(Alliance News) - Stocks in London are set for a tepid open, as investors weighed yesterday's US inflation print and warnings of an impending recession in the world's largest economy from the Federal Reserve.
In early economic news on Thursday, the health of the UK economy was also in focus.
Numbers from the Office for National Statistics showed the domestic economy stalled in February, with a decline in the services sector.
"Although a recession has been avoided, for now at least, the UK economy remains in a troubling state. Today's reading comes just days after the International Monetary Fund predicted that the UK economy will shrink this year, the worst performance among the G20 nations," BRI Wealth Management analyst Tom Hopkins commented.
Meanwhile, UK new house buyer demand continued to fall for the 11th consecutive month in March.
In early UK corporate news, grocer Tesco said annual pretax profit was halved in its financial year, while Carex handwash maker PZ Cussons expects to meet market consensus in its full year.
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 just 3.0 points at 7,827.84
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Hang Seng: down 0.5% at 20,216.09
Nikkei 225: closed up 0.3% at 28,156.97
S&P/ASX 200: closed down 0.3% at 7,324.10
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DJIA: closed down 38.29 points, 0.1%, at 33,646.50
S&P 500: closed down 0.4% at 4,091.95
Nasdaq Composite: closed down 0.9% at 11,929.34
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EUR: up at USD1.0986 (USD1.0978)
GBP: up at USD1.2484 (USD1.2460)
USD: up at JPY133.26 (JPY133.14)
GOLD: up at USD2,015.97 per ounce (USD2,008.47)
OIL (Brent): up at USD86.94 a barrel (USD86.99)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
11:00 CEST EU industrial production
11:00 BST Ireland CPI
US President Joe Biden continues visit to Ireland
09:30 BST UK BoE credit conditions survey
14:00 BST UK BoE Chief Economist Huw Pill speaks at MNI Conference
08:30 EDT US PPI
08:30 EDT US unemployment insurance weekly claims report
16:30 EDT US foreign central bank holdings
16:30 EDT US federal discount window borrowings
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The UK economy registered no growth in February, as a contraction in services and production offset strong growth in construction, according to the Office for National Statistics on Thursday. ONS estimated that in February, real gross domestic product registered no growth from the previous month. This compared with the upwardly revised 0.4% growth seen in January. January was initially estimated at 0.3% growth. February's reading was below the 0.1% market consensus, as cited by FXStreet. ONS explained that falls in services and production were offset by growth in construction.
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Fierce competition for UK rented properties is squeezing prices higher in a "frenzied" lettings market, while housing sales remain downbeat, research by surveyors has found. Tenant demand reached a five-month high with strong demand seen across the country, the Royal Institution of Chartered Surveyors said. Meanwhile, new house buyer demand fell for the 11th month in a row in March, Rics found. While surveyors still expect sales to remain under pressure in the next few months, they were less downcast than in February amid expectations of interest rate rises coming to an end. It also marked the first time in more than a year that the proportion of surveyors expecting sales to pick up in the next 12 months was positive. Furthermore, the proportion of professionals who noted a decline in house prices slowed for the first time in 10 months.
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BROKER RATING CHANGES
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HSBC raises Taylor Wimpey to 'buy' (hold) - price target 570 (390) pence
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Berenberg cuts Industrials REIT to 'hold' (buy) - price target 168 (165) pence
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JPMorgan cuts WPP price target to 1,240 (1,300) pence - 'overweight'
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COMPANIES - FTSE 100
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Grocery chain Tesco said annual group sales in the year to February 25, excluding value-added tax and fuel, rose 5.3% year-on-year to GBP57.66 billion from GBP54.77 billion. Total annual revenue rose to GBP65.76 billion from GBP61.34 billion. The revenue figure excludes VAT but does include fuel. Pretax profit fell 51% year-on-year to GBP1.00 billion from GBP2.03 billion. The grocer proposed a final dividend of 7.05 pence, taking the full year total to 10.90p - unchanged from the prior year. Looking ahead to financial 2024, Tesco expects to deliver a "broadly flat" level of retail adjusted operating profit, which was GBP2.49 billion in financial 2023. Retail free cash flow is expected within its target range of GBP1.4 billion to GBP1.8 billion. The company said it will buyback GBP750 million worth of shares over the next 12 months.
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Tobacco company Imperial Brands reiterated previous guidance that first-half group adjusted operating profit is expected to be "at a similar level" to the previous year on a constant currency basis. The Rizla-producer ended its first half on March 31. "Tobacco & [next generation products] adjusted operating profit has been impacted by the planned increase in NGP investment, the impact of our exit from Russia, and the continued unwind of Covid-19," the firm said. However, growth in Distribution adjusted operating profit has helped to offset these headwinds somewhat. "We are on track to deliver full-year results in line with expectations and our guidance of low single-digit constant currency net revenue growth," Imperial said.
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COMPANIES - FTSE 250
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Consumer products firm PZ Cussons updated on its third quarter ended March 4, reporting like-for-like revenue growth of 6.2%, bringing quarterly revenue to GBP166.0 million. Its performance strengthened in Europe and the Americas, as expected, with a "marked improvement in profitability". It expects adjusted pretax profit in financial 2023 to be "at least in line" with current market estimates, citing Bloomberg consensus of GBP68.1 million. "We remain confident in delivering against FY23 expectations and that further strategic progress will be made in the balance of FY23 and into FY24," said Chief Executive Jonathan Myers.
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OTHER COMPANIES
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BHP Group said its AUD9.6 billion, around USD6.44 billion, takeover of Oz Minerals Ltd inched closer. The Melbourne-based diversified miner said Oz shareholders gave the thumbs-up on Thursday, paving the way for the group to acquire 100% of Oz. The Oz board had unanimously recommended the offer. Back in November, BHP increased its non-binding indicative takeover offer for Oz to AUD28.25 per share in cash. This represented a premium of 49% to Oz's closing price of AUD18.92 per share on August 5, when BHP tabled its initial offer. BHP said on Thursday the deal now required the approval of the Federal Court of Australia. Oz is expected to apply for court orders approving the transaction on Monday next week.
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Japanese tech investment firm SoftBank has decided to sell nearly all of its stake in Alibaba to limit exposure to China, the Financial Times reported Thursday. SoftBank was an early investor in the Chinese internet company founded by Jack Ma but began to offload its shares last year. According to the report, SoftBank, which once owned 34% of Alibaba, has sold more than USD7 billion of its shares since the start of the year through prepaid forward contracts. Last year, it sold a record USD29 billion of shares in the Chinese company, reported the FT.
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By Elizabeth Winter, Alliance News senior markets reporter
Comments and questions to newsroom@alliancenews.com
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