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(Alliance News) - Stocks in London are set for a grim open on Thursday, and look set to give back Wednesday's sizeable gains, while the pound has sunk to a multi-year low.
In early news in London, the UK economy expanded in the first quarter of 2022, but growth was behind expectations. BT's annual profit rose. Rolls-Royce is trading in line. Coca-Cola HBC said volumes have surged.
IG futures indicate the FTSE 100 index will open down 92.86 points, or 1.2%, at 7,254.80 on Thursday. The blue-chip index closed up 105.44 points, or 1.4%, at 7,347.66 on Wednesday.
In the US on Wednesday, equities ended firmly in the red, amid fears the US Federal Reserve will hike rates aggressively with inflation remaining at near 40-year highs. The Dow Jones Industrial Average closed down 1.0%, the S&P 500 down 1.7%, and the Nasdaq Composite down 3.2%.
Inflation in the US is proving to be stubbornly strong, with April's reading coming in hotter than anticipated and heaping further pressure on the US Federal Reserve.
SPI Asset Management's Stephen Innes said equity markets around the globe are "struggling to find a floor".
"The consensus is that inflation has peaked, at least in the US. A floor for global equity markets depends on how quickly US CPI inflation falls. A bounce in inflation breakeven following the stronger-than-expected US CPI data points to scepticism that the decline will be steep. The stickier inflation is, the more hawkish the market debate toward neutrality," he added.
Data from the US Bureau of Labor Statistics on Wednesday showed consumer prices rose 8.3% in April from a year before. While this marked a slowdown from March's 8.5% annual rise, the increase was faster than the 8.1% expected by the market.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 1.8%. In China, the Shanghai Composite was 0.1% lower, while the Hang Seng index in Hong Kong was down 1.8%. The S&P/ASX 200 in Sydney ended down 1.8%.
"What these wild market moves are telling us is that investors have very little idea of whether we're near a short-term base, or whether we've got further to fall. As a result of yesterday's sharp turnaround in the US, and a weaker Asia session, European markets look set to open sharply lower," CMC Markets analyst Michael Hewson said.
The UK's economy was unable to perform as strongly as expected, preliminary data from the Office of National Statistics showed.
For the first quarter of 2022, UK gross domestic product is expected to have increased 0.8% versus the immediately previous quarter, which is behind market consensus - according to FXStreet - of 1.0% quarter-on-quarter expansion.
In the final quarter of 2021, the GDP grew by 1.0% on quarterly basis.
Annually, GDP rose 8.7% in the first quarter, but this too was behind market forecasts of 9.0% growth.
The ONS noted that the economy was 0.7% bigger than its pre-coronavirus level, which covers the final three months of 2019.
However, economic performance deteriorated during the course of the first three months of this year. Monthly estimates show that GDP rose by 0.7% in January, followed by no growth in February 2022 and a fall of 0.1% in March 2022.
Turning to services and industrial production, the picture was not any brighter. In March, services output fell by 0.2% from the month before.
"The largest negative contribution to growth was from wholesale & retail trade, which fell by 2.8%; however, this was offset by human health & social work activities, which grew by 1.5%," the ONS said.
Industrial production output fell by 0.2%, as well, while it was forecast to grow by 0.1%. Manufacturing production also was down by 0.2% in March from February, while the FXStreet-cited consensus had predicted a flat reading.
The pound was quoted at USD1.2217 early Thursday, sinking to a level not seen since March 2020, and was down from USD1.2323 at the London equities close on Wednesday.
In London, telecommunications firm BT Group said it delivered a "strong" performance in financial 2022, and has set up a new joint venture with Warner Bros Discovery to show sport in the UK and Ireland.
The 50-50 JV will see BT Sport and Eurosport combine.
"By bringing together the sports content offering of both BT Sport and Eurosport UK, the JV will have one of the most extensive portfolios of premium sports rights including UEFA Champions League, UEFA Europa League, the Premier League, Premiership Rugby, UFC, the Olympic Games, tennis Grand Slams featuring the Australian Open and Roland-Garros, cycling Grand Tours including the Tour de France and Giro d'Italia and the winter sports World Cup season," BT explained.
Once the deal closes, the production and operational assets of BT Sport will become a wholly owned subsidiary of Warner Bros. BT will get GBP93 million from Warner Bros and up to GBP540 million by way of an earn-out.
Turning back to results, BT reported pretax profit in the financial year that ended March 31 of GBP1.96 billion, improved from GBP1.80 billion in the same period a year prior.
Revenue fell to GBP20.85 billion from GBP21.33 billion. BT noted revenue growth from its Openreach business was offset by a fall in Enterprise and Global, while Consumer - its biggest unit - was flat.
Chief Executive Philip Jansen said: "Openreach continues to build like fury, having now passed 7.2 million premises with 1.8 million connections; a strong and growing early take-up rate of 25%. Meanwhile, our 5G network now covers more than 50% of the UK population. We have the best networks in the UK and we're continuing to invest at an unprecedented pace to provide unrivalled connectivity for our customers. At the same time we're seeing record customer satisfaction scores across the business."
Soft drinks bottler Coca-Cola HBC recorded strong growth in the first quarter, with organic revenue - minus its Russian and Ukrainian operations - surged 26%.
In the three months to March 31, the bottling partner of Coca-Cola Co reported group revenue growth of 31% to EUR1.77 billion from EUR1.35 billion, with Established markets up 20%, Developing up 40% and Emerging up 36%.
Coca-Cola Co suspended its business in Russia during the quarter and stopped taking orders for concentrate. As a result, Coca-Cola HBC said it will now have a " much smaller presence" in the country moving forward.
"We are evaluating all options here and will share more in due course, alongside the financial implications of any decision made for both 2022 performance and the level of non-cash charges," it added.
Group volume was up 23% in the first quarter to 605.5 million cases from 490.8 million the year prior.
Jet engine maker Rolls-Royce said on Thursday its performance year-to-date has been in line with expectation, and it has left its 2022 guidance unchanged.
"We are well positioned for the anticipated growth in our end markets and continue to expect positive momentum in our financial performance in 2022 despite the ongoing risks around macroeconomic uncertainties," Rolls added.
It noted its Civil Aerospace business saw large engine long-term service agreement flying hours for the first four months of 2022 jump 42% versus the prior year period.
Rolls continued: "Passenger demand is recovering on routes where travel restrictions have been lifted, such as in Europe and the Americas, but additional Covid-19 restrictions have resulted in fewer flights in China where the situation is still evolving."
FTSE 100-listed property investor Land Securities said it has sold 32 to 50 Strand, in London, for GBP195 million to Singapore-headquartered real estate investor Sinarmas.
"The disposal is in line with Landsec's strategy to accelerate growth through recycling capital into higher return opportunities," it explained.
Brent oil was quoted at USD105.45 a barrel Thursday morning, down from USD107.27 late Wednesday. Gold stood at USD1.848.30 an ounce, lower against USD1,849.37.
The euro was priced at USD1.0514, lower against USD1.0540. Against the yen, the dollar was trading at JPY129.47, down from JPY130.23.
The economic events calendar on Thursday has US producer prices at 1330 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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