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(Alliance News) - Stocks in London are set to open higher on Tuesday, buoyed by a strong performance amongst Chinese equities as Beijing pledged fresh economic support measures.
With data in recent months showing growth stuttering and business activity slowing, Beijing has come under pressure to provide much-needed support, particularly for the vast property sector.
Top leaders on Monday signalled a fresh push to get the post-Covid recovery back on track, particularly the troubled property sector, which accounts for a major part of the world's number-two economy.
Meanwhile, across the Atlantic, the US Federal Reserve is set to start its two-day policy meeting later today. The central bank is widely expected to lift interest rates by 25 basis points.
"But what Fed officials will also do is to remind investors that the tightening cycle is probably not over and that there will probably be another rate hike on the US' horizon," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
In early UK corporate news, Unilever reported a double-digit percentage rise in interim profit, while Croda International reported an 80% decline in half-year profit.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 12.91 points, or 0.2%, at 7,691.50
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Hang Seng: up 3.8% at 19,367.98
Nikkei 225: closed down 0.1% at 32,682.51
S&P/ASX 200: closed up 0.5% at 7,339.70
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DJIA: closed up 183.55 points, 0.5%, at 35,411.24
S&P 500: closed up 0.4% to 4,554.64
Nasdaq Composite: closed up 0.2% at 14,058.87
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EUR: higher at USD1.1083 (USD1.1073)
GBP: higher at USD1.2849 (USD1.2816)
USD: higher at JPY141.49 (JPY141.27)
Gold: lower at USD1,926.30 per ounce (USD1,958.30)
(Brent): higher at USD82.65 a barrel (USD82.23)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
US Federal Open Market Committee meeting begins
10:00 CEST EU ECB bank lending survey
10:00 CEST Germany Ifo business climate index
11:00 BST UK CBI industrial trends survey
09:30 BST UK BoE asset purchase facility quarterly report
11:00 BST UK CBI industrial trends survey
08:55 EDT US Johnson Redbook retail sales index
09:00 EDT US house price index
10:00 EDT US Richmond Fed business activity survey
10:00 EDT US consumer confidence index
16:30 EDT US API weekly statistical bulletin
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The OECD has failed in its efforts to reform the international tax system despite several deals in recent years, the Tax Justice Network said, calling for the United Nations to take over responsibility. The Organisation for Economic Cooperation & Development, a club dominated by rich nations, has helped set global tax rules for decades and has been working to reform them given rampant abuse by multinational firms. In 2021, in talks led by the OECD, agreement was reached on a minimum tax rate of 15% on multinationals and to develop rules on how to tax multinationals so countries do not lose out by profit shifting. But implementation of the minimum rate and development of the tax rules have been slow. "No significant reductions have been made in the amount of tax countries lose to global tax abuse since the start of the OECD's efforts to reform global tax 10 years ago," said the Tax Justice Network.
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BROKER RATING CHANGES
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JPMorgan cuts Auto Trader to 'underweight' (neutral) - price target 555 (630) pence
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UBS cuts Moneysupermarket.com to 'sell' (buy) - price target 260 (275) pence
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Barclays raises Ryanair price target to 24.25 (24) EUR - 'overweight'
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COMPANIES - FTSE 100
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Unilever reported a double-digit percentage rise in interim profit and a small rise in turnover in the first half of 2023. The consumer goods company reported a pretax profit of EUR5.27 billion, up 21% from EUR4.36 billion the year prior. Turnover climbed 2.7% to EUR30.43 billion from EUR29.62 billion. Meanwhile, underlying sales grew 9.1% year-on-year. Consequently, Unilever said it now expects underlying sales growth for the full year to be above 5%, ahead of its multi-year range.
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Croda International reported an 80% decline in interim profit but nonetheless reaffirmed its adjusted profit expectations for the full-year. The speciality chemicals company reported a pretax profit of GBP128.7 million, down sharply from GBP636.5 million the year prior. Revenue totalled GBP880.9 million, down 22% from GBP1.13 billion. Croda noted the prior year benefited from a GBP360.6 million divestment profit. The company's margin worsened to 20% from 28%, impacted by lower volumes and phasing of Covid-19 lipid sales. Looking forward, Croda said it continues to expect full-year adjusted pretax profit between GBP370 million and GBP400 million.
