(Alliance News) - Stocks in London are set for a higher open on Thursday but could be in for a mixed session as focus will remain on rising Covid cases in Europe, with low volume as the US takes the day off for Thanksgiving.
In early UK corporate news, Vivo Energy has accepted a takeover offer from a majority shareholder, Hochschild Mining feels its Peru operations are back on track, and Mitchells & Butlers is encouraged by recent trading at its pubs.
IG says futures indicate the FTSE 100 index of large-caps to open 19.78 points, or 0.3%, higher at 7,306.10 on Thursday. The blue-chip index closed up 19.63 points, or 0.3%, at 7,286.32 on Wednesday.
"Today's European market session, while set to see a positive start, could well be a subdued affair as the day progresses, with most of the attention likely to be on how the new German government deals with the Covid emergency unfolding across its health system," CMC Markets analyst Michael Hewson said.
The EU health agency on Wednesday appealed to member states to "urgently" introduce measures to counter surging Covid-19 cases, a day after the WHO Europe warned that 700,000 more may die on the European continent this winter.
With more than 2.5 million cases and almost 30,000 deaths reported in the past week, Europe is by far the region currently worst hit by the virus, according to AFP's tally.
The trend is increasing, especially in countries with the lowest vaccination rates. Europe's return to the pandemic's epicentre has been blamed on sluggish vaccine uptake in some nations, the highly contagious Delta variant, colder weather moving people indoors again, and the easing of restrictions.
CMC's Hewson continued: "Last night's [US] Fed minutes would appear to show a central bank that is becoming increasingly anxious about rising prices and their effect on the US economy. Unsurprisingly the pace of the taper was a topic for discussion, with some participants wanting a faster taper than the current USD10 billion in US treasuries and USD5 billion in mortgage-backed securities. Over the last two meetings there also seemed much less confidence that what we are seeing is transitory in nature, when it comes to inflation."
The minutes from November's meeting read: "Various participants noted that the committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the committee's objectives."
The meeting minutes show the Fed discussed inflationary pressures and supply chain challenges, believing that supply constraints are set to continue longer than the central bank had previously expected. More positively, US labour market conditions continue to improve and the Fed expects better payroll numbers in the months ahead.
In London, Hochschild Mining "welcomed" the move by the presidency of the Council of Ministers in Peru, which the miner believes clarified comments made late last week by the head of Cabinet.
"In particular, the company notes the government's commitment to upholding the rule of law and that its express recognition of the continued rights of mining companies to request extensions and modifications of existing permits for mining and exploration activities," Hochschild said.
The miner added: "In line with the announcement, the company's operations in southern Ayacucho, Pallancata and Inmaculada will continue to operate under the existing legal framework."
The stock had tanked on Monday after Hochschild reported the risk that the Peruvian government may close two of its three operating gold and silver mines, one of which is its largest in terms of production and has represented around three-quarters of its cashflow.
However, the Peruvian government on Wednesday reaffirmed its respect for the current legal framework.
Vivo Energy said Thursday it will recommend a USD1.85 per share offer from Vitol Investment Partnership that values the firm at USD2.3 billion.
In sterling terms, the offer is roughly a 25% premium to its closing price of 111.40 pence on Wednesday - which implies a market cap of about GBP1.4 billion. The offer includes Vivo's planned USD0.02 dividend.
Vitol noted it has been in talks with one of Vivo's founding shareholders, Helios Entities, over a potential deal for its 27% stake in Vivo.
"Due to the existing Vitol shareholders' 36.0% shareholding, the agreement with Helios meant that there was a risk that minority shareholders may become disadvantaged through acceptance of an offer that they might otherwise not have wanted to accept, in order not to remain a shareholder in an illiquid position. As a result, the independent Vivo directors engaged with BidCo to negotiate a fair value for the minority Vivo shareholders," Vivo explained.
Vivo Chair John Daly added: "The offer from Vitol represents an attractive value in cash for Vivo shareholders, and Vitol's proven track record of supporting Vivo's long-term growth plans will support Vivo in continuing to deliver benefits to its wider stakeholders."
Pub chain Mitchells & Butlers said Thursday its trading has been encouraging since pandemic restrictions have been lifted in the UK but noted there are still challenges with continued cost pressures.
In the 52 weeks to September 25, its pretax loss narrowed to GBP42 million from a GBP123 million loss the year before. Operating profit was up to GBP81 million from GBP8 million.
Revenue slumped 28% to GBP1.07 billion from GBP1.48 billion. It noted Drinks like-for-like revenue in the period was down 22% but, more promisingly, Food revenue was up 2.5%. In total, like-for-like sales was down 9.6%.
Mitchells said, for the eight weeks since the period end, like-for-like sales versus a similar period in financial 2019 are up 2.7%, comprising an increase in like-for-like food sales of 9.5% and a decrease of like-for-like drink sales of 4.8%. Volumes remain in decline by between 10% and 15%.
Chief Executive Phil Urban said: "The trading environment remains challenging and cost headwinds continue to put pressure on the sector. However, we have strengthened our balance sheet and returned to profitability and cash generation, allowing us to resume our capital plan and Ignite programme which will deliver sales and efficiency improvements to help combat these challenges."
In New York on Wednesday, stocks ended mostly higher ahead of the Thanksgiving break, with the S&P 500 and Nasdaq playing catch-up after a soft week so far but the Dow Jones Industrial Average slipping as banks gave back recent gains.
The Dow closed down just 9.42 points. The S&P 500 ended up 0.2% and the Nasdaq Composite ended up 0.4%. The New York market is closed on Thursday for the Thanksgiving Day holiday and reopens for a half day on Friday.
Sterling was quoted at USD1.3347 early Thursday, higher than USD1.3328 at the London equities close on Wednesday. The euro traded at USD1.1218 early Thursday, higher on USD1.1195 late Wednesday.
Against the yen, the dollar was soft at JPY115.33 versus JPY115.38 late Wednesday in London.
Oanda's Jeffrey Halley said: "The US dollar rallied once again overnight after a more hawkish tone to the FOMC minutes and higher than expected PCE data. Some pre-holiday risk-hedging buying may also have flowed through currency markets with the US dollar being the market's favourite way to play the inflation/Fed-taper trade at the moment, especially with the euro languishing under a virus cloud."
Data on Wednesday showed US personal consumption expenditures grew 5.0% year-on-year for October, accelerating from September's 4.4% rise and posting ahead of analyst expectations, according to FXStreet, for growth of just 4.6%.
In Asia on Thursday, the Nikkei 225 in Tokyo closed up 0.7%. The Shanghai Composite shed 0.2%, while the Hang Seng index was up 0.2% in late trading.
The S&P/ASX 200 in Sydney closed up 0.1%.
Gold was quoted at USD1,793.70 an ounce early Thursday, up on USD1,790.62 on Wednesday. Brent oil was trading at USD82.23 a barrel, down from USD82.73.
The economic calendar on Thursday minutes from the last European Central Bank meeting at 1230 GMT.
By Paul McGowan; paulmcgowan@alliancenews.com
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