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(Alliance News) - Stocks in London were called flat on Tuesday morning, unable to take inspiration from the rally on Wall Street, while stocks in China remained volatile after Xi Jinping was handed a third term as national leader on Sunday.
In the UK, focus will be on the new prime minister, Rishi Sunak, with focus on Tuesday shifting to who will fill his Cabinet.
Sunak is expected to address the nation just before noon, before entering No 10 as the UK's first Hindu prime minister, the first of Asian heritage, and the youngest for more than 200 years at the age of 42.
The former chancellor will then turn his attention to assembling a top team that he will hope can return a measure of stability to both the Conservatives and the country.
"After both Boris Johnson and Penny Mordaunt pulled out of the British PM race, Rushi Sunak cried victory on Monday afternoon, and markets cried 'Ready for Rishi'," remarked Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Investors are betting on Sunak to restore "confidence and credibility" that the country lost in "just about 6 weeks under Liz Truss' disastrous rule".
"Sunak has an opposite view on how to do things compared to Liz Truss. While Truss aimed for big spending and energy credits, Sunak opts for financial austerity, as the country's debt-to-GDP went through the roof due to the pandemic spending. Therefore, Sunak wants to reduce debt - of course at a very bad time with the war and the energy crisis," she added.
In China, investors remain wary, with the Shanghai Composite and the Hang Seng index seeing big swings on Tuesday following the previous day's rout, as Xi tightened his grip on power in China. Shanghai had closed down 2.0% on Monday, while the Hang Seng had lost 6.7%.
It was another positive session in the US on Monday, driven by an expectation that we may be close to a pause in the current pace of Federal Reserve rate rises.
Oanda's Edward Moya said: "Investors are getting more confident that inflation will soften as the consumer rethinks massive purchases. Fed rate hike expectations will remain volatile, but expectations are growing that a weaker economy will let the Fed pause their tightening after the February policy meeting."
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called up 3.91 points, or 0.1%, at 7,017.90
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Hang Seng: up 0.3% at 15,217.90
Nikkei 225: up 1.0% at 27,239.12
S&P/ASX 200: closed up 0.3% at 6,798.60
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DJIA: closed up 417.06 points, or 1.3%, at 31,499.62
S&P 500: up 44.59 points, or 1.2%, at 3,797.34
Nasdaq Composite: up 92.90 points, or 0.9%, at 10,952.61
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EUR: soft at USD0.9869 (USD0.9877)
GBP: lower at USD1.1277 (USD1.1295)
USD: higher at JPY148.92 (JPY148.82)
GOLD: lower at USD1,647.40 per ounce (USD1,648.76)
OIL (Brent): higher at USD91.25 a barrel (USD90.88)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
1000 CEST EU ECB bank lending survey
1000 CEST Germany IFO business climate index
0900 BST UK BoE Chief Economist Huw Pill speaks
0855 EDT US Johnson Redbook retail sales index
0900 EDT US house price index
1000 EDT US Richmond Fed business activity survey
1000 EDT US consumer confidence index
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It is a "groundbreaking milestone" that Rishi Sunak will become the UK's next prime minister, US President Joe Biden said as he marked Diwali. Biden said at an event in Washington on Monday evening "it matters" that for the first time a person of colour, who is also the child of Indian immigrants, could rise to the highest political office in the country.
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EU energy ministers are due to start discussions in Luxembourg on Tuesday on capping extreme gas price fluctuations after EU leaders reached a late-hour compromise. Last week's agreement is seen as the lowest common denominator all countries could agree to, including Germany, which has been arguing against any measure intervening directly in the price of gas. The details of the cap are still unclear, including if or when it would enter into force. The commission tabled a proposal last week on the basic principles for temporarily limiting price spikes within a trading day, an emergency limit for wholesale gas prices, as well as guidelines to make joint gas purchases operational. A commission spokesperson said on Monday that the details of the price mechanisms would only be worked out once they are approved in principle. If EU energy ministers fail to approve these principles at their next meeting in November as expected, an additional leaders' summit could be scheduled in the coming weeks.
