(Alliance News) - Stocks in London were called to open lower on Thursday, amid a busy day for company earnings and an interest rate decision by the EU's central bank in the afternoon.
The Federal Reserve lifted US interest rates by 25 basis points on Wednesday, and, in a press conference shortly after the announcement, Chair Jerome Powell emphasised a change in language around future policy that suggested it was the last hike of the current tightening cycle.
"In the statement from March we had a sentence that said: 'the committee anticipates that some additional policy firming may be appropriate'. That sentence is not in the statement any more, we took that out," Powell said.
Now attention turns to the European Central Bank.
The Frankfurt-based central bank will announce its decision at 1415 CEST. A press conference with ECB President Christine Lagarde will follow at 1500 CEST.
The market is expecting the ECB to slow down its pace of interest rate hikes to a 25 basis point hike - the same as the Fed - but with sticky inflation and record low unemployment, there remains the possibility of another 50 basis point move.
"The ECB is already well behind other central banks in its rate hiking cycle, and yesterday EU unemployment fell to a new record low of 6.5%. That might prompt a more aggressive posture today and a 50bps move on the basis that it is better to do too much when it comes to inflation than do too little," said CMC Markets' Michael Hewson.
In early UK company news, GSK received US approval for its RSV vaccine in older adults. Shell launched a USD4 billion share buyback alongside its quarterly results. Next backed its annual outlook with trading in the first quarter being slightly better than anticipated. Liontrust Asset Management confirmed it has agreed to buy Swiss peer GAM.
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 29.5 points, 0.4%, at 7,758.87
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Hang Seng: up 0.8% at 19,851.56
Nikkei 225: Tokyo market closed for Greenery Day
S&P/ASX 200: closed down 4.2 points at 7,193.20
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DJIA: closed down 270.29 points, or 0.8%, at 33,414.24
S&P 500: closed down 28.83 points, or 0.7%, at 4,090.75
Nasdaq Composite: closed down 55.18 points, or 0.5%, at 12,025.33
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EUR: up at USD1.1084 (USD1.1057)
GBP: up at USD1.2586 (USD1.2543)
USD: down at JPY134.46 (JPY135.09)
Gold: up at USD2,042.47 per ounce (USD2,025.44)
(Brent): up at USD73.10 a barrel (USD72.01)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
10:00 CEST EU services purchasing managers' index
11:00 CEST EU producer price index
14:15 CEST EU ECB interest rate announcement
08:00 CEST Germany foreign trade
09:55 CEST Germany services PMI
11:00 IST Ireland unemployment
09:30 BST UK services PMI
08:30 EDT US unemployment insurance weekly claims report
11:00 EDT US manufacturing PMI
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UK Prime Minister Rishi Sunak said his Conservative party is moving away from "box set drama" politics, but warned it was in for a "hard night" at the local elections. Voters will head to the polls across England on Thursday as Sunak faces his first major electoral test since becoming prime minister just over six months ago. The local elections are also likely to be the final set of polls before the next UK general election, with the results expected to give an indication of whether Labour leader Keir Starmer could be on course for No 10.
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BROKER RATING CHANGES
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Wells Fargo cuts Flutter Entertainment to 'equal weight' - price target 16,600 pence
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COMPANIES - FTSE 100
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The US approved the world's first vaccine for the respiratory syncytial virus, the culmination of a decades-long hunt to protect vulnerable people from the common illness. Announced late Wednesday, drugmaker GSK's Arexvy was green-lighted for adults aged 60 and older, with similar shots from other makers including Pfizer and Moderna expected to follow soon. RSV is a common virus that normally causes mild, cold-like symptoms, but can be serious for infants and the elderly, as well as those with weak immune systems and underlying conditions.
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Oil major Shell said revenue in the first quarter was USD86.96 billion, rising from USD84.20 billion a year before, but below USD101.30 billion in the fourth quarter. Pretax profit rose to USD14.35 billion from USD10.78 billion the year before, but was behind USD16.44 billion in the preceding quarter. The weakness compared to the fourth quarter "mainly reflected unfavourable tax movements, and lower realised oil and gas prices, partly offset by lower operating expenses and higher Chemicals and Products trading and optimisation results," Shell said. The company also took impairment charges of USD500 million during the first quarter. Shell announced a USD4 billion share buyback, which it expects to complete by the announcement of its second quarter results.
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Clothing and homewares retailer Next update on its trading in the first quarter. In the 13 weeks to April 29, full price sales fell 0.7% year-on-year, which was ahead of guidance of a 2% decline. Believing it to be "too early" to raise its sales guidance for the half or the full year, Next tweaked its sales forecasts for the second quarter to down by 5%, compared to down 4% previously. "This adjustment seems reasonable, as some of the first quarter's success, particularly in holiday clothing sales leading up to Easter, might have been pulled forward from the second quarter," Next explained. The second quarter of 2022 also had benefitted from pent-up demand for events such as weddings and proms, Next said. It reiterated its full-year outlook, expecting pretax profit to fall 8.7% to GBP795 million and earnings per share to fall 13% to 501.9 pence. It still expects annual sales to be down 1.5% from the previous year. Next guided for surplus cash of GBP220 million, some of which it intends to return to shareholders, some to invest in platform partners.
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COMPANIES - FTSE 250
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London-based asset manager Liontrust confirmed it has conditionally agreed to acquire Zurich-listed GAM Holding in an all-share deal valuing GAM at CHF107 million, or GBP96 million. The offer is equivalent to CHF0.67 per share. GAM has some CHF23.3 billion assets under management and advice as at March 31, and the combination of the firms would create a global asset manager with GBP53 billion AuMA. Should the acquisition receive shareholder approval, Liontrust expects it to complete in the fourth quarter. GAM shareholders will have a 12.6% stake in the enlarged Liontrust. "Liontrust and GAM are both client-centric businesses that thrive on providing solutions and first-class service. The enlarged company will provide the platform from which to deliver this to a broader client base," said Liontrust Chief Executive John Ions. Liontrust last month had confirmed discussions between the two peers.
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OTHER COMPANIES
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Data migration platform company WANdisco said it was undertaking a "reorganisation and review process" which would see headcount shrunk by around 30%. "Regrettably, the proposed action is a necessary step to responsibly position WANdisco for long-term growth," said Executive Chair Kenneth Lever. Lever joined the firm last month, as the firm's chief executive officer and chief financial officer stepped down. The company's shares have been suspended since late March, after fraudulent activity was discovered from one of its senior sales employees, which had inflated its financial projections. "The company has continued to trade in the ordinary course of business. Activity also continues to progress on various workstreams with the objective to lift the suspension of the company's shares as soon as is practicable," WANdisco said.
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Johnson & Johnson announced the pricing for its new consumer health company Kenvue, which is due to float in New York later in the day. Kenvue's upsized initial public offering will be for 172.8 million shares at USD22.00 each, giving it a market cap of over USD41 billion. It will trade under the ticker 'KVUE'. The IPO is expected to close on Monday, with J&J to own 1.7 million of Kenvue's shares, or a 90.9% stake. The New Brunswick, New Jersey-based drug maker had first announced plans to split into two separate listed companies back in November. Kenvue will house brands such as Tylenol, Neutrogena, Listerine and Band-Aid.
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By Elizabeth Winter, Alliance News senior markets reporter
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