(Alliance News) - London's FTSE 100 is set to move higher, after data showed the UK economy kicked off the new year with gross domestic product growth, and as investors digest Tuesday's US inflation data.
According to the Office for National Statistics, UK gross domestic product expanded 0.2% on-month in January, in line with FXStreet cited consensus. UK GDP had shrunk 0.1% in December from November.
Numbers last month had showed the UK economy slipped into recession in the three months to December.
UK gross domestic product slumped 0.3% in the fourth quarter of 2023 from the third quarter, according to figures from the ONS. The UK economy already had declined 0.1% in the third quarter from the second.
The US inflation data, meanwhile, "could have been worse", SPI Asset Management analyst Stephen Innes summarised.
The US Bureau of Labor Statistics on Tuesday said the pace of year-on-year consumer price growth picked up to 3.2% in February, from 3.1% in January, where it had been expected to remain, according to FXStreet cited consensus.
"January's inflation reading had already been higher than anticipated, leading to uncertainty about when the Federal Reserve might begin cutting interest rates. However, despite another strong report in February, investors sense the Fed is looking for any reason or excuse to cut rates this election year. With another few months of data collection, rate cut probabilities suggest they will undoubtedly find that impetus," Innes added.
In early UK corporate news British American Tobacco confirmed it has trimmed its stake in ITC. Balfour Beatty announced a share buyback and 4imprint reported an annual earnings improvement.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.2% at 7,759.31
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Hang Seng: down 0.1% at 17,075.34
Nikkei 225: down 0.3% at 38,695.97
S&P/ASX 200: closed up 0.2% at 7,729.40
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DJIA: closed up 235.83 points, 0.6%, at 39,005.49
S&P 500: closed up 1.1% at 5,175.27
Nasdaq Composite: closed up 1.5% at 16,265.64
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EUR: up at USD1.0924 (USD1.0916)
GBP: down at USD1.2777 (USD1.2783)
USD: down at JPY147.60 (JPY147.76)
GOLD: down slightly at USD2,159.03 per ounce (USD2,163.49)
(Brent): lower at USD82.18 a barrel (USD82.49)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
10:00 GMT eurozone industrial production
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The ONS said that in January, UK industrial production declined 0.2% from December. It had been expected to be unchanged, according to FXStreet cited consensus. Production grew 0.6% in December from November. On an annual basis, industrial production was 0.5% higher in January, though that fell short of the FXStreet cited consensus which forecast a 0.7% rise, as well as December's 0.6% year-on-year climb. Separate data showed the UK trade deficit stretched to GBP3.13 billion in January, from GBP2.60 billion in December. Imports rose 1.4% to GBP72.39 billion from GBP71.36 billion a month earlier. Exports rose at a slower month-on-month pace of 0.7% to GBP69.26 billion from GBP68.76 billion.
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The UK is set to sign an agreement on closer trade co-operation with Texas as the British government continues to pursue state-level deals in the absence of a wider free trade agreement with the US. Trade Secretary Kemi Badenoch and Texas Governor Greg Abbott are expected to formally sign the agreement in Westminster on Wednesday. The agreement is not a trade deal, because individual US states do not have the power to sign these, but is similar to a memorandum of understanding designed to improve co-operation between businesses in Britain and Texas and tackle regulatory barriers to trade. Badenoch said: "I'm delighted to welcome Governor Abbott to the UK for this landmark signing. Today's signature with Texas marks the UK's eighth US state-level pact, meaning UK firms now have access to states with a combined GDP of GBP5.3 trillion – equivalent to a quarter of the whole US economy. This shows our US state-level strategy is working and really delivering for British businesses." The agreement is targeted particularly at the energy sector, as well as life sciences and business services.
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BROKER RATING CHANGES
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JPMorgan raises Flutter to 'overweight' ('neutral') - price target 21,300 (16,300) pence
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JPMorgan cuts Entain to 'neutral' ('overweight') - price target 910 (1,280) pence
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COMPANIES - FTSE 100
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British American Tobacco said it netted GBP1.5 billion from the sale of 436.9 million shares in cigarette maker ITC. BAT sold the stock, which represents around 3.5% of ITC share capital, in a block trade. ITC is a Kolkata, India-based company. It is India's biggest cigarette maker but has diversified into other businesses as well, including luxury hotels. BAT on Tuesday had said that after the sale, it would own just under 26% of ITC. On Tuesday, the London-based maker of cigarettes and vapes added it intends to use the net proceeds of the block trade to buy back its own shares over a period ending December 2025, starting with GBP700 million in 2024.
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COMPANIES - FTSE 250
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Balfour Beatty reported a decline in annual profit, though its revenue grew and the infrastructure firm upped its payout and announced a buyback. Revenue in 2023, including joint-ventures and associates, climbed 7.4% to GBP9.60 billion from GBP8.93 billion in 2022. Statutory revenue, which excludes those items, was 4.8% higher at GBP7.99 billion from GBP7.63 billion. Pretax profit was 15% lower at GBP244 million from GBP287 million. Balfour lifted its final dividend by 14% to 8.0 pence from 7.0p. It meant its annual dividend was 10% higher at 11.5p from 10.5p. In addition, it said it plans to repurchase GBP100 million of its stock during the 2024 phase of its share buyback programme. Chief Executive Leo Quinn said: "The board remains confident in Balfour Beatty's ongoing ability to deliver sustainable cash generation for significant shareholder returns, with growth from our earnings-based businesses in 2024 underpinned by the strength of the group's order book. Looking to 2025 and beyond, we expect our unique capabilities and complex infrastructure project experience to drive further earnings growth, with attractive opportunities being pursued in the UK energy, transport and defence markets and in the US."
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4imprint, a marketer and distributor of promotional products, reported annual earnings growth and said the new year has gone in line with expectations so far. Revenue in the year to December 30 rose 16% to USD1.33 billion from USD1.14 billion. Pretax profit jumped 36% to USD140.7 million from USD103.7 million. 4imprint lifted its final dividend by 25% to 150.0 cents per share from 120 cents, giving it a total dividend of 215 cents, up 34% from 160. Chair Paul Moody said: "The group has made significant operational and financial progress in 2023, reflecting a clear strategy and a highly resilient business model. Trading results in the first two months of 2024 have been in line with both the board's expectations and consensus forecasts. We are confident that we will continue to take market share."
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OTHER COMPANIES
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Keywords Studios hailed a "resilient" 2023 performance during what it described as a tricky year for the video game industry. Keywords said revenue last year rose 13% to EUR780.4 million from EUR690.7 million. The provider of technical and creative services for video game production said pretax profit declined 49% to EUR35.0 million from EUR68.0 million. Administrative expenses were 28% higher at EUR252.3 million. Adjusted pretax profit, which strips out some of those costs, was 2.4% higher at EUR114.7 million. Chief Executive Officer Bertrand Bodson said: "In what was a difficult year for the industry, we delivered resilient performance in 2023 and continued to extend our market leadership position, reflecting our role as a diversified enabler of the industry." The CEO added: "We made considerable progress against our strategic objectives and delivered a record year of M&A, bringing greater exposure to higher growth and margin Create services, and have an extensive pipeline of acquisitions in 2024. We will continue to successfully navigate the current market conditions and are excited by the opportunities that lie ahead as we deliver against our plans and become a +EUR1 billion revenue business in the coming years."
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By Eric Cunha, Alliance News news editor
Comments and questions to newsroom@alliancenews.com
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Entain (ENT)
Flutter Entertainment (FLTR)
British American Tobacco (BATS)
4Imprint (FOUR)
Balfour Beatty (BBY)
Keywords Studios Plc (KWS)