-the-fact' dynamic when Powell takes centre stage," SPI Asset Management analyst Stephen Innes commented.
"While risks around the Fed's mandate may appear more balanced now compared to the peak of the inflation scare, recent core price growth readings emphasize that inflation remains a primary concern, overshadowing worries about other economic indicators, so there is room for hawks to fly."
In early UK corporate news, GSK lifted its outlook, while Haleon affirmed guidance. Next said its first-quarter went better than planned, but expects a "weaker" second-quarter.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up slightly at 8,146.13
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Hang Seng: financial markets in Hong Kong closed
Nikkei 225: down 0.3% at 38,274.05
S&P/ASX 200: down 1.2% at 7,569.90
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Dow: closed down 570.17 points, 1.5%, at 37,815.92
S&P 500: closed down 1.6% at 5,035.69
Nasdaq Composite: closed down 2.0% at 15,657.82
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EUR: down at USD1.0657 (USD1.0690)
GBP: down at USD1.2479 (USD1.2523)
USD: up at JPY157.87 (JPY157.44)
GOLD: down at USD2,288.56 per ounce (USD2,298.10)
(Brent): down at USD85.48 a barrel (USD86.42)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
China - Labor Day. Financial markets closed.
France - Labor Day. Financial markets closed.
Germany - Labor Day. Financial markets closed.
Ireland - Labor Day. Financial markets closed.
Italy - Labor Day. Financial markets closed.
Spain - Labor Day. Financial markets closed.
Switzerland - Labor Day. Financial markets closed.
09:30 BST UK manufacturing PMI
11:00 BST Ireland unemployment
13:15 BST US ADP jobs report
14:45 BST US manufacturing PMI
15:00 BST US ISM manufacturing PMI
15:00 BST US job openings and labour turnover survey
19:00 BST US interest rate decision
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UK house price growth slowed last month, numbers from Nationwide showed. UK house prices rose 0.6% on-year in April, easing from a 1.6% surge in March. On a monthly basis, they fell 0.4%. They had declined 0.2% in March from February. "UK house prices fell by 0.4% in April, after taking account of seasonal effects. This resulted in a slowing in the annual rate of house price growth to 0.6% in April, from 1.6% the previous month," Nationwide analyst Robert Gardner said. "The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year. House prices are now around 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects."
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Politicians and canvassers are beginning their final day of campaigning ahead of Thursday's local elections in the UK. Voters in England and Wales will go to the polls on May 2 for local, mayoral, and police and crime commissioner elections. The polls are the final test of public opinion at the ballot box ahead of the next general election, which Prime Minister Rishi Sunak has said will come in the second half of 2024. Forecasts suggest the elections could see the Conservatives lose up to half of the council seats they are defending across 107 councils, having lost a third of seats last year. Most of the seats up for re-election were last contested in 2021, at the peak of Boris Johnson's popularity as the Covid-19 vaccine was rolled out. A total of 11 mayoral contests are also taking place, including for the London mayoralty. A wave of defeats for Sunak could be enough to push more Tory MPs into seeking to replace him as leader before the general election, though all counts will not be declared until Sunday, May 5.
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BROKER RATING CHANGES
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Berenberg raises FirstGroup price target to 195 (191) pence - 'buy'
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Berenberg raises HSBC price target to 830 (800) pence - 'buy'
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COMPANIES - FTSE 100
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Pharmaceutical firm GSK said it expects annual sales to rise at the upper end of its forecast, following a "strong" start to 2024. GSK said revenue in the first-quarter of the year rose 5.9% to GBP7.36 billion from GBP6.95 billion a year prior. Pretax profit, however, weakened 29% to GBP1.36 billion from GBP1.91 billion. GSK reported 'other' expenses worth GBP533 million, hurting its bottom line, and swing from GBP297 million in gains a year prior. Chief Executive Officer Emma Walmsley said: "We have made a strong start to 2024, with another quarter of excellent performance and continued pipeline progress, including positive data read outs for 4 phase III medicines. These, together with other R&D achievements, mean we have strengthened prospects for growth in all of our key therapeutic areas this quarter: infectious diseases, HIV, respiratory/immunology and oncology. We expect this strong momentum to continue, and look forward to delivering another year of meaningful growth in sales and earnings in 2024." GSK now expects annual revenue to rise at the upper part of its 5% to 7% range, at constant currency. It expects constant currency operating profit growth in its core operations of 9% to 11%, its outlook raised from 7% to 10%. Core earnings per share growth of 8% to 10% at constant currency is now expected, the guidance bumped up from 6% to 9%.
