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(Alliance News) - Stocks in London are set to open lower on Wednesday after US President Donald Trump halted stimulus talks until after November's presidential election.
In early UK company news, Tesco reported profit growth in the first half and boosted its interim dividend by 21%, while IP Group said portfolio company Enterprise Therapeutics's TMEM16A potentiator program has been bought by Roche, and Liontrust Asset Management posted a "strong" quarterly performance.
IG says futures indicate the FTSE 100 index of large-caps to open 6.24 points lower at 5,943.70 on Wednesday. The FTSE 100 closed up 7.00 points, or 0.1%, at 5,949.94 on Tuesday.
"All the noise overnight came from the US President, breaking of stimulus talks with congressional Democrats and announcing his intentions instead, to enact a new package after he wins the elections," said Jeffery Halley, senior market analyst at Oanda.
US President Donald Trump said Tuesday he was calling off talks on a new stimulus plan until after the election, accusing Democrats of not negotiating in good faith.
"I have instructed my representatives to stop negotiating until after the election," he wrote in a tweet.
The afternoon tweet undid optimism that had developed in recent days after House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin resumed talks on a follow-up measure to the USD2.2 trillion CARES Act passed to blunt the coronavirus downturn.
Trump accused the Democratic House leader of negotiating in bad faith, and said he had asked Senate Majority Leader Mitch McConnell to instead focus on confirming his appointed judge to an opening on the Supreme Court.
Pelosi slammed Trump and the "complete disarray" of the White House after he halted the stimulus talks.
"Clearly, the White House is in complete disarray," she said, adding that Trump was rejecting Federal Reserve warnings that too little support would result in a weak recovery with unnecessary hardship for millions of American households and businesses.
Federal Reserve Chair Jerome Powell earlier on Tuesday had said the US recovery from the pandemic downturn would be "stronger and faster" with more government aid.
"Even if policy actions ultimately prove to be greater than needed, they will not go to waste," Powell said in an address to an economics conference.
There is a greater risk of not doing enough to support the economy, he said.
"The effect [of US stimulus talks ending] on markets was immediate and predictable, as the street had priced in a positive outcome to talks for the past few sessions," Oanda's Halley said. "Equity markets fell aggressively; the US Dollar rallied with pro-cyclical currencies."
In the US on Tuesday, Wall Street ended in the red, with the Dow Jones Industrial Average ending down 1.3%, the S&P 500 down 1.4% and Nasdaq Composite closing 1.6% lower.
Sterling was quoted at USD1.2899 early Wednesday, down from USD1.2956 at the London equities close on Tuesday.
The euro traded at USD1.1740 early Wednesday, lower than USD1.1787 late Tuesday.
Against the yen, the dollar was quoted at JPY105.75 versus JPY105.60.
In Asia, the Japanese Nikkei 225 index ended flat. Financial markets in China are closed to commemorate 'Golden Week', though the Hang Seng index in Hong Kong was up 0.8% on Wednesday.
In early UK company news, Tesco reported a rise in interim profit and also said it has hired a new chief financial officer.
The grocer has appointed Imran Nawaz as its new finance chief, who will join in April 2021. Nawaz is currently CFO at FTSE 250-listed Tate & Lyle.
Turning to the results, revenue for the 26 weeks to August 29 rose 0.7% to GBP28.72 billion from GBP28.51 billion a year ago, while pretax profit jumped 29% to GBP551 million from GBP428 million.
The rise in profit came despite GBP533 million of Covid-19 costs taken in the half, though this was largely offset by business rates relief of GBP249 million and a contribution from higher-than-expected food sales. For the full-year, these costs are estimated at GBP725 million.
Group like-for-like sales in the half grew 6.5%, with the UK & Ireland up 7.2%.
Looking ahead, the supermarket chain said it expects a "broadly even balance" to the year in terms of retail profitability in the first and second half. Retail operating profit in the current financial year is now expected to be "at least" the same level as the year before on a continuing operations basis.
Tesco added: "We continue to expect to report a loss for the Bank of between GBP175 million and GBP200 million for the 2020/21 financial year. We will review any changes made to macro-economic forecasts and this could result in releases from or further additions to the bad debt provision. Whilst headline profitability is impacted in the short term, the Bank's capital ratios and liquidity remain strong."
The FTSE 100 constituent boosted its dividend by 21% to 3.20 pence.
IP Group said Swiss pharma giant Roche has bought investee Enterprise Therapeutics's novel TMEM16A potentiator portfolio.
Under the deal, Enterprise's shareholders received an upfront payment of GBP75 million and are eligible to receive additional contingent payments. As a result of this transaction, IP Group's cash realisations for the year to date now total GBP183.9 million, which it said is "2.3 times greater" than the GBP79.5 million recorded for the whole of 2019.
Following completion of the transaction, IP Group holds just under a 22% stake in Enterprise.
Liontrust Asset Management said it delivered a "strong" sales and fund performance over the past three months.
The fund management firm posted net inflows of GBP777 million in the three months to September 30, and GBP1.75 billion for the six months to September.
Assets under management & advice were GBP20.6 billion at the end of September, an increase of 28% since the start of the current financial year.
"The strong momentum of the business over the past few years has continued through the Covid-19 crisis. This is testament to our fund management teams and their robust investment processes, strong relationships with clients, the power of the brand and how successfully everyone at Liontrust has adapted to the current environment," said Chief Executive John Ions.
Inkjet printing technology company Xaar said it has been subject to a "cyber security incident" which involved unauthorised access to its computer systems.
"Xaar has contained the incident and not experienced any impact to business operations and continues to fulfil all customer requirements. To date there is no evidence that any data has been extracted," the company said.
It appointed external forensic cyber security experts whose investigations are ongoing. Xaar said it will work on a safe recovery of all systems, applications and data "as quickly as possible" to minimise any fallout from the incident on business.
Gold was quoted at USD1,888.64 an ounce early Wednesday, falling from USD1,909.10 on Tuesday. Brent oil was trading at USD42.10 a barrel, lower than USD42.58 late Tuesday.
In the economic calendar on Wednesday, there is UK Halifax house price index at 0830 BST followed by US FOMC meeting minutes at 1900 BST.
By Lucy Heming; lucyheming@alliancenews.com
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