LONDON MARKET PRE-OPEN: Lower Call; Schroders Confirms Lloyds Talks

LONDON (Alliance News) - Stocks in London on Monday are set to continue last week's slide, fuelled by concerns that strong US economic data will lead to a quickened pace of interest rate hikes.In early company news, Schroders confirmed it is in talks to work "closely together" with Lloyds Banking on wealth management, insurer Lancashire said it expects to post a negative return on equity for the third quarter following hurricane Florence and other natural disasters, and retailer French Connection is mulling putting itself up for sale. IG says futures indicate the FTSE 100 index of large-caps to open 2.34 points lower at 7,319.10 on Monday. The FTSE 100 index closed down 1.3%, or 96.57 points, at 7,321.44 on Friday."Last week global equity markets experienced a heavy sell-off as US Treasury yields rose sharply. Exceptionally strong US data combined with hawkish comments from the Fed's Jerome Powell led investors to believe that the path of rate hikes could steepen. Fears that higher interest rates will dampen growth kept equities out of favour," said Jasper Lawler, head of research at London Capital Group.While the closely-watched US nonfarm payrolls on Friday disappointed, climbing by 134,000 jobs in September compared to the widely expected 185,000, the previous month's figure was revised significantly higher to show 270,000 jobs added in August compared to the originally reported 201,000.The unemployment rate in September also fell more than expected, to 3.7% compared to expectations of 3.8% and August's 3.9%. Hourly earnings growth was in line with expectations at 2.8%.Following the data on Friday, Wall Street ended lower. The Dow Jones Industrial Average ended down 0.7%, the S&P 500 shed 0.6% and Nasdaq Composite tumbled 1.2%.In early UK company news, FTSE 100 asset manager Schroders confirmed that it is in discussions with Lloyds Banking Group "with a view to working closely together in parts of the wealth sector".Sky News earlier had reported that Lloyds Banking is to inject its GBP13 billion wealth management arm into a new joint venture with Schroders. The deal will see Lloyds owning 50.1% of the new JV, with Schroders owning the rest, Sky said.It will be part of a three-pronged tie-up between the companies, with Schroders taking on a GBP109 billion investment management contract from Lloyds-owned Scottish Widows, according to Sky. The contract is currently held by Standard Life Aberdeen but has been terminated by Lloyds over competition worries.Schroders on Monday said: "Discussions are ongoing and there can be no certainty that these discussions will lead to any formal arrangement being entered into. A further announcement will be made when appropriate."Legal & General said it has completed a GBP2.4 billion buyout for the Nortel Networks UK pension plan. "This transaction brings our total volume for global pension de-risking business to more than GBP8.4 billion for the year to date, a new record for us," said Legal & General Chief Executive Nigel Wilson.Lancashire Holdings said that it expects a significant hit due to its exposure to loss events in its marine portfolio as well as natural disasters such as hurricane Florence and typhoons Jebi, Mangkhut and Trami.A USD30 million net loss is expected from the loss events in the marine portfolio, while the net loss elsewhere from natural catastrophes is expected to be in the range of USD25 million to USD45 million.These estimates are after anticipated recoveries from the outwards reinsurance programme, Lancashire said."Given these loss estimates, the company expects that it will produce a negative return on equity for the third quarter of 2018. absent these events, the company would have been profitable for the third quarter. The company also expects to remain profitable for the first 9 months of 2018," said Lancashire.IP Group said that portfolio company Diurnal Group's Chronocort phase-three study did not meet its primary objective."The stated primary objective of the protocol was to demonstrate superiority of Chronocort to conventional therapy in endocrine control over the 24-hour period: as titration of conventional therapy achieved control as good as titration of Chronocort, the primary objective of the trial was not met," explained IP.IP holds a 43.6% stake in Diurnal.Clothing retailer French Connection, responding to press reports, confirmed it is reviewing "all strategic options" to deliver maximum value for shareholders. This includes the potential sale of the company.There can be no certainty that an offer will be made for the company, French Connection emphasised, nor as to the terms on which any offer will be made. Sports Direct International holds a 26.7% stake in the firm.Newspaper publisher Reach said it remains confident in meeting its annual expectations after third quarter revenue grew 21%, boosted by its acquisition of the Express & Star. On a like-for-like basis, however, revenue fell 7%.Circulation and publishing print advertising revenue fell by 4% and 20% respectively in the period. Publishing digital revenue grew by 7% with display and transactional revenue growing by 12%.In Asia on Monday, the Japanese Nikkei 225 index is closed for the Health & Sports Day holiday. In China, the Shanghai Composite is down 3.2% as it re-opens from a week-long holiday, while the Hang Seng index in Hong Kong is down 0.9%.Overnight, in Chinese data, the private sector logged moderate growth in September as stronger than expected services activity was offset by softer manufacturing growth.The Caixin composite output index rose marginally to 52.1 in September from 52.0 in August, with a score above 50 indicating expansion. At the same time, the services Purchasing Managers' Index picked up to 53.1 from 51.5 a month ago, to signal the strongest increase in activity for three months.However, manufacturing production showed a marginal pace of expansion that was the weakest since October 2017.To come in the economic calendar on Monday is German industrial production for August at 0700 BST and eurozone investor confidence at 0930 BST.Brexit, as ever, will be in focus this week as UK Prime Minister Theresa May faces flashpoints with both Brussels and pro-Leave Conservative part members.Despite key EU leaders sounding more upbeat at the prospects of a deal in recent days, Brussels appears set to reject key aspects of May's Chequers proposals on Wednesday. However, it was reported that the prime minister hopes to break the deadlock over the Irish border issue by keeping the EU's present customs arrangements beyond when the transition period is due to end in December 2020.This comes after optimistic noises from the EU that a deal could be completed within weeks, with Ireland's deputy prime minister Simon Coveney insisting that both sides were 90% there.Time is running out for London and Brussels to strike a deal as EU leaders insist substantive progress must have been made by a leaders' summit on October 17 for the bloc to agree a further Brexit gathering in November.Progress on a deal with Brussels comes as Japanese Prime Minister Shinzo Abe said the UK would be welcomed into the Trans-Pacific Partnership trade pact "with open arms" by Japan. The TPP is an 11-nation trade agreement which includes Japan, Canada, Australia and Mexico.Referring to withdrawal talks between London and Brussels, the Japanese prime minister told the Financial Times: "I hope that both sides can contribute their wisdom and at least avoid a so-called disorderly Brexit."Sterling was quoted at USD1.3093 early Monday, flat from USD1.3096 at the London equities close on Friday.