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(Alliance News) - Stock prices in London are set to open lower on Thursday as European markets digest the latest US Federal Reserve policy meeting, while focus turns to the UK's own central bank, which unveils an interest rate decision at midday.
In early UK company news, Next raised its full-year profit guidance as it reported better-than-anticipated sales since the re-opening of stores, Trainline said it outperformed its expectations for operating cost savings in the first half, and IG Group said it performed "very strongly" in the first quarter.
IG says futures indicate the FTSE 100 index of large-caps to open 59.48 points lower at 6,019.00 on Thursday. The FTSE 100 closed down 27.06 points, or 0.4%, at 6,078.48 on Wednesday.
The lower call for London comes after Wall Street finished mostly in the red in the wake of the Fed's decision.
The policy-setting Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25%, as widely expected, and intends to keep the benchmark lending rate low until maximum employment is achieved even if inflation rises above 2%.
"We expect to maintain an accommodative stance of monetary policy until these outcomes, including maximum employment, are achieved," Powell said.
In its forward guidance, which Powell said was "strong and powerful" and will support economic growth, the Fed does not expect core personal consumption expenditure inflation to hit 2.0% until 2023. The Fed is expects unemployment to be at 4.0% in 2023, falling from 7.6% in 2020, 5.5% in 2021 and 4.6% in 2022.
The Fed also noted that, over coming months, it will continue to increase its holdings of Treasury securities and agency mortgage-backed securities at least at its current pace.
Powell said the Fed is "not out of ammo", and believes the central bank has "lots of tools".
Stephen Innes, chief global markets strategist at AxiCorp, said: "Not extending Treasury purchases was the hawkish surprise from the Fed and should drive real yields higher and gold and other commodities lower in the near term, with the rally in EURUSD stalling in particular."
Gold was quoted at USD1,942.50 an ounce early Thursday, down from USD1,969.00 on Wednesday, amid a stronger dollar. Brent oil was trading at USD41.50 a barrel, down against USD41.90 late Wednesday.
The euro traded at USD1.1761 early Thursday, lower than USD1.1843 late Wednesday.
In the US on Wednesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average ending up 0.1% but the S&P 500 down 0.5% and the Nasdaq Composite down 1.3%.
In early UK company news, Next reported a loss for the first half but raised its full-year outlook.
Revenue for the half-year to July 25 was GBP1.29 billion, a sharp drop from GBP2.01 billion a year ago. The firm swung to a pretax loss of GBP16.5 million from a profit of GBP327.4 million.
Pre-IFRS 16, an accounting rule related to leases, Next posted a pretax profit of GBP9.0 million, dropping from GBP319.6 million a year prior.
Full price sales in the period were down a third on last year, though Next noted that sales in the last seven weeks have been up 4% on a year ago. In the last thirteen weeks, since stores reopened, brand full price sales have "been much better" than anticipated, down 2% on last year.
"Unfortunately, we believe that recent sales are very unlikely to be indicative of our sales performance for the rest of the year," said Next, noting a boost from fewer people taking overseas holidays and recent cool weather.
For the rest of the year, full price sales are expected to be down 12%. Pretax profit is seen at GBP300 million, up from the central scenario of GBP195 million given in July's trading statement.
Trainline said ticket sales were sharply lower over its first half, though did improve as the second quarter progressed.
Revenue for the six months to August 31 was GBP31 million, just 24% of the prior level's level. The train and coach ticketing platform noted a tough first quarter, which saw net ticket sales at just 9% of the same period a year ago, but this stepped up to 30% in the second quarter and exited in August at 42%.
Overall, net ticket sales for the first half amounted to GBP358 million, just 19% of the prior year's level.
Over the first half of the year, Trainline said it outperformed its expectations for operating cost savings. Given this outperformance and the revenue generated over the period, the company expects to report an adjusted Ebitda loss for the period of between GBP14 million to GBP19 million.
"With the industry now on a path to recovery, albeit more slowly than previously expected, Trainline is phasing its operations back to normal. It has brought back most of its furloughed teams and is now dialing up discretionary spend, including its marketing activity, in step with customer demand in each of its respective markets," said Trainline.
IG Group said it performed "very strongly" in the first quarter.
Net trading revenue of GBP209 million in the three months to August 31 was up 62% on a year ago, driven by continued high levels of trading activity from existing clients and a 50% rise in total active clients.
"I am excited by the outstanding performance we delivered in the first quarter as we enter the second year of our three-year growth strategy. This was a great start to the year, and although there was some moderation from the exceptional performance in Q4, our first quarter results demonstrate IG's continued strength across the Core Markets, while also highlighting the growth potential in the Significant Opportunities," said Chief Executive June Felix.
Oxford Biomedica reported a narrowed interim loss amid a busy first half.
Revenue was up 6% to GBP34.0 million in the six months to June 30, while its pretax loss halved to GBP6.1 million from GBP12.1 million.
Oxford Biomedica said it expects a stronger second half to the year and, in addition, its partnership with AstraZeneca on the pharmaceutical firm's potential Covid-19 vaccine is likely to boost revenue in the year in excess of GBP10 million subject to successful scale up and regulatory approval of the fourth bioprocessing suite within Oxbox.
Operating Ebitda for the group is expected to be "in the low to mid-single digit million range" for the year on this basis.
"The first six months of the year, continuing into the second half of 2020, have probably been the busiest I have known in my time at Oxford Biomedica, set against the backdrop of one of the most unusual times in our working history," said Chief Executive John Dawson.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.7%. In China, the Shanghai Composite is down 0.1%, while the Hang Seng index in Hong Kong is down 1.7%. Â
Following the Fed decision, the Bank of Japan said on Thursday it expects a moderate pace of economic improvement following the global pandemic but warned that there are "extremely high uncertainties" going forward.
The bank decided to keep its short-term policy interest rate unchanged at negative 0.1%.
The central bank noted that both Japan's and overseas economies have started picking up again, although the economies remain in a severe situation due to the impact of the coronavirus pandemic at home and abroad.
Against the yen, the dollar rose to JPY104.97 versus JPY104.85.
Finishing off a bumper central banking week is the BoE at midday. No change to policy is expected this week, but analysts think the UK central bank will set the stage for further easing in November.
"With November action from the Bank of England looking ever-more-likely, we'll be watching closely to see if policymakers offer up any further clues on which tools they're most likely to use," said ING.
Sterling was quoted at USD1.2932 early Thursday ahead of the BoE, lower than USD1.2996 at the London equities close on Wednesday.
Outside of the BoE, there is a eurozone consumer price index print at 1000 BST and weekly US initial jobless claims at 1330 BST.
By Lucy Heming; lucyheming@alliancenews.com
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