LONDON BRIEFING: UK inflation back above 10%; Asos swings to loss

(Alliance News) - Stocks in London were called higher on Wednesday, with a third successive daily gain possible, while the pound traded below an earlier high despite UK inflation hitting double-figures again.

The consumer price index rose by 10.1% in September from a year before, according to the Office for National Statistics. The inflation rate picked up from 9.9% in August and returned to the same rate as recorded in July.

The latest figure came in marginally hotter-than-expected, with a reading of 10% foreseen by the market, according to FXStreet.

The reading is likely to ensure another chunky rate hike by the Bank of England next month, potentially even a 75 basis point lift to the bank rate.

The BoE on Tuesday pushed back the sale of government bonds to November 1 due to the fiscal announcement later this month. The central bank had been due to start selling UK government bonds, called gilts, on October 31.

The BoE had initially dismissed a report from the Financial Times which stated it would delay a planned sale of GBP838 billion of UK government bonds purchased under a quantitative easing programme.

The pound traded back below the USD1.13 mark, having spent much of Wednesday morning above it during Asian trade.

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

----------

MARKETS

----------

FTSE 100: called up 0.3% at 6,956.24

----------

Hang Seng: down 2.0% at 16,572.56

Nikkei 225: closed up 0.4% at 27,257.38

S&P/ASX 200: closed up 0.3% at 6,800.10

----------

DJIA: closed up 337.98 points, or 1.1%, at 30,523.80

S&P 500: closed up 42.03 points, or 1.1%, at 3,719.98

Nasdaq Composite: closed up 96.60 points, or 0.9%, at 10,772.40

----------

EUR: firm at USD0.9836 (USD0.9826)

GBP: flat at USD1.1295 (USD1.1291)

USD: up at JPY149.37 (JPY149.24)

GOLD: down at USD1,643.06 per ounce (USD1,647.70)

OIL (Brent): up at USD90.17 a barrel (USD88.97)

(changes since previous London equities close)

----------

ECONOMICS

----------

Wednesday's key economic events still to come:

1000 BST EU harmonised CPI

0930 BST UK house price index

1600 BST UK BoE MPC Member Catherine Mann speaks

----------

UK Prime Minister Liz Truss faces a humiliating clash with Keir Starmer on Wednesday, having been forced to junk her entire economic strategy and with her leadership in peril. She will square off against the Labour leader in Prime Minister's Questions for the first time since her new Chancellor Hunt ripped up her plan for tax cuts and increased public borrowing in a bid to reassure markets in the wake of the mini-budget turmoil. It could come amid more gloomy economic news, with economists predicting that Office for National Statistics data will reveal inflation returned to double-figures in September. The PM faces disquiet from Tory MPs over plans for public spending cuts across all departments, after Hunt warned of decisions of "eye-watering difficulty" to plug the government's multibillion-pound financial black hole.

----------

Truss has survived a meeting of the Cabinet without any ministers calling for her to quit, but Tory members and voters appear to be turning on her. A snap poll of party members released on Tuesday saw more than half respond that she should resign and 83% say she was doing a bad job. Downing Street insisted the Cabinet fully supported the prime minister and stressed that Truss was focused on the challenges facing the country rather than party infighting.

----------

Labour is calling on Tory MPs to seize an opportunity to end fracking "once and for all" in the UK by backing a move to pave the way for a vote on the issue. The party will use an opposition day debate on Wednesday to put forward a motion which, if passed, would guarantee time in the Commons for a bill to ban the controversial gas extraction technique for good. Labour says it wants to give MPs a chance to overturn the government's decision to lift England's fracking ban, which broke a Tory manifesto promise. The moratorium had been in place since 2019 following a series of earth tremors. Some MPs have been clamouring for a vote on the issue, while the government has insisted that future applications will be considered where there is local support, although it is not clear how that will be measured. Labour said it will make it "clear" in the debate that it continues to be open to ministers providing an opportunity in government time for a binding vote on the matter.

----------

BROKER RATING CHANGES

----------

HSBC raises Marstons to 'hold' (reduce)

----------

RBC raises Frasers to 'sector perform' (under perform) - price target 750 (850) pence

----------

Barclays cuts Flutter Entertainment to 'equal weight' (overweight) - price target 11,000 (13,800) pence

----------

COMPANIES - FTSE 100

----------

Antofagasta said third-quarter output markedly improved from the second, helped by greater water availability at its drought-hit Los Pelambres asset in Chile. The copper miner said third-quarter output amounted to 181,900 tonnes, up 40% quarter-on-quarter. Antofagasta said output doubled in Los Pelambres alone, "on improved water availability". It left annual guidance unchanged, expecting copper output in the range of 640,000 to 660,000 tonnes. "In 2023 copper production is expected to be between 670,000 and 710,000 tonnes, with completion of the Los Pelambres desalination and concentrator plants, and lower production at Centinela Cathodes," Antofagasta guided.

