(Alliance News) - Stocks in London were set to open higher on Wednesday, but the day will be dominated by the consumer inflation report in the US, with red-hot readings already out from Germany and China.
In early corporate news in London, ITV had a strong quarter, Compass is back to pre-Covid business levels, and property investors LXi REIT and Secure Income REIT are eyeing a merger.
IG futures indicate the FTSE 100 index will open up 47.08 points, or 0.6%, at 7,290.30 on Wednesday. The blue-chip index closed up 26.64 points, or 0.4%, at 7,243.22 on Tuesday.
Central banking moves in Europe and the US to tighten monetary policy will have traders on edge in anticipation of the US consumer price index report.
The US CPI print is due at 1330 BST. On an annual basis, inflation is expected to slow to 8.1% in April from a four decade-high of 8.5% in March.
AvaTrade analyst Naeem Aslam said: "The price action for the US and European futures is still fragile, and it is likely to remain that way as traders continue to worry about inflation and the central bank's monetary policies.
"The US CPI data, which is due later in the day, is going to be driving the price action not only for today but will also set the tone for the rest of the week. It is widely anticipated that inflation in the US may have peaked, although lawmakers and speculators do believe that the full influence of the Ukraine and Russia conflict is still unknown."
In the US on Tuesday, the Dow Jones Industrial Average closed down 0.3%, while the S&P 500 advanced 0.3%, and the Nasdaq Composite closed 1.4% higher.
In Germany, the annual inflation rate accelerated to 7.4% in April from 7.3% in March.
The reading was in line with market consensus, cited by FXStreet.
"The inflation rate thus reached an all-time high for the second month in a row since German reunification," said Georg Thiel, president of the Federal Statistical Office. "In March 2022, the inflation rate jumped to 7.3%, the main reason being the development of energy product prices. What stands out in April 2022 is the above-average increases in food prices. This is where the impact of the war in Ukraine is becoming more and more visible."
Versus the previous month, consumer prices were 0.8% higher in April, matching March's 0.8% rise.
On a harmonised basis, allowing for EU-wide comparison, annual inflation in Germany quickened to 7.8% in April from 7.6% in March.
In London, television broadcaster and programmer producer ITV said it had a "strong" first quarter, with revenue growing across the business.
In the three months to March 31, total external revenue was up 18% to GBP834 million, with ITV Studios revenue up 23% to GBP458 million. Media & Entertainment revenue was up 13% to GBP545 million, aided by total advertising revenue rising 16%.
Looking ahead, ITV noted its second and third quarters face tough advertising comparatives as a result of the European Championships last summer. Advertising revenue is expected to fall about 6% in the second quarter from a year prior, with June in particular to see a 9% drop.
Contract caterer Compass said on Wednesday a first-half revenue surge was driven by "notable" volume recovery in its Business & Industry and Education businesses.
In the six months to March 31, pretax profit jumped to GBP632 million from GBP133 million the year before, as revenue rose 36% to GBP11.5 billion from GBP8.4 billion.
Compass noted its underlying revenue in the second quarter was double the year prior and maintained a run rate above its pre-Covid levels.
"We continue to recover strongly from the pandemic and have achieved the important milestone of revenue exceeding our pre-Covid level on a run rate basis. We have seen a notable improvement in Business & Industry and Education as employees return to the office and students to in-person learning," Chief Executive Dominic Blakemore explained.
Due to its strong performance in the first half, Compass is upping its organic growth guidance, which is now expected to grow about 30%, rising from previous expectations of 20% to 25% growth.
Property investor LXi REIT said it has agreed to buy Secure Income REIT, through a share exchange offer.
The merger will see Secure Income shareholders receive 3.32 new LXi shares. At LXi's closing price of 142.2 pence on Tuesday - the day before the deal was announced - this values Secure Income at GBP1.5 billion.
LXi noted a partial cash alternative will be offered, where Secure Income shareholders can receive 118.88p and 2.488 new LXi shares. The total cash being offered is capped at GBP385 million.
Once the deal is completed, LXi shareholders will own about 53% of the new, enlarged company.
"The boards of LXi and SIR believe there is a strong strategic, operational and financial rationale for the merger, bolstering the existing highly attractive investment case of each business to create a more compelling investment case for the combined group," the pair said in a statement.
The boards of both companies have unanimously recommended the deal.
In Asia on Wednesday, the Japanese Nikkei 225 index ended up 0.2%. In China, the Shanghai Composite was 0.9% higher, while the Hang Seng index in Hong Kong was up 1.3%. The S&P/ASX 200 in Sydney closed up 0.2%.
China's consumer inflation rose at its quickest pace in nearly half a year, official data showed Wednesday, reflecting the growing costs of the country's zero-Covid curbs and high commodity prices.
The damage from Beijing's strict zero-Covid strategy has been increasingly reflected in economic data, as lockdowns in key cities such as Shanghai have snarled supply chains and pushed up transportation prices.
April's consumer price index, a key gauge of retail inflation, rose more than expected at 2.1% year-on-year, picking up from the pace of a month before, said the National Bureau of Statistics.
This was due to "factors like the domestic epidemic and continued rise in international commodity prices", the bureau's senior statistician Dong Lijuan said in a statement.
Since April, China's biggest city Shanghai had been almost entirely sealed off.
Brent oil was quoted at USD105.16 a barrel Wednesday morning, higher from USD104.75 late Tuesday. Gold stood at USD1,843.70 an ounce, lower against USD1,846.88.
SPI Asset Management's Stephen Innes said: "Fears of an economic slowdown are bleeding into the oil market, especially with tighter restrictions in Beijing and Shanghai, suggesting the on-the-ground conditions are worsening. Restrictions continue to tighten, flagging domestic demand risks and global supply risks. And this economically painful backdrop likely triggered Saudi Arabia to lower oil prices for its Asian customers over the weekend, which mechanically puts downward pressure on prices worldwide."
China's flagship zero-Covid strategy to defeat the pandemic is unsustainable, the World Health Organization said Tuesday, adding that it had told Beijing so and called for a policy shift.
"When we talk about the zero-Covid strategy, we don't think that it's sustainable, considering the behaviour of the virus now and what we anticipate in the future," WHO chief Tedros Adhanom Ghebreyesus told a press conference.
The pound was quoted at USD1.2340 early Wednesday, higher from USD1.2300 at the London equities close Tuesday. During Tuesday's session, sterling fell to an intraday low of USD1.2295 in afternoon trade, its lowest level since mid-2020.
The euro was priced at USD1.0545, higher against USD1.0533. Against the yen, the dollar was trading at JPY130.24, soft from JPY130.38.
By Paul McGowan; paulmcgowan@alliancenews.com
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ITV (ITV)
Compass Group (CPG)