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(Alliance News) - Stocks in London are to open a touch lower on Tuesday, with little in the way of catalysts for global markets, given a lack of major data and a holiday in the US.
It was already a muted start to the second half of 2023 for the FTSE 100 on Monday, when it edged 0.1% lower.
Financial markets in New York are closed for the Independence Day holiday.
The week picks up speed on Wednesday, however, with the release of minutes from the Federal Open Market Committee's latest meeting minutes. On the central banking front, the Reserve Bank of Australia decided against a rate hike, but did not rule out more monetary policy tightening in meetings to come.
"Today's European session looks set to be a quiet one with the US off for the 4th July holiday, and little in the way of economic data ahead of tomorrow's services PMI numbers for June which are likely to make for better reading from an economic resilience point of view," CMC Markets analyst Michael Hewson commented, noting that Monday's manufacturing readings were weak.
In early UK corporate news, Sainsbury's said it is seeing signs that food inflation is easing. The grocer also backed yearly guidance. Eurowag lifted its stake in a payments provider, while budget carriers Wizz Air and Ryanair reported traffic growth.
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 0.1% at 7,518.26
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Hang Seng: up 0.3% at 19,356.20
Nikkei 225: closed down 1.0% at 33,422.52
S&P/ASX 200: closed up 0.5% at 7,279.00
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DJIA: closed up just 10.87 points at 34,418.47
S&P 500: closed up 0.1% at 4,455.59
Nasdaq Composite: closed up 0.2% at 16,816.77
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EUR: flat at USD1.0908 (USD1.0905)
GBP: up at USD1.2704 (USD1.2675)
USD: down at JPY144.40 (JPY144.59)
GOLD: flat at USD1,926.15 per ounce (USD1,927.00)
(Brent): down at USD75.07 a barrel (USD75.92)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
US Independence Day: financial markets closed
10:00 BST EU balance of payments
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A first UN Security Council meeting on the potential threats of artificial intelligence to international security will be the centrepiece of the UK's presidency this month. The July 18 meeting will include briefings by international AI experts and Secretary-General Antonio Guterres, who last month called the alarm bells over the most advanced form of AI "deafening", and loudest from its developers. He said: "These scientists and experts have called on the world to act, declaring AI an existential threat to humanity on a par with the risk of nuclear war." In September, he announced plans to appoint an advisory board on artificial intelligence and has said he would react favourably to a new UN agency on AI, suggesting the mix of knowledge and regulatory powers of the International Atomic Energy Agency as a model. Announcing the meeting, UK ambassador Barbara Woodward said the UK wants to encourage "a multilateral approach to managing both the huge opportunities and the risks that artificial intelligence holds for all of us", stressing that "this is going to take a global effort".
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The Reserve Bank of Australia left its key interest rate unchanged, with Governor Philip Lowe saying that while inflation had "passed its peak" the economic outlook remained uncertain. The decision comes after monetary policymakers last month hiked the benchmark rate 25 basis points to 4.1% – its highest level since May 2012. Lowe on Tuesday cited "uncertainty surrounding the economic outlook" as one reason the board decided to stand pat this month. "This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook," he said. Government figures released last week showed the headline rate of inflation dropped to 5.6% on-year in May, from 7.3% – an improvement but still well above the RBA's target range of between 2% and 3%. Whilst inflation in Australia has already peaked, it is still "too high" and will remain so "for some time yet", Lowe said. Some further monetary policy tightening may be required, he continued.
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BROKER RATING CHANGES
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JPMorgan cuts Persimmon to 'neutral' ('overweight') - price target 1,090 (1,600) pence
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RBC cuts Dunelm to 'underperform' ('sector perform') - price target 1,000 (1,300) pence
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Barclays cuts Petrofac price target to 90 (200) pence - 'equal weight'
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COMPANIES - FTSE 100
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Grocer Sainsbury's reported a first-quarter sales hike, boosted by Easter, the King's coronation and UK bank holidays. It left its bottom-line outlook unchanged for its full-year, still predicting underlying pretax profit of GBP640 million and GBP700 million, a range which represents a 7.2% fall to a 1.4% rise. Total retail sales, excluding fuel, rose 9.2% in the first-quarter ended June 24. Also excluding fuel, like-for-like sales climbed 9.8% on-year. Fuel sales alone fell 21%. Grocery sales rose 11%, while general merchandise sales improved 4.0%, helped by a 5.1% climb in the Argos arm alone. Clothing sales fell 3.7%, however. "We are putting all of our energy and focus into battling inflation so that customers get the very best prices when they shop with us, particularly now as household budgets are under more pressure than ever. Food inflation is starting to fall and we are fully committed to passing on savings to our customers," Chief Executive Simon Roberts said. Sainsbury's said first-quarter growth was "led by" convenience stores and supermarkets, with customers continuing to return to stores, a far cry from pandemic times. Sainsbury's added: "Stronger sales growth was driven primarily by a return to volume growth, helped by a particularly strong performance over bank holidays and warmer weather towards the end of the quarter."
