LONDON MARKET PRE-OPEN: NMC Health Plans Review; Intu's Spanish Sale

(Alliance News) - Stocks in London are set for a lower open on Monday, despite news that China will lower tariffs on some products at the start of next year, as equities pull back from a recent winning streak.

In early UK company news, NMC Health said it will launch an independent review into allegations made by short seller Muddy Waters, intu Properties has agreed to sell a Spanish shopping centre, and Nichols said profit for 2020 could be materially below expectations.

IG says futures indicate the FTSE 100 index of large-caps to open 15.78 points lower at 7,566.70 on Monday. The FTSE 100 index closed up 8.66 points, or 0.1% at 7,582.48 on Friday, marking its eighth consecutive trading day of gains.

"The US-China trade story has been the gift that keeps on giving as last week European equity markets enjoyed a rally – the Stoxx 600 reached an all-time," explained David Madden at CMC Markets.

"The mood on Wall Street was even more bullish as the Dow Jones and the S&P 500 racked up all-time highs," he said. "The trade story has been at the forefront of traders' minds for months and the fact that stage one has been agreed upon has been a major boon to the markets."

In the US on Friday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.3%, the S&P 500 up 0.5% and Nasdaq Composite up 0.4%.

In Asia on Monday, the Japanese Nikkei 225 index ended flat. In China, the Shanghai Composite ended down 1.4%, while the Hang Seng index in Hong Kong is 0.1% lower.  

China will lower import tariffs on food items such as pork, fish, cheese and nuts, as well as pharmaceuticals and a range of chemical products. From July 1 next year, it will also further reduce some tariffs on some technology products, said the ministry in a statement on its website.

The move does not appear to be linked to the US-China trade war. Earlier this month, the two sides announced a mini-agreement to reduce some levies in a bruising trade war, which has dragged on global growth all year.

In early UK company news, NMC Health said it will be commencing an independent, third-pary investigation into claims made by short seller Muddy Waters.

Muddy Waters last week alleged "rot" at NMC, with the UAE-focused healthcare firm believing the claims led to an "unwarranted" share price reaction. The stock is down 50% in the past seven days.

The independent review will be overseen by a committee made up of a majority of independent non-executive directors.

"We are confident that this review, when complete, will be entirely confirmatory of the disclosures provided by the company to date. We will also be progressing relevant legal and regulatory options following the actions taken by third parties to mislead the market and manipulate the share price," said NMC.

The FTSE 100 constituent added that it believes its current share price is "not a fair reflection of the value of the company" which has a "consistent track record of strong growth and cash generation".

Miner Anglo American said it has received the next phase of its operating licence for the Minas-Rio tailings facility in Brazil.

This follows works to raise the dam as part of the Step 3 licence area of the mine.

"This is an important milestone for our Minas-Rio iron ore operation in Brazil towards reaching its full potential...We expect Minas-Rio to produce 23 million tonnes in 2019, with an FOB unit cost of [about] USD24 per tonne," said Seamus French, chief executive of Bulk Commodities.

ViiV Healthcare said Saturday it has received a complete response letter from the US Food & Drug Administration related to its application for cabotegravir and rilpivirine long-acting regimen for treatment of HIV-1 infection in virologically suppressed adults.

The FDA sends a complete response letter if it determines to not approve a new drug application in its current form.

ViiV, a joint venture of GlaxoSmithKline, Pfizerand Shionogi, said the reasons given by the FDA for its rejection relate to chemistry manufacturing and controls, rather than any safety issues. It said it will work with the US regulator to determine next steps for the application.

intu Properties said it has sold the intu Puerto Venecia shopping centre in Spain for EUR475.3 million.

intu Puerto Venecia is a joint venture between intu and the Canada Pension Plan Investment Board, which was formed in 2015.

The transaction is part of the shopping centre owner's strategy of fixing its balance sheet, and the deal will deliver net proceeds of around EUR115 million after repaying asset-level debt, working capital adjustments and tax. intu will use the money to repay debt, with the transaction reducing loan to value by around 1%.

Nichols said it was pleased with its performance in 2019, though expects a hit from sweetened drinks taxes in Saudi Arabia and the UAE in the year ahead.

Sales in 2019 are expected to be 4.0% ahead of the year before, a performance the soft drinks maker said it was "pleased" with given a slowdown in the UK market and a challenging consumer environment. Sales in both the UK and the International businesses are ahead of 2018.

Annual pretax profit is expected in line with market forecasts.

However, Nichols noted that Saudi Arabian and UAE tax authorities have recently implemented an excise tax of 50% to be levied on the retail price of non-carbonated sweetened drinks.

This tax will be applied to all non-carbonated drinks containing both natural and artificial sweeteners, including sales of Vimto products. This means that, unlike the UK soft drinks levy, product reformulation "is not an option".

"Whilst it is difficult to estimate the future effect on sales volumes of the Vimto brand in these regions, at this point in time, we have to assume the increased retail price will have a negative impact from 2020," said Nichols.

In order to mitigate the impact, Nichols said it is currently developing plans in collaboration with its long-term in-market partner which will require increased investment in the Vimto brand to maintain its market position.

While there is a "broad" range of possible outcomes, Nichols said pretax profit in 2020 could be "materially below" current expectations as a result.

Sterling was quoted at USD1.3007 early Monday, lower than USD1.3051 at the London equities close on Friday.

The euro was quoted at USD1.1083 early Monday, flat on USD1.1087 late Friday. Against the yen, the dollar was quoted flat at JPY109.39 versus JPY109.37.

In commodities, gold was quoted at USD1,484.19 early Monday, higher than USD1,478.61 at the London equities close on Friday. Brent oil was trading at USD65.96 early Monday, firm from USD65.80 at the London equities close on Friday.

The economic events calendar on Monday has US durable goods orders at 1330 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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