(Alliance News) - Stock prices in London are seen opening marginally lower on Wednesday as investors look ahead to the US Federal Reserve's interest rate decision after the London market close.
In early company news, fund supermarket Hargreaves Lansdown provided an update in relation to recent trading. Iron ore pellet producer Ferrexpo declared a special dividend alongside its annual results. Travel concessions operator SSP Group said it was taking "proactive actions to strengthen its balance sheet" in light of the coronavirus crisis, as it launched a rights issue.
IG futures indicate the FTSE 100 index is to open 3.31 points lower at 6,800.30. The blue-chip index closed up 53.91 points, or 0.8%, at 6,803.61 Tuesday.
Hargreaves Lansdown said trading in January had been similar to previous lockdown periods with strong dealing volumes, significant engagement from clients, and robust net new business and net new client numbers.
The stockbroker said it continued to see elevated volumes of trading since the end of January with an increased proportion of these directed towards international equities - driven by interest in US stocks from existing clients.
As a result, Hargreaves Lansdown expects pretax profit for the financial year ending June 30, to be modestly above the top end of analyst expectations.
The current range of company-collected analyst expectations for financial 2021 pretax profit is in a range between GBP334 million to GBP360 million. Hargreaves posted pretax profit of GBP378.3 million in financial 2020.
Ferrexpo said it has been able to deliver a strong financial performance, alongside healthy shareholder returns, through "consistent investment and capital management".
For 2020, the miner reported revenue of USD1.7 billion, up 13% from USD1.5 billion in 2019, and pretax profit of USD747.9 million, up 63% from USD459.6 million.
Ferrexpo said 2020 iron ore pellet production was up 7% to 11.2 million tonnes from 10.5 million tonnes.
Ferrexpo said that, in light of its strong operational and financial performance, coupled with its transition to a net cash position and continued healthy iron ore prices, it has declared a further special interim dividend of 39.6 US cents, bringing total dividends paid in respect of 2020 to 72.6 US cents. Ferrexpo said it will consider a final dividend for 2020 as well, which if proposed, will be put to vote at its AGM in May.
Ferrexpo is based in Baar, Switzerland but mines for iron-ore in Ukraine.
Looking ahead, the company said: "The outlook for pellet premiums in 2021 is positive, with continued supply disruption of Brazilian pellet exports expected, as Brazilian producers face continued operational issues in the consistent supply of pellet feed, as well as the apparent prioritisation of the domestic steel sector in Brazil. The return of Brazilian pellet producer Samarco is not expected to materially impact the market in 2021, with this operation ramping up towards a reduced level of output compared to previous levels. Global demand for pellets continues to be robust."
SSP Group said it intends to raise gross proceeds of GBP475 million by way of a fully underwritten 12 for 25 rights issue, its food concessions in airports and rail stations having been badly damaged by Covid-related travel restrictions throughout 2020.
Further, SSP said it has secured the extension of its bank facilities that were previously due to mature in July 2022 to January 2024, and secured waivers and modifications of the existing covenants under those bank facilities and its US private placement notes. These agreements are conditional on the equity raise.
Providing context for strengthening its balance sheet, SSP highlighted that there are ongoing uncertainties as to the pace and shape of its recovery. It highlighted new variants of Covid-19, vaccine supply constraints and various lockdown and travel restrictions mean that the pace of the recovery in 2021 has been delayed in relation to the company's original expectations.
"This holistic set of balance sheet measures will significantly strengthen SSP's financial position and resilience, and will position SSP for the next phase of the pandemic. These measures will protect the business if the global travel sector experiences a more prolonged recovery from the pandemic, whilst under SSP's base case scenario, they will strengthen the group's balance sheet and provide increased capacity for investment as the travel market recovers," SSP explained.
SSP said it is "strategically well-positioned" to benefit from the recovery in the travel sector. It expects a near full return of passenger numbers to pre-Covid levels by financial year 2024 led by a rebound in domestic and leisure short-haul air and rail travel.
Ahead on Wednesday, the Federal Open Market Committee will conclude its two-day policy meeting and announce its decision at 1800 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1830 GMT.
Powell has made it clear the US central bank will wait until employment has recovered and inflation is securely above 2.0% before it will roll back its easy-money policy.
Members of the policy-setting FOMC are expected to raise the economic projections they made in December to take into account the US stimulus and improving outlook since then.
CMC Markets analyst David Madden commented: "Recently we saw the yield on the US 10-year government bond move above 1.63%, its highest level in 13 months. An increase in yields tends to forewarn an increase in interest rates, something the Fed is not planning until 2024. Last month, Jerome Powell, the Fed's boss, cautioned that inflationary pressure is on the horizon but it shouldn't be big enough or last long enough to justify tightening policy.
"Powell will have to strike a balance between not seeing too concerned about higher yields but at the same time, he can't be exceptionally dovish as that would most likely inflate stock prices even more. Equities have enjoyed a bullish run lately so a nudge higher in yields will probably encourage profit taking."
The Fed's meeting comes ahead of other central bank meetings later this week, with the Bank of England announcing its policy decision on Thursday and the Bank of Japan on Friday.
The Japanese Nikkei 225 index closed flat on Wednesday. In China, the Shanghai Composite ended flat, while the Hang Seng index in Hong Kong is down marginally.
The pound was quoted at USD1.3914 on Wednesday morning, up from USD1.3886 at the London equities close Tuesday.
The euro was priced at USD1.1902, up from USD1.1894. Against the yen, the dollar was trading at JPY109.11, marginally higher from JPY109.02.
Brent oil was quoted at a USD68.84 barrel early Wednesday, higher against USD68.28 late Tuesday. Gold was trading at USD1,736.07 an ounce, up from USD1,729.46.
The economic events calendar on Wednesday has eurozone consumer price data at 1000 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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SSP Group (SSPG)
Hargreaves Lansdown (HL.)
Ferrexpo (FXPO)