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(Alliance News) - Stocks in London are called to open higher on Friday, after a morale-boosting UK retail sales reading, while NatWest kicked off London's banking earnings season with a profit beat.
The lender also confirmed its interim boss as its permanent chief.
Focus turns to US producer price data at 1330 GMT. Numbers are expected show producer prices rose 0.1% monthly in January from December, according to FXStreet, but annual growth is forecast to ebb to 0.6% last month from 1.0% a month prior.
Unlike the UK and Japan, currently in technical recession, the US economy is in rude health, despite the Federal Reserve taking interest rates to lofty territory.
"Only one country seems to have been spared so far despite a sharp rate hike cycle: the USA. And the data of the last few days in particular - apart from the heavyweights of the labor market and inflation - increasingly support the scenario that Powell & Co could succeed in achieving a soft landing despite the massive interest rate hikes, which of course are having an effect on the economy," Commerzbank analyst Antje Praefcke commented.
"I wonder where the dollar will go from here. After all, a lot has already been priced into the greenback: a possible soft landing as well as later and gradual interest rate cuts. So what else would have to happen to push it even higher."
In early UK corporate news, NatWest's annual profit grew, despite a fourth-quarter slowdown. Property investor Segro lifted its payout, while power controllers maker XP Power issued an early earnings warning for 2024.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.5% at 7,635.83
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Hang Seng: up 2.7% at 16,367.99
Nikkei 225: up 0.9% at 38,487.24
S&P/ASX 200: up 0.7% at 7,658.30
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DJIA: closed up 348.85 points, 0.9%, at 38,773.12
S&P 500: closed up 0.6% at 5,029.73
Nasdaq Composite: closed up 0.3% at 15,906.17
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EUR: up at USD1.0768 (USD1.0759)
GBP: up at USD1.2601 (USD1.2581)
USD: up at JPY150.15 (JPY150.11)
GOLD: up at USD2,006.11 per ounce (USD1,999.98)
OIL (Brent): flat at USD82.65 a barrel (USD82.66)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
13:30 GMT US building permits
13:30 GMT US PPI
13:30 GMT US housing starts
15:00 GMT US Michigan consumer sentiment index
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UK retail sales growth comfortably topped forecasts in January, numbers showed, in an encouraging reading of an economy which fell into recession at the end of last year. According to the Office for National Statistics, UK retail sales grew 3.4% on-month in January, a stark reversal in fortunes from the record 3.3% slide registered in December from November. December's number was downwardly revised from a 3.2% fall. January's retail sales figure was predicted to show growth of 1.5%, according to FXStreet, so the actual figure markedly beat market consensus. The latest figure showed the largest monthly rise since April 2021, taking retail sales volume back to the level of this past November. "Sales volumes in all subsectors except clothing stores increased over the month, with food stores such as supermarkets contributing most to the increase," the ONS said. Year-on-year, UK retail sales rose 0.7% in January, following a 2.4% fall in December. Annual growth defied expectations of a 1.4% decline, according to FXStreet. The data follows numbers on Thursday showing the UK slipped into recession in the fourth-quarter. UK gross domestic product slumped 0.3% in the fourth quarter of 2023 from the third quarter, according to figures from the ONS. This was worse than the expected 0.1% fall, according to FXStreet-cited consensus. The UK economy already had declined 0.1% in the third quarter from the second.
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UK Prime Minister Rishi Sunak has suffered a double defeat at the Wellingborough and Kingswood by-elections, with opposition leader Keir Starmer hailing the results as a sign the public wants change. The twin blows will compound the PM's woes, coming the day after it was officially announced that the UK had entered a recession at the end of 2023, and mean the Conservatives have suffered more by-election defeats than in any single Parliament since the Second World War. Labour overturned majorities of 11,220 and 18,540, delivering the government's ninth and tenth by-election defeats of the current Parliament and securing its second-largest swing from the Conservatives ever. Gen Kitchen secured Wellingborough with 45.8% of the vote, while Damien Egan won Kingswood with 44.9% of the vote. The results provided Labour with a boost after a U-turn on the party's pledge to spend GBP28 billion on green projects and an antisemitism row that forced it to drop its candidate for another by-election in Rochdale in two weeks' time. Reacting to the victories, Starmer said: "These are fantastic results in Kingswood and Wellingborough that show people want change and are ready to put their faith in a changed Labour Party to deliver it. Conservative Deputy Chair James Daly insisted that, despite the "disappointing" results, there was "no love" for Starmer and denied there was any evidence that voters had switched directly from the Tories to Labour.
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The new Stormont brake committee will have scope to assess the impact of Northern Ireland being left in regulatory limbo if it diverges from both EU and UK laws. Members of the Windsor Framework Democratic Scrutiny Committee were told that their work will involve assessing the consequences of applying a new or replacement EU law in Northern Ireland and also the potential ramifications of not applying it. Under post-Brexit trading rules, aspects of EU law still apply in Northern Ireland. The UK and EU's Windsor framework on the trading arrangements includes a democratic oversight function for Stormont's Assembly, designed to give members of the legislative assembly in Northern Ireland a voice in respect of proposed changes to European laws. The Stormont brake is a mechanism that allows a minimum of 30 MLAs to refer a proposed law change to the UK government. The government would then make an assessment of the proposed changes on Northern Ireland and could ultimately veto its application in the region.
