(Alliance News) - Stock prices in London are seen opening lower on Friday after US Federal Reserve Chair Jerome Powell's response to inflation fears disappointed investors.
In early company news, trading and clearing operator and index calculator London Stock Exchange Group raised its dividend and hailed its acquisition of financial market data and infrastructure provider Refinitiv. Mike Ashley's Frasers Group hit out at UK Chancellor Rishi Sunak's "worthless" support measures for large retailers. Telecommunications testing company Spirent Communications bought in the US.
IG futures indicate the FTSE 100 index is to open 51.68 points lower at 6,599.20. The blue-chip index closed down 24.59 points, or 0.4%, at 6,650.88 on Thursday.
London Stock Exchange Group said it delivered a strong financial performance, saying revenue growth continues across its businesses, despite challenging market conditions
For 2020, LSEG posted total revenue of GBP2.12 billion, up 2.9% from GBP2.06 billion in 2019, and total income rose 6% to GBP2.44 billion from GBP2.31 billion. The figures were in-line with company-compiled consensus forecasts.
LSEG reported pretax profit of GBP685 million in 2020, up 5.2% from GBP651 million in 2019.
The stock exchange operator declared a total dividend of 75.0 pence, up 7.1% from 70.0p paid out in 2019. This also was as expected. Analysts had predicted LSEG to up its payout for 2020 to 75.2p.
LSEG hailed its "transformational" acquisition of Refinitiv saying it will ramp up its growth strategy and position as a leading global financial markets infrastructure and data provider by adding leading data, analytics and multi-asset class capital markets capabilities.
"The group is well positioned for future growth despite an uncertain macro-economic and regulatory environment. The group will also continue to invest in new products and services as well as operational excellence and resiliency. I look forward to working with the executive team to deliver for our customers, shareholders and other stakeholders," said Chief Executive Officer David Schwimmer.
Frasers Group voiced its frustrations at the business rates relief announced in the UK government budget statement on Wednesday.
The House of Fraser and Sports Direct owner said that the retail sector as a whole has "repeatedly asked for structural reform of business rates, none has been forthcoming".
Frasers Group said it and many retailers would have expected "suitable relief" until structural reform is implemented.
In the budget, the existing business rates holiday was extended for three months, until the end of June. Further, until April 2022, rates will be discounted by two thirds, up to a limit of GBP2 million per premises - with a lower cap for businesses that have been able to stay open.
Frasers said "the rates cap on 'businesses' from July 2021 to March 2022, makes it a near worthless support package for large retailers".
"For Frasers Group this cap will make it nearly impossible to take on ex-Debenhams sites with the inherent jobs created. It will also mean we need to review our entire portfolio to ascertain stores that are unviable due to unrealistic business rates," the company said. "Frasers Group believes that retailers should pay the fair amount of rates in line with realistic rateable values, but instead we continue to have an unwieldy, overly complex, and out of date business rates regime."
Spirent Communications said it has acquired US-based automated wireless test solutions provider octoScope for USD55 million on a debt and cash free basis.
Spirent said the deal was part of the targeted investment and M&A plans outlined at its Capital Markets Day in October and strengthens its position in Wi-Fi and 5G test markets.
"This acquisition supports our strategy of sustainable, profitable growth by establishing Spirent as the firm market leader in the expanding Wi-Fi space, adding to our 5G solution portfolio. octoScope brings to us an impressive and well-known customer base, providing us with the opportunity to further leverage our established global routes to market and trusted relationships with our key accounts," said CEO Eric Updyke.
Calls for a lower market open on Friday followed comments from the US Federal Reserve chair.
Wall Street ended firmly in the red on Thursday, with the Dow Jones Industrial Average down 1.1%, S&P 500 down 1.3% and Nasdaq Composite down 2.1%.
Fed Chair Powell on Thursday afternoon reiterated that the Fed would not tighten its policies until its goals of full employment and consistently high inflation had been met, and that was likely to be some time away.
As the US economy recovers, he said "you could see prices moving up" but those increases are likely to be transient. "And this is a difference between a one-time surge in prices and ongoing inflation."
However, while Powell said the Fed was ready to step in when needed, traders were left disappointed that he did not indicate the bank would act on the rise in yields such as increasing its bond purchases.
The yield on benchmark 10-year US Treasuries spiked back above 1.5% at a one-year high after his comments - yields rise as prices fall. Inflation makes bonds less attractive by eroding the value of their income payments.
The dollar strengthened following Powell's comments. The pound was quoted at USD1.3875 early Friday, down sharply from USD1.3989 at the London equities close Thursday.
The euro was priced at USD1.1957, lower from USD1.2047. Against the Japanese yen, the dollar was trading at JPY108.15, up sharply from JPY107.56.
"Activity in FTSE futures hints at a sluggish start in London, yet softer pound and solid energy prices should throw a floor under the British blue-chip sell-off," commented Swiss Quote analyst Ipek Ozkardeskaya.
The Japanese Nikkei 225 index closed down 0.2%. In China, the Shanghai Composite ended flat, while the Hang Seng index in Hong Kong was off 0.1%. The S&P/ASX 200 in Sydney closed down 0.7%.
China's leaders on Friday set a growth target "above 6.0%" for 2021, putting it back above pre-pandemic levels, after the virus was largely brought under control at home thanks to strict lockdowns and mass testing.
The goal comes after the world's number-two economy suffered its slowest rate of expansion in four decades because of the strict containment measures and as the disease wiped out global trade.
"In setting this target, we have taken into account the recovery of economic activity," said Premier Li Keqiang at the opening of the country's annual legislative session, adding that this dovetails with future goals such as "high-quality development", innovation and reform.
Beijing usually sets annual economic growth targets that it regularly exceeds, though it did not set a target last year owing to the outbreak of the virus pandemic.
Gold was trading at USD1,697.15 an ounce early Friday, down from USD1,718.65 at the London equities close Thursday.
The OPEC group of oil producers and its allies decided to allow a slight rise in crude output in April after talks on Thursday, with market demand still fragile.
Brent oil was quoted at USD67.67 a barrel Friday morning, higher from USD67.11 late Thursday.
A statement released after the ministerial-level talks said participants "approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130,000 and 20,000 barrels per day respectively, due to continued seasonal consumption patterns".
The oil exporting countries are largely extending their restrictive production policy for another month until the end of April.
Friday's economic calendar has UK Halifax house price index figures at 0830 GMT and the eagerly awaited US jobs report for February at 1330 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Spirent (SPT)
Frasers Group (FRAS)