(Alliance News) - Stock prices in London are set to open higher on Thursday in the wake of the US Federal Reserve's latest meeting, with focus now turning to central bank decisions from Switzerland and the Bank of England.
"There was little in the way of surprises from the Federal Reserve last night, with the central bank committing to keep buying bonds at the rate of at least USD120 billion a month until substantial progress had been made in respect of the economic recovery. Given that the recovery appears to be stalling, particularly in relation to the labour market and consumer spending, as retail sales declined for the first time since April, this was welcome news for investors," said Michael Hewson at CMC Markets.
He added: "This pledge has translated into a positive Asia session and looks set to give markets here in Europe a lift as they look to open later this morning."
In early UK company news, WPP said it is aiming for a recovery to 2019 revenue less pass-through costs levels by 2022, Rio Tinto promoted its chief financial officer to chief executive, and TalkTalk Telecom agreed to be bought out in a GBP1.11 billion deal.
IG says futures indicate the FTSE 100 index of large-caps to open 27.99 points higher, or 0.4%, at 6,598.90 on Thursday. The FTSE 100 closed up 57.59 points, or 0.9%, at 6,570.91 on Wednesday.
The Fed on Wednesday kept key interest rates unchanged and maintained monthly bond purchases of at least USD120 billion at its final policy meeting of 2020.
The Federal Open Market Committee decided to keep the target range for the federal funds rate unchanged at 0.00% to 0.25%. The FOMC said it expects to maintain this target range until labour market conditions have reached levels consistent with the committee's assessments of maximum employment and inflation has risen to 2.0% and is on track to moderately exceed 2.0% "for some time".
In addition, the US central bank said it will continue to increase its holdings of Treasury securities by at least USD80 billion per month and of agency mortgage-backed securities by at least USD40 billion per month until "substantial further progress has been made" toward the FOMC's maximum employment and price stability goals.
In the US on Wednesday, Wall Street ended largely higher, with the Dow Jones Industrial Average down 0.2%, the S&P 500 up 0.2% and Nasdaq Composite up 0.5%.
Asian markets rose on Thursday. In Japan, the Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite ended up 1.1%, while the Hang Seng index in Hong Kong is up 0.4%. In Australia, the S&P ASX 200 closed up 1.2%.
Against the yen, the dollar was quoted at JPY103.21, down from JPY103.52.
In early UK company news, advertising agency WPP said it intends to return the core Communications business to sustainable growth and is targeting annual cost savings of GBP600 million by 2025.
"In partnership with our agency brands we are deepening and accelerating the change already happening within WPP. We aim to return our Communications business to sustainable growth and invest further in the high-growth areas of Commerce, Experience and Technology. We are converting our size into scale," said Chief Executive Mark Read.
The FTSE 100 constituent wants to supplement growth with mergers & acquisitions of GBP200 million to GBP400 million annually.
WPP said like-for-like revenue less pass-through costs fell 6.7% in the two months to November, with the result for 2020 expected to be in line with the year-to-date performance of an 8.4% decline. WPP is aiming for a recovery to 2019 revenue less pass-through costs levels by 2022.
The company expects 3% to 4% annual growth in revenue less pass-through costs from 2023, and will implement a new dividend policy, intending to grow this annually with a payout ratio of around 40% of headline earnings per share. The 2020 dividend will be in line with this new policy.
"Our goal is to pay a dividend that is growing and sustainable, reflecting the strong cash generation of the business while allowing for sufficient reinvestment for growth," said WPP, adding that it anticipates recommencing the share buyback funded by the Kantar transaction proceeds in 2021.
Separately, WPP said a revised proposal of AUD0.70 per share to acquire the remaining shares in WPP AUNZ it does not already own has been accepted. The total aggregate consideration payable for WPP for the remaining shares will be around AUD230 million.
Miner Rio Tinto said it has promoted Jakob Stausholm to be its next chief executive, effective from the start of 2021.
Stausholm joined the Anglo-Australian miner in 2018 as an executive director and chief financial officer, having previously been CFO and strategy & transformation officer of Danish shipping company AP Moeller - Maersk.
Controller Peter Cunningham will be appointed interim chief financial officer of Rio Tinto.