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Top bankers have been summoned to a meeting with the financial watchdog to discuss concerns surrounding interest rates for savers lagging behind the cost of mortgages. The Financial Conduct Authority expects chief executives from HSBC, NatWest, Lloyds and Barclays to attend on Thursday amid allegations of "blatant profiteering". But sources were playing down the likelihood of a charter being drawn up in the vein of the one agreed between Chancellor Jeremy Hunt and the big mortgage lenders. MPs on the Treasury Committee were stepping up their campaign to increase saving rates for lenders, which are failing to keep up with soaring mortgages. They wrote to the four biggest lenders demanding answers to their concerns that saving rates are "too low" in the light of the base interest rate reaching 5%.
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COMPANIES - FTSE 250
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WAG Payment Solutions said it has exercised an option to lift its stake in logistics-focused payment service provider JITpay, forking out another EUR25.7 million. It said EUR6.5 million of that will be used as primary capital. Acquiring just over an 18% stake, Eurowag now owns 28% of JITpay. It first bought in back in September, acquiring just shy of 10% for an initial EUR14.3 million. Eurowag added: "The investment will further enhance Eurowag's platform capabilities by adding industry specific invoice discounting and billing management capabilities. JITpay is active in Germany, Poland, the Netherlands, Czechia, Slovakia, Slovenia, Lithuania, Latvia and Spain, and has several active strategic partnerships with Europe's largest freight exchanges. In addition, this partnership will strengthen Eurowag's presence in Germany, the largest trucking market in Europe, with JITpay's fast-growing base of over 2,150 customers, and further expands the group's vast data lake." The remaining 72% of JITpay is owned by existing shareholders, though Eurowag has the option to acquire that stake from 2025 onwards.
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Drax Group's biomass power plant could lose subsidies if it is found not to be complying with sustainability requirements, a minister has said. The House of Lords heard concerns on Monday over the environmental credentials of the power station in North Yorkshire, one of the UK's largest, which burns biomass such as wood pellets and receives green subsidies. One peer called for independent scientists to be sent to Canada to verify the sustainability of wood used to make biomass pellets, and another accused a minister of having his "head in the sand" over the issue. The energy regulator Ofgem said in May that it was investigating whether Drax Power Limited is in breach of "annual profiling reporting requirements relating to the Renewables Obligations scheme and other related matters".
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Budget airline Wizz Air said it carried 5.3 million passengers last month a 23% rise year-on-year. On a rolling 12-month basis, it has carried 54.2 million, rising 49%. Capacity is also on the up, rising 14% in June alone and 37% on a rolling 12-month basis. Dublin-listed peer Ryanair said its traffic improved 9.4% to 17.4 million in June, from 15.9 million a year prior.
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OTHER COMPANIES
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Restore announced a profit warning and said its chief executive has departed with immediate effect. Charles Bligh has stood down by "mutual consent", the London-based provider of digital and information management and lifecycle services said. Senior Independent Director Jamie Hopkins becomes interim CEO. Chair Sharon Baylay-Bell has become executive chair, also with immediate effect. Restore said its technology arm has continued to suffer a "reduction in demand for certain service lines". As a result, Restore said adjusted pretax profit in 2023 will be lower than the GBP31 million that is expected. Adjusted pretax profit in 2022 amounted to GBP41.0 million, so it expects a decline of roughly a quarter or more. It expects to make cost savings of GBP4.5 million in 2023, however. Restore said: "We continue to focus on structural cost savings in staff and supplier input costs, and these programmes are delivering the targeted results. With actions already taken and further planned steps in early Q3 we expect to reduce permanent staff by 230. These roles are across senior managers, sales, support functions and operations."
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Wholesale business Kitwave reported improved interim earnings, and it expects its outturn for the full financial year to top market expectations. For the six months to April 30, revenue improved 23% on-year to GBP275.0 million from GBP223.3 million. Pretax profit climbed 48% to GBP8.3 million from GBP5.6 million. "Although trading in the wholesale sector is typically weighted towards the second half of the year and being mindful of the continuing wider macroeconomic challenges, we remain confident that the positive momentum seen in the first six months of the year will continue throughout 2023, and results for the full financial year will be ahead of the market expectations established at the start of the financial year," Kitwave said.
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By Eric Cunha, Alliance News news editor
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