Vodafone Share News (VOD)

(Alliance News) - Stocks in London are set to open lower on Wednesday despite gains in Asia and the US overnight.

In early UK company news, tobacco firm Imperial Brands warned on earnings due to restrictions on flavoured vaping products in the US. Telecommunications company Vodafone reiterated guidance and said it is preparing for a potential IPO of its European tower infrastructure in 2021. Housebuilder Barratt Developments posted a rise in interim profit.

IG says futures indicate the FTSE 100 index of large-caps to open 28.62 points lower at 7,411.20 on Wednesday. The FTSE 100 index closed up 113.51 points, or 1.6%, at 7,439.82 on Tuesday.

"Asian stocks followed up on the US session gains...But [futures for] European stock indices remained on the backfoot after a solid Tuesday session. FTSE and DAX futures edged lower hinting that the European equity markets could retrace a part of yesterday's gains at the open," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Ozkardeskaya explained that "the correction of the coronavirus sell-off and the rush towards technology stocks" were the "major catalysts" pushing US indices higher on Tuesday.

The Dow Jones Industrial Average closed up 1.4%, the S&P 500 up 1.5% and the Nasdaq Composite up 2.1%.

President Donald Trump's State of the Union address became a shocking display of US divisions Tuesday with Democrats protesting the Republican's boasts before their leader, Nancy Pelosi, ripped up her copy of the speech on live television.

The speech began with as much rancour as it ended, when Trump ignored past custom and declined to shake hands with Pelosi, who as speaker of the House of Representatives had overseen the push to impeach Trump for abuse of office.

Underlying all the tension was the fact that after months of impeachment investigations in the Democratic-led House, the Republican majority Senate is now almost certain to acquit Trump on Wednesday.

Stocks also were higher in Asia overnight.

In Asia on Wednesday, the Japanese Nikkei 225 index ended up 1.0%. In China, the Shanghai Composite closed up 1.3%, while the Hang Seng index in Hong Kong is 0.3% higher.

Released overnight, data showed China registered a modest expansion in business activity in January.  

The Chinese composite output index fell to 51.9 in January, the weakest recorded in the past four months, from 52.6 in December. The headline business activity index fell to 51.8 in January, a three-month low, from 52.5 in December.

"Provided that more than 50 million people were quarantined last month, rail and road travels on major axed halted, most businesses closed their doors and haven't opened just yet, a minor fall in expansion is rather encouraging. Or the number doesn't tell the truth," remarked Swissquote's Ozkardeskaya.

Imperial Brands issued a profit warning following new vaping regulation in the US.

Tobacco trading remains in line with expectations, the FTSE 100 constituent told its annual general meeting, but group constant currency net revenue is now seen at a "similar level" to last year and adjusted earnings per share are expected to be slightly lower.

This is because of the US Food & Drug Administration's ban on certain flavours of cartridge-base vapour devices, as well as weaker-than-expected consumer demand for vapour.

First half adjusted earnings per share are expected to be down around 10% at constant currency, which the company said is due to the phasing of inventory write-downs, "primarily relating to the US flavour ban".

"Regulatory uncertainty and adverse news flow continues to affect demand in the US and Europe. We estimate this will result in significantly lower year-on-year [Next Generation Product] net revenue as well as increased provisions for slow-moving stock," Imperial said.

Vodafone reiterated its full-year guidance as trading came in line with expectations for the third quarter.

For the three months to December 31, organic service revenue growth was 0.8%. Group revenue was up 6.8% to EUR11.75 billion.

The telecommunications firm reiterated its guidance of adjusted earnings before interest, tax, depreciation and amortisation between EUR14.8 billion and EUR15 billion.

Outside of the results, Vodafone said it remains on track to legally separate its European tower infrastructure into a new organisation which will be operational by May 2020, and it is preparing for a potential IPO in "early 2021".

"I am pleased with the pace at which we have executed our commercial and strategic priorities, which has allowed us to maintain our momentum in the quarter. Competition in Europe remains challenging, primarily in the value segment, however we continued to improve customer loyalty and to grow in broadband, and we achieved good growth in Africa. We expect a further gradual improvement in service revenue growth in Q4, led by Europe," said Chief Executive Nick Read.

Housebuilder Barratt Developments said it achieved a "strong" first half performance as profit rose.

Revenue in the six months to December rose 6.3% to GBP2.27 billion, with pretax profit up 3.7% to GBP423.0 million.

The firm lifted its interim payout by 2.1% to 9.8 pence. Further, Barratt said it has extended its capital return plan and will pay a special return of GBP175 million in November 2021, in addition to the planned GBP175 million payment in November this year.

On current trading, Barratt said the rate of net private reservations per active outlet per average week from the end of its first half to February 2 was 0.83, up from 0.74 a year before.

"We have achieved a strong first half performance, delivering continued volume growth and making good progress against our medium term targets. We have made a good start to our second half and with substantial net cash, a well-capitalised balance sheet and strong forward sales, the outlook for the full year is in line with our expectations," said Chief Executive David Thomas.

Babcock International said Archie Bethel intends to retire as chief executive, and the defence contractor has started a process to find his replacement.

Bethel will remain in his role until his successor is in place.

"Having served at Babcock for 16 years, I feel that this is the right time to retire. In the meantime, I am focused on positioning the company for further success in the future," said Bethel.

Domino's Pizza reported sales growth in the fourth quarter, but its international operations continued to lag.

Group system sales were up 3.7% to GBP352.0 million in the 13 weeks to December 29, up 4.1% organically.

UK & Ireland system sales grew 4.4% to GBP326.7 million, up 4.5% organically, while International sales fell 5.0% to GBP25.3 million, down 1.4% on an organic basis.

UK & Ireland operating profit is expected to be "within the range of current market expectations", said Domino's, noting that this range is around GBP102.1 million to GBP104.1 million.

For its international operations, Domino's said it expects a GBP20 million operating loss. The disposal of its international operations is progressing, the company said, with the focus on Norway as a priority.

For 2019, Domino's said it expects to take non-cash non-underlying charges in the region of GBP20 million relating to impairment charges for corporate stores, and around GBP20 million to GPB40 million as impairment charges for its international businesses.

Still to come in the UK corporate calendar on Wednesday are full-year results from pharmaceutical firm GlaxoSmithKline at 1200 GMT.

In forex, sterling was quoted at USD1.3015 early Wednesday, soft compared to USD1.3026 at the London equities close on Tuesday.

The euro was at USD1.1039 early Wednesday, flat versus USD1.1035 late Tuesday. Against the yen, the dollar was trading at JPY109.33 versus JPY109.43.

Among commodities, gold was quoted at USD1,561.65 an ounce early Wednesday, up from USD1,552.50 on Tuesday. Brent oil was trading at USD54.18 a barrel early Wednesday, lower than USD55.00 late Tuesday.

In the economic calendar on Wednesday are a raft of services PMIs, with Germany at 0855 GMT, the eurozone at 0900 GMT and the UK at 0900 GMT. Eurozone retail sales are at 1000 GMT.

In the US on Wednesday, there is the ADP employment report at 1315 GMT and services PMI at 1445 GMT, followed by the ISM non-manufacturing PMI at 1500 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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