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(Alliance News) - London was called lower on Thursday after a bruising afternoon session on Wall Street on Wednesday, following the "drama" of the US Federal Reserve's July meeting minutes.
In early UK corporate news, miner Antofagasta lowered its annual production guidance, casino operator Rank Group is "delighted" to that financial 2021 is over, and paving slabs maker Marshalls expects growth.
IG futures indicate the FTSE 100 index is to open down 78.52 points at 7,090.80 on Thursday. The blue-chip index closed down 11.79 points, or 0.2%, at 7,169.32 on Wednesday.
Stocks in New York ended lower on Wednesday after minutes from the Fed's July policy meeting showed a reduction in monthly asset purchases could begin as early as this year.
The Dow Jones Industrial Average and S&P 500 both shed 1.1%, while the Nasdaq Composite finished 0.9% lower.
Oanda analyst Jeffrey Halley said: "The overnight release of the FOMC minutes provided some drama, with the committee members mostly lining up behind a tapering of quantitative easing sooner rather than later.
"Although caution was expressed about the potential impact of the Covid-19 delta-variant on the recovery, most of the discussion appears to be around timing. Views were split over starting into the end of the year or early next. That seems to be rather splitting hairs to me as to whether tapering commences in late Q4 or early Q1, which makes little difference; the fact is, Fed tapering looks likely to start in a few months."
In the monetary policy meeting that ended on July 28, all members of the Federal Open Market Committee said the US economy had made progress toward the Fed's maximum-employment and price-stability goals since the adoption of the guidance on USD120 billion in monthly Treasury and mortgage-backed securities purchases in December.
Investors now expect Fed Chair Jerome Powell to make an announcement about tapering in the next few months, with the process likely to begin before the end of the year.
New York's rough session carried into Asia. In Tokyo, the Nikkei 225 index closed down 1.1% on Thursday. In China, the Shanghai Composite was 0.6% lower, while the Hang Seng index in Hong Kong was down 2.2%. The S&P/ASX 200 in Sydney ended down 0.5%.
"The release of FOMC meeting minutes on Wednesday, which communicated a more hawkish view of the massive stimulus being provided to the US economy, caused a drop in sentiment," Avatrade Chief Market Analyst Naeem Aslam said.
"The Fed's ultra-easy monetary policy, which has been in effect since 2020, has provided support to financial markets by driving down bond yields. Because of lower returns on these bonds, investors have shifted to riskier assets such as equities, which typically provide higher returns. The shift toward a tighter monetary policy, on the other hand, indicates that the central bank is unlikely to provide the same level of liquidity to investors in near future."
The minutes led to a spike in the dollar overnight. The pound was quoted at USD1.3705 early Thursday, down from USD1.3750 at the London equities close Wednesday. The euro was priced at USD1.1677, down from USD1.1705.
Against the Japanese yen, the dollar was trading at JPY110.07, up from JPY109.92.
Oanda's Halley said: "The procession of Fed officials making up the FOMC who have made hawkish comments since the FOMC meeting, especially after the blockbuster non-farm payrolls released at the start of August, would appear to swing the likelihood of tapering in December. Next week's Jackson Hole Symposium may give markets more visibility on the Fed's current thinking, and if not, the September FOMC meeting certainly will."
In London, Chilean miner Antofagasta's first half revenue surged on the back of strong copper demand and multi-year high prices.
In the six months to June 30, pretax profit spiked to USD1.78 billion from USD387.5 million a year before.
Revenue surged 68% year on year to USD3.59 billion from USD2.14 billion.
Copper sales volume slipped 6.3% to 325,100 tonnes, and gold sales fell 4.3% to 103,700 ounces, but the firm's realised copper price jumped 80% to USD4.42 per pound while the gold price increased to USD1,776 per ounce from USD1,680 a year before.
As a result, Anto's cash flow from operations grew to USD2.46 billion from USD906.9 million, allowing the miner to declare a dividend of 23.6 US cents, up from 6.2 cents a year before.
