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(Alliance News) - Stocks in London are set to recover some poise on Thursday as investor focus turns to another key economic release this week, US retail sales.
In early corporate news, Shell announced a change in leadership, Hilton Food Group cautioned on full year profitability, and THG cut earnings guidance.
The US inflation surprise earlier this week continued to hang over European markets "like a black cloud" on Wednesday, said CMC Markets's Michael Hewson.
However, Wall Street staged a minor rebound after a bruising sell-off.
The hotter-than-expected inflation print sparked fears that the US Federal Reserve could mull a full percentage point - 100 basis points - interest rate hike next week.
However, CMC's Hewson said: "It still seems unlikely that the Fed will go by more than 75bps at this point despite the collective freakout of the past couple of days, with the positive finish in the US last night expected to see European markets open slightly higher later this morning."
Investors will now be looking to US retail sales, due out at 1330 BST, to assess how well consumers are holding up in the face of inflationary pressures.
"The most salient change for US consumers in August was a steep, double-digit decline in gasoline prices. Obviously, less spending at gas stations will drive down the headline retail sales reading all else equal, but consumers likely redirected those savings at the pump to other areas. For that reason, the retail sales control group (which excludes gasoline, autos, building materials, and restaurants) will be closely watched as a gauge for underlying demand," said Forex.com.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called up 28.9 points, 0.4%, at 7,306.2
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Hang Seng: up 0.3% at 18,893.92
Nikkei 225: closed up 0.2% at 27,875.91
S&P/ASX 200: closed up 0.2% at 6,842.90
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DJIA: closed up 30.12 points, or 0.1%, at 31,135.09
S&P 500: closed up 13.32 points, or 0.3%, at 3,946.01
Nasdaq Composite: closed up 86.10 points, or 0.7%, at 11,719.68
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EUR: lower at USD0.9961 (USD0.9997)
GBP: lower at USD1.1512 (USD1.1588)
USD: higher at JPY143.61 (JPY142.70)
GOLD: lower at USD1,687.88 per ounce (USD1,705.20)
OIL (Brent): lower at USD93.82 a barrel (USD95.38)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
11:00 CEST EU foreign trade
11:00 BST Ireland goods exports and imports
08:30 EDT US retail sales
08:30 EDT US unemployment insurance weekly claims report
08:30 EDT US export sales
09:15 EDT US industrial production
10:00 EDT US manufacturing and trade sales
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Confidence among UK consumers has fallen into negative territory for the first time since June 2020, according to a survey. The Consumer Confidence Index from YouGov and the Centre for Economics & Business Research fell by 4.2 points in August from 103.0 to 98.8, the largest decline since the early stages of the pandemic. It comes as inflation, largely driven by energy price rises, piles pressure on consumers ahead of winter. Both household finance measures – for the last 30 days and the outlook for the next 12 months – dropped by 3.1 points and 10 points respectively. Every other measure also saw worsening scores, including the outlook for house prices plummeting by 7.2 points to 124.9. Perceptions of job security looking ahead fell from 120.9 to 118.5.
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Irish premier Micheal Martin has said that EU plans to target energy firms' profits will provide "an important stream of revenue" ahead of a "difficult winter", but added that the crisis could be prolonged further. It came as the European Commission announced proposals to redistribute to customers profits made in Europe's energy sector, made amid the energy crisis fuelled by Russia's invasion of Ukraine. European Commission President Ursula von der Leyen told the European Parliament that a temporary cap should be placed on the revenues of electricity companies, which could raise EUR140 billion to help people hit by spiralling prices. She said profits "must be shared and channelled" to those who need help the most, adding that the EU's electricity market must be reformed to tackle high energy costs. The European Commission is also proposing that EU member states collect any 2022 profits from the oil, gas, coal and refinery sectors that are above a 20% increase on the average profits of the previous three years, and redistribute them to customers.
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The rising costs of energy imports combined with a weak yen have brought Japan's trade balance deep into the red, with the country's trade deficit in August reaching a record JPY2.8 trillion, about USD19 billion, the Finance Ministry said. The August figures mean that the resource-poor country, despite being the world's third largest economy, has now been in the red for 13 months in a row. The value of imports rose by 50% to JPY10.9 trillion, the highest increase since records began in 1979, due largely to rising energy prices. The country's exports rose 22% in August to around JPY8 trillion.
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Russia's Vladimir Putin and China's Xi Jinping gather with other Asian leaders in the ancient Silk Road city of Samarkand from Thursday for a regional summit touted as a challenge to Western global influence. Xi and Putin will be joined by the leaders of India, Pakistan, Turkey, Iran and several other countries for the meeting of the Shanghai Cooperation Organisation in the Uzbek city on Thursday and Friday. The main summit day will be Friday, but it is a meeting of the Russian and Chinese leaders on Thursday that will be the most closely watched. For Putin, the summit is a chance to show that Russia cannot be isolated internationally, at a time when Moscow's forces are facing major battlefield setbacks in Ukraine. For Xi – on his first trip abroad since the early days of the coronavirus pandemic – it is an opportunity to shore up his credentials as a global statesman ahead of a pivotal congress of the ruling Communist Party in October.
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BROKER RATING CHANGES
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HSBC raises BT Group to 'buy' (hold)
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Credit Suisse raises GSK to 'neutral' (underperform) - price target 1,430 (1,630) pence
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Credit Suisse cuts AstraZeneca to 'neutral' (outperform) - price target 1,1000 pence
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COMPANIES - FTSE 100
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Shell announced that Chief Executive Officer Ben van Beurden will step down at the end of 2022. Taking his place from January 1 of next year will be Wael Sawan, currently Shell's head of integrated gas & renewables. Van Beurden will continue to work as an adviser to the board until June 30 of next year, at which point he will leave the oil major. Reuters first reported earlier this month that van Beurden was set to depart next year.
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COMPANIES - FTSE 250
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IG Group said revenue in the first quarter ended August 31 was 11% higher year-on-year at GBP241.8 million from GBP218.3 million. This was led by growth in OTC derivatives and exchange traded derivatives," the contracts-for-difference trading provider said. Japan continued to deliver strong revenue growth of 24% year over year, while the UK, EU, Australia and Emerging Markets also saw higher revenue over the same period," it said.
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Hilton Food Group said its expects annual profit to be below expectations, due to cost pressures on consumers, as well as the hit from start-up costs and rising interest rates. In the 28 weeks to July 17, it said pretax profit decline by 9.7% year-on-year to GBP19.6 million from GBP21.7 million. Revenue was 20% higher to GBP2.0 billion from GBP1.7 billion.
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OTHER COMPANIES
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THG said that, in the first six months of the year, pretax loss narrowed to GBP22.3 million from GBP66.7 million year-on-year. Revenue climbed 12% to GBP1.1 billion from GBP958.8 million. Looking ahead to the full year, the online beauty products retail platform now expects adjusted earnings before interest, tax, depreciation and amortisation to come in at a range of GBP100 million to GBP130 million. Earlier this year, it had been expecting adjusted Ebitda of GBP161 million, in line with the previous year. THG also said two non-executive directors are departing and two now ones have been appointed.
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By Elizabeth Winter; elizabethwinter@alliancenews.com
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