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(Alliance News) - Stock prices in London are seen opening markedly lower on Thursday, as surprisingly hawkish meeting minutes from the US Federal Reserve hit equity markets across the globe.
Stocks in the US slumped overnight on Wednesday, while equities in Asia struggled on Thursday.
IG futures indicate the FTSE 100 index is to open 81.5 points lower, 1.1%, at 7,435.37. The blue-chip index closed up 11.72 points, or 0.2%, at 7,516.87 on Wednesday.
In the London market, meanwhile, focus was on a series of holiday trading updates from major retailers. Next said full price sales in the eight weeks to Christmas Day were ahead of expectations, and it will now pay a special dividend. B&M European said it saw a "very strong golden quarter".
Elsewhere, baker Greggs said annual sales have increased and it said it will promote its retail and property director to chief executive, replacing Roger Whiteside in May. Greggs also is considering a special dividend.
FTSE 100-listed Next said full price sales in the eight weeks to December 25 were up 20% from pre-pandemic times. The figure was GBP70 million ahead of guidance, the retailer noted.
Following its decent Christmas trading, Next has lifted profit guidance. It now expects pretax profit of GBP822 million for the financial year ending in January, which would be a 9.8% hike from pre-pandemic times. Its previous outlook was for pretax profit of GBP800 million. Pretax profit in the year that ended January 30, 2021 was GBP342 million.
For the year about to end, Next expects full price sales growth of 13% from two years earlier, also GBP70 million ahead of forecasts. For the following year, so the financial ending January 2023, it expects full price sales to rise 7.0% annually.
"Our headline sales growth expectations of 7.0% sounds uncontroversial. However, forecasting sales for the year ahead is unusually difficult and the buoyancy of recent months makes it all the harder," the retailer said.
The Christmas period was not without difficulty, however. Next said stock levels were "materially lower than planned" and it saw a hit to delivery service levels due labour shortfalls.
Next declared a 160 pence special dividend which will be paid by the end of this month. It will return to its "pre-pandemic ordinary dividend cycle in the year ahead", Next said.
Discounting peer B&M European Value Retail said total revenue in the third quarter ended December 25 was largely flat at GBP1.40 billion, inching up 0.1% at constant currency.
Annual like-for-like revenue in the UK alone fell 6.2%, though it grew 14% from two years earlier, before the onset of the pandemic.
"The group has delivered a very strong golden quarter, with our two-year like-for-like performance demonstrating strong retention of new customers. Our decision to take receipt of imported Christmas stock early in the season meant we were able to provide customers with great products at great prices," Chief Executive Simon Arora said.
"The consistency of performance in the core B&M UK business reflects the growing appeal of our stores as a destination visit for seasonal products, as well as the strength of our supply chain."
B&M said it now expects annual adjusted earnings before interest, tax, depreciation and amortisation guidance in the range of GBP605 million to GBP625 million. This is ahead of current analyst consensus of GBP578 million.
Arora is "confident" about the company's prospects, though noted uncertainty related to supply chain disruption, inflation and possible Covid-19 curbs.
Like Next, FTSE 250-listed Greggs also outlined plans for a special dividend. The baker expects to be in a position to make an distribution of GBP30 million to GBP40 million this calendar year.
"A decision on the size and timing of any special dividend distribution is expected to be made in the first half of 2022, subject to trading conditions," the company said.
In the year that ended January 1, sales amounted to GBP1.23 billion, up 52% annually from GBP811 million and rising 5.3% from GBP1.17 billion from two years earlier.
Annual like-for-like sales were down 3.3% from pre-pandemic times, though in the fourth quarter alone, they rose 0.8%.
The company's seasonal lines, featuring its Festive Bake and mince pies, were popular once again, Greggs said.
"We enter 2022 with a strong financial position that will support our ambitions to accelerate the rate of growth in our shop estate whilst developing new digital channels and extending the trading day. Whilst conditions in the first few months of 2022 are likely to remain challenging, we are confident that we are well placed to make progress on the many attractive opportunities that lie ahead," outgoing CEO Whiteside said.
