Alliance News) - Stocks in London are set to open lower on Thursday on persisting fears of a second wave of Covid-19 infections and as tensions flare once more between the US and China.
The pound edged up slightly ahead of the Bank of England's latest monetary policy decision due at midday. Sterling was quoted at USD1.2551 early Thursday, higher than USD1.2525 at the London equities close on Wednesday.
"We expect the Bank of England to keep its bank rate at 0.1% despite ongoing discussions of negative rates. Instead of a rate cut, we expect the Bank of England to expand its QE programme by another GBP100 billion," said Danske Bank.
In early company news, National Grid expects a GBP400 million hit from Covid-19 in the year ahead, Tesco has agreed to sell its Polish business for GBP181 million, and Taylor Wimpey raised GBP522 million via a share placing, subscription and retail offer.
IG says futures indicate the FTSE 100 index of large-caps to open 63.05 points lower at 6,210.20 on Thursday. The FTSE 100 closed up 10.46 points, or 0.2%, at 6,253.25 on Wednesday.
Stocks in Europe were called lower on Thursday after a broadly downbeat US session and mixed trading in Asia overnight.
"Covid-19 fears in Beijing and parts of the US and geopolitical concerns in Asia continue to weigh on sentiment," commented Jeffrey Halley, senior market analyst at Oanda.
Beijing has reported a decline in newly confirmed cases of coronavirus as the city continued to press stricter measures to contain a new outbreak.
The Chinese capital reported 21 new cases, down from 31 on Wednesday, and these were among 28 new cases recorded across the whole country.
Beijing moved to suspend classes and restrict tourism and travel in and out of the city earlier this week to stem any further spread in the latest outbreak traced to the city's largest wholesale market.
Meanwhile, the US pressed China over its treatment of Uighur Muslims and Hong Kong as the two powers stood firm in high-level talks in Hawaii amid soaring tensions.
Secretary of State Mike Pompeo met over nearly nine hours at a Honolulu military base with senior Chinese official Yang Jiechi, in the two countries' highest-level meeting since the coronavirus pandemic sent tensions skyrocketing, a State Department official said.
Just as Pompeo met Yang, Trump signed into law an act that authorises sanctions for Chinese officials involved in the detention of some one million Uighur Muslims and other Turkic Muslims. Beijing quickly responded that the law "maliciously attacks" China and threatened consequences.
In Asia on Thursday, the Japanese Nikkei 225 index ended down 0.5%. In China, the Shanghai Composite is up 0.1%, while the Hang Seng index in Hong Kong is down 0.4%. Â
In the US on Wednesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average ending down 0.7%, the S&P 500 down 0.4% and Nasdaq Composite closing 0.2% higher.
In early UK company news, Tesco said it has agreed to sell its business in Poland for GBP181 million.
"We have seen significant progress in our business in Central Europe, but continue to see market challenges in Poland. Today's announcement allows us to focus in the region on our business in Czech Republic, Hungary and Slovakia, where we have stronger market positions with good growth prospects and achieve margins, cashflows and returns which are accretive to the group," said Chief Executive Dave Lewis.
The sale includes the disposal of 301 stores, with the associated distribution centres and head office, to Salling Group. Net proceeds from the sale are expected to be GBP165 million, settled in cash, with completion expected in the current financial year.
Further, the grocer said it has made "gross progress" in selling its remaining Polish property outside of the transaction.
Over the past 18 months, it has either sold or agreed to sell 22 stores for net proceeds of GBP200 million. Tesco said it will seek to realise value from the remaining assets, which include 19 currently trading stores not covered in the Salling transaction.
National Grid said it expects a GBP400 million hit from Covid-19 in the financial year ahead, as it reported a dip in profit for its recently ended one.
Revenue in the year to March 31 edged down 2.6% to GBP14.54 billion from GBP14.93 billion, while pretax profit fell 5% to GBP1.75 billion from GBP1.84 billion.
The power company took a GBP117 million provision for bad debts in the period, and expects a "slightly bigger" impact in the financial year due ahead to the weaker economic backdrop.
National Grid expects Covid-19 to hit underlying operating profit by GBP400 million in the year ahead amid additional costs in the UK and higher bad debt charges in the US. For the recently ended financial year, underlying operating profit amounted to GBP3.45 billion, up 1% on the year before that.
"Whilst Covid-19 will impact our financial performance in FY21, we expect this to be largely recoverable over future years and therefore anticipate no material economic impact on the group in the long-term. We continue to target asset growth of 5% to 7% in the near term and with an efficient balance sheet that underpins asset and dividend growth, the group is well positioned to create value for shareholders," said Chief Executive John Pettigrew.
National Grid will payout a full-year dividend of 48.57 pence, up 2.6% on the year before.
Housebuilder Taylor Wimpey said it raised GBP522 million in a placing, subscription and retail offer.
Taylor Wimpey placed 355.0 million shares at a price of 145p each, raising GBP515 million. Concurrently, directors subscribed for 324,823 shares in total at the same price, while employees and other retail investors subscribed for 4.9 million shares via the PrimaryBid platform.
The placing price represented a 4% discount to Wednesday's closing price of 151.8p.
Stagecoach said it has agreed with its lenders a covenant waiver for the periods ending October 31, 2020 and May 1, 2021 with its lenders for facilities expiring March 2025.
As an alternative to the covenants, the transport operator has agreed minimum liquidity thresholds.
"Combined with the other actions outlined in our announcements on 23 March, 3 April and 28 May, the group has strong liquidity, with available cash and undrawn, committed bank facilities of over GBP800 million," Stagecoach said.
Outside of equities, safe haven assets firmed amid Thursday's cautious mood. Against the yen, the dollar was quoted at JPY106.92, down from JPY107.24 a day before, while gold traded at USD1,725.75 an ounce early Thursday, firm versus USD1,724.21 on Wednesday.
Elsewhere in commodities, Brent oil was trading at USD40.63 a barrel early Thursday, soft versus USD40.90 late Wednesday.
The euro traded at USD1.1229 early Thursday, higher than USD1.1221 late Wednesday.
The economic events calendar on Thursday has US jobless claims at 1330 BST.
By Lucy Heming; lucyheming@alliancenews.com
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