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(Alliance News) - Stocks in London were set to open lower on Friday, amid renewed fear about higher global interest rates and despite an unexpected up-tick in UK retail sales.
Michael Hewson at CMC Markets said a remark by Cleveland Fed President Loretta Mester on Thursday that there had been a "compelling case for a 50 basis point rate hike" at the US central bank's last policy meeting prompted "another bout of US dollar strength and higher yields".
"Her comments also raised the prospect that she may not have been alone in thinking along those lines," he added.
The comments added to the weight on the US stock market, following data that revealed US producer price inflation picked up on a monthly basis in January. The dollar rose, pushing the pound below USD1.20.
In the UK, retail sales figures released early Friday showed an unexpected rise in January. Retail sales volumes are estimated to have increased by 0.5% in January from December, reversing a revised fall of 1.2% in December from November.
Among London listings, Segro said it swung to a pretax loss, while NatWest announced a GBP800 million share buyback.
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 25.13 points, or 0.3%, at 7,987.40
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Hang Seng: down 1.1% at 20,755.63
Nikkei 225: closed down 0.7% at 27,513.13
S&P/ASX 200: closed down 0.9% at 7,346.80
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DJIA: closed down 1.3% at 33.696.85
S&P 500: closed down 1.4% at 4,090.41
Nasdaq Composite: closed down 1.8% at 11,855.83
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EUR: down at USD1.0643 (USD1.0674)
GBP: down at USD1.1955 (USD1.2004)
USD: up at JPY134.66 (JPY134.08)
Gold: down at USD1,824.63 per ounce (USD1,835.31)
(Brent): down at USD84.16 a barrel (USD85.13)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
10:00 CET EU balance of payments
08:30 EST US import and export price indexes
08:30 EST US Fed Richmond President Thomas Barkin speaks
10:00 EST US leading indicators
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UK retail sales rose in January from the month before, according to an estimate released by the Office for National Statistics. Retail sales volumes are estimated to have increased by 0.5% in January from December, reversing a revised fall of 1.2% in December from November. Markets had expected retail sales volumes to fall by 0.3% monthly, according to FXStreet. The ONS said sales volumes remained 1.4% below their pre-Covid February 2020 levels. Against a year prior, retail sales volumes are estimated to have fallen by 5.1% in January. In December, retail sales volumes fell by 6.1% year-on-year. Markets had expected a steeper annual decline in retail sales volumes in January, anticipating a 5.5% fall. Excluding fuel, retail sales volumes increased by 0.4% on a monthly basis but fell 5.3% on a yearly basis.
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BROKER RATING CHANGES
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Numis cuts British Land to 'add' - price target 530 pence
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Numis cuts Land Securities to 'add' - price target 800 pence
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Numis cuts Derwent London to 'add' - price target 3,050 pence
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COMPANIES - FTSE 100
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NatWest reported pretax operating profit of GBP5.13 billion in 2022, up from GBP3.84 billion the previous year. This came as net interest income jumped to GBP9.84 billion from GBP7.53 billion, and non-interest income climbed to GBP3.31 billion from GBP2.89 billion. NatWest said its return on tangible equity in the year was 12.3%. Its CET1 ratio was 14.2%, 170 basis points lower than at January 1, 2022, reflecting distributions and linked pensions accruals of around 310 basis points, it said. The bank proposed a final dividend of 10 pence per share and said it intends to start a GBP800 million share buyback in the first half of 2023. Looking forward, NatWest said the economic outlook remains uncertain but said it expects to achieved a return on tangible equity of between 14% and 16% in 2023.
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Property investor and developer Segro swung to a pretax loss of GBP1.93 billion in 2022 from a profit of GBP4.06 billion in 2021. This came as the firm booked a realised and unrealised property loss of GBP1.95 billion in the year, compared to a gain of GBP3.67 billion the year prior. More positively, revenue rose to GBP669 million from GBP546 million, as net rent income increased 19% year-on-year to GBP522 million from GBP439 million. Segro also noted strong occupier demand, with GBP98 million of new headline rent commitment during 2022, up from GBP95 million in 2021. Segro hiked its annual dividend by 8.2% to 26.3 pence from 24.3p.
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COMPANIES - FTSE 250
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City of London Investment Trust reported a net asset value of 395.4 pence at the end of December, up from 390.9p as at June 30, 2022. In the year as a whole, the investment firm posted a total NAV return of 5.1%. This compared to a total NAV return of 0.3% for its benchmark index, the FTSE All-Share index. In the final six months of 2022, however, the company's return was 4.5% compared to the benchmark's 5.1%. City of London Investment Trust said this was achieved despite "continuing turbulence in global markets and a brief period of unprecedented political volatility in the UK".
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OTHER COMPANIES
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Building materials firm Kingspan reported a sharp rise in annual revenue and a jump in profit in 2022. Pretax profit rose to EUR746.6 million from EUR689.0 million in 2021. Revenue climbed 28% to EUR8.34 billion from EUR6.50 billion. Kingspan declared a final dividend of EUR0.238 per share, down from EUR0.26 per share the year prior. This resulted in a total payout of EUR0.494 per share in 2022, compared to EUR0.459 in 2021. Kingspan said it was a record year overall, despite a "testing environment" and a tougher second half. Looking forward, Kingspan said it expects to deliver a "broadly similar" trading profit in the first quarter of 2023 to that of 2022 but said it was "mindful" of a more demanding comparative to come in the second quarter.
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By Heather Rydings, Alliance News senior economics reporter
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