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(Alliance News) - Stocks in London are set to open lower on Wednesday, retracing some gains made in the previous session, as jitters set in ahead of a key end-of-week US labour market report.
In early UK company news, Tesco raised its full-year guidance and unveiled plans for a share buyback. PageGroup and Lookers also boosted their full-year outlook, both having seen a strong performance in the third quarter.
IG says futures indicate the FTSE 100 index of large-caps will open down 50.50 points, or 0.7%, at 7,026.60 on Wednesday. The FTSE 100 closed up 66.09 points, or 0.9%, at 7,077.10 on Tuesday.
"The choppy week continues as markets continue to chase their tails in a light data week ahead of Friday's US non-farm payrolls main event," said Jeffery Halley, senior market analyst at Oanda.
In focus on Wednesday will be the US ADP employment report at 1315 BST, a precursor to Friday's nonfarm payrolls figure. Consensus, according to FXStreet, sees the ADP jobs figure rising to 428,000 in September from 374,000 in August.
Stocks in New York rebounded overnight, but momentum failed to flow into Asia.
"I am expecting the markets to continue tying themselves in knots over the next few sessions until we, hopefully, get a decisive non-farm payrolls print. Higher or lower than 500,000 will do, as it will allow some clarity on the Federal Reserve taper path and positioning appropriately," said Oanda's Halley.
In the US on Tuesday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.9%, the S&P 500 up 1.1%, and the tech-heavy Nasdaq Composite up 1.4%.
In Tokyo on Wednesday, the Nikkei 225 index closed down 1.1%. In China, markets in Shanghai remain shut for National Day Golden Week, while the Hang Seng index in Hong Kong was down 0.4% in late trade. The S&P/ASX 200 in Sydney closed down 0.6%.
The dollar edged higher as traders await the key September jobs report.
Sterling was quoted at USD1.3601 early Wednesday, falling from USD1.3630 at the London equities close on Tuesday.
The euro traded at USD1.1576, down from USD1.1600 late Tuesday. Against the yen, the dollar strengthened to JPY111.76 versus JPY111.50.
The greenback was shaking off warnings that the US is flirting with a disastrous downgrade in its credit rating, as lawmakers remained deadlocked over how to stave off a debt default with just days to spare.
Democrats say the Senate needs to act by the end of the week to raise the government's borrowing cap, but a vote set by Democratic Senate leader Chuck Schumer for Wednesday looks doomed to fail as the Republicans refuse to allow a simple majority vote.
"Unfortunately, sadly and confoundingly, too many Republicans seem proud of this moment where they're pushing us to the edge of default, and possible downgrade," Schumer told a news conference.
If the stalemate holds, the US will not have the funds to meet its obligations to creditors and could default on its USD28 trillion debt by October 18, according to Treasury Secretary Janet Yellen, who said Tuesday this could trigger another recession.
In early UK company news, Tesco boosted its full-year profit guidance, kept its interim dividend steady and revealed plans for a share buyback.
Revenue in the half-year that ended August 28 rose to GBP30.42 billion from GBP28.72 billion year-on-year. It highlighted retail like-for-like sales growth of 2.3% from a year before, and growth of 8.4% when compared with two years ago, a pre-pandemic period.
Adjusted retail operating profit rose to GBP1.39 billion from GBP1.19 billion a year before. Pretax profit soared to GBP1.14 billion from GBP551.0 million.
"We've had a strong six months; sales and profit have grown ahead of expectations, and we've outperformed the market," said Chief Executive Ken Murphy.
The interim performance led the grocer to upgrade its outlook. Tesco now expects full-year adjusted retail operating profit between GBP2.5 billion and GBP2.6 billion. This would be higher than the GBP1.99 billion achieved last year, as well as above the GBP2.33 billion posted for the pandemic-free 2020 financial year.
As well as upping guidance, the supermarket chain unveiled an ongoing share buyback programme, worth GBP500 million in its first tranche which will be carried out until October next year.
The interim dividend was held steady at 3.20p.
"I'm really pleased with our progress as we increased customer satisfaction and grew market share leading to a strong financial performance. With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset," said CEO Murphy.
Tobacco firm Imperial Brands said it is trading in line with expectations.
For the financial year that ended September 30, Imperial Brands said net revenue is expected to have grow around 1% on an organic, constant currency basis, driven by continued strong pricing in tobacco.
Adjusted organic operating profit growth is expected to be in line with guidance of low to mid-single digit constant currency growth, reflecting "significantly reduced" losses in Next Generation Products - such as heated tobacco and vape offerings - and increased Distribution profit.
"The tobacco business has performed well although adjusted operating profit will be slightly lower than last year, as previously guided, as a result of the planned increased investment to support our strategic plan as well as lower stock revenue/profit in Australia (around GBP90 million) and US state litigation settlement costs (around GBP50 million)," Imperial explained.
Recruitment firm PageGroup lifted its outlook again following growth in the third quarter.
For the three months to the end of September, gross profit jumped 65% year-on-year to GBP228.1 million. Compared to 2019, profit was 13% ahead. Gross profit per fee earner was up 21% on 2019.
"Given the magnitude of the impact of Covid-19 on 2020, we are continuing to compare our results to 2019, our record gross profit year," said Chief Executive Steve Ingham.
Despite uncertainty ahead, driven by Covid-19 and supply chain disruption, the FTSE 250-listed firm said its performance in the third quarter has boosted confidence for the full-year. It now expects annual operating profit in the region of GBP155 million, having previously been seen in a range of GBP125 million to GBP135 million.
Lookers said it now expects full-year underlying pretax profit to be "materially ahead" of its previous forecasts given a strong third quarter showing.
"Trading in Q3 remained strong and above the board's expectations driven by new vehicle market outperformance, excellent new and used vehicle margins and continued tight cost and working capital control," the motor retail and aftersales service company said.
The chip shortage continues to put pressure on the supply and availability of new vehicles, auto dealer Lookers said, leading to robust used vehicle demand as a result. While like-for-like used vehicle sales were down 17% in the quarter against strong year-ago comparatives, this was more than offset by "unprecedented margin retention".
Brent oil was trading at USD82.98 a barrel early Wednesday, steady on USD82.87 late Tuesday as the commodity continues to push to fresh three-year highs.
"Crude oil has gained support from uncertainty regarding energy supplies as supplies of coal, natural gas, and crude appear to be tighter. Monday's OPEC meeting only exacerbated the issue," said Naeem Aslam, chief market analyst at AvaTrade.
Gold was quoted at USD1,751.93 an ounce, soft against USD1,753.55 on Tuesday.
Besides the ADP jobs report in the US, the economic events calendar on Wednesday has a UK construction PMI reading at 0930 BST and eurozone retail sales at 1000 BST.
By Lucy Heming; lucyheming@alliancenews.com
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