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(Alliance News) - Stock prices in London are seen opening lower on Thursday after the US Federal Reserve indicated that interest rate hikes will come sooner than expected.
In early UK company news, Premier Inn-owner Whitbread was upbeat over its prospects as lockdown restrictions ease. Recently listed boot maker Dr Martens posted a fall in annual profit.
Wise confirmed plans for a direct listing in London. The announcement, combined with a string of smaller plans for IPOs revealed on Thursday, came after shares in online furniture retailer Made.com fell as they began conditional trading on the London Main Market on Wednesday.
IG futures indicate the FTSE 100 index is to open 23.05 points lower at 7,161.90. The blue-chip index closed up 12.47 points, or 0.2%, at 7,184.95 on Wednesday.
Whitbread said it has seen encouraging signs for trading as the UK emerges from lockdown.
Total UK accommodation sales were down 61% in the first quarter, the 13 weeks to May 27, compared to the same period in financial 2020, the 13 weeks to May 30, 2019, with the period being the last similarly timed period before the onset of the Covid-19 crisis.
Food & Beverage total sales were down 86%, reflecting the UK government's lockdown restrictions that were in place for most of the quarter. Whitbread said total first quarter sales were down 70% from two years earlier and like-for-like sales were down 71%.
Whitbread said that, since May 17, trading has been strong, with high levels of demand in tourist locations, driven by the anticipated bounce in leisure demand post reopening, and also by the period including May half-term school holidays.
Outside the UK, Whitbread said 19 of 30 operational hotels were open in Germany and occupancy was improving.
Looking ahead, Whitbread said outlook and guidance is unchanged from what was provided at the full-year results in April, despite the four-week delay in the UK government's Step 4 of lockdown easing, announced on Monday.
Whitbread expects leisure demand in coastal and other tourist locations to remain very strong throughout the summer, while the full recovery of leisure demand is dependent on the final release of lockdown, and the return of unrestricted events.
"The group traded significantly ahead of the market during the quarter, despite the impact of the UK government restrictions that were in place for the majority of the first quarter. Trading in the UK since May 17, when overnight leisure stays were permitted, and when our restaurants fully reopened for indoor service, has been encouraging. Additionally, our forward bookings continue to improve, benefiting from the anticipated post-lockdown bounce in leisure demand, and a continued gradual improvement in business bookings. During the first quarter we opened 10 new hotels in the UK," said Chief Executive Officer Alison Brittain.
Dr Martens reported a fall in pretax profit, as it released its first set of earnings since floating in London.
For the financial year that ended March 31, revenue was up 15% to GBP773 million from GBP672.2 million the year before, but pretax profit declined 52% to GBP35.7 million from GBP74.8 million.
Looking ahead, Dr Martens said the guidance set out at the IPO in February remains unchanged, for both financial 2022 and over the medium-term.
In financial 2022 it expects high-teens revenue growth, as it laps the Covid-19 hit experienced in financial 2021. From financial 2023 and over the medium-term Dr Martens anticipates mid-teens revenue growth. In addition, the company said it expects to begin paying a dividend in financial 2022.
"Our product durability and timeless design are rooted in a sustainable, long-term approach, and our brand custodian philosophy continues to guide the decisions we take. This underpins the financial guidance we laid out at the time of the IPO which is unchanged. Whilst the global trading environment remains uncertain, the strength of our iconic global brand means we look to the future with confidence." said CEO Kenny Wilson.
On the new listings front, technology company Wise said that it is seeking the first direct listing on the London Stock Exchange.
"In contrast to a traditional initial public offering, a direct listing is a fairer, cheaper and more transparent way for Wise to broaden its ownership, in support of its mission to move money around the world faster, cheaper and more conveniently" Wise explained.
Earlier this week, Sky News reported that the payments app, formerly known as TransferWise, was looking at a value of up to GBP9 billion.
Upon listing, Wise said it would have a dual class share structure with 'A' and 'B' shares, saying this will allow it to "focus on its mission as it transitions into the public markets".
