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(Alliance News) - Stock prices in London are seen opening lower on Monday, amid concerns about Federal Reserve plans to continue to ramp up US interest rates to combat runaway inflation and ahead of a key central bank summit this week.
In early company news, telecommunications firm Vodafone has agreed to offload its Hungarian business. Embattled movie-house chain Cineworld said it was considering filing for bankruptcy in the US.
IG futures indicate the FTSE 100 index will open 16.27 points lower at 7,534.10. The index closed up 8.52 points, or 0.1%, at 7,550.37 Friday.
Vodafone said it has entered into an agreement in principle with Hungarian technology firm 4iG Public and Hungarian state holding company Corvinus to sell its Vodafone Hungary arm for a total cash consideration equivalent to an enterprise value of EUR1.8 billion.
Both parties are targeting completion by the end of 2022.
Vodafone said the combination of the Hungarian business with 4iG is "complementary", with limited overlaps. The addition of Vodafone Hungary's infrastructure to 4iG will create a "stronger competitor to the incumbent operator", it said.
Chief Executive Officer Nick Read explained: "The Hungarian government has a clear strategy to build a Hungarian-owned national champion in the ICT sector. This combination with 4iG will allow Vodafone Hungary, which has a proud history of success and innovation in the country, to play a major role in the future growth and development of the sector as a much stronger scaled and fully converged operator. The combined entity will increase competition and have greater access to investment to further the digitalisation of Hungary."
Cineworld said its Cineworld and Regal movie theatres across the globe are "open for business as usual" and continues to welcome customers and members, despite the group's financial difficulties.
Last Wednesday, Cineworld said it was in "active discussions" with various stakeholders, exploring the possibilities to secure further liquidity or restructure its balance sheet through a "comprehensive deleveraging transaction". It also warned that lacklustre trading was prompting potential financing decisions that could significantly dilute shareholders.
Then last Friday, the Wall Street Journal reported the company was preparing to declare bankruptcy, as it struggles to recover from pandemic lows. The report said Cineworld was expected to file a Chapter 11 petition in the US and is also considering filing for an insolvency proceeding in the UK.
In response early Monday, Cineworld said strategic options through which it may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the US and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process.
Cineworld also said it is in discussions with many of its major stakeholders including its secured lenders and their legal and financial advisers.
"Any such filing would be expected to allow the group to access near-term liquidity and support the orderly implementation of a fully funded deleveraging transaction," it said on Monday.
"Cineworld would expect to maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees," it said.
"As previously announced, any deleveraging transaction would, however, result in very significant dilution of existing equity interests in Cineworld."
Wall Street ended significantly lower on Friday, with the Dow Jones Industrial Average down 0.9%, S&P 500 down 1.3% and Nasdaq Composite down 2.0%.
A dip in consumer price rises and signs of economic slowdown had raised hopes that US policymakers would ease up - and possibly cut next year - after two successive, 75-basis-point rate hikes, helping equities rally globally.
But that optimism has eroded in recent weeks as Fed officials, including Chair Jerome Powell, have warned that the battle against inflation was far from won, particularly as the jobs market remained resilient.
One of the latest was Richmond Fed President Thomas Barkin, who reasserted his commitment to bringing inflation back to 2.0% target levels from the four-decade high of around 9.0%.
He said on Friday the policy-setting Federal Open Market Committee will "do what it takes to get there", but warned: "There's a path to getting inflation under control but a recession could happen in the process."
Ahead this week, the Jackson Hole Economic Symposium gets underway on Thursday and will conclude on Saturday. The annual event is traditionally hosted by the Kansas City Fed and will feature a keynote speech from Powell on Friday.
"While this week's US [personal consumption expenditure] inflation numbers are likely to confirm the slightly softer US inflation numbers, they are unlikely to be sufficient to shift the narrative enough to shake the complacency of those who still think a Fed pivot may be coming," said CMC Markets analyst Michael Hewson.
The report also is scheduled for Friday.
"This is why this week's Jackson Hole symposium is so important as it could well set the tone for the rest of the year, as it has done on previous occasions over the last 10 years," Hewson added.
In Asia on Monday, the Nikkei 225 index in Tokyo closed down 0.5%. In China, the Shanghai Composite was down 0.1%, while the Hang Seng index in Hong Kong was down 0.2%. The S&P/ASX 200 in Sydney ended down 1.0%.
China's central bank cut its benchmark lending rate on Monday, a week after a surprising key interest rate cut, as the country looks to boost an ailing housing market.
The one-year loan prime rate, which serves as a benchmark for corporate loans, was reduced to 3.65% from 3.7%, the People's Bank of China said in a statement. The five-year LPR, which is used to price mortgages, was cut to 4.3% from 4.45%, it added.
The pound was quoted at USD1.1820 early Monday, up from USD1.1790 at the London equities close Friday.
The euro was priced at USD1.0027, down from USD1.0035. Against the yen, the dollar was trading at JPY137.10 in London, soft against JPY137.15.
Brent oil was quoted at USD95.04 a barrel Monday morning, down from USD96.45 late Friday. Gold stood at USD1,742.12 an ounce, lower against USD1,748.05.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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