LONDON MARKET PRE-OPEN: IG Trading Revenue Surges; ECB Decision Ahead

(Alliance News) - Stock prices in London are set to open lower on Thursday as markets take a breather from the week's rally ahead of a European Central Bank decision later in the day.

In early UK company news, Standard Life Aberdeen sold more shares in HDFC Life Insurance Co in India. IG Group reported a surge in fourth-quarter net trading revenue, while Aston Martin unveiled plans to cut up to 500 jobs as part of a "fundamental reset" of the business.

IG says futures indicate the FTSE 100 index of large-caps to open 22.81 points lower at 6,359.60 on Thursday. The FTSE 100 index closed up 162.27 points, or 2.6%, at 6,382.41 on Wednesday - bringing its week-to-date gain to 5%.

"I do not think you can fault investors for taking some risk off the table ahead of the enormous risk events of the week, today's ECB meeting and Friday's NFP," said Stephen Innes, chief global markets strategist at AxiCorp, referring to the US non-farm payrolls report.

The European Central Bank will release its latest monetary policy decision at 1245 BST on Thursday, followed by a press conference with President Christine Lagarde.

The ECB is widely expected to increase its EUR750 billion pandemic emergency purchase programme by EUR500 billion as it reveals a downbeat set of macroeconomic projections.

"Expanding central bank balance sheets and effective forward guidance has been crucial in supporting equity market gains, optimism over the EU recovery fund proposal has also helped. The consensus expectation is for a EUR500 billion expansion of the PEPP today. A failure to increase asset purchases is unlikely but would stem the rally in EURUSD in the near term and cap recent gains stocks," Innes said.

The euro traded at USD1.1206 ahead of the meeting, down against USD1.1223 late Wednesday.

Germany's governing parties have agreed to a stimulus package worth EUR130 billion to help the country's economy recover from the coronavirus pandemic, Chancellor Angela Merkel said late Wednesday after two days of marathon talks.

The raft of measures include billions in aid for struggling industries; additional funding for municipalities as they deal with growing unemployment and lost tax revenue; and a one-time EUR300 per child bonus, to be paid out along with other child benefits.

Merkel said drastic spending was needed in order to "to give the next generations a future".

The total value agreed to in the 21 hours of talks exceeded expectations. Previous reporting said the parties were looking at measures totalling around EUR80 billion.

In the US on Wednesday, Wall Street ended in the green, with the Dow Jones Industrial Average up 2.1%, the S&P 500 up 1.4% and Nasdaq Composite up 0.8%.

In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.3%. In China, the Shanghai Composite is down 0.1%, while the Hang Seng index in Hong Kong is also down 0.1%.  

Against the yen, the dollar was quoted at JPY109.09, firm versus JPY108.95 on Wednesday.

Gold was priced at USD1,700.97 an ounce early Thursday, higher than USD1,697.55 on Wednesday. Brent oil was trading at USD39.30 a barrel, soft on USD39.52 late Wednesday.

In early UK company news, Standard Life Aberdeen said it has further sold down its stake in HDFC Life Insurance Co.

The sale of 40.0 million shares, representing just under a 2% stake, was conducted via subsidiary Standard Life (Mauritius Holdings) 2006 and sold at an average price of INR496.40, which will result in Standard Life Aberdeen receiving GBP207 million from the sale.

SLMH06's remaining shareholding in HDFC Life is 10.27%, which is worth GBP1.1 billion.

"It is also noted that a shareholding above 10% continues to provide SLMH06 with the right to nominate one director to the board of HDFC Life and 8.89% of SLMH06's remaining shareholding in HDFC Life is locked in until end March 2021," Standard Life said.

Water firm Pennon lifted its dividend, "pleased" with its performance in the recently ended financial year.

Revenue edged up 0.6% to GBP636.7 million for the year to March 31 from GBP632.6 million the year before, but pretax profit declined 4.1% to GBP193.1 million from GBP201.4 million.

Lower earnings reflected the mix of margin on retail and wholesale revenue, with South West Water's wholesale margin reducing as a result of lower customer consumption. In addition, the utility recorded increased depreciation on asset growth and higher absolute interest.

