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LONDON BRIEFING: Frasers confident; DS Smith profit down, CEO to leave

Thu, 07th Dec 2023 08:09

(Alliance News) - London's FTSE 100 made a slow start on Thursday, after equities in Asia struggled following Chinese trade data which failed to soothe growth worries about the world's second-largest economy.

Chinese exports rose in November for the first time in seven months, officials said, though the reading compares with a low base from last year, during zero-Covid measures.

The figure was much better than analyst forecasts and followed a 6.4% slump in October, though it still suggested a post-pandemic recovery for the Asian nation is materialising slowly.

"China's exports appear to have bottomed out, but the outlook is only for a weak recovery going into 2024, given the likely prospect of soft global demand," Pantheon Macroeconomics analyst Duncan Wrigley cautioned.

In early UK corporate news, packaging firm DS Smith reported weaker half-year earnings and said its chief executive will step down. Sports Direct owner Frasers is confident of achieving yearly guidance.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 0.4% at 7,488.15

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Hang Seng: down 0.7% at 16,342.98

Nikkei 225: closed down 1.8% at 32,858.31

S&P/ASX 200: closed down 0.1% at 7,173.30

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DJIA: closed down 70.13 points, or 0.2%, at 36,054.43

S&P 500: closed down 17.84 points, or 0.4%, at 4,549.34

Nasdaq Composite: closed down 83.20 points, or 0.6%, at 14,146.71

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EUR: down at USD1.0764 (USD1.0796)

GBP: down at USD1.2557 (USD1.2601)

USD: down at JPY146.08 (JPY147.17)

Gold: up at USD2,029.37 per ounce (USD2,026.89)

(Brent): down at USD74.56 a barrel (USD75.14)

(changes since previous London equities close)

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ECONOMICS

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Thursday's key economic events still to come:

10:00 GMT EU GDP

13:30 GMT US initial jobless claims

15:00 GMT US wholesale trade

15:30 GMT US EIA weekly natural gas storage report

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President of the European Commission Ursula von der Leyen on Thursday told Chinese leader Xi Jinping they must address the "imbalances and differences" between the bloc and China. "China is the EU's most important trading partner," von der Leyen said, "but there are clear imbalances and differences that we must address." President Xi Jinping told EU leaders that China and the bloc must "jointly respond to global challenges" in his opening remarks at a summit in Beijing. "We must jointly respond to global challenges and work together to promote world stability and prosperity," Xi told European Council President Charles Michel and European Commission President Ursula von der Leyen. European leaders met Chinese President Xi Jinping in Beijing for talks dominated by divisions between the bloc and its largest economic partner over everything from trade to the war in Ukraine.

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UK house prices increased in November for the second month in a row, following a prior streak of six successive monthly falls, according to mortgage lender Halifax. The average house price index increased 0.5% in November from October. Prices had increased from an upwardly revised 1.2% in October from September. On an annual basis, prices were 1.0% lower, easing from a 3.1% fall in September. The year-on-year reading for October was nudged higher from an initially reported 3.2% fall. The data from October had initially showed prices rose 1.1% on-month. The typical UK home cost GBP283,615 in November, around GBP1,300 higher than in October.

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UK Prime Minister Rishi Sunak has been rocked by the resignation of his immigration minister after rejecting demands to opt out of European human rights laws to revive the Rwanda policy. Robert Jenrick told the PM that his new draft legislation aimed at stopping small boat crossings "does not go far enough" and is a "triumph of hope over experience". Sunak's long-term political ally argued that he had to quit because he has "such strong disagreements" with the government's approach to immigration. Jenrick had been seen as taking an increasingly firm approach over plans to stop asylum seekers making unauthorised crossings of the Channel in small boats in recent weeks. The draft Bill compels judges to treat Rwanda as a safe country after the Supreme Court ruled the scheme was unlawful over risks to refugees.

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BROKER RATING CHANGES

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JPMorgan cuts IAG to 'underweight' (neutral) - price target 1.45 (2.80) EUR

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Barclays cuts BAT price target to 2,650 (3,200) pence - 'overweight'

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COMPANIES - FTSE 100

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DS Smith said pretax profit in the six months that ended October 31 fell 15% to GBP268 million from GBP315 million a year earlier, while revenue fell 18% to GBP3.51 billion from GBP4.30 billion. The paper-based packaging maker said its second-quarter volume performance was improved compared to first quarter and that it expects stronger volume performance in the second half than first half. It maintained its interim dividend payment at 6.0 pence per share. It expects a full-year outcome in line with internal expectations. DS Smith also announced that Chief Executive Officer Miles Roberts intends to retire after 13 years with the company. His formal notice period will start on December 1 next year, meaning he would step down no later than November 30, 2025. DS Smith said this will give the company enough time to identify and appoint his successor.

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Frasers said pretax profit in the six months that ended October 29 rose 8.0% to GBP310.2 million from GBP287.2 million a year earlier, while revenue rose 4.4% to GBP2.77 billion from GBP2.65 billion. Retail operating costs for the owner of the Sports Direct and Flannels retail chains rose 0.4% to GBP755.9 million from GBP752.6 million. Looking ahead, Chief Executive Officer Michael Murray said: "As noted at the [financial] 2023 preliminary results, [financial] 2024 started well. This strong trading momentum continued throughout the first half of [financial] 2024 and into the early recent weeks of the second half especially at Sports Direct. We are looking forward to our Christmas trading period and remain confident of achieving [adjusted pretax profit] in the range GBP500 million to GBP550 million. We are building a diverse business for sustained multi-year growth. Our substantial ongoing investment into our elevation strategy, infrastructure and new business integrations continues to unlock that potential, and we expect further profitable growth for [financial] 2025 and beyond."

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COMPANIES - FTSE 250

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Watches of Switzerland said pretax profit in the six months that ended October 29 fell to GBP66.5 million from GBP82.7 million a year earlier, while revenue was down to GBP761.4 million from GBP765.2 million. Basic earnings per share fell to 19.8 pence from 27.2p. Looking ahead, the retailer of Swiss watches said it kept full-year guidance unchanged, based on "sequential trading improvement and the large showroom refurbishments reopening pre-Christmas".

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OTHER COMPANIES

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Investor Kelso said it has written to THG encouraging a demerger, saying it believes THG's sum of parts is worth significantly more than its current valuation and that a demerger could resolve the "disparity" between THG's shares and its fundamentals. "As Kelso has stated previously, many of the larger global peers for THG's Nutrition business trade on over 3-7 times sales valuation multiples, while several of the larger global Beauty brands trade on 3-5 times sales. By comparison, THG trades on around 0.5 times sales...There are several good examples of such demerger confirmations on the London Stock Exchange, including Whitbread's demerger of Costa Coffee in April 2018 and GSK's Consumer Healthcare business in July 2021," said Kelso.

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Smart Metering agreed to a private equity takeover from funds advised by Kohlberg Kravis Roberts. KKR will pay 955 pence per Smart Metering share, a 40% premium to the stock's Wednesday closing price. It gives Smart Metering a GBP1.3 billion valuation on a fully diluted basis and an enterprise value of GBP1.4 billion. "KKR's offer recognises the strength and resilience of our model and will ensure SMS has the necessary capital to accelerate and unlock its full growth potential. The offer price represents a significant premium to the current share price and allows shareholders to realise immediate and attractive value for their shareholding," Smart Metering CEO Tim Mortlock said.

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By Greg Rosenvinge, Alliance News senior reporter

Comments and questions to newsroom@alliancenews.com

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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