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(Alliance News) - Stocks in London are set to open in the red on Tuesday as concerns around the world's two largest economies weighed on market mood.
Concerns over China's economic stability resurfaced on Monday after China Evergrande Group announced that it was unable to issue new debt as its subsidiary was "being investigated".
Stephen Innes, managing partner at SPI Asset Management said while this development may not surprise those closely following China's property market, it has nonetheless reignited concerns that the country's housing sector is still deteriorating rather than showing signs of improvement and that financial stability risks are "rising".
Markets were also on edge as they looked to some worrying developments over in the US.
On Monday, the Moody's ratings agency warned that a US government shutdown this weekend, amid political deadlock in Congress, would have negative implications for the country's top-tier credit rating.
The warning from Moody's – the only major agency to maintain its rating for US sovereign debt at its highest level – underscores the potential economic danger to the US of failing to reach an agreement to keep the government funded before the end of the month.
In early UK corporate news, PZ Cussons reported a drop in annual profit as it lamented a "challenging" external backdrop, while Smiths Group saw its profit more than triple amid a "record" year of organic revenue growth.
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 22.49 points, or 0.3% at 7,601.50
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Hang Seng: down 0.9% at 17,576.83
Nikkei 225: closed down 1.0% at 32,343.71
S&P/ASX 200: closed down 0.5% at 7,044.90
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DJIA: closed up 43.04 points, 0.1%, at 34,006.88
S&P 500: closed up 0.4%, at 4,337.44
Nasdaq Composite: closed up 0.5%, at 13,271.32
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EUR: lower at USD1.0582 (USD1.0589)
GBP: lower at USD1.2182 (USD1.2211)
USD: higher at JPY149.10 (JPY148.81)
Gold: lower at USD1,912.27 per ounce (USD1,918.62)
(Brent): lower at USD91.00 a barrel (USD91.44)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
Japan final labour survey
Japan economic report
UK BoE governor attends Financial Policy Committee meeting
08:55 EDT US Johnson Redbook retail sales index
09:00 EDT US house price index
10:00 EDT US Richmond Fed business activity survey
10:00 EDT US consumer confidence index
13:30 EDT US Federal Reserve Governor Michelle Bowman speaks
16:30 EDT US API weekly statistical bulletin
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Beijing said it "firmly opposes" American sanctions on Chinese companies and individuals the US Treasury Department says have connections to Iran's drone and military aircraft development. Washington last week slapped sanctions on "seven individuals and four entities" based in Iran, China, Russia and Turkey it said had facilitated shipments and financial transactions involving Tehran's military hardware programme. The US accuses Iran of supplying Russia with drones, which have become a major feature of Moscow's war in Ukraine and are in regular use in Syria. Iran denies sending drones to Russia for use in Ukraine.
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BROKER RATING CHANGES
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Morgan Stanley raises Barclays to 'overweight' - price target 230 pence
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RBC starts Taylor Wimpey with 'sector perform' - price target 145 pence
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Exane BNP raises Aviva to 'neutral' (underperform) - price target 430 (420) pence
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COMPANIES - FTSE 100
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Smiths Group said it had delivered a "record" year of organic revenue growth as its profit more than tripled. The company reported a pretax profit of GBP360 million in the year ended July 31, multiplied from GBP103 million the previous year. Revenue from continuing operations climbed 18% to GBP3.04 billion from GBP2.57 billion. Smiths noted that it was a "record" year of organic revenue growth and said it is now "well positioned" for its financial 2024 growth targets which see organic revenue growth between 4% and 6%. It expects the growth to be weighted to the second half of financial 2024.
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COMPANIES - FTSE 250
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PZ Cussons reported a drop in annual profit as it lamented a "challenging" external backdrop evidenced by rising costs. The company reported a pretax profit of GBP61.8 million in the year ended May 31, down from GBP64.5 million the previous year. The drop in profitability came as PZ Cussons recorded higher costs during the year. Cost of sales rose to GBP399.0 million from GBP365.3 million, selling & distribution costs rose to GBP105.3 million from GBP90.3 million, and its administration expenses climbed to GBP99.8 million from GBP78.0 million. More positively, the company's revenue from continuing operations jumped to GBP656.3 million from GBP592.8 million. Looking forward, PZ Cussons said it expects to deliver adjusted operating profit within the range of current market expectations for financial 2024. The current consensus range sees adjusted operating profit between GBP61.5 million and GBP68.2 million.
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AG Barr said it was confident of delivering full-year profit in line with recently increased market expectations following a strong first-half performance. The Irn-Bru maker reported a reported profit of GBP27.8 million in the six months ended July 30, up from GBP24.7 million the previous year, despite its cost of sales jumping 48% year-on-year to GBP131.0 million. Revenue in the half climbed 33% to GBP210.4 million from GBP157.9 million, supported by the contribution of the Boost Drinks business which was acquired by the firm in December. "In August we communicated our expectation of delivering a full year profit performance marginally above the top end of analyst consensus. Despite the extended period of poor weather across the summer, we remain confident in delivering in line with these revised market expectations," the company said. AG Barr also declared an interim dividend of 2.65 pence, up from 2.50p the year prior.
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OTHER COMPANIES
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Asos reported a double-digit percentage decline in revenue in the 53 weeks ended September 3 and predicted that its earnings before interest and tax would be at the bottom end of its guided range for the year. In the 53 weeks ended September 3, the online fashion retailer reported total group revenue had declined by 10% year-on-year. It noted that UK sales had fallen 12% year-on-year, while EU and US sales fell 1% and 6%, respectively. Sales in the Rest of the World dropped 29% against the comparative period. In the quarter ended September 3, total group revenue fell 12% year-on-year. Asos said that, despite the sales decline in its fourth quarter, it expects it to be another profitable quarter. It added that thanks to profit improvement and cost savings, it is trading in line with its financial 2023 target. Nonetheless, Asos said its earnings before interest and tax are expected around the bottom of the guided GBP40 million to GBP60 million range for the full-year.
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Consumer products manufacturer Supreme said it expects trading for the year ended March 31 to be "significantly" ahead of market expectations following "record" profitable growth in the first half of the year. Revenue for the full-year is expected between GBP195 million and GBP205 million, while adjusted earnings before interest, tax, depreciation and amortisation are seen between GBP28 million and GBP30 million. This clears market consensus which sees adjusted Ebitda at GBP25.6 million. Supreme said its Vaping category remains a "key growth driver" for the company, witnessing "significant" demand from key retailers for its vaping products. "This increased demand combined with improved margins in our Wellness and Vaping category plus further synergistic overheads savings arising from the businesses acquired in [financial 2023] have led to an increase in the full year adjusted Ebitda expectation for the core business of around GBP1.5 million," the company said.
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By Heather Rydings, Alliance News senior economics reporter
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