----------

COMPANIES - FTSE 250

----------

Asos reported a swing to an annual loss, though the online fast-fashion retailer outlined plans to revive its fortunes under its new chief executive, Jose Calamonte, having performed a "diagnostic" of its issues. Revenue in the financial year that ended August 31 rose 0.7% to GBP3.94 billion from GBP3.91 billion a year earlier. However, Asos reported a swing to an annual pretax loss of GBP31.9 million of GBP177.1 million. "The second half of the year proved more challenging than expected. While ASOS had expected an acceleration in revenue growth against weaker comparatives, inflationary pressures on consumers increased markedly as the year progressed, and impacted consumers' confidence and discretionary income. As a result, growth in the second half was lower than had been anticipated," it explained. Among its issues, Asos said, is an underperforming international arm, its supply chain operations, its "customer acquisition and commercial model", and the need for data and digital improvements. "Over the next 12 months, ASOS will deliver on four actions targeted at improving its ability to navigate the existing uncertainty, focused on: renewing its commercial model and improving inventory management; simplifying and reducing its cost profile; ensuring a robust and flexible balance sheet; and reinforcing the leadership team and refreshing the culture," Asos said. It expects a GBP100 million to GBP130 million non-cash stock write-off for the new financial year. Capital expenditure, at GBP175 million to GBP200 million, will be below the mid-term range of GBP200 million to GBP250 million.

----------

Spectris backed annual guidance, and the supplier of precision instrumentation set out new growth targets. Like-for-like sales in the third quarter of 2022 rose 10% annually. "We continue to see strong demand for our products and services, underpinning our expectation for high single digit organic sales growth for the full year. Orders remain ahead of revenue, even when compared to our strong performance in the third quarter last year, supported by our continued focus on R&D investment and new product introductions," Chief Executive Andrew Heath said. It continues to expect "high single digit" growth in like-for-like sales this year. The outlook for full-year adjusted operating profit remains in line with current market expectations. Looking further out, Spectris outlined new medium-term goals. It will target organic sales growth of 6% to 7% in the medium-term, with an adjusted operating margin above 20%. In 2021, sales amounted to GBP1.16 billion. Its adjusted operating margin was 16.3%. Spectris is hosting a capital markets day on Wednesday.

----------

OTHER COMPANIES

----------

Shanta Gold, fresh from announcing potential takeover interest from three parties, including fellow London listing Chaarat Gold, updated on a possible offer. It said any offer from Yintai Gold will likely be in cash. Alongside Chaarat and Yintai, Shandong Gold is mulling an offer for Shanta, the company said on Tuesday. Chaarat on Tuesday confirmed it was in the early stages of discussions for a Shanta bid.

----------

BHP reported a rise in iron ore output at the start of its new financial year, though the miner cautioned on macroeconomic uncertainty, energy costs and labour markets. In the three months to September 30, iron ore production rose 3% year-on-year to 65.1 million tonnes. Copper output rose 9% annually to 410,000 tonnes, though production of metallurgical coal weakened 1% to 6.7 million tonnes. Energy coal production tumbled 38% to 2.6 million tonnes. BHP left annual output guidance unchanged. It expects copper production between 1.6 million and 1.8 million tonnes. Iron ore production between 249 million and 260 million tonnes is expected. Chief Executive Mike Henry said: "We expect global macro-economic uncertainty in the short term to continue to affect supply chains, energy costs, labour markets and equipment and materials availability. BHP remains well positioned, with a portfolio and balance sheet to withstand external challenges and a strategy positioned to benefit from the global mega-trends of decarbonisation and electrification."

----------

Just Eat Takeaway.com said it was profitable in the third quarter of 2022, beating expectations. The food delivery company said it was adjusted earnings before interest, tax, depreciation and amortisation positive in the third quarter of 2022. This was an outcome "materially ahead of prior guidance at the beginning of the year". JET now expects to be adjusted Ebitda positive in the second half, having previously expected an adjusted Ebitda margin in the range of minus 0.5% and minus 0.7%. The profitable quarter came despite total orders falling 11% year-on-year to 235.3 million. Total gross transaction value improved 2%, however. "Management expects the company to maintain positive adjusted Ebitda in 2023, and the long-term objectives for Just Eat Takeaway.com remain unchanged," the company said.

----------

Nestle said it continued to increase its sales as it raised its organic growth guidance for the full year. In the nine months to September 30, Nestle reported sales of CHF69.13 billion, about USD69.40 billion. This was up 9.2% from the CHF63.29 billion recorded last year. The sales growth was driven principally by North America, where sales increased to CHF19.09 billion from CHF17.17 billion last year. All the other regions remains roughly constant. Nestle also noted that acquisitions had a positive influence of 1.2%. Pricing increased 7.5% as Nestle sought to pass on much of its increased costs. The Vevey, Switzerland-based food and drink conglomerate saw organic growth hit 8.5% in the nine months, reaching 9.3% in the third quarter.

----------

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.