(Alliance News) - Stocks in London are expected to get the new week off to a positive start, helped by promising industrial data from China, but central banks are expected to dominate headlines the rest of the week.
In early UK company news, Flutter said it has not made a decision about publicly listing its US business, FanDuel. DCC has acquired a primary care supplier in Germany and Switzerland, and Provident Financial said its Consumer Credit Division may be in trouble without help from the regulators.
IG says futures indicate the FTSE 100 index of large-caps to open 30.13 points, or 0.4%, higher at 6,791.60 on Monday. The FTSE 100 index closed up 24.51 points, or 0.3%, at 6,761.47 on Friday.
"This morning's European open is expected to pick up where we left off last week, despite a lacklustre Asia session which saw the latest Chinese retail sales and industrial production data get off to a reasonably strong start for 2021," CMC Markets analyst Michael Hewson said.
The Japanese Nikkei 225 index closed 0.2% higher Monday. In China, the Shanghai Composite closed down 1.0%, while the Hang Seng index in Hong Kong was up 0.1% in late trade. The S&P/ASX 200 in Sydney ended slightly higher.
China's industrial output and retail sales surged in the first two months of the year, official data showed Monday, underscoring the country's recovery from the coronavirus pandemic.
Industrial production spiked a forecast-busting 35% on-year, the biggest bounce in decades, while retail sales also beat expectations with 34% growth.
But the National Bureau of Statistics said the latest surge was in part due to distortions from last year's "low base in the same period".
Both indicators plunged in the early months of 2020 after Covid-19 surfaced in central China and spread rapidly around the country.
But the world's second-largest economy became the first to bounce back after imposing strict lockdowns and virus control measures, clocking a full-year economic growth of 2.3%.
"After removing the base effect, the growth of main indicators is stable and macro indicators are in a reasonable range," said the NBS.
Data for January and February were released together to eliminate the influence of uncertainties brought about by China's Lunar New Year holiday, which typically falls within this period.
Industrial output in the first two months rose 17%.
Industrial activity was likely boosted by the fact that many migrant workers were discouraged from returning to their hometowns because of Covid-19 restrictions, meaning some factories remained open through the holiday or reopened sooner.
"We expect activity to remain strong in the near-term, as the easing of virus restrictions boosts consumption and fiscal stimulus among key trading partners should keep exports strong," said Capital Economics senior China economist Julian Evans-Pritchard.
In the US on Friday, Wall Street ended mostly higher after US President Joe Biden finally signed his enormous coronavirus stimulus package into law, while a spike in bond yields hurt the tech sector. The Dow Jones Industrial Average advanced 0.9% and the S&P 500 by 0.1%. The Nasdaq Composite, however, gave back 0.6%.
CMC's Hewson said: "There appears to be increasing optimism that with the signing last week of the USD1.9 trillion stimulus deal, which made it through both US houses undiluted, that we look set for a big economic rebound in the second half of this year, with the risk we could also see a sharp rise in inflationary risk, which might force the US Federal Reserve to tighten monetary policy sooner rather than later."
He noted, however: "Rising bond yields, with the US 10-year yield now above 1.62%, and at a one year high, have served to cast doubt about the longer-term sustainability of some of the more expensive areas of the US market, and through we did see the Nasdaq break a run of three successive weeks of losses, the continued rise in US long term yields is prompting some anxiety about sky high valuations across a number of areas."
Sterling was quoted at USD1.3925 early Monday, down from USD1.3985 at the London equities close on Friday.
UK house prices climbed again in March, property listing site Rightmove said on Monday, as buyer demand reached record levels.
The average price of new property coming to the market was 0.8% higher monthly in March at GBP321,064. Annually it was up 2.7%.
"With demand being driven by the side effects of the lockdowns and the additional spur of government incentives, we anticipate further price rises during the traditional spring selling season," Rightmove said.
The housing market found support in UK Chancellor of the Exchequer Rishi Sunak's budget statement earlier in March. Sunak extended the stamp duty holiday on UK house purchases until the end of June. He also outlined a mortgage guarantee scheme to help buyers with small deposits get on the property ladder.
The euro traded at USD1.1925 early Monday, lower than USD1.1940 late Friday. Against the yen, the dollar rose to JPY109.14 versus JPY109.00.
German Chancellor Angela Merkel's conservatives suffered heavy losses in two key regional elections Sunday, as voters punished the party for a series of pandemic setbacks and a face-mask procurement scandal.
Merkel's centre-right Christian Democratic Union was headed for its worst-ever score in the southwestern states of Baden-Wuerttemberg and Rhineland-Palatinate, according to estimates from public broadcasters ARD and ZDF.
Both votes were viewed as a snapshot of the national mood ahead of a general election on September 26 – when Merkel's successor will be chosen.
Gold was quoted at USD1,724.40 an ounce early Monday, higher than USD1,710.65 on Friday. Brent oil was slightly higher at USD69.76 versus USD69.63 late Friday.
AstraZeneca on Sunday has insisted its coronavirus vaccine is safe, after concern around blood clots prompted Ireland to become the latest European country to suspend use of the jabs.
A review of available safety data in more than 17 million people who have been vaccinated across the UK and EU has shown no evidence of an increased risk, the pharmaceutical giant said. People across the UK are still being urged to get their vaccine.
The decision followed reports of serious clotting in adults in Norway which left four people in hospital.
The number of cases of blood clots reported is lower than the hundreds of cases that would be expected among the general population, AstraZeneca's Chief Medical Officer Ann Taylor said.