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BROKER RATING CHANGES
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RBC initiates Admiral with 'sector perform' - target 2,600 pence
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RBC initiates Sabre Insurance with 'outperform' - target 200 pence
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Berenberg cuts Close Brothers price target to 425 (1,100) pence - 'buy'
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COMPANIES - FTSE 100
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NatWest Group confirmed interim boss Paul Thwaite as permanent chief executive, as it laid out annual profit which topped consensus. Thwaite took on the job in an interim basis last year after Alison Rose resigned from the role in July. The scandal concerning the closure of the Brexit-backing politician Nigel Farage's Coutts account culminated in Rose's resignation at the time. The lender said its pretax profit in 2023 totalled GBP6.18 billion, a rise of 20% from GBP5.13 billion in 2022. It topped company-compiled consensus of GBP5.97 billion. Total income rose 12% to GBP14.75 billion from GBP13.16 billion, beating consensus of GBP14.61 billion. Net interest income alone shot up 12% to GBP11.05 billion on the back of interest rate hikes. For the final quarter, total income slipped 4.6% on-year to GBP3.57 billion, but ahead of consensus of GBP3.39 billion. Pretax profit amounted to GBP1.26 billion, a decline of 12% annually, but above a forecast of GBP1.03 billion. NatWest achieved a bank net interest margin for the year of 3.04%, above its most recent guidance of "greater than 3%". That outlook had been downgraded from a previous forecast of around 3.15%. NatWest declared a final dividend of 11.5 pence, up 15% from 10.0p. Its total dividend for the year amounted to 17.0p, an increase of 26%. Looking to 2024, it expects a return on tangible equity of around 12%, down from 2023's 17.8%. It expects the figure to rise to "greater than 13% for 2026. It expects income "excluding notable items" on the range of GBP13.0 billion to GBP13.5 billion for 2024, so down as much as 9.3% from 2023's GBP14.34 billion.
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Segro said it performed strongly in 2023 and "occupier markets remained favourable throughout". The property investor said this came despite a "weaker macroeconomic backdrop". Its pretax loss for the year narrowed to GBP263 million from GBP1.97 billion in 2022. Adjusted pretax profit improved 6.0% to GBP409 million from GBP386 million. Adjusted earnings per share rose 5.5% to 32.7p from 31.0p and beating consensus of 32.2p. Its assets under management slipped 1.3% to GBP20.68 billion, while its portfolio value declined 4.0% to GBP17.76 billion. Segro's IFRS net asset value per share fell 5.5% to 886p per share at the end of 2023, from 938p 12 months earlier. "Segro delivered a strong operating performance in 2023, despite the weaker macroeconomic backdrop. Significant rental uplifts on the standing portfolio and our profitable development programme have driven further growth in both earnings and dividends." Chief Executive David Sleath said. "Last year, tighter monetary conditions resulted in a modest, yield-driven valuation decline; however, we are reassured by continued rental growth across our markets. Market expectations for lower interest rates, if sustained, provide a positive backdrop for a recovery of investment market sentiment as the year progresses." Segro upped its final dividend by 4.9% to 19.1p per share, resulting in an annual dividend of 27.8p, up 5.7%.
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COMPANIES - FTSE 250
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Georgian bank TBC Bank Group registered a rise in annual earnings, helped by surging net interest income. Total operating income rose 15% to GEL2.37 billion, around GBP713.8 million, from GEL2.07 billion. Net interest income alone jumped 27% to GEL1.64 billion. Pretax profit was 7.0% higher at GEL1.33 billion from GEL1.25 billion. It declared a final dividend of GEL4.67 per share, up 58% from GEL2.95 a year prior, taking its annual payout to GEL7.22, up 32% on-year.
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OTHER COMPANIES
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XP Power, a manufacturer of power controllers, warned its 2024 results will be "significantly below market expectations". The Singapore-based firm said there will be a "shortfall in revenue" this year. "This is based on recent order intake, revenue performance and discussions with customers, particularly within the Healthcare and Industrial Technology sectors, which confirm unusual, temporarily soft demand conditions and destocking. These softer trends have also emerged within our direct industry peers," it added. "In early 2024, we have seen, as expected, the continuation of the ongoing cyclical slowdown in the semiconductor manufacturing equipment sector and we continue to expect conditions in this sector to improve as the year progresses." XP Power said it has seen "additional savings" that can be delivered in the first-quarter, however.
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Plexus Holdings said it has won a deal worth GBP1 million to provide services for multiple plug and abandonment activities in the North Sea. Plexus will provide a customer with wellhead equipment in the "Dutch sector of the North Sea". Work begins in the second quarter of the year and runs for nine months. Work in the plug and abandonment space could pick up, the Plexus CEO said. "The number of wells that must be permanently plugged and abandoned is fast growing, particularly in mature offshore locations such as the North Sea, where the OEUK indicated that decommissioning would account for 25% of oil and gas expenditure in 2023, up from 12% in 2022, and encouragingly I believe this trend will continue. We are therefore delighted that Plexus' reputation is strengthening within this sector, and that our range of customers is broadening," CEO Ben Van Bilderbeek explained.
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By Eric Cunha, Alliance News news editor
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