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(Alliance News) - London's FTSE 100 was called to start the new week higher, after a strong handover from Asia on Monday and a bullish end to the first week of the year in New York.
Hopes that the US Federal Reserve would slow the pace of rate hikes, as well a further easing of Covid curbs in China, have lifted the mood.
"European open looks set to be a positive one, with Asia markets also getting a boost as China took further steps to reopen its economy, as it relaxed its zero-Covid policy further resuming travel with Hong Kong," CMC Markets analyst Michael Hewson commented.
Grim virus infection figures from a province in China served as a reminder of the risks the country faces in reopening, however.
Almost 90% of people in China's third most populous province have now been infected with Covid-19, a top official said on Monday.
In early UK corporate news, AstraZeneca announced an acquisition, while Keller warned of an earnings hit after finding fraudulent activity at a unit in Australia.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called up 0.2% at 7,717.29
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Nikkei 225: Tokyo closed for Coming of Age Day holiday
Hang Seng: up 1.8% at 21,365.24
S&P/ASX 200: closed up 0.6% at 7,151.30
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DJIA: closed up 700.53 points, 2.1%, at 33,630.61
S&P 500: closed up 2.3% at 3,895.08
Nasdaq Composite: closed up 2.6% at 10,569.29
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EUR: up at USD1.0672 (USD1.0612)
GBP: up at USD1.2134 (USD1.2051)
USD: down at JPY132.11 (JPY132.44)
GOLD: up at USD1,877.42 per ounce (USD1,861.63)
Brent: up at USD79.94 a barrel (USD79.64)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
10:00 GMT EU unemployment
11:00 GMT Ireland industrial production
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UK government ministers will hold a series of meetings with union leaders as they seek to prevent future strikes over pay in the NHS, in class rooms, and on the rails. Health Secretary Steve Barclay will meet with leaders including from the Royal College of Nursing on Monday, amid cautious optimism the government might soften its stance. Teaching unions will attend talks with Education Secretary Gillian Keegan ahead of announcements this week over whether their members will go on strike. Rail Minister Huw Merriman is also holding talks on Monday with train workers after sustained action crippled services, with only one in five trains running between Tuesday and Saturday. UK Prime Minister Rishi Sunak raised hopes on Sunday by saying he was willing to discuss pay with health workers, though this is unlikely to prevent strikes if the current pay deal is not renegotiated.
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The UK Treasury is poised to announce a reduced scheme to support businesses with their energy bills after Chancellor Jeremy Hunt warned existing spending is "unsustainably expensive". The new package will be announced to members of Parliament on Monday, with the current cap on the unit cost of electricity and gas for firms set to expire at the end of March. Sources told PA that the replacement will give a discount on wholesale prices, not a fixed price, with very heavy energy-using sectors getting a larger discount than other businesses. No 11 has rolled the pitch for the levels of support to be scaled back, arguing the current scheme costing more than GBP18 billion cannot be sustained forever. Hunt last week told business leaders the level of support was unsustainable and reiterated it was always limited to run for six months.
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Pessimism and low confidence among UK businesses has led firms' recruitment plans to reach the lowest levels in two years, an influential report has found. Employers are pausing hiring plans and considering redundancies to manage rising costs, accounting and advisory firm BDO said in its analysis of more than 4,000 businesses surveyed across different sectors. Optimism and productivity eked up by a fraction in December, but it followed a significant drop in November, therefore remaining well below historic levels. BDO uses employment, inflation, optimism and productivity indices to get an overall picture of business sentiment. A score above 95 points represents growth, and anything below is considered a contraction. In the latest report, business productivity and optimism were both given scores below 92, putting them firmly in negative territory.
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The political chaos of the last year has hit the competitiveness of the UK as a place to manufacture and made it less attractive for foreign investment, according to surveys. Two in five of more than 200 firms surveyed said they believe the UK is now less attractive to foreign investors, while more than half warned that on-going political instability was damaging business confidence. Almost three-quarters of respondents to the Make UK survey expected their energy costs to increase this year, with two-thirds predicting reducing production or cutting jobs despite the government energy support package. Three out of five manufacturers said they were increasingly concerned about energy blackouts affecting their business. Make UK warned that a less generous relief package may not shield companies from the worst of these increases, while excluding some companies which have a high energy exposure but do not currently fall under the traditional 'energy intensive' definition.
