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(Alliance News) - London's FTSE was called down on Wednesday following criticisms from China on the US-UK trade deal being detrimental to third-party interests, and new threats from Europe for sanctions on Russia if a ceasefire in Ukraine is not reached.
The US-China trade deal came into effect on Wednesday, as tariffs between the two countries are lowered in a temporary ceasefire to the trade war that has wreaked havoc on global markets and international supply chains.
Meanwhile, the UK government sets out plans to cut civil servants working in London by 12,000 and shift jobs to a series of new regional "campuses" across the country, in a move that will see 11 government office buildings in the capital close.
In early corporate news, luxury goods company Burberry said it will cut up to 1,700 jobs globally as it swings to a loss against a "difficult macroeconomic backdrop", and pharmaceuticals firm GSK agrees to purchase liver disease treatment efimosfermin alfa for around USD2.0 billion.
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 8,575.42
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Hang Seng: up 1.9% at 23,553.55
Nikkei 225: closed down 0.1% at 38,136.03
S&P/ASX 200: closed slightly up at 8,270.90
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DJIA: closed down 269.67 points, or 0.6%, at 42,140.43
S&P 500: closed up 42.36 points, or 0.7%, at 5,886.55
Nasdaq Composite: closed up 301.74 points, or 1.6%, at 19,010.08
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EUR: up at USD1.1196 (USD1.1174)
GBP: up at USD1.3307 (USD1.3278)
USD: down at JPY147.09 (JPY147.84)
Gold: down at USD3,230.17 per ounce (USD3,250.97)
(Brent): up at USD66.25 a barrel (USD66.21)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
08:15 BST UK Bank of England Deputy Governor Sarah Breeden speaks
10:15 BST US Federal Reserve Governor Christopher Waller speaks
14:10 BST US Federal Reserve Vice Chair Philip Jefferson speaks
15:30 BST US EIA crude oil stocks
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China has criticised the UK-US trade deal in a potential blow to the government's bid to revive relations with the country. Beijing said it was a "basic principle" that such agreements should not target other nations. Britain's deal with America, which was the Trump administration's first since it unveiled sweeping global tariffs last month, includes an agreement to co-ordinate to "address non-market policies of third countries." It is understood that this clause is intended to prevent the UK becoming a "backdoor" for circumvention of American measures on trade and security in relation to nations such as China through its exports to the country. "Co-operation between states should not be conducted against or to the detriment of the interests of third parties," Beijing's foreign ministry told the Financial Times. The statement poses difficulties for Keir Starmer's government as it seeks to navigate its trading position between two economic superpowers.
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The Financial Conduct Authority said the UK's insurance market could benefit from simpler, more straightforward requirements. The UK regulator is proposing to strip "outdated or duplicated" requirements from its insurance rules, to help reduce costs for firms and encourage competition in the sector. Proposals include no longer requiring companies to review the value of their product at least every 12 months; instead, they would use the risks and characteristics of each product to decide how often they review them. The regulator also plans to give firms the flexibility to appoint one lead insurer to comply with its rules in situations where more than one party is involved in designing the insurance product. Specified minimum hours of training and development required for insurance and funeral plan employees would also be removed under the proposals. Changes could support lower costs and wider access for the businesses and consumers who rely on insurance to manage risk, while maintaining appropriate levels of protection, the regulator said. It is also proposing to create a new definition to identify big commercial insurance customers who should not be captured by its conduct rules.
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UK holidaymakers are trimming their budgets this summer and looking for ways to make their money stretch further amid economic and political uncertainty and worries about rising living costs, research suggests. 83% of people aim to cut back on their travel spending this summer, research for home-swapping platform Kindred found. 12% said they have managed to cut some of their holiday costs so far. Meanwhile, 14% said they would be willing to skip going on holiday altogether.