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Compass Group reported strong organic growth in its financial third quarter, ended June 30, and left its full-year guidance unchanged. Organic revenue growth was 15% in the quarter. Year-to-date organic revenue growth was 21%. Consequently, the firm reiterated its annual guidance. It expects operating profit growth towards 30% on a constant-currency basis, to be delivered through organic revenue growth of around 18% and an underlying operating margin in the range of 6.7% to 6.8%. "Longer term, we expect the growth opportunities to sustain mid-to-high single-digit organic growth and a path back to our historical margin, leading to profit growth above revenue growth," it added.
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Shell said it will receive up to USD650 million for its 35% interest in an Indonesian gas project. Shell Upstream Overseas Services (I) Ltd, a Shell subsidiary, will sell its participating interest in the Masela production sharing contract to Indonesia's PT Pertamina Hulu Energi and Petronas Masela Sdn Bhd, part of Malaysia's Petroliam Nasional Bhd, known as Petronas. The PSC includes the Abadi gas project located in the Masela block, offshore Saumlaki in Maluku province, Indonesia. Japan's Inpex Corp holds the other 65% of the Masela PSC and is the operator of Abadi.
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COMPANIES - FTSE 250
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SThree said it delivered a "resilient" performance in the first half of 2023 against "strong comparatives and macroeconomic headwinds". The recruitment company reported a pretax profit of GBP38.5 million, down 13% from GBP44.3 million the year prior. This was driven by a solid net fee performance, the company said, but offset by higher operating expenses which grew 8% year-on-year. More positively, revenue climbed to GBP825.2 million from GBP772.2 million. SThree said its interim dividend was approved at 5.0 pence per share, in-line with the year prior. Looking forward, SThree said the macroeconomic backdrop remains "unpredictable" in the short-term.
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Games Workshop said it delivered its "highest level" of sales since the company floated nearly 30 years ago and upped its dividend significantly. In the year ended May 28, the games manufacturer reported a pretax profit of GBP170.6 million, up from GBP156.5 million the year prior. Revenue totalled GBP470.8 million, up from GBP414.8 million the year prior. "We finished the year having delivered eight consecutive years of group sales and profit growth - in the period we reported the highest level of sales and the most profit we have generated since flotation 29 years ago," said Chief Executive Kevin Rountree. Games Workshop declared a dividend of 415 pence, up sharply from 235p the year prior.
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OTHER COMPANIES
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Ergomed said it showed "resilience" in the first half of 2023 as it reported revenue of GBP76.7 million, representing an increase of 10% from the GBP69.9 million achieved the year prior. "Ergomed has made a very solid start to the year demonstrating continued growth, reflecting the resilience of the markets we operate in, our services-based business model, and the global appeal of our offering to our clients," said Chair Miroslav Reljanovic. Consequently, Ergomed said its revenue and adjusted earnings before interest, tax, depreciation and amortisation for 2023 as a whole are expected to be in line with market expectations. The company did not specify those market expectations. Ergomed is a company focused on providing specialised services to the pharmaceutical industry.
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Ceres Power said it expects to report improved revenue and a stronger gross margin in the first half of 2023. The company expects revenue in the six-month period to be around GBP11 million. This would be up from GBP9.7 million the year prior, if achieved. Gross margin is expected between 55% to 60%, up from 55% the previous year. The company added it expects full-year revenue growth against the prior year as a result of its "growing" pipeline of potential new licence partners with whom it said it is in active discussions. "Despite the ongoing delay with the China [joint ventures], the company is making good progress elsewhere, especially with our growing pipeline of opportunities. We have made a significant shift in the business over the past two years, and I am particularly excited by the progress in our electrolyser technology, including signing a partnership with Linde and Bosch earlier this year, and the level of interest in licences to exploit the global market for green hydrogen," said Chief Executive Phil Caldwell. Ceres Power is a company focused on fuel cell and electrochemical technology.
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By Heather Rydings, Alliance News senior economics reporter
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