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Haleon, a consumer health arm spun out of GSK, backed its annual guidance and reported a "solid" quarter. Reported revenue declined 2.2% on-year to GBP2.92 billion in the first-quarter of the year. Revenue rose 3.0% on an organic basis, however. Pretax profit grew 8.9% to GBP590 million from GBP542 million. Looking ahead, it still predicts annual organic revenue growth in the 4% to 6% range. CEO Brian McNamara said: "First quarter trading was solid and in line with guidance shared when we reported FY 2023 results. Organic revenue growth of 3.0% was impacted by lapping tough comparatives in the prior year particularly in respiratory health and pain relief." The CEO added: "Regionally, whilst growth was held back in the US from inventory adjustments by some retailers, Haleon's consumption in this region was strong, up mid-single digit and ahead of the market. As such, we remain confident of delivering on our FY guidance."
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Retailer Next said sales in recent weeks have been ahead of expectations, and it maintained its annual profit forecast. In the 13 weeks to April 27, its first-quarter, full price sales rose 5.7% on-year. The outcome was ahead of guidance, with the clothing and homewares seller having predicted growth of 5%. It still expects pretax profit to grow 4.6% in the full-year to GBP960 million. Next added: "We are maintaining our guidance for full price sales in the first half to be up 2.5%. This implies that our sales in Q2 will be down -0.3%. We expect the sales performance in the second quarter to be weaker than the first quarter because last year benefited from particularly warm weather from late May through to the end of June."
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COMPANIES - FTSE 250
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Aston Martin Lagonda recorded weaker results, for a first-quarter that it labelled a "period of transition". The carmaker said revenue in the first-quarter fell 10% to GBP267.7 million from GBP295.9 million a year earlier. Its pretax loss widened to GBP138.8 million from GBP74.2 million. Executive Chair Lawrence Stroll commented: "2024 is a year of immense product transformation at Aston Martin, with the introduction of four new models to the market before the end of the year. Our first quarter performance reflects this expected period of transition, as we ceased production and delivery of our outgoing core models ahead of the ramp up in production of the new Vantage, upgraded DBX707 and our upcoming V12 flagship sports car which we've confirmed today. As part of our ongoing programme of ultra-exclusive models, we will deliver a new Special in the fourth quarter of the year." It expects a second-quarter performance to be "broadly similar" to the first. Stroll added: "In March, we were pleased to successfully complete our planned refinancing, securing improved terms on new five-year senior secured notes. This followed upgrades from leading credit agencies, recognising the significant progress made by Aston Martin over recent years and the opportunity for our strategy to continue to deliver improved performance in the years to come. This, along with our existing lenders demonstrating their continued support through a 70% increase in the new [revolving credit facility] to GBP170 million, marked a significant step in strengthening our balance sheet, aligning Aston Martin for a positive financial future." Net debt as of March 31 stood at GBP1.04 billion, rising 20% from GBP868.1 million a year prior.
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Computacenter said its first-quarter went largely in line with expectations, though it noted a "challenging" period in the UK. The technology and IT service provider expects adjusted pretax profit in the first-half to be weaker than the prior year's GBP121.8 million. Computacenter said: "Computacenter expects to make further progress in 2024 with the performance for the group during the first quarter broadly in line with our expectations. Germany and North America delivered solid underlying performances while the UK remained challenging."
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OTHER COMPANIES
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Luxury brand Mulberry expects to report an annual revenue decline, as it grappled with a "backdrop of challenging macro-economic conditions". Group revenue for the year ended March 30 fell 4%, or 2.7% at constant currency, it said. "While we achieved positive revenue growth in the first half, Mulberry has not been immune to the broader downturn in luxury spending experienced in recent months, particularly in the UK and Asia. This decline was partially offset by positive trading in the US, where we have benefitted from increased brand awareness," CEO Thierry Andretta said. "Looking ahead, the trading environment in the UK and China remains challenging and we do not expect this to change in the short term. We are therefore managing the business prudently, focusing on executing our strategy and vision to become a global sustainable luxury brand."
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Renold won a GBP10.6 million deal to produce flexible couplings for the Royal Canadian Navy. "This contract, together with other military work recently awarded, means that Renold's military order book has increased by GBP13.1 million, over recent months," the supplier of industrial chains and related power transmission products said. Renold explained the new pact with be delivered over the next six years. Flexible couplings are a key component on a ship's propulsion system, the firm said.
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Touchstone Exploration said it has struck an all-share deal to acquire Trinity Exploration & Production. The all-share agreement values the latter at GBP24.1 million. Touchstone Exploration, oil and natural gas exploration and production active in Trinidad & Tobago, said the deal will create a "leading Trinidadian operator of scale". It said: "The addition of Trinity's existing production portfolio, along with its exploration and development assets, will position the combined group as one of the leading independent operating companies dedicated to investing in both onshore and offshore activity to grow Trinidadian oil and gas production." As part of the deal, Trinity shareholders will receive 1.5 new Touchstone shares for each Trinity share owned. Trinity Shareholders will own just under 20% of the combined firm. Trinity directors consider the terms of the deal to be "fair and reasonable".
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By Eric Cunha, Alliance News news editor
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