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Thousands more civil servants are set to be moved out of London as the UK government seeks to cut costs and "radically reform the state". Under plans announced on Wednesday, the government will cut the number of civil servants working in London by 12,000 and shift jobs to a series of new regional "campuses" across the country. The changes will also see 11 government office buildings in London close, including one of its largest Westminster sites, in a move expected to save GBP94 million a year by 2032. Pat McFadden, the Chancellor of the Duchy of Lancaster, said the government was "taking more decision-making out of Whitehall and moving it closer to communities all across the UK". Government departments will be expected to submit plans for relocating staff, including senior civil servants, as part of the spending review due to be completed on June 11. The move will see two new major "campuses" created, one in Manchester focused on digital innovation and AI and another in Aberdeen on energy. Other roles will be created in Birmingham, Leeds, Cardiff, Glasgow, Darlington, Newcastle & Tyneside, Sheffield, Bristol, Edinburgh, Belfast and York, with the changes expected to bring GBP729 million to the local economy by 2030.
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Uncertainty about trade and industrial policy triggered by US tariffs won't derail growth in sales of electric vehicles, which should account for one in four cars sold this year, the IEA said Wednesday. In its annual report on the outlook for the uptake of electric vehicles – a key element in efforts to reduce climate-changing emissions – the International Energy Agency indicated that the increasing affordability and lower operating costs were supporting sales. "Our data shows that, despite significant uncertainties, electric cars remain on a strong growth trajectory globally," IEA Executive Director Fatih Birol said in a statement accompanying the report. "This year, we expect more than one in four cars sold worldwide to be electric, with growth accelerating in many emerging economies," he added. "By the end of this decade, it is set to be more than two in five cars as EVs become increasingly affordable." The IEA put sales of EVs, including plug-in hybrids, at more than 17 million last year, as sales increased by more than 3.5 million vehicles from 2023. With first quarter EV sales jumping 35% globally, the IEA expects more than 20 million should be sold this year.
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President Donald Trump announced the lifting of US sanctions on Syria and signed a massive arms deal with Saudi Arabia on Tuesday, as he kicked off his first major foreign trip since returning to the White House. Speaking in the Saudi capital Riyadh, the first stop of a three-nation Middle East tour, Trump said the US would lift sanctions imposed on Syria, calling it a chance for the war-wracked country "to shine." The high-profile visit to Riyadh also included the US and Saudi Arabia signing a USD142 billion arms deal, described by the White House as the largest defence sales agreement in US history. Trump and Saudi Crown Prince Mohammed bin Salman also signed multiple cooperation agreements across energy, medical research, judicial development, and defence modernisation.
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European countries could impose new sanctions against Russia "in the coming days" if Moscow does not agree to a ceasefire in Ukraine, the French president said. Macron stressed that "no legal framework" existed to seize frozen Russian assets, adding that it was "not a good solution."
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BROKER RATING CHANGES
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Exane BNP starts Hikma Pharmaceuticals with 'outperform' - price target 2,650 pence
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Bank of America raises RS Group to 'buy' (neutral), price target 730p (550p)
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Investec reinitiates Volex with 'buy' - price target 325 pence
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COMPANIES - FTSE 100
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Compass Group reports pretax profit of USD1.28 billion million for the six months that ended March 31, rising 6.7% from USD1.20 billion a year prior. This is driven by revenue growing 8.8% to USD22.57 billion from USD20.74 billion. The contract caterer declares an interim dividend of 22.6 cents per share, up 9.2% on-year from 20.7 cents. Earnings per share increase 11% to 64.5 cents from 58.3 cents. "The group achieved double-digit underlying operating profit growth driven by strong organic revenue and margin progression across both regions," says Chief Executive Officer Dominic Blakemore. "We are now in the fourth year of net new business growth within our 4-5% target range, supported by an improved performance in Europe and client retention rate of over 96%." Looking ahead, Compass continues to expect high single-digit underlying operating profit growth, driven by organic revenue growth over 7.5% and ongoing margin progression. The group is "confident" in sustaining mid-to-high single-digit organic revenue growth over the longer-term, with ongoing margin progression expected to lead to profit growth ahead of revenue growth.