Flutter Entertainment responded to a CNBC report, saying the betting giant is considering spinning out US sports betting subsidiary FanDuel as a separately traded company on a US stock exchange.
Flutter noted it "regularly evaluates" its organisational and capital structure in an attempt to best position itself.
"Options including the listing in the US of a small shareholding in FanDuel are being considered but no decision has been made at this time. Should a decision be made to proceed with a listing in due course, an announcement will be made as appropriate," the Paddy Power owner added.
Blue-chip support services group DCC said its Healthcare business has agreed to acquire Worner Medizinprodukte, a supplier of medical and laboratory products to the primary care sector in Germany and Switzerland.
The deal, expected to close in April, is for an initial enterprise value of about EUR80 million.
Worner Medizinprodukte recorded revenue of about EUR70 million in 2020 and employs 158 people. Worner will continue to be led by its existing management team from its headquarters in Reutlingen, Germany.
Royal Dutch Shell noted its wholly-owned subsidiary, QGC Common Facilities Co Pty Ltd, has completed the sale of a 26% interest in the Queensland Curtis LNG Common Facilities to Global Infrastructure Partners Australia for USD2.5 billion, following regulatory approval.
The deal, first announced at the end of December, is consistent with Shell's strategy of selling non-core assets, the oil major said, in an effort to "simplify" its portfolio.
Sub-prime lender Provident Financial said its Consumer Credit Division faces liquidation unless a scheme of arrangement can be agreed to pay off increasing customer complaints.
"When combined with the impact of Covid-19 on its profitability, customer complaints can no longer be treated as part of operating costs," Provident explained.
It continued: "If approved, a scheme will bring certainty for stakeholders and ensure that customers with a legitimate claim get fair access to redress payments. The group will fund legitimate scheme claims with GBP50 million and will cover further scheme related costs estimated at approximately GBP15 million. The total commitment would be met out of PFG's existing resources."
The company said customer complaint payments were about GBP25 million in the second half of 2020. On top of this, the unit processed balance reductions for home credit customers of about GBP11 million during the same period.
"If the scheme is not approved, it is likely that CCD will be placed into administration or liquidation. If this were to happen, CCD customers would not be expected to receive any redress payment. Whilst the financial repercussions for CCD would be expected to be substantial, the direct financial or operational repercussions for Vanquis Bank and Moneybarn of an administration or liquidation of CCD would not be significant," Provident added.
The doorstep lender also noted the UK Financial Conduct Authority has opened an enforcement investigation into its CCD unit - focusing on the consideration of affordability and sustainability of lending to customers for the period between February 2020 and February 2021.
"CCD intends to work closely with the FCA in the coming months, including in relation to the investigation, which is unlikely to conclude until 2022," Provident said.
In better news for Provident, it said its fourth quarter performance was ahead of internal expectations, and, as a result, for the year as a whole.
Chief Executive Malcolm Le May said: "Whilst the latest [UK] government lockdown has reduced the demand for unsecured credit in our markets so far this year, we continue to see scope for growth opportunities, post-Covid, over the medium-term."
Business-to-business media firm Ascential reported a widened loss in 2020 as its Marketing and Retail & Financial Services units saw a severe drop in revenue.
Ascential reported a pretax loss of GBP184.3 million in 2020 compared to a loss of GBP7.9 million in 2019.
Total revenue fell 31% to GBP263.7 million from GBP380.3 million. The firm's Marketing unit revenue fell 60% and Retail & Financial Services revenue dropped 78%. It Digital Commerce unit, however, saw revenue grow 32% to GBP103.1 million.
Chief Executive Duncan Painter said: "Digital Commerce is now our largest and fastest growing segment and is well placed to benefit from the structural gains arising from the acceleration in e-commerce adoption. While our two marquee events are ready for a recovery as conditions allow, the Covid-19 pandemic restrictions continue to influence the timing of a return to maximum participation at venues.
"Nevertheless, the resilience and underlying momentum within the business model, combined with our strong balance sheet and strong trading in the first two months of the year, give us confidence of further good progress in the year ahead."
Ascential decided against dividends in 2020, versus the 1.8 pence payout in 2019, but said it will keep shareholder payouts under review.
Takeaway food delivery service Deliveroo confirmed its plans for a London IPO, hoping to raise GBP1 billion from the issue of new shares as well as the sale of existing shares.
As previously disclosed, the IPO will include a "community offer" in which the company will allow UK-based customers of the firm, with a Deliveroo account, to apply for shares.
Deliveroo also confirmed it will have two classes of ordinary shares: Class A shares and Class B shares. The Class B shares will, on admission, be held solely by Deliveroo's Founder & Chief Executive Will Shu. The Class A shares will be entitled to one vote for every share, while the Class B shares will be entitled to 20 votes for every share held.
The Class B shares will not be admitted to listing or to trading on any stock exchange. On the third anniversary of an IPO, Deliveroo noted, the Class B shares will automatically convert into Class A shares.
It is a quiet day in the international calendar on Monday, with only the NY Empire state manufacturing index at 1330 GMT of any note.
Focus for the rest of the week, central banks - and inflation worries - will be in central focus, as we get three more major central banks rate decisions: the US Federal Reserve on Wednesday, the Bank of England on Thursday, and the Bank of Japan on Friday.
Speaking in a note on Friday, BD Swiss analyst Marshal Gittler said: "The Fed and Bank of England meetings should be fairly routine, while the outcome of the Bank of Japan meeting looks to be unusually complicated and uncertain."
By Paul McGowan; paulmcgowan@alliancenews.com
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