(Alliance News) - Stock prices in London are set to open higher on Wednesday following a buoyant session in Asia overnight as fears over coronavirus receded amid a slowdown in new cases.
In early UK company news, Babcock said it now sees underlying operating profit at the lower end of guidance, Dunelm raised its outlook, and Plus500 set out plans for a buyback programme despite revenue and profit for 2019 slumping.
IG says futures indicate the FTSE 100 index of large-caps to open 25.06 points higher at 7,524.50 on Wednesday. The FTSE 100 index closed up 52.56 points, or 0.7%, at 7,499.44 on Tuesday.
"Risk sentiment was positive yesterday, sending global equities up by 0.5-1% and European rates up some 2bp. The positive risk sentiment continued in the overnight Asian session. The data on the coronavirus suggest that the spread is diminishing, adding to the positive risk sentiment," said Danske Bank.
The death toll from China's new coronavirus epidemic climbed past 1,100 on Wednesday but the number of new cases fell for a second straight day, as the World Health Organization urged global unity to combat the "grave threat".
Most of the deaths have been in Hubei and its capital, Wuhan, the epicentre of the crisis. But in a positive development, the number of new cases has fallen in Hubei for two straight days. Outside the province, the number of new patients has declined for the past week.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.7%. In China, the Shanghai Composite ended up 0.9%, while the Hang Seng index in Hong Kong is 1.0% higher near the close. ÂÂ
In the US on Tuesday, Wall Street was muted, with the Dow Jones Industrial Average ending flat, the S&P 500 up 0.2% and the Nasdaq Composite up 0.1%.
Bernie Sanders won New Hampshire's high-stakes Democratic primary on Tuesday, according to US network projections, leaving rivals including party stalwart Joe Biden in his wake as he staked his claim to challenge President Donald Trump in November.
Indiana ex-mayor Pete Buttigieg finished in second place at 24% as he readied for the more difficult battlegrounds ahead, while fellow Midwestern moderate Amy Klobuchar maintained a late surge to place third on about 20%. Liberal Elizabeth Warren finished in fourth place at about 9%.
After months atop the pack, Biden had already conceded he expected to do badly in New Hampshire, as he did a week earlier in Iowa - and the former vice president's worst fears were beginning to materialise as he languished in fifth with just over 8%.
In early UK company news, Babcock International damped profit guidance as it lowered expectations for its Aviation unit.
The defence firm continues to see underlying revenue around GBP4.9 billion for the current financial year, ending in March, but underlying operating profit is expected around GBP540 million, compared to a previous guidance range of GBP540 million to GBP560 million.
Underlying earnings per share are seen in line with consensus.
Trading in Aviation has been mixed, the firm explained, with good performance in the UK and its international operations offset by "continued challenges" in southern Europe and the oil and gas business.
"The three large providers of helicopter services who operate worldwide in oil and gas have all emerged from Chapter 11 bankruptcy protection with reduced debt and written-down assets. This has effectively reset global market pricing levels, forcing us to respond quickly to remain competitive. We will also exit our oil and gas businesses in Ghana and Congo," said Babcock.
As a result, Babcock said it has lowered its expectations for the unit and, in response to the unit's trading, will be implementing "improvement and restructuring programmes".
"We will also write down assets and leases in our oil and gas business. We expect to incur an exceptional charge related to these issues of around GBP85 million, predominantly in oil and gas," said Babcock.
Outside of Aviation, both Marine and Land continue to perform well, the company said.
Home furnishings retailer Dunelm raised its full-year outlook following double-digit profit growth in its first half.
Revenue for the 26 weeks to December 28 amounted to GBP585.0 million, up 6.0% on a year ago. Pretax profit grew more strongly, up 19% to GBP83.6 million, as gross margin expanded to 51.5% from 50.3% a year prior.
Like-for-like sales rose 5.6% against a "strong" comparative of 7.8% in the period a year ago.
Dunelm raised its interim dividend by 6.7% to 8.0 pence per share.
"We have made good progress over the first half, following a strong performance last year, which is reflected in the significant growth delivered in both sales and profits," said Chief Executive Nick Wilkinson.
"The third quarter has started well, with a successful Winter Sale across the total retail system," he added. "As a result, we expect full year FY20 profit before tax to be slightly ahead of the top of the latest range of analyst expectations. We are monitoring the Coronavirus outbreak carefully. To date we have not assumed any material disruption to our supply chain or any financial impact in the year."
Dunelm noted that analyst pretax profit estimates for the current financial year to June range from GBP135.0 million to GBP137.3 million.
Online trading provider Plus500 reported a "year of two distinct halves" as profit and revenue slumped in 2019.
For all of 2019, trading income halved to USD354.5 million from USD720.4 million, while pretax profit dived to USD189.3 million from USD503.0 million.
The online trading services provider said it performed robustly across all key metrics in the second half of the year compared to the first, with the latter hit by "extremely" low volatility in the first quarter. 2019 marked the first full year of trading under the new regulatory regime introduced in Europe, Plus500 noted, with customer trading patterns "adjusting through the year".
Turning to current trading, Plus500 said "positive momentum" has continued into 2020, reflecting heightened levels of volatility in financial markets.
"We finished 2019 in good financial and operational shape following a period of changes for the industry, which has provided a more certain regulatory outlook for Plus500 and the industry as a whole. We were particularly pleased with the strong improvement in financial performance in the second half of 2019 and believe that customer trading patterns have now adjusted following the regulatory changes introduced in Europe last year," said Chief Executive Asaf Elimelech.
Plus500 also on Wednesday set out plans for a new share buyback programme, aiming to purchase up to USD30.0 million in shares. It did, though, cut its total dividend for the recent year to USD0.6501 per share from USD1.9977 in 2018.
In forex, sterling was quoted at USD1.2952 early Wednesday, higher than USD1.2944 at the London equities close on Tuesday.
The euro traded at USD1.0905 early Wednesday, soft versus USD1.0917 late Tuesday. Against the yen, the dollar was quoted at JPY109.89 versus JPY109.87.
In commodities, gold was quoted at USD1,563.80 an ounce early Wednesday, flat on USD1,564.39 on Tuesday. Brent oil was trading at USD55.10 a barrel early Wednesday, higher than USD54.10 late Tuesday.
In Wednesday's economic calendar, there is eurozone industrial production at 1000 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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Babcock (BAB)
Plus500 (PLUS)
Dunelm (DNLM)
