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(Alliance News) - London's FTSE 100 is called to open lower on Wednesday, with equities on the back foot after more hawkish comments from a US central banker.
Fed Governor Michelle Bowman said in prepared remarks in Ohio on Tuesday: "I continue to expect that we will need to increase the federal funds rate further to bring inflation down to our 2% target in a timely way."
This comes amid "an unusually high level of uncertainty regarding the economy," with data revisions and geopolitical risks, said Bowman, who also sits on the rate-setting Federal Open Market Committee.
Bowman's words followed Minneapolis Fed President Neel Kashkari saying the Fed's inflation fight is not over. Fed Chair Jerome Powell speaks at 1415 GMT on Wednesday.
The prospect of higher for longer US interest rates boosted the dollar.
In early UK corporate news, Marks & Spencer reported stronger half-year results, outsourcer Serco said it has won a new contract and newspaper publisher Reach announced job cuts.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 0.3% at 7,389.54
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Hang Seng: down 0.4% at 17,593.03
Nikkei 225: down 0.3% at 32,166.48
S&P/ASX 200: closed up 0.3% at 6,995.40
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DJIA: closed up 56.74 points, or 0.2%, at 34,152.60
S&P 500: closed up 0.3% at 4,378.38
Nasdaq Composite: closed up 0.9% at 13,639.86
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EUR: down at USD1.0682 (USD1.0688)
GBP: down at USD1.2272 (USD1.2304)
USD: up at JPY150.71 (JPY150.51)
GOLD: up at USD1,968.18 per ounce (USD1,963.77)
OIL (Brent): down at USD81.59 a barrel (USD82.55)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
09:00 GMT EU ECB consumer expectations survey results
10:00 GMT EU retail trade
09:00 GMT UK BoE Governor Andrew Bailey speaks at Central Bank of Ireland's Financial System Conference
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UK house prices are expected to be around GBP45,000 higher on average by 2028, as market demand and buying power recovers, according to a forecast. Property adviser Savills, which released the research, said the market looks set to "bottom out" around the middle of next year. Across Britain, the average property value will increase to GBP300,108 in 2028, marking a GBP45,521 or 17.9% increase from an average house price of GBP254,587 in 2023, according to Savills. The average house price is projected to fall by 3.0% in 2024 but Savills said this will be followed by price increases in 2025, 2026, 2027 and 2028 as affordability pressures slowly ease.
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Foreign ministers from the seven countries in the G7 worked to forge a unified stance on the Israel-Hamas war at intensive meetings in Tokyo on Wednesday. US Secretary of State Antony Blinken met with other senior diplomats as they look to contain a worsening humanitarian crisis and stop an escalation of fighting in Middle East. The second and final day of the G7 Foreign Minister talks intersects with a flurry of global crises. In Tokyo, Blinken and foreign ministers from Britain, Canada, France, Germany, Japan and Italy will be seeking common ground in part to prevent the Gaza war from further destabilising already shaky security in the broader Middle East and seeking to maintain existing positions on other matters. While the conflict in Gaza and the humanitarian suffering that has followed Israel's response to the deadly October 7 Hamas attack lead the agenda, the envoys are also dealing with Russia's war in Ukraine, North Korea's nuclear and missile programmes and China's growing aggression in territorial disputes with its neighbours. Blinken said it is crucial to find a unified stance on the war in Israel, similar to what diplomats have done over Ukraine and other major issues. The ministers are also trying to keep existing differences on Gaza from deepening. Britain's Foreign Secretary James Cleverly told a select group of journalists, including The Associated Press, that his government only supports a geographically specific "humanitarian pause" and not a wider ceasefire.
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BROKER RATING CHANGES
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Morgan Stanley raises Rolls-Royce to 'overweight' (equal-weight) - price target 276 (166) pence
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Berenberg raises Direct Line price target to 170 (161) pence - 'hold'
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COMPANIES - FTSE 100
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Marks & Spencer Group reported improved interim results and early signs suggest the clothing, home and food retailer will enjoy a robust Christmas. Revenue in the half-year to September 30 increased 11% to GBP6.13 billion from GBP5.54 billion a year earlier. Pretax profit jumped 56% to GBP325.6 million from GBP208.5 million. M&S said: "M&S's first half results showed a good year on year improvement in almost all businesses. Favourable market conditions, surprisingly resilient consumer demand and the effect of competitor exits from the market provided a solid backdrop. In this environment, the strategy to reshape for growth has enabled M&S to increase customer numbers and market share in both businesses, with healthy volume growth and reduced promotions in Food, higher than expected full price sales in Clothing & Home and structural cost reduction supporting robust margins." Food sales rose 15%, while in Clothing & Home, they increased 5.7%. Chief Executive Stuart Machin said: "Looking ahead, trading momentum has been maintained through October, with customers responding positively to our Christmas ranges. There will be challenges and headwinds in the year ahead and progress won't be linear, but we are ambitious for future growth and are driving what is in our control." The company's interim dividend amounted to 1.0 pence per share. It did not pay an interim dividend in the year prior.
