Alliance News) - Stock prices in London are seen opening flat, with investors awaiting a key speech from US Federal Reserve Chair Jerome Powell, as the central bank's Jackson Hole virtual symposium gets underway on Thursday.
In early UK company news, jet engine maker Rolls-Royce reported a widened interim loss and departure of its chief financial officer. Paddy Power owner Flutter Entertainment said it is seeing encouraging signs in the second half as sporting events resume. Retailer and consumer goods firm Hut Group is eyeing a GBP4.5 billion stock market flotation.
IG futures indicate the FTSE 100 index is to open 3.80 points higher at 6,049.40. The blue-chip index closed up 8.59 points, or 0.1%, at 6,045.60 Wednesday.
In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.3%, S&P 500 up 1.0% and Nasdaq Composite up 1.7%. The S&P and Nasdaq Composite ended at fresh record highs for the fifth straight day of trading.
Rolls-Royce Holdings said the coronavirus crisis has significantly affected its 2020 performance, with civil aviation sector with flights grounded across the world.
For the half-year ended June 30, revenue fell 26% to GBP5.82 billion from GBP7.88 billion last year, and the company's pretax loss widened to GBP5.37 billion from GBP3.24 billion on an underlying basis.
The company reported free cash outflow of GBP2.8 billion, "deteriorated" from a GBP429 million outflow last year, "reflecting the reduction in engine flying hour receipts and a substantial working capital related outflow that included a cessation of invoice discounting".
Rolls-Royce said underlying revenue in 2020 is expected to be 25% to 30% lower than the prior year. Beyond 2020, it is targeting a return to positive free cash generation during the second half of 2021 and annual 2021 free cash outflow is expected at significantly reduced levels compared to 2020.
"Uncertainty remains high as a result of Covid-19, particularly around the easing of travel restrictions and the pace of economic recovery. Our recovery assumptions are based on a gradual recovery in civil aviation activity commencing towards the end of H2 2020. Most Power Systems end markets are currently expected to recover by the end of 2021 and revenues are expected to be back to 2019 levels in 2022. Defence performance is expected to remain resilient throughout the period," the company said.
In addition, Rolls-Royce said Chief Financial Officer Stephen Daintith has decided to leave the company "to take up another opportunity". The search for his replacement is underway.
Flutter Entertainment said its first-half financial performance exceeded expectations amid challenges posed by the coronavirus pandemic, which caused sporting events to be cancelled.
For the half-year to June 30, revenue came in at GBP1.52 billion, up 49% from GBP1.02 billion last year, but pretax profit fell 70% to GBP24 million from GBP81 million.
Flutter said that, due to the current disruption caused by Covid-19, the board considers it prudent to suspend the dividend for 2020.
Looking ahead, Flutter said its outlook remains highly uncertain, due to potential further Covid-19 related disruption and possible regulatory change across various markets. However, it said trading in the second half so far has been encouraging, "benefiting from condensed football fixtures, favourable sports results and ongoing resilience of gaming".
Hut Group said it intends to float on the Main Market of the London Stock Exchange, with a free float of at least 20% of the issued share capital and a fixed offer price equating to GBP4.5 billion pre-money equity value.
Hut Group said the offer would be comprised of new shares to be issued by the company raising gross proceeds of GBP920 million.
No date for the initial public offering was given, but Sky News reported Wednesday that the company has eyed September 16 as its first day of trading.
Later Thursday, investors will be looking to Powell who will speak at the online meeting of global central bankers, in which he is expected to outline the Fed's plans for monetary policy.
The central bank has provided crucial support worth trillions of dollars to the world's top economy during the coronavirus crisis, helping stocks bounce back from their March lows.
Analysts believe the Fed chief could change the policy focus to allow inflation to rise above 2.0% for a time, allowing the economy to heat up and unemployment to fall.
"A fairly decent set of US durable goods numbers for July, helped underpin the positive mood, and looks set to see some positive spill over to markets here in Europe, ahead of today's keenly anticipated speech by Fed chair Jay Powell, where there is some speculation that he could well explore or hint at a new policy of AIT, or average inflation targeting," said CMC Markets analyst Michael Hewson.
"This means that central bank policymakers would be prepared to tolerate prices rising above 2.0% for periods of time to compensate for other periods of time when inflation is running below target. He is also likely to ram home the message from his previous press conference that the recovery still largely depends on the virus, and the Fed remains ready to do whatever is necessary to support the economy," Hewson added.
US orders for durable goods jumped in July, buoyed by strong demand for motor vehicles and parts, according to the latest figures from the Department of Commerce on Wednesday. New orders for US manufactured durable goods rose by 11% in July on a monthly basis, accelerating from a 7.7% increase in June. The reading beat market expectations, cited by FXSteet, for a 4.3% rise.
The pound was quoted at USD1.3205 early Thursday, up from USD1.3186 at the London equities close Wednesday.
The euro stood at USD1.1827 Thursday morning, up from USD1.1819 at the European equities close Wednesday. Against the yen, the dollar was trading at JPY106.00, lower from JPY106.16.
In commodities, Brent oil was quoted at USD45.76 a barrel Thursday morning, up from USD45.58 at the London equities close Wednesday. Gold was quoted at USD1,941.27 an ounce, down from USD1,944.17.
The Japanese Nikkei 225 index ended down 0.4% on Thursday. In China, the Shanghai Composite is up 0.4%, while the Hang Seng index in Hong Kong is down 0.9%.
The economic calendar on Thursday has US initial jobless claims at 1330 BST and a GDP reading due at the same time.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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