Back in September, Rio Tinto said that, by mutual agreement, CEO Jean-Sebastian Jacques would resign from his role with effect on March 31, or earlier should a successor be appointed before then. He will step down from his role as an executive director on January 1, the company said on Thursday, and leave the group at the end of March.
In May, Rio Tinto had blasted rock shelters in the Juukan Gorge in Western Australia's remote Pilbara region, destroying one of the earliest known sites occupied by Australia's indigenous people in order to expand its iron ore mine. Following a board review in August, the group said it had engaged extensively with shareholders, some of which had expressed concerns about executive accountability for the failings identified.
TalkTalk Telecom has agreed to be taken over by Tosca IOM in a deal valuing the London-listed telecommunication firm at GBP1.11 billion.
Shareholders will receive 97 pence in cash per TalkTalk share under the deal, a 16% premium to the stock's closing price on October 7, being the last business day before the offer period started. TalkTalk shares closed at 96.25 pence in London on Wednesday.
Tosca IOM newly-incorporated company, formed at the direction of London-based alternative asset manager Toscafund and private equity investor Penta.
"Having considered in detail the best interests of all shareholders and TalkTalk as a whole, the independent TalkTalk directors believe that the cash offer from Toscafund provides an opportunity for shareholders to recognise immediate value for their shares at a premium of approximately 26% to volume-weighted average price for the three month period ended 7 October 2020," said TalkTalk Senior Non-Executive Director Ian West.
The deal is expected to close in the first quarter of 2021.
Separately on Thursday, TalkTalk reported interim results. Revenue fell to GBP740 million for the six months to September from GBP792 million a year prior, with the company swinging to a pretax loss of GBP3 million from a GBP1 million profit.
In light of the recommended acquisition, there will be no interim dividend, the firm said.
SSP Group, an operator of food and beverage outlets in travel locations, reported a sharp swing to loss in its recently ended financial year as the pandemic hit the travel market.
Revenue for the year slumped to GBP1.43 billion from GBP2.79 billion the year before, sending SSP to a pretax loss of GBP425.8 million, turning from a profit of GBP197.2 million the year prior.
Like-for-like sales were down 51%, with the company noting these were hit by Covid-19 and the closure of most global travel markets since March.
From very low sales in the third quarter - 93% lower year-on-year - passenger numbers increased gradually over the final quarter and by the end of September were 76% lower year-on-year. However, the re-emergence of the virus and further lockdowns since the end of the financial year has resulted in further volatility in passenger numbers.
"As a result we expect sales during the first quarter of the 2021 financial year to remain broadly in line with the final quarter of the year, approximately 80% lower year-on-year. This volatility is expected to continue through the second quarter of the new financial year," said SSP.
The company will pay no dividend for the year.
To come in the central banking calendar for Thursday are decisions from the Swiss National Bank at 0830 GMT and the Bank of England at midday. Neither central bank is expected to alter interest rates.
The SNB decision comes after the central bank on Wednesday flatly rejected accusations from the US that the wealthy Alpine nation was involved in currency manipulation. The comment came after the US Treasury found in its semi-annual foreign exchange report that Switzerland, along with Vietnam, was intervening in currency markets to affect its balance of payments.
The bank stressed that its interventions on foreign exchange markets were in no way aimed at affecting the balance of payments, nor to gain unfair competitive advantage for the Swiss economy.
Meanwhile, focus on the BoE meeting will lie on any signals the bank provides should the backdrop deteriorate.
"The turn of the year will almost certainly bring disruptions. Brexit even with a deal will be a seismic change and Covid restrictions could well tighten again after Christmas as well. In short, the need for the central bank to remain accommodative isn't going anywhere fast, in fact it may even grow," said Fiona Cincotta at City Index.
Sterling was quoted at USD1.3576 early Thursday, higher than USD1.3500 at the London equities close on Wednesday.
The euro traded at USD1.2229 early Thursday, higher than USD1.2188 late Wednesday.
Gold was quoted at USD1,871.10 an ounce early Thursday, higher than USD1,857.15 on Wednesday. Brent oil was trading at USD51.72 a barrel, up from USD50.62 late Wednesday.
The data calendar on Thursday has eurozone inflation readings at 1000 GMT and the latest US jobless claims figures at 1330 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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