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(Alliance News) - Stock prices in London were seen opening almost unchanged on Wednesday despite a strong close in the US overnight, as investors digested the latest developments surrounding the Omicron variant of Covid-19.
In early company news, housebuilder Berkeley Group increased its profit guidance for the current year following robust half-year results. Peer Taylor Wimpey said its long-standing chief executive is to step down. Travel concessions company SSP Group was optimistic over its prospects as restrictions ease.
IG futures indicate the FTSE 100 index is to open 0.90 of a point lower at 7,339.00. The blue-chip index closed up 107.62 points, or 1.5%, at 7,339.90 on Tuesday.
In the US on Tuesday, Wall Street ended sharply higher, with the Dow Jones Industrial Average up 1.4%, S&P 500 up 2.1% and Nasdaq Composite up 3.0%.
In Asia on Wednesday, Tokyo's Nikkei 225 index closed up 1.4%. In China, the Shanghai Composite ended up 1.2%, though the Hang Seng index in Hong Kong was flat. The S&P/ASX 200 in Sydney finished 1.3% higher.
Berkeley Group reported a rise in interim earnings as the housebuilder hailed its London-focused investment strategy.
For the six months to October 31, revenue rose 36% to GBP1.22 billion from GBP895.9 million last year, and pretax profit increased 26% to GBP290.7 million from GBP230.8 million.
Looking ahead, Berkeley raised its earnings expectation for the current financial year by 5% from the current guidance, which was for pretax profit to be at a similar level to last financial year of GBP518.1 million.
Further, as a result of a resilient sales market, its delivery pipeline and the recovery of sales to pre-pandemic levels, Berkeley said pretax profit growth is expected to be around 5% per annum for the next three financial years. This sees Berkeley on a path to delivering GBP625 million of pretax profit for the year ending April 30, 2025, it said.
"The performance reflects Berkeley's conviction and investment in its strategy over the last 18 months, which is focused on London and the South East, the country's most under-supplied housing markets, in spite of the challenges presented by the pandemic, supply chain constraints, and regulatory environment. Over this time, we have continued to deliver in line with our uniquely long-term operating model, progressing construction across our portfolio of 64 live projects," said Chief Executive Officer Rob Perrins.
Taylor Wimpey said Chief Executive Officer Pete Redfern will step down from the role after 14 years and will leave the housebuilder once a suitable candidate has been identified and a full handover has taken place.
Taylor Wimpey said it has a succession plan in place and the recruitment process is advanced, with a selection process considering both internal and external candidates.
SSP Group, which operates food and beverage outlets in travel locations, reported a fall in annual revenue as government-imposed travel restrictions affected all of its major markets for a large proportion of the year.
For the financial year ended September 30, SSP posted revenue of GBP834.2 million, down 42% from GBP1.43 billion last year, as its pretax loss narrowed to GBP411.2 million from GBP425.8 million.
Turning to current trading, SSP said revenue in first nine weeks of the new financial year was averaging 66% of 2019 levels. The London-based firm highlighted that sales trends have continued to improve, with air passenger numbers in the UK and continental Europe boosted by an extended European summer holiday season. In addition, rail passenger numbers were continuing to benefit from commuters returning to offices in greater numbers, it said.
Deputy CEO Jonathan Davies said: "Looking ahead, the medium-term outlook remains unchanged, which is for a return to broadly pre-Covid levels of like-for-like revenue and [earnings before interest, tax, depreciation, and amortization] margins by 2024. We are now starting to mobilise the pipeline of around 200 new outlets that have already been secured and we anticipate delivering approximately 15% of additional net contract gains over the medium term.
"Furthermore, we expect to utilise our significant financial capacity and competitive strength to accelerate our new business growth and to capitalise fully on the recovery in the travel sector."
The expected weaker start in London on Wednesday comes as investors continued to monitor the ongoing developments of the latest Covid strain.
Omicron does not appear to cause more severe disease than previous Covid variants, and is "highly unlikely" to fully dodge vaccine protections, a top WHO official told AFP.
The World Health Organization's second-in-command, said while a lot remained to be learned about the new, heavily mutated variant of Covid-19, preliminary data indicated it did not make people sicker than Delta and other strains.
"The preliminary data doesn't indicate that this is more severe. In fact, if anything, the direction is towards less severity," WHO emergencies director Michael Ryan said in an interview, insisting though that more research was needed.
The Pfizer-BioNTech vaccine still provides some protection in the face of the Omicron variant, but its potency is sharply reduced, a South African lab study published on Tuesday has suggested.
A small study - testing 14 plasma samples from 12 participants - from the Africa Health Research Institute in Durban found that Omicron resulted in a 41-fold decline in neutralising antibodies produced by people who had received a two-dose regimen of the Pfizer vaccine.
However, Omicron's escape of the Pfizer vaccine was "extensive but incomplete". The study noted that those who had been previously infected as well as vaccinated showed higher neutralisation rates than those only vaccinated.
"This week's price action so far has been a complete contrast to last week's schizophrenic back and forth. The last two days have been ones of unbridled optimism that for all the concerns about Omicron, there is a growing hope that for all the concerns about its greater transmissibility, that any fallout is likely to be mild, and that when it comes to hospitalisations and deaths, the outcomes are likely to be better than Delta," commented CMC Markets analyst Michael Hewson.
"The gains in equity markets we are seeing are all the more surprising given that they are coming against a backdrop of rising inflationary risk, and central banks that are likely to start withdrawing some of their monetary policy support in the weeks and months ahead. Today's European open could well see a modest pause on a day that is fairly data light."
The pound was quoted at USD1.3242 early Wednesday, up from USD1.3224 at the London equities close Tuesday.
The euro was priced at USD1.1290, higher against USD1.1241. Against the Japanese yen, the dollar was trading at JPY113.35, down from JPY113.58.
Brent oil was quoted at USD74.86 a barrel Wednesday morning, up from USD74.74 late on Tuesday. Gold stood at USD1,790.00 an ounce, firm against USD1,785.50.
In a quiet international economic calendar on Wednesday, there are US MBA mortgage applications in the afternoon, along with a rate decision from the Bank of Canada.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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