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(Alliance News) - As this week's bumpy ride for markets continues, stock prices in London are set to open lower on Thursday, with fears of a second wave of coronavirus coming to the fore once more.
In early UK company news, engineer Smiths Group reported a fall in interim profit but said trends have stabilised, waterworks United Utilities guided for lower interim revenue and profit, and movie house chain Cineworld revealed a massive loss for its first half.
IG says futures indicate the FTSE 100 index of large-caps to open 63.66 points lower at 5,835.60 on Thursday. The FTSE 100 closed up 69.80 points, or 1.2%, at 5,899.26 on Wednesday. At this closing level, the index was down 1.8% in the week-to-date.
"Fading prospects for US fiscal stimulus and the stepping up of mobility restrictions on concerns about the second wave of Covid-19 are smacking global stock markets again," said AxiCorp's Stephen Innes.
Innes noted: "A procession of Fed speakers voiced more concerns about the ongoing impasse on additional fiscal stimulus. But it was Fed Vice Chair Clarida that might have delivered the harshest reminder when he noted the 'economy is recovering robustly, but we are still in a deep hole'. Indeed, that stern warning pains even the most bearish eye."
Federal Reserve Chair Jerome Powell warned US lawmakers that the world's largest economy would see a slower recovery should they not push ahead with a fresh rescue package, noting that stimulus cheques and expanded unemployment payments moderated the impact of the virus earlier this year.
Powell reiterated his support for further fiscal stimulus, saying it is "unequalled" by anything else. Congressional stimulus talks have stalled since early August with both political parties about USD1 trillion apart.
Wall Street ended lower Wednesday, with the Dow Jones Industrial Average ending down 1.9%, the S&P 500 down 2.4% and Nasdaq Composite down 3.0%.
In Asia on Thursday, the Japanese Nikkei 225 index ended down 1.1%. In China, the Shanghai Composite is down 1.5%, while the Hang Seng index in Hong Kong is down 1.8%.
Against the yen, the dollar was quoted at JPY105.34, firm versus JPY105.30. The euro traded at USD1.1648 early Thursday, lower than USD1.1685 late Wednesday.
In early UK company news, Smiths Group said it achieved a "robust" performance for the financial year which ended July 31.
Revenue from continuing operations for the year was up 2% to GBP2.55 billion, though down 1% on an underlying basis. Pretax profit more than halved to GBP133 million, however, from GBP304 million the year before.
Smiths Group said profit was hit by lower volumes in the second half as well as additional costs to support business continuity, and the firm also took GBP31 million in restructuring costs and GBP24 million of write-downs.
The defence and medical technology company said its guidance remains withdrawn given Covid-19 uncertainty, though it said total group underlying revenue for the four months to the end of August has stabilised at a 5% fall, or down 8% for continuing operations.
"We are seeing a stabilisation of recent trends; but we are not complacent and are continuing to strengthen the business to deliver sustainable outperformance in the future," said Chief Executive Andy Reynolds Smith.
United Utilities said trading is in line with expectations for its half-year.
For the first half to September 30, the water company said its operating performance is on track again its AMP7 plan, and it continues to target net outcome delivery incentive outperformance for the full year.
Cash collection from household customers has been consistent with targets set prior to Covid-19 pandemic. While the FTSE 100 constituent anticipates bad debt may increase as government support schemes come to an end, it has "confidence in the adequacy of the provision we made" at the March 2020 year-end.
Group revenue is expected to be lower than the first half of last year, while underlying operating profit is also expected to be down year-on-year.
In the FTSE 250 index, Cineworld swung to a chunky loss in the first half of the year as Covid-19 shuttered its sites between mid-March to summer.
Admissions were down 65% in the first half of 2020, with revenue down 67% to USD712.4 million from USD2.15 billion a year ago. Cineworld posted a pretax loss of USD1.64 billion versus a profit of USD139.7 million a year prior.
The cinema operator said 561 out of 778 sites are re-opened currently, and it has been "encouraged" by its recent performance. It noted a "good" performance of the film Tenet earlier this month, and named 'Wonder Woman 1984', 'Black Widow' and the latest James Bond instalment 'No Time To Die' as some of the "exciting" films coming up in 2020.
However, Cineworld added: "There can be no certainty as to the future impact of Covid-19 on the group. If governments were to strengthen restrictions on social gathering, which may therefore oblige us to close our estate again or further push back movie releases, it would have a negative impact on our financial performance and likely require the need to raise additional liquidity. However, we are well prepared operationally for all possible eventualities and continue to monitor for any potential changes to government restrictions or guidelines."
Cineworld said negotiations with banks remain ongoing in order to secure covenant waivers in respect of December 2020 and June 2021.
Under a 'going concern' section of the results report, it was noted: "The group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facilities for at least 12 months from the approval date of these interim consolidated financial statements, however the covenants are forecast to be breached at 30 December 2020, 30 June 2021 and 31 December 2021."
The directors expect waivers will be obtained.
Pub chain Mitchells & Butlers said it is "well placed" in the face of further pub restrictions.
Since re-opening, the company said it has continued to outperform the market. In July, like-for-like sales declined by 32%, hit by reduced capacity. During August, however, the government's 'Eat Out to Help Out' scheme helped return the business to like-for-like sales growth, of 1.4%.
Subsequent trading in the first three weeks of September has settled "slightly below this" at a like-for-like sales decline of 6.4%, prior to the introduction of a 10pm pub curfew in England from Thursday onwards.
"The future remains both challenging and uncertain, with only this week a curfew and other additional restrictions being imposed on how and when we can operate. However, we believe we are well placed to meet that challenge and to keep Mitchells & Butlers at the forefront of the eating and drinking-out market," said Chief Executive Phil Urban.
The UK on Wednesday reported 6,178 new coronavirus cases, a marked jump in the daily infection rate that comes a day after Prime Minister Boris Johnson unveiled new nationwide restrictions.
It follows a rise of 4,926 the day before, and brings the total confirmed cases in Britain since the pandemic hit earlier this year to 409,729. With a further 37 deaths reported in the past 24 hours, 41,862 people in Britain who tested positive for the virus have now died – the highest toll in Europe.
On Tuesday, Johnson set out plans to close pubs early and reverse previous guidance that people should go back to the office, warning the country was at "a perilous turning point".
Many MPs are pushing the government to extend its furlough scheme that at its peak in May covered the wages of 8.9 million workers who might otherwise have lost their jobs.
The scheme is due to end in October, and Johnson insisted on Tuesday it could not go on indefinitely. However, there is speculation of new economic support to come, after the prime minister said his government would deliver "further creative and imaginative schemes to keep our economy moving".
Finance minister Rishi Sunak is due to address MPs in the House of Commons on Thursday.
Sterling was quoted at USD1.2693 early Thursday, down sharply on USD1.2755 at the London equities close on Wednesday.
Gold was quoted at USD1,852.22 an ounce early Thursday, lower than USD1,868.00 on Wednesday. Brent oil was trading at USD41.50 a barrel, falling from USD42.16 late Wednesday.
The economic events calendar on Thursday has Germany's Ifo business climate at 0900 BST and the latest US jobless claims figures at 1330 BST.
By Lucy Heming; lucyheming@alliancenews.com
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