Greggs expects annual results to top previous expectations. It hailed "good" operational cost control in the final quarter but warned inflationary pressures are to "remain elevated in 2022".
Greggs, which has been addressing CEO succession as Whiteside approaches retirement age, said it has named Roisin Currie as his replacement. Currie's appointment is effective from May.
Currie is currently retail & property director. Whiteside will step down from the board at the end of May's annual general meeting, though he will remain available to support the transition process until January 2023.
Currie will be appointed CEO designate and executive director from February 1. Currie's appointment comes as Greggs is looking to boost its digital offering.
"Roisin leads the development of the Greggs shop estate and its growing delivery business, in partnership with Just Eat. As a member of the company's operating board, she has played a key role in the development of the strategic plans set out last year," the company said.
"Prior to joining Greggs in 2010, Roisin worked at Asda where she held people director roles responsible for the organisation's retail and distribution operations."
Elsewhere in London, ad agency M&C Saatchi confirmed it has received a preliminary takeover approach from Main Market-listed acquisition vehicle AdvancedAdvT.
Vin Murria, the executive chair of AdvancedAdvT, also is an M&C Saatchi director, so M&C Saatchi said it will form an independent committee to consider any offer made. AdvancedAdvT, which is backed by Marwyn Investment Management, announced on Wednesday that it had bought a 9.8% stake in M&C Saatchi, spending GBP24.0 million.
"No proposal has been received but the board has been told to expect one in the near term. Accordingly, there can be no certainty that an offer will be made, nor as to the terms on which any offer might be made," M&C said.
"The board confirms that the new strategy announced in Q1 2021 is already delivering, with the company's performance consistently exceeding expectations, demonstrated by a succession of positive trading upgrades."
In the US on Wednesday, the Dow Jones Industrial Average fell 1.1%, the S&P 500 dropped 1.9%, and the Nasdaq Composite plunged 3.3%.
In Asia, Tokyo's Nikkei 225 slumped 2.9% on Thursday. The Shanghai Composite in China closed down 0.3%, though the Hang Seng in Hong Kong was 0.4% higher in late trade. The S&P/ASX 200 in Sydney lost 2.7%.
Conditions for a US interest rate hike could be met "relatively soon" if the labour market continues to improve, minutes released on Wednesday from the Fed's December policy meeting showed
Federal Open Market Committee members flagged persistent price pressures and agreed that the inflation goal had been met. The labour market has made "rapid progress" and some participants even viewed current conditions as consistent with maximum employment.
"Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve's balance sheet relatively soon after beginning to raise the federal funds rate," the minutes from the meeting showed.
"Almost all participants agreed that it would likely be appropriate to initiate balance sheet run-off at some point after the first increase in the target range for the federal funds rate."
At December's meeting, the Fed said it was on track to end its pandemic-era bond purchases by March as the central bank kept interest rates at historic lows. The Federal Open Market Committee decided to keep the target range for the federal funds rate at 0.00% to 0.25%.
"The extra hawkish element hammered the sentiment, sending the US yields higher and the equities lower. The better-than-expected ADP data certainly gave an extra support to the Fed hawks," Swissquote analyst Ipek Ozkardeskaya commented.
The dollar was on the up, meanwhile.
The pound fell to USD1.3509 early Thursday from USD1.3562 at the London equities close on Wednesday. The euro stood at USD1.1290, down from USD1.1326. Against the yen, the greenback was largely flat at JPY115.91, versus JPY115.90.
A barrel of Brent oil was quoted at USD80.28 early Thursday, down from USD81.20 late Wednesday. Gold, hurt by a stronger dollar, slumped to USD1,801.33 an ounce from USD1,823.20.
Thursday's economic calendar has Germany inflation data at 1300 GMT. Eurozone producer prices are at 1000 GMT and US initial jobless claims are due at 1330 GMT followed by ISM's services PMI at 1500 GMT.
By Eric Cunha; ericcunha@alliancenews.com
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