(Alliance News) - Stock prices in London are seen opening higher on Wednesday, with a report of a resumption of natural gas flows to Europe through the Nord Stream 1 pipeline supporting equities.
An eye-popping UK inflation print has piled pressure on the Bank of England. Over in New York, Netflix shares surged overnight on well-received quarterly numbers.
IG futures indicate the FTSE 100 index is to open 41.5 points, 0.6%, higher at 7,337.78. The blue-chip index closed up 73.04 points, or 1.0%, at 7,296.28 on Tuesday.
In early UK corporate news, miner Antofagasta has pledged to keep a lid on costs as copper prices weaken. Postal service Royal Mail has announced a name change and mooted a possible separation should its core arm see no "significant change". Automotive marketplace Pendragon cautioned on new car volumes.
Antofagasta said copper output in the second quarter of the year fell 6.5% quarter-on-quarter to 129,800 tonnes. For the half-year, it was 26% lower year-on-year at 268,000 tonnes.
A leak at the Los Pelambres asset in Chile hit output.
Copper output guidance for 2022 has been lowered to between 640,000 and 660,000 tonnes, from the previous range of 660,000 tonnes to 690,000 tonnes.
"This revision mainly reflects the impact of the pipeline incident and the continued uncertainty arising from the water shortage at Los Pelambres. The drought has continued at Los Pelambres during the period, although there has been heavier precipitation in July. The revised guidance range incorporates a low probability negative outlook for water availability for the rest of the year. Strict water management protocols remain in place to optimise water usage and mitigate the impact of low water availability," Antofagasta explained.
It also noted weaker copper prices, which have been on a downward trend since June.
Chief Executive Ivan Arriagada said: "The significant decline in the copper price since the beginning of June has reinforced our commitment to control costs, particularly during this period of higher input prices and general inflation."
Royal Mail said revenue in its core unit during the first quarter ended June was 12% lower year-on-year.
Revenue in the eponymous Royal Mail unit in the UK was hit by "weakening retail trends, lower [Covid-19] test kit volumes and a return to structural decline in letters".
The domestic unit suffered an adjusted operating loss of GBP92 million.
At GLS, the company's Amsterdam-based logistics arm, volumes fell 3% annually, though revenue was up 7.8% in sterling terms, or 9.8% in euros.
There could be wholesale changes afoot at group level. The London listing has announced a name change to International Distributions Services PLC, to reflect the "increased importance" of GLS at group level.
There also could be a separation, should the Royal Mail arm continue to be a laggard.
"The board has always maintained that there should be no cross subsidy in the group and recognises the need to address improvements in Royal Mail's performance quickly. In the event that significant change within Royal Mail is not achieved, the board will consider all options to protect the value and prospects of the group, including separation of the two companies," the company said.
Elsewhere in London, car dealer Pendragon backed annual guidance after "another strong performance" in the first half.
It expects underlying pretax profit of GBP33 million for the half-year ended June 30, down 6.0% from GBP35.1 million a year earlier. Pendragon noted it faced some cost pressures during the half.
Marketing costs amounted to around GBP7 million, and the firm also took a hit from the removal of GBP8.3 million worth of government support.
"The increase in UK Motor gross profits, combined with a strong performance in the leasing business, were offset by an increase in underlying operating costs of approximately GBP20 million," Pendragon explained.
Volumes for new cars were weaker during the period, due to industry supply constraints. New car volumes in the wider market were down 12%.
"As a result, the group's focus has continued to be on maximising the level of margin achieved per unit, and strengthening the already robust order bank. New gross profit per unit is higher year-on-year and more than outperformed the volume shortfalls. Used vehicle volumes were also down year-on-year as supply constraints from lower new car production continued to have a knock-on impact on used car availability. Used gross profit per unit also remained strong; although, as anticipated, this has been lower than the exceptional levels seen in H2 FY21," Pendragon said.
"We are pleased with the strong start to FY22 and remain confident we have the right strategy in place. We are mindful of the challenges to both new and used vehicle supply which are expected to continue for at least the remainder of the current financial year. Softening consumer sentiment also has the potential to impact on demand in the second half. However, we believe our market-leading proposition and mix of business models means we remain resilient in the face of these challenges and we continue to expect to deliver group underlying profit before tax in line with board expectations."
In Tokyo on Wednesday, the Nikkei 225 closed up 2.7%, while the S&P/ASX 200 in Sydney ended 1.7% higher. In China, the Shanghai Composite was up 0.7%, while the Hang Seng in Hong Kong was 1.3% higher.
In New York, Netflix shares climbed 7.9% after hours, following a 5.6% rise on Tuesday.
It reported a rise in second-quarter earnings, hailing the success of smash hit Stranger Things, as the streaming services provider lost fewer subscribers than anticipated.
For the three months to June 30, revenue was USD7.97 billion, up from USD7.34 billion in the second quarter last year.
Second quarter net income was USD1.44 billion, or USD3.20 per diluted share, up from USD1.35 billion, or USD2.97 diluted EPS last year.
The Los Gatos, California-based firm reported 220.7 million paid subscribers as of March end, down from 221.6 million in the first quarter, but up from 209.2 million in the second quarter last year.
Elsewhere, market sentiment has been bolstered by a Reuters report on Tuesday that Russian gas flows via the Nord Stream 1 pipeline are seen restarting on time on Thursday after the completion of scheduled maintenance. Reuters cited two sources familiar with the export plans.
Since last week Monday, Nord Stream 1 has not been delivering gas due to scheduled maintenance work. The work is scheduled to last until Thursday.
Russian President Vladimir Putin, however, threatened a further reduction in gas deliveries to Europe through the Nord Stream 1 pipeline Tuesday night, according to news agency TASS.
Putin said if a gas turbine sent to Canada for repairs is not returned to Russia soon, the daily volume delivered by Nord Stream 1 could drop to as low as 33 million cubic metres by the end of July.
The pound was lower after UK inflation data. Sterling was quoted at USD1.2000 early Wednesday, down from USD1.2030 at the London equities close on Tuesday.
The UK inflation rate raced to 9.4% in June, figures on Wednesday showed, beating market forecasts and hitting a series high.
The annual pace of price increases accelerated from 9.1% in May and also topped FXStreet-cited market consensus of 9.3%.
According to the Office for National Statistics, the June reading was the hottest annual inflation rate in its latest series, which began in 1997. Inflation was last this high in 1982, the ONS added.
A year earlier, the UK inflation rate was 2.5%.
Also on the economic events calendar on Wednesday is the latest UK ONS house price data at 0930 BST.
The euro stood at USD1.0233 early Wednesday UK time, down from USD1.0245 at the European equities close on Tuesday. Against the yen, the dollar was trading at JPY138.28, up from JPY137.77.
Brent oil was quoted at USD105.87 a barrel, up from USD105.85. Gold stood at USD1,706.40 an ounce, down from USD1,714.05.
By Eric Cunha; ericcunha@alliancenews.com
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Antofagasta (ANTO)
