(Alliance News) - Stocks in London are called to open lower on Wednesday, after Fitch's US rating downgrade caused Asian markets to fall sharply.
Fitch downgraded the US' top-notch credit rating by a step on Tuesday, citing a growing federal debt burden and an "erosion of governance" that has manifested in debt limit standoffs.
The decision to downgrade the US from AAA to AA+ sparked a fiery rebuttal from the White House, with press secretary Karine Jean-Pierre saying the move "defies reality." Treasury Secretary Janet Yellen said in a separate statement that she "strongly" disagreed with Fitch as well, calling the change "arbitrary and based on outdated data."
It is the first such downgrade by a major ratings company in more than a decade. A debt ceiling impasse in 2011 saw S&P lower Washington's AAA rating, drawing bipartisan outrage.
In corporate news, housebuilder Taylor Wimpey reported lower interim revenue and profit. Airlines Wizz Air and Ryanair reported a higher number of customers in July.
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 64.5 points, 0.8%, at 7,601.77
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Hang Seng: down 2.4% at 19,531.59
Nikkei 225: closed down 2.3% at 32,707.69
S&P/ASX 200: closed down 1.3% at 7,354.70
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DJIA: closed up 71.15 points, or 0.2%, at 35,630.68
S&P 500: closed down 12.23 points, 0.3%, at 4,576.73
Nasdaq Composite: closed down 62.11 points, 0.4%, at 14,283.91
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EUR: up at USD1.0992 (USD1.0961)
GBP: up at USD1.2775 (USD1.2742)
USD: down at JPY142.84 (JPY143.41)
Gold: up at USD1,949.01 per ounce (USD1,942.88)
(Brent): up at USD85.73 a barrel (USD84.79)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
11:00 IST Ireland unemployment
09:00 CEST Spain unemployment
09:30 BST UK narrow money and reserve balances
07:00 EDT US MBA weekly mortgage applications survey
08:15 EDT US ADP national employment report
10:00 EDT US housing vacancies
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Product safety laws are to be modernised to better protect customers when shopping online and buying products such as smart devices, the UK government has announced. The Department for Business & Trade said the plans would cut business costs and reduce unnecessary red tape with the introduction of measures like electronic labelling, enabling them to invest more in their own firms. It said much of the current regime was underpinned by "outdated" EU laws, with some dating back to 1987. A consultation will seek views on how the UK can better regulate innovations such as connected devices including smart watches and speakers, and artificial intelligence, while ensuring British businesses are not "stifled" by red tape.
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BROKER RATING CHANGES
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Socgen raises Weir Group price target to 2,410 (2,360) pence - 'buy'
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Barclays cuts Diageo price target to 4,440 (4,720) pence - 'overweight'
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Berenberg raises HSBC price target to 820 (780) pence - 'buy'
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COMPANIES - FTSE 100
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Taylor Wimpey said it has had a "resilient" first half performance with completions slightly ahead of its expectations. In the six months ended July 2, the housebuilder's revenue fell 21% to GBP1.64 billion from GBP2.08 billion a year earlier. Pretax profit plummeted 29% to GBP237.7 million from GBP334.5 million. Taylor Wimpey declared interim dividend of 4.79p per share. Looking ahead, the company expects full year UK completions excluding JVs to be in the range of 10,000 to 10,500, at the upper end of its previous guidance, with full year operating profit including JVs to be between GBP440 million and GBP470 million. Chief Executive Jennie Daly said: "The first half of the year has been characterised by variable market conditions including substantially higher mortgage rates. While this has inevitably impacted our results, I am pleased that we have delivered a resilient performance with first half completions slightly ahead of our expectations."
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BAE Systems reported that revenue in the first half of 2023 rose to GBP11.00 billion from GBP9.74 billion a year earlier. The London-based defence contractor said pretax profit climbed to GBP1.20 billion from GBP779 million. On the back of the results, BAE declared an interim dividend of 11.5p, up 11% year-on-year, and approved a further share buyback of up to GBP1.5 billion. Looking ahead, the company upped 2023 sales guidance to growth between 5% and 7%. "With a record order backlog and good operational performance, we're well positioned to continue delivering sustained growth in the coming years, giving us confidence to continue investing in new technologies, facilities, highly-skilled jobs and in our local communities," said CEO Charles Woodburn.
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COMPANIES - FTSE 250
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Wizz Air said it carried 6.0 million passengers in July, representing a 27% increase compared to July 2022, at a load factor of 94.9% up from 89.&% a year ago. On a rolling 12 months basis, Budapest-based Wizz Air said it carried 55.4 million passengers, up 45% from 38.1 million, at a load factor of 90%, up from 83%. During the period, it said Wizz Air Abu Dhabi launched its latest route to Erbil, the capital city of the Kurdistan region of Iraq. It explained that the new route reaffirms the airline's commitment to ultra-low-cost travel in the region and unlocks travel opportunities for both residents and travelers in the UAE.
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Ibstock reported that revenue in the six months ended June 30 fell by 14% to GBP223 million from GBP259 million a year ago. The Leicestershire, England-based maker of clay and concrete building products explained that this reflects reduced activity levels in its residential markets. Pretax profit fell by 42% to GBP30 million from GBP51 million. Despite being lower year-on-year, Ibstock said first half year with performance marginally ahead of the board's expectations. It also upped its interim dividend to 3.p from 3.3p a year ago, which it said reflects confidence going ahead.
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John Wood said it has been awarded a multi-year enterprise framework agreement to continue to provide services to Shell's global projects. Under the agreement, the Aberdeen, Scotland-based engineering and consulting business will continue to support projects that ensure energy security and enable energy transition projects focused on carbon capture, low-carbon fuels and hydrogen. The framework is for three years, with options for two one-year extensions. CEO Ken Gilmartin said: "This award continues a 70-year relationship between Shell and Wood, spanning more than 20 countries and numerous major projects. Complex project excellence is where we excel and we are aligned with Shell in our strategic ambitions to deliver the energy the world needs today while simultaneously delivering the energy transition at pace."
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OTHER COMPANIES
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Coca-Cola Europacific Partners said it has agreed to buy Coca-Cola Beverages Philippines from Coca-Cola. The London-based soft drinks bottler said that it has entered a letter of intent with Aboitiz Equity Ventures to jointly acquire the company. Under the agreement, Coca-Cola Europacific Partners would own 60% of CCBPI and Aboitiz Equity Ventures 40%. The company noted that there is no certainty that the deal will go through, but if complete it should go through by the end of financial 2023. Coca-Cola Europacific Partners also announced that revenue in the first half of 2023 rose 8.5% year-on-year to EUR8.98 billion. Pretax profit climbed 23% to EUR1.10 billion from EUR898 million.
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Ryanair said that it carried 18.7 million customers in July, up 11% year-on-year from 16.8 million. The load factor, however, was unchanged at 96%. On a rolling 12-month basis, the Dublin-based low-cost airline carried 175.3 million customers, up 23% from 142.0 million a year ago. The load factor improved to 94% from 87%. Ryanair noted that it operated over 102,000 flights in July, however over 800 flights were cancelled due to third-party strikes.
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By Sophie Rose, Alliance News reporter
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