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Anglo American reported that rough diamond sales at De Beers plunged as the group cut stock due to tough economic challenges and factory closures in India. The London-based mining company said provisional rough diamond sales value for the ninth sales cycle of 2023 tumbled to USD80 million, compared to USD200 million in the eighth cycle. On an annual basis, sales crashed from USD454 million in the ninth cycle in 2022. The provisional rough diamond sales figure quoted for cycle nine represents the expected sales value for the period between October 4 and November 3 and remains subject to adjustment based on final completed sales. The cycle eight sales took place between September 18 and October 3. De Beers Chief Executive Al Cook said macro-economic challenges continued to affect the diamond sector.
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COMPANIES - FTSE 250
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ITV said revenue edged higher in the first nine months of the year, with its ITVX streaming platform impressing, though advertising revenue declined. Total revenue in the nine months to September 30 amounted to GBP2.98 billion, a rise of 0.9% from GBP2.95 billion a year earlier. In the ITV Studios production arm, revenue rose 9.3% on-year to GBP1.52 billion, though in Media & Entertainment, it fell 6.5% to GBP1.46 billion. M&E includes ITVX, as well as ITV's television networks. "ITVX continued to perform strongly. Total digital revenues were up 23% and total streaming hours were up 27% to the end of September with monthly active users continuing to grow in line with our expectations," ITV said. M&E's outcome was hurt by a 7% decline in total advertising revenue. ITV added: "The advertising market remains challenging and over the full year 2023 we expect ITV TAR to be down around 8% versus 2022 TAR, which was the second highest in ITV's history and included the positive impact of the FIFA World Cup." ITV continued: "Over the full year 2023, we expect to deliver around 3% growth in total Studios revenue, following 19% growth in 2022. On an organic basis, we expect average growth over 2022 and 2023 to be well ahead of our medium term target and the wider market."
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Pub firm JD Wetherspoon said reported continued "gradual improvement" in sales, with inflationary pressures easing, though energy costs remain robust. In the 14 weeks to November 5, like-for-like sales were 9.5% higher on-year. Chair Tim Martin said: "Sales in the first 14 weeks of the financial year have continued the pattern of gradual improvement which has followed the ending of lockdowns and restrictions. Inflationary pressures have eased, but energy costs, in particular, remain at far higher levels than pre-pandemic, putting pressure on suppliers and the wider economy." Martin said the firm is upping its investment in existing pubs in the current financial year to around GBP70 million, from GBP46.9 million a year prior. He added: "Areas of investment include new staff rooms, changing rooms, glass racks above bars and air conditioning. The company currently expects an outcome for the financial year in line with market expectations, and will provide further updates as the year progresses."
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Outsourcer Serco said it has won a deal with the UK Ministry of Justice to provide electronic monitoring services in England and Wales. The contract kicks off in May and is worth GBP200 million of a six-year term. The value would be upped to GBP275 million if an option to extend the pact by two years is exercised. Serco added: "Serco will introduce a new data-led, technology-based approach and will be responsible for delivering field services, contact centre and administrative monitoring services in the installation and removal of electronic monitoring devices. This will include being the service integrator for the electronic monitoring devices and supporting technology, which will be delivered by a separate provider. "
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OTHER COMPANIES
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Newspaper publisher Reach announced further cost cutting measures which will see it trim its workforce by 450 roles. Reach will look to deliver a 5-6% in-year reduction in the operating costs for 2024. It explained: "This cost reduction programme is part of the Company's drive to strengthen its position as a leading digital publisher, and mitigate against the backdrop of continuing inflationary pressures that we expect to impact 2024. As part of this programme Reach proposes to reduce its total workforce by an estimated 450 full time roles. The savings will allow the business to deliver on its long term plans, while continuing to invest to drive better customer value, develop online products and grow new audiences." Reach in March had announced a plan to reduce costs in 2023 by 5% to 6%. It said those measures are on track to be delivered. Reach had said in March: "Savings will be generated throughout the business and include more efficient procurement throughout the print supply chain, the simplification of central support functions and the removal of editorial duplication. As part of these efficiency measures, we will unfortunately lose some colleagues from the business, a decision which has not been taken lightly, as we continue to focus on delivering our digital strategy, which will secure the long-term sustainability of the business."
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Time Out said annual revenue increased and the media and hospitality set out a confident outlook, despite noting "challenging macroeconomic conditions". Net revenue in the year ended June 30 grew 37% to GBP76.0 million from GBP55.4 million. Net revenue excludes concessionaires' share. Time Out's pretax loss widened to GBP25.0 million from GBP19.5 million. Administrative expenses were 35% higher at GBP79.4 million from GBP58.7 million. Time Out said: "The 2023 financial year provides us with the foundations for continued growth which, combined with ongoing rigorous management of the cost base, can significantly improve future cash flows and profitability. In contrast to most media and hospitality businesses, Time Out Group now has multiple avenues for sustained growth and is building a valuable long term recurring earnings stream. Despite macroeconomic headwinds, we have increased confidence in future growth and further traction as we continue to deliver against our ambitious plans, with Q1 FY24 performance in line with management expectations."
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By Eric Cunha, Alliance News news editor
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