"Our key growth projects are on track, and we remain focused on operating discipline and cost control, while producing copper responsibly and sustainably for all our stakeholders," Chief Executive Ivan Arriagada said.
Anto noted the driest year of a 12-year drought in Chile will hurt production in the second half. The miner lowered its full-year outlook for copper production to be between 710,000 to 740,000 tonnes versus previous guidance of 730,000 to 760,000.
Landscaping products firm Marshalls said its trading continues to improve and recent order intake has been "good".
The company swung to a first-half pretax profit of GBP38.9 million from a GBP16.0 million loss a year before, as revenue in the six months to June 30 grew to GBP298.1 million from GBP210.5 million, as well as topped 2019's first half revenue figure of GBP280.1 million.
Marshalls declared an interim dividend of 4.70 pence, in line with 2019 after withholding its shareholder payout last year.
The company raised its outlook for 2021 and 2022.
Chief Executive Martyn Coffey said: "The Construction Products Association's recent summer forecast predicts year-on-year increases in UK market volumes of 14% in 2021 and 6.3% in 2022, and the group expects to meet or outperform the market. Market conditions remain supportive, despite certain supply chain challenges, which are leading to inflationary pressures across the sector."
Coffey is "encouraged" by the strength in demand.
"The board is confident of making further progress and is accordingly raising its expectations for 2021 and 2022," he added.
Rank Group's annual net gaming revenue slumped, leading to a loss for the casino operator.
In the year that ended June 30, the firm fell to a pretax loss of GBP72.0 million compared to the GBP9.4 million profit the year before.
Net gaming revenue dropped 48% to GBP329.6 million from GBP629.7 million.
"The year to June 30 was exceptionally challenging for the group and, frankly, we are delighted it is over," Chief Executive John O'Reilly said.
Rank noted 79% of its revenue is derived from its venues businesses, so closures imposed by UK government's response to the pandemic amounted to 59% of available operating days being shut. It also said capacity constraints and reduced opening hours further held back revenue in the period.
O'Reilly continued: "We are now well into a new financial year with our venues open and trading positively. Good progress is being made in our digital businesses and there is a renewed sense of confidence as we focus on the growth initiatives within our clearly defined transformation programme.
"Rank was delivering strong revenue and profit growth before the pandemic and the steps we have taken over the last 18 months, particularly in carefully managing our liquidity and developing the transformation plans, will enable the group to return to that growth trajectory as the impact of the pandemic reduces and consumer confidence for indoor leisure experiences grows."
In Rank's Grosvenor brand venues, like-for-like net gaming revenue from reopening on May 17 to August 15 was down 19% on the same 13-week pre-pandemic period in 2019. Average weekly revenue since reopening has been GBP5.7 million, ahead of the company's breakeven of GBP4.4 million per week.
Rank's Mecca brand has seen a "slightly slower" recovery, with like-for-like revenue down 21% in the 13-week period.
Johnson & Johnson on Wednesday said it is in talks with US regulators including the Food & Drug Administration and Centers for Disease Control & Prevention over a possible booster shot for its Covid-19 vaccine.
In July, J&J published results from a study's interim findings on its vaccine showing that there was no waning of an immune response "for at least eight months" - which was the length of time that had been evaluated to date.
The study found the single-shot vaccine generated "strong, persistent immune activity" against the Delta variant and other Covid variants.
Brent oil was quoted at USD67.19 a barrel Thursday morning, down from USD68.75 late Wednesday. Gold was trading at USD1,776.70 an ounce, lower against USD1,779.25.
"Oil prices have been falling for the last five days and fell nearly 1% on Wednesday. Concerns about dampening demand expectations as a result of an increase in coronavirus cases worldwide have contributed to the drop. The rise in the dollar index following the release of the FOMC meeting minutes yesterday has added to the downside pressure," Avatrade's Aslam said.
The economic events calendar on Thursday has the latest US jobless claims at 1330 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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