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BROKER RATING CHANGES
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Berenberg cuts Unite Group price target to 1,100 pence (1,350p) - 'buy'
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Berenberg cuts Asos price target to 1,200 pence (1,800p) - 'buy'
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Berenberg cuts Segro price target to 1,040 pence (1,260p) - 'buy'
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COMPANIES - FTSE 100
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HSBC reported a decline in profit and revenue in the third quarter. In the three months to September 30, the China-focused bank reported pretax profit of USD3.15 billion, down 42% from USD5.40 billion a year before. "We maintained our strong momentum in the third quarter and delivered a good set of results. Our strategy produced good organic growth in all three global businesses, and net interest income increased on the back of rising interest rates. We retained a tight grip on costs, despite inflationary pressures, and remain on track to achieve our cost targets for 2022 and 2023," Chief Executive Noel Quinn said. Net interest income improved to USD8.58 billion from USD6.61 billion, but net fee income fell to USD2.78 billion from USD3.32 billion. Net insurance premium income slipped to USD2.66 billion from USD2.72 billion. As a result, revenue decreased by 3.2% to USD11.62 billion from USD12.01 billion.
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Whitbread reported strong growth in the first half of its financial year, topping pre-pandemic business levels, as it boasted of its Premier Inn hotel chain outperforming the market. In the 26 weeks to September 1, Whitbread recorded a pretax profit of USD307.4 million versus a USD19.3 million loss the year prior. Revenue more than doubled to USD1.35 billion from USD661.6 million. Premier Inn UK revenue surged to GBP1.30 billion from GBP650.6 million. Whitbread reinstated its interim dividend, declaring a payout of 24.4 pence. Chief Executive Alison Brittain said: "We delivered an outstanding trading performance in the first half of the year, with revenues and profit before tax above pre-pandemic levels. Our UK hotels traded well-ahead of the market, benefiting from our 'investing to win' commercial and operational initiatives that are continuing to drive growth."
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COMPANIES - FTSE 250
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Softcat, in the financial year that ended July 31, recorded a pretax profit increase to GBP136.1 million from GBP119.0 million, while revenue improved to GBP1.08 billion from GBP784.0 million. It upped its final dividend to 16.6 pence from 14.4p, taking its total dividend to 23.9p from 20.8p. Chief Executive Graeme Watt noted Softcat has now recorded 68 successive quarters of organic year over year income and profit growth. "We made excellent progress selling deeper into existing customers and saw gross profit per customer improve by 16%, while also attracting new customers driving 2.1% growth in our overall customer base," he added. Softcat also declared a special dividend of 12.6p, down from 20.5p a year earlier. Looking ahead, the company said it expects to continue to deliver double-digit gross profit growth.
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Genuit Group said it seen a 4.7% rise in revenue in the nine months to September 30 to GBP472 million, thanks to a 6.2% rise in Residential sales. The Leeds, England-based plastic pipes manufacturer, formerly known as Polypipe, noted a "challenging" trading environment and said it expects "some slowing in line with pressures on the sector". Chief Executive Joe Vorih added: "Repair, Maintenance & Improvement is particularly impacted, though some bright spots remain, including conversion to renewable heating and improvement to existing heating system efficiency. The group is well positioned to weather this uncertainty, with variable manufacturing capacity and we have already undertaken significant self help measures with planned improvements to our cost structure."
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OTHER COMPANIES
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E-commerce retailer THG said its total revenue increased 2.1% in the third quarter to GBP518.6 million from GBP507.8 million. Its Beauty unit saw 4.9% growth, while Nutrition added 2.9%. "Consumer behaviour during the third quarter remained stable and consistent, reflecting the resilience of beauty, health and wellness categories," it explained. THG said its fourth quarter has started positively.
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By Paul McGowan; paulmcgowan@alliancenews.com
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