(Alliance News) - Stock prices in London are set for a rebound on Wednesday as markets in Asia posted minor gains overnight ahead of the latest US Federal Reserve decision.
"FOMC position squaring has stalled the momentum in stocks but has not quashed it. As you can see by today's markets, the relentless rebound in equity markets continues to endure suggesting no one is willing to call a top," said Stephen Innes, chief global markets strategist at AxiCorp.
In early UK company news, SEGRO increased the size of its fundraise to GBP680 million, Shaftesbury reported a fall in net asset value as Covid-19 battered footfall in London's West End, and Restaurant Group unveiled plans to shut 125 Leisure sites under a company voluntary arrangement.
IG says futures indicate the FTSE 100 index of large-caps to open 10.08 points higher at 6,345.80 on Wednesday. The FTSE 100 index closed down 136.87 points, or 2.1%, at 6,335.72 on Tuesday.
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.
"We do not expect the Federal Reserve to make any significant changes to its policy stance tonight despite the very positive jobs report surprise on Friday, although markets have priced out negative rates. However, we are looking for two things: whether the Fed changes its forward guidance and whether it puts a number on its monthly QE buying," said Danske Bank, referring to quantitative easing.
In the US on Tuesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average down 1.1% and the S&P 500 down 0.8%, but the Nasdaq Composite closing 0.3% higher.
The dollar was broadly lower ahead of the Fed. Sterling was quoted at USD1.2765 early Wednesday, firm on USD1.2742 at the London equities close on Tuesday.
The euro traded at USD1.1360 early Wednesday, flat against USD1.1359 late Tuesday. Against the yen, the dollar was quoted at JPY107.45, down from JPY107.71.
In Asia on Wednesday, the Japanese Nikkei 225 index ended up 0.2%. In China, the Shanghai Composite is down 0.5%, while the Hang Seng index in Hong Kong is up 0.1%. Â
"US stock index futures have crept higher in Asia, which seems to have mollified the region's investors and limited the fall-out from Wall Street's retreat overnight...Asia appears to have moved into wait-and-see mode today, although one feels that it would not take much to spark a temporary rush for the exit door from the fast-money mob," said Jeffrey Halley, Asia Pacific senior market analyst at Oanda.
China's factory-gate prices remained at four-year lows in May, official data showed, as the demand shock from the coronavirus continued to take a toll on the world's second-largest economy.
The producer price index, which measures the cost of goods at the factory gate, steepened its decline last month, falling 3.7% on-year.
The figure was worse than the 3.2% fall expected by analysts in a Bloomberg survey and also April's 3.1% decline – underscoring the stress faced by manufacturers as China's economy churns back to life after pandemic lockdowns.
China's consumer price index rose 2.4% in May, just below the 2.6% expected and slipping back from 3.3% a month earlier, according to data from the National Bureau of Statistics.
Gold was quoted at USD1,719.57 an ounce early Wednesday, flat versus USD1,718.42 on Tuesday. Brent oil was trading at USD40.55 a barrel early Wednesday, marginally higher than USD40.56 late Tuesday.
In the UK, Prime Minister Boris Johnson is set to announce children will soon be able to visit zoos in the latest easing of lockdown measures – although their wait to go back to school could last months.
Johnson will face the nation at the Downing Street briefing on Wednesday and is expected to confirm zoos, safari parks and drive-in cinemas can reopen in England from June 15. It comes a day after Business Secretary Alok Sharma confirmed shops would also be able to reopen on the same day as the government seeks to kick-start the UK economy.
Meanwhile, Europe's most powerful countries urged the EU to better prepare for the next pandemic after chaotic responses to the coronavirus, as Moscow emerged from lockdown despite Russia still being in the grip of a surging epidemic. There should be a "common European approach" to challenges like Covid-19 in future, leaders including French President Emmanuel Macron and German Chancellor Angela Merkel wrote in a letter and policy paper to the EU's top official.
The US recorded 819 deaths in the past 24 hours, bringing its own grisly toll to more than 111,000 out of 1.97 million cases – leaving it the country hardest hit by the pandemic in terms of both the number of fatalities and the number of cases.
And the crisis continued to escalate in Latin America, which by late Tuesday had almost 1.4 million cases and nearly 70,000 deaths. Brazil's health ministry cited figures late Tuesday indicating the death toll had risen by 1,272 to over 38,400 killed by the virus – the third highest toll in the world after the US and Britain.
In early UK company news, warehouse investor SEGRO said it increased the size of its fundraise to GBP680 million from GBP650 million due to "strong demand" from investors.
A total of 82.1 million shares have been placed by BofA Securities and UBS London Branch at a price of 820 pence each. Alongside this, investors had subscribed for 865,435 shares via the PrimaryBid platform.
The placing price represents a 4.5% discount to Tuesday's closing price of 858.8p.
"The company is pleased by the strong support it has received from new and existing shareholders, including a number of its existing retail shareholders via the retail offer," said SEGRO.
In further fundraising news, Premier Inn-owner Whitbread said its 1 for 2 rights issue generated acceptances in respect of 61.5 million shares at a price of 1,500 pence each.
This represents just over 91% of the total number of shares to be issued under the fully underwritten rights issue.
Joint bookrunners JP Morgan Cazenove and Morgan Stanley now will try to find acquirers for the remaining 5.8 million shares not accepted. If any are left over after this, they have agreed to take up the remaining shares.
London West End-focused property investor Shaftesbury reported a fall in net asset value as Covid-19 hit visitor numbers.
EPRA net asset value fell 11% to 878 pence at March 31 from 982p at the end of September, which the company said was due to revaluation deficits.
Its wholly-owned portfolio valuation fell 7.9% on a like-for-like basis to GBP3.5 billion following an increase in yields reflecting economic uncertainties, the impact of Covid-19 on near-term income and occupancy assumptions, and a softening of residential values.
The "decisive outcome" of the December 2019 UK general election helped to boost business confidence and investment as well as consumer activity, with Shaftesbury's occupiers reporting good footfall and spending over Christmas and the New Year, as well as in the early weeks of 2020
However, Covid-19 began to hit leasing activity in February with a number of negotiations put on hold or terminated. The "collapse" in West End footfall was evident from early February in Chinatown and then spread across the rest of the area from mid-March, Shaftesbury said.
"Although our business performed well during the first four months of the period, the growing impact of the measures to address the pandemic are having a material impact on normal patterns of life and commerce, both for our occupiers and on the near-term prospects for our business and financial performance," said Chief Executive Brian Bickell.
Restaurant Group set out plans to reduce the size of its Leisure estate and rental cost base via a company voluntary arrangement.
The CVA will relate to The Restaurant Group (UK) Ltd, which comprises mainly Frankie & Benny's outlets as well as some Chiquito sites and other Leisure brands. The arrangements will have no impact on Wagamama, Airport Concessions and Pub operations.
A "comprehensive" review of the Leisure estate portfolio has identified 210 trading sites that are either underperforming, on unfavourable lease terms or not expected to generate future profitable returns. Of these, 125 have been selected for closure in the short-term, with the balance of 85 sites to seek a reduction in rental costs and revised lease terms.
There are around 65 Leisure sites which will be unaffected by the CVA
"The issues facing our sector are well documented, and we have already taken decisive action to improve our liquidity, reduce our cost base and downsize our operations. The proposed CVA will deliver an appropriately-sized estate for our Leisure business to ensure we are well positioned despite the very challenging market conditions facing the casual dining sector," said Chief Executive Andy Hornby.
The economic calendar for Wednesday has US inflation at 1330 BST.
By Lucy Heming; lucyheming@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