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Pharmaceutical firm GSK agrees to buy Boston Pharmaceuticals' lead asset, efimosfermin alfa, for an upfront payment of USD1.2 billion alongside potential additional success-based milestone payments totalling USD800 million. Efimosfermin is a phase 3-ready, potential best-in-class, investigational specialty medicine to treat and prevent progression of steatotic liver disease. SLD affects around 5% of the global population, with limited therapueitc options available for patients. "The FGF21 class has shown some of the most exciting data in MASH including first-in-disease evidence of cirrhosis reversal, and efimosfermin has the potential to define a new standard-of-care with its monthly dosing and tolerability profile," says GSK Chief Scientific Officer Tony Wood. "Efimosfermin will significantly expand our hepatology pipeline and provide us the opportunity to develop a new potential best-in-class medicine with first launch expected in 2029. It complements GSK'990, also in development for [alcohol-related liver disease] and [metabolic dysfunction-associated steatohepatitis], offering GSK options to develop both monotherapy and potential combinations to improve patient outcomes."
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The UK Competition & Markets Authority is considering whether Aviva's planned acquisition of FTSE 250-listed car and home insurer Direct Line will weaken competition within the UK. The regulator launched its merger inquiry to both insurers on Wednesday and has until a July 10 deadline to reach its phase 1 decision.
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COMPANIES - FTSE 250
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Burberry plans to cut up to 1,700 jobs globally as it swings to a pretax loss of GBP66 million in the year that ended March 29, from a profit of GBP383 million the year before, driven by a 17% decline in revenue to GBP2.46 billion from GBP2.97 billion. The luxury goods firm proposes no dividend for the year, against a 61.0 pence per share payout a year prior. "After a challenging first half, we have moved at pace to implement Burberry Forward, our strategic plan to reignite brand desire, improve our performance and drive long-term value creation," says Chief Executive Officer Joshua Schulman. "Our customers are responding to our Timeless British Luxury brand expression. With improvement in brand sentiment, we will be ramping up the frequency and reach of our campaigns as our Autumn and Winter collections arrive in store. The continued resilience of our outerwear and scarf categories reaffirms my belief that we have the most opportunity where we have the most authenticity. While we are operating against a difficult macroeconomic backdrop and are still in the early stages of our turnaround, I am more optimistic than ever that Burberry's best days are ahead and that we will deliver sustainable profitable growth over time."
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TP ICAP backs out of a planned minority listing of its Parameta Solutions arm as a result of "recent market turbulence", noting it will "now keep under review the appropriate timing for potential minority listing". The listing had been planned for as early as the second quarter of 2025. The announcement comes as the interdealer broker reports that total revenue grew 10% to GBP629 million in the three months that ended March 31 in its "best quarter ever". First-quarter Global Broking revenue rises 14%, Liquidnet revenue is up 16%, while Energy & Commodities revenue remains unchanged, in line with expectations due to a competitive hiring market for brokers in 2024. Parameta Solutions revenue is up 6% during the three-month period. TP ICAP remains "comfortable" with current market expectations for adjusted earnings before interest and tax, and will release its interim 2025 results on August 6.
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OTHER COMPANIES
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H&T Group has agreed the terms for a potential acquisition by FirstCash Holdings, under which each H&T shareholder will be entitled to receive 661 pence in cash per H&T share. This comprises 650p in cash and a final dividend of 11p per share. The offer represents a 44% premium to the H&T closing price of 458p on Tuesday, and values H&T at around GBP297 million on a fully diluted basis, with an implied enterprise value of around GB351 million. H&T directors believe the offer to represent an attractive opportunity for H&T shareholders, and intend to recommend unanimously that shareholders vote in favour of the scheme. "The acquisition has a compelling strategic rationale, bringing together two businesses with complementary offerings focussed on the values and benefits of their customers," says H&T Chief Executive Officer Chris Gillespie. "It's clear to us that FirstCash has full appreciation of our capabilities, the dedication of our employees, commitment to the customer and with their backing and support, I am confident H&T will have an extremely bright future."
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By Emily Parsons, Alliance News reporter
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