Wise explained class 'B' shares hold 9 votes per share, are strictly non-transferable and, amongst other voting right cancellation events, expire on the fifth anniversary of any listing.
All of Wise's shareholders and holders of vested options as at May 23, 2021 are entitled to elect to receive 50% of the class 'A' share holding in the company with additional class 'B' shares on a one-for-one basis.
Kristo Kaarmann, CEO and co-founder of Wise, is entitled to elect to receive 100% of his class 'A' share holding in the company with additional corresponding class 'B' shares on a one-for-one basis.
No details around timing or price of a potential listing were provided.
"Bringing in the people we serve as owners of Wise is something I've long wanted to do. Recently, we welcomed our first customer owners by gifting shares to a group of 1,800 active customers. Because of the long-term nature of our mission, we've always chosen shareholders with an understanding of, and passion for, the problem we're solving. A direct listing, combined with a widely available dual class share structure, allows us to bring customers and other like-minded investors into our shareholder base, whilst keeping the focus on our deeply ingrained mission as we grow at speed," said Kaarmann.
Wall Street ended lower following the US central bank announcement on Wednesday. The Dow Jones Industrial Average closed down 0.8%, the S&P 500 index down 0.5% and the Nasdaq Composite down 0.2%.
The Fed turned hawkish as policymakers eyed rising inflation, as a majority of the members its policy setting committee predicted a rate hike in 2023.
The Federal Open Market Committee left its benchmark rate unchanged in the range of 0.00% to 0.25%, as widely expected, and recommitted to "maintain an accommodative stance of monetary policy". The Fed also left its quantitative easing programme unchanged.
Fed officials appear to have grown more hawkish since their last meeting in April, with 11 of the 18 committee members expecting at least two rate hikes in 2023 and 7 expecting one as soon as next year, according to updated quarterly economic projections released after the discussions closed.
Looking ahead, the Fed expects US GDP growth of 7.0% in 2021, up from its 6.5% prediction in March, with 2022's target unchanged at 3.3%, while GDP growth in 2023 is now tipped at 2.4%, up from 2.2% in March.
"The Federal Reserve's meeting held a nasty surprise for investors; the dot plots of future rate hikes abruptly shifted forward en masse to 2023. Fed Chair Jerome Powell said that the time was coming for a talk about starting to talk about beginning to talk about quantitative easing tapering," said Oanda Markets analyst Jeffery Halley.
"Powell's pleas to take the abrupt shift in the dot plots 'with a grain of salt' fell on deaf airs as US yields rose, the US dollar spiked, equities fell, while gold and bitcoin were stretchered off injured. With Fed officials having spent the weeks and months ahead of last night's FOMC meeting beating the inflation is transitory, it's all about the labour market, nothing to see here, move along mantra, the FOMC really did spook financial markets overnight."
Gold was trading at USD1,818.80 an ounce early Thursday in London, down from USD1,857.40 late Wednesday.
The Japanese Nikkei 225 index ended down 0.9% on Thursday. In China, the Shanghai Composite was up 0.1%, while the Hang Seng index in Hong Kong was down 0.2%.
Japan plans to lift Tokyo's virus emergency on June 20, a month before the Olympics, the government announced as reports said only 10,000 spectators would be allowed at Games events.
Tokyo and several other parts of the country have been under a virus emergency since April 25, with the measure forcing the early closure of bars and restaurants and banning them from selling alcohol. It is due to expire on June 20, and the minister overseeing Japan's coronavirus response said the government would seek to move Tokyo and nine other regions to looser restrictions.
The dollar was higher against major counterparts in the wake of the Fed's rate decision.
The pound was quoted at USD1.3993 early Thursday in London, down sharply from USD1.4103 at the London equities close Wednesday.
The euro stood at USD1.1998, sharply lower from USD1.2117. Against the yen, the dollar was trading at JPY110.66, up from JPY109.94.
Brent oil was quoted at USD74.14 a barrel, down from USD74.88 late Wednesday.
The international economic events calendar on Thursday has eurozone consumer price index figures at 1000 BST and US initial jobless claims at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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