For the continuing group and waste business Viridor, which Pennon agreed to sell in March, profit was up 16% to GBP301.5 million.

Pennon raised its dividend by 6.6% to 43.77 pence.

"We are pleased with the solid operational and financial performance delivered this year. Viridor has continued to drive growth while South West Water has maintained its sector leading returns," said Chief Executive Chris Loughlin.

Online trading firm IG said it continued to see high levels of client activity in the final quarter of its financial year.

IG released a trading update in April which noted that quarter to date net trading revenue was estimated to be around GBP173 million.

Financial market volatility has remained elevated, and high levels of client trading activity has continued, it said, with net trading revenue for the fourth quarter to May 31 now estimated to be GBP259 million - more than double to GBP117.9 million achieved a year ago.

Full-year net trading revenue is expected at GBP649 million, sharply higher than GBP476.9 million the year before.

"As previously announced, the group has successfully implemented its comprehensive business continuity plan in response to the Covid-19 virus. The group's ongoing investment in communications and infrastructure has enabled all employees to work safely from home, and IG will continue to invest in technology in order to provide the best possible service for our clients," said IG.

Aston Martin said it plans to cut up to 500 jobs as part of a "fundamental reset" of the business.

The luxury car maker said it is planning a reduction in front-engined sports car production to rebalance supply to demand, but noted that its first sports utility vehicle, the DBX, remains on track for deliveries in the summer and has a strong order book.

Aston Martin will launch a consultation process of proposals to reduce the workforce by up to 500, reflecting lower than originally planned production volumes and improved productivity across the business.

"Aston Martin continues to take decisive action in other areas to reduce cost and remove non-critical expenditure from the business at every level including in areas such as contractor numbers, site footprint, marketing and travel," the company said.

Its restructuring is expected to deliver, on an annualised basis, operating costs savings of GBP10 million and reduced directed manufacturing costs in line with volumes of around GBP8 million. Capital expenditure is expected to be reduced by GBP10 million.

The associated cash restructuring costs are expected to be GBP12 million in 2020.

Central and eastern Europe-focused airline Wizz Air reported a slump in passenger numbers for May amid Covid-19 travel restrictions.

Passenger numbers collapsed 96% to 126,549 in May against 3.5 million carried a year ago. Capacity was cut by 94% to 207,025 passengers, but load factor still fell by 32.8 percentage points to 61.1% from 93.9%.

Fevertree Drinks said Covid-19 is hitting its on-trade segment, but its performance across off-trade is "very encouraging".

On-trade sales typically represent half of UK revenue, the premium tonic water maker said, and have been "severely impacted" by the lockdown.

However, off-trade performance has been strong. Sales in the first full month of lockdown were up 24% year-on-year and positive momentum has been seen since, reflecting increased consumption at home.

US off-trade sales have grown "extremely strongly".

"As highlighted at the group's preliminary results in April, Covid-19 will have a material impact on FY20 trading, with headwinds on gross margin due to changes in channel and territory mix. However, we remain committed to continuing to invest through this period of uncertainty as opportunities arise, particularly in marketing, enabled by the group's strong balance sheet and conviction in our ability to deliver long-term sustainable growth," Fevertree said.

Sterling was quoted at USD1.2538 early Thursday, lower than USD1.2604 at the London equities close on Wednesday.

UK Prime Minister Boris Johnson braced the nation dealing with a coronavirus death toll of more than 50,000 for "many job losses" as further details of the economic impact of the pandemic were set to emerge.

He said the government would take an "interventionist" approach to support the economy as it emerges from the lockdown.

On Thursday, the Commons business committee will hear more on the impact of coronavirus on businesses and workers, while the Bank of England will publish a list of companies which receive funding through its Covid Corporate Financing Facility lending scheme.

Meanwhile, ministers are likely to face further questions over their decision to end virtual voting in the Commons after Business Secretary Alok Sharma, who appeared visibly ill while in the chamber on Wednesday, was tested for Covid-19.

In the economic calendar on Thursday, there are eurozone retail sales at 1000 BST. US initial jobless claims are at 1330 BST with the trade balance due at the same time.

By Lucy Heming; lucyheming@alliancenews.com

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