(Alliance News) - Stock prices in London are seen opening lower on Tuesday amid ongoing trepidation over high levels of inflation, as Australia's central bank raised interest rates by more than expected.
In early UK company news, waste removal company Biffa received a takeover offer from private equity firm Energy Capital Partners, as fashion retailer Ted Baker saw its preferred suitor walk away. Transport operator National Express still expects to reinstate dividends as revenue recovers from the pandemic.
IG futures indicate the FTSE 100 index is to open 28.22 points lower at 7,580.00. The index closed up 75.27 points, or 1.0%, at 7,608.22 on Monday.
Biffa said it has received a series of "unsolicited and indicative" proposals from private equity firm Energy Capital Partners.
ECP's proposal is in respect of a possible offer at a price of 445 pence per Biffa share in cash, valuing the company at around GBP1.35 billion. The offer is a 37% premium to Biffa's closing price of 325p on Monday.
Biffa said its board has concluded that should a firm offer be made on the same financial terms as the proposal it would be "minded to recommend it" to Biffa shareholders.
Turning to current business, Biffa said it continues to trade well, with underlying performance being in line with the board's expectations. Volumes have remained at expected levels, and Biffa continues to mitigate inflationary pressures, it added.
Pearson said it has agreed to sell its local K12 Courseware businesses in Italy and Germany to European K12 learning services company Sanoma for GBP163 million, which will be paid in cash.
Under the terms, Pearson will also enter into an agreement with Sanoma for it to distribute Pearson's English Language Teaching products in Italy.
The sale was part of the education materials company's ongoing strategic review which Pearson said it continues to "make good progress" in the remaining areas of the review.
Ted Baker said it was informed by its preferred bidder late Monday that it does not intend to proceed with an offer for the retailer. The bidder indicated that its reason for not proceeding was not linked to its due diligence review of the company, Ted Baker explained.
The fashion retailer said it will now go back and look at other proposals received as part of its formal sale process, but there can be no certainty that an offer will be made.
National Express said revenue continues to track close to 2019's pre-pandemic level, leaving the transport operator on track for 2022 full year revenue of around GBP2.7 billion and a profit margin of 7%.
Further, National Express said it expects progress toward its 9% average profit margin target from 2022 to 2027 and recovery to its pre-pandemic margin level of around 10% in the later stages of that period. This is expected to drive more than GBP100 million of earnings before interest and tax growth over the same period, it said.
National Express also said it was "rigorous" in its capital allocation, reinvesting free cash flow generation into organic opportunities and expects to resume dividend payments for the 2022 full-year.
Wall Street ended higher on Monday, with the Dow Jones Industrial Average up 0.1%, S&P 500 up 0.3% and Nasdaq Composite up 0.4%.
US equities started strongly before giving up most gains, as the yield on the 10-year US Treasury note, a proxy for inflation and interest rates, climbed above 3.0%.
CMC Markets analyst Michael Hewson explained that the "late pullback has translated into a softer European open, as once again investors fret about how high rates might go".
In Asia on Tuesday, stocks were mixed. Tokyo's Nikkei 225 index closed up 0.1%. The Shanghai Composite was up 0.1%, while the Hang Seng index in Hong Kong was down 0.6%. The S&P/ASX 200 in Sydney ended down 1.5%.
Australia's central bank hiked interest rates on Tuesday, warning as well of more increases as officials try to rein in "significantly" high inflation.
The Reserve Bank of Australia upped its main lending rate by half a percentage point to 0.85%. It also increased the interest rate on exchange settlement balances by 50 basis points to 75 basis points.
Governor Philip Lowe pointed to "significant" inflation rises as the reason behind the bank's move.
Lowe said inflation is expected to increase further in Australia, before slotting back towards the RBA's 2% to 3% target range.
"General expectations had been for a 25bps move which always seemed a little half-hearted. It's been clear for some time the RBA is behind the curve, especially since the RBNZ has been so aggressive, in its attempts to curb inflation, so today's move by 50bps to 0.85%, shouldn't have been a surprise and sends a message that they are concerned about that, and are determined to get out in front of it," said Hewson.
Meanwhile, UK Prime Minister Boris Johnson is set to meet his Cabinet on Tuesday as he seeks to keep his premiership afloat by putting a bruising confidence ballot firmly behind him.
The PM insisted he had secured a "decisive" victory despite 148 of his own MPs voting to oust him on Monday night, arguing the government could now "move on" and focus on what "really matters to people".
Tory MPs voted by 211 to 148 in support of the prime minister on Monday, but the scale of the revolt against his leadership left him wounded.
When Theresa May faced a confidence vote in 2018 she secured the support of 63% of her MPs, but was still forced out within six months.
For Johnson, this was 59%, as 41% of his MPs voted against him, a worse result than May.
The dollar was higher across the board. The pound was quoted at USD1.2445 on early Tuesday, down from USD1.2528 at the London equities close Monday.
The euro was priced at USD1.0678, down from USD1.0688. Against the Japanese yen, the dollar was trading at JPY132.90 in London, up sharply from JPY131.61.
Brent oil was priced at USD119.98 a barrel Tuesday morning, up from USD119.27 at the London equities close Monday. Gold stood at USD1,840.14 an ounce, lower against USD1,844.10.
Tuesday's economic calendar has a UK PMI reading at 0930 BST, and eurozone investor confidence at 0930 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
Pearson (PSON)