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BROKER RATING CHANGES
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Citigroup reinitiates London Stock Exchange Group with 'buy' - price target 8,800 pence
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UBS cuts Ashmore Group to 'neutral' ('buy') - price target 255 (235) pence
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HSBC starts YouGov with 'buy' - price target 1,225 pence
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COMPANIES - FTSE 100
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AstraZeneca said it will fork out up to USD1.8 billion to acquire hypertension and chronic kidney disease therapies developer CinCor Pharma. The deal gives AstraZeneca global right to the baxdrostat high blood pressure treatment. The Cambridge-based pharmaceutical firm will buy outstanding CinCor shares for USD26, plus a possible extra USD10 each depending on regulatory submission of a baxdrostat product. Astra will pay USD1.3 billion upfront, more than twice CinCor's USD515.5 million market capitalisation. The consideration rises to USD1.8 billion if potential contingent value payments are made.
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Vodafone said the buyers of its Hungary arm have completed due diligence, with the EUR1.7 billion sale to 4iG Public and Corvinus set to take place later this month. "This combination establishes a scaled converged operator across mobile and fixed communications and supports the Hungarian government's goal of creating a national Information and Communications Technology champion. The combined entity will increase competition and accelerate investment in the ongoing digitalisation of Hungary," Vodafone Interim Chief Executive Margherita Della Valle said. The UK company said it will use the cash received to pay down its debt.
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COMPANIES - FTSE 250
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Geotechnical specialist contractor Keller Group said it has identified "deliberate and sophisticated financial reporting fraud" in its Austral arm in Australia. Keller said two individuals have been dismissed and an internal probe is underway. It is also in the process of naming an external adviser to perform an independent investigation. "Austral, contributing [around] 3% of group revenue, is a unique business within the group, and is the only business that exclusively accounts for revenue on a percentage of completion basis in the division," Keller added. The fraud relates to Austral's performance from 2019 onwards. Keller expects a hit of GBP6 million for the first half of 2022 and GBP8 million to GBP10 million relating to prior years. The fraud continued into the second half of 2022, it added. Keller expects full-year operating profit "slightly below" the bottom end of a GBP109 million to GBP114 million market forecast range. For 2021, Keller posted statutory operating profit of GBP80.5 million, or GBP92.8 million on an underlying basis.
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OTHER COMPANIES
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Video games publisher and developer Frontier Developments expects a first-half revenue hike, helped by the release of the F1 Manager 2022 racing title and survival game Stranded: Alien Dawn. Frontier expects revenue of GBP57 million for the six months to November 30, up 16% year-on-year from GBP49.1 million. For the full-year, however, it no longer expects to meet market consensus forecasts for revenue and operating profit, which stand at GBP135 million and GBP19 million, respectively. Sales across its portfolio were subdued during the key festive period. Frontier also noted an "uncertain contribution" from its Frontier Foundry arm, which publishes games developed by partner studios. "The outturn over the five remaining months of the financial year is dependent on a number of variables, including the timing and contribution from the scheduled Foundry releases and the macro-economic environment. The board believes it is still possible to surpass last year's record revenue performance of GBP114 million, particularly if one of the upcoming Foundry titles is a conspicuous success." Its new top-line guidance is for revenue of "not less" than GBP100 million.
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Tortilla Mexican Grill expects annual results in line with expectations, despite UK rail strikes hitting trade. For the financial year ended January 1, the dining chain dealt with "ongoing uncertainties impacting the market and wider sector in the short term". It said revenue climbed 20% year-on-year to GBP57.7 million from GBP48.1 million the financial year prior. Fourth-quarter like-for-like growth was 16% on three years earlier, before the onset of the pandemic. "This was despite challenging trading conditions in December due to the combined impact of poor weather and multiple train strikes. Some favourable changes in input costs, together with actions taken by management and the strong trade in the majority of the fourth quarter give the board confidence that FY22 revenue and profit will be in line with market expectations," the company said.
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By Eric Cunha, Alliance News news editor
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