(Alliance News) - Stocks in London are set to open higher on Thursday, tracking gains in the US overnight as nerves were soothed by a broadly as-expected US inflation reading and a softening of consumer price pressures in China.
In early UK company news, QinetiQ warned its full-year margin will be at the lower end of guidance. Sabre Insurance said full-year profit will be "moderately" below analyst forecasts. Dunelm backed full-year consensus figures after a strong start to its financial year.
IG says futures indicate the FTSE 100 index of large-caps will open up 50.38 points, or 0.7%, at 7,192.20 on Thursday. The FTSE 100 closed up 11.59 points, or 0.2%, at 7,141.82 on Wednesday.
"Due to last night's resilient US performance, markets here in Europe look set to open slightly higher, with the FTSE 100 looking to open at its highest levels in over a month," said Michael Hewson.
Wall Street ended mostly higher on Wednesday, with the Dow Jones Industrial Average closing flat, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.7%
Stocks in New York got a lift after US inflation data on Wednesday held no major surprises, the core measure rising 0.2% month-on-month in September, in line with expectations after a rise of 0.1% in August.
The headline annual inflation rate was 5.4% for September, ticking up slightly ahead of expectations for price growth to be in line with the 5.3% reported for August.
On Thursday, China reported that factory inflation hit its highest level in a quarter of a century on surging commodity costs last month - but consumer price growth eased.
The producer price index, which measures the cost of goods at the factory gate, rose 10.7% year-on-year in September, the National Bureau of Statistics said, marking the biggest jump in its data going back to October 1996. This marked an uptick from 9.5% growth in August.
More reassuringly, consumer price growth was flat month-on-month, undershooting forecasts for a rise of 0.3% and following on from 0.1% growth last month. The annual measure also was lower than expected, rising just 0.7% against forecasts of 0.9%.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite was up 0.1%, while the Hong Kong market was shut for a holiday. The S&P/ASX 200 in Sydney ended up 0.5%.
In early UK company news, ahead of a capital markets day focused on Legal & General Capital, L&G highlighted a goal for the business of generating up to GBP600 million in profit from alternative assets by 2025.
LGC, L&G's primary alternative asset manufacturer, said the event will take a look into the business and outline its goals for the future. Key ambitions include growing its alternative asset portfolio to around GBP5 billion by 2025 and generating returns on the portfolio of around 10% to 12%, with operating profit of GBP500 million to GBP600 million from alternatives by 2025. LGC as a whole is targeting operating profit of GBP600 million to GBP700 million by 2025.
"By investing in and developing high-quality alternative assets, LGC generates attractive risk-adjusted returns for shareholders, structures attractive long-duration investments for LGR and, increasingly, provides compelling alternative investment opportunities for third party investors," said LGC Chief Executive Laura Mason.
QinetiQ reported a solid first quarter, but warned its full-year margin will be at the lower end of guidance.
The defence technology firm said its half-year performance was in line with market consensus forecasts, with "excellent" order intake of GBP700 million, up 25% year-on-year.
For the full-year, QinetiQ expects mid-single-digit organic revenue growth at around 5% but warned its underlying operating profit margin will be at the lower end of its 11% to 12% expected range.
"This expectation includes short-term effects of the customer's mission shifting from Afghanistan and Covid-related delivery and supply chain challenges in the US," the firm said.
QinetiQ also cautioned that it is experiencing supply issues on a "large complex programme", which it didn't name, that could result in the need for a one-off write down. It is working to cap the risk at below GBP15 million.
Homewares retailer Dunelm reported a jump in first quarter sales and backed full-year consensus figures.
Total sales in the first quarter ended September 24 rose 8.3% year-on-year to GBP388.8 million, and this was up 48% on two years ago. Gross margin dipped by around 10 basis points due to sale timing, and it still expects a full-year margin up to 75 basis points lower than the year before.
"We are pleased with our performance in the first quarter, with sales growth across all channels and continued market share gains, especially given the strength of the comparative period last year, which benefited from pent-up demand following the first UK lockdown," said Chief Executive Nick Wilkinson.
While noting supply chain issues, the home furnishings retailer said sales growth in the first quarter was "encouraging" and backed "recently increased" analyst consensus forecasts for its full-year pretax profit outturn. Dunelm placed current consensus at GBP179 million. Pretax profit in financial 2021, which ended June 26, was GBP157.8 million, up from GBP109.1 million in financial 2020.
Motor insurance provider Sabre warned that full-year profit will be "moderately" below analyst forecasts.
It said a recovery in motor insurance pricing during the third quarter has been "slightly slower" than expected as Covid-related restrictions unwind. It has maintained pricing discipline trough extended soft market conditions.
Gross written premium for the nine months to the end of September was GBP126.7 million, down from GBP139.2 million a year ago.
It expects pretax profit for 2021 will be "moderately below" the analyst forecast range of GBP41 million to GBP46 million "but with dividend levels supported by the strength of our capital position". For 2020, Sabre recorded pretax profit of GBP49.1 million, down from GBP56.5 million in 2019.
"Throughout the past quarter, we have seen some further tentative signs that market prices may be starting to correct, however we have not yet seen significant price movements indicative of a market 'turn'," the company said, though it said it is well placed to capitalise on a recovering market in 2022.
Equity market focus now lies on US producer prices and jobless claims figures, due on Thursday at 1330 BST.
The US Federal Reserve will be keeping an eye on the factory price monitor after minutes on Wednesday showed the central bank could begin reducing the pace of its USD120 billion monthly asset purchase programme by as soon as mid-November.
At present, the Fed is currently buying at least USD80 billion in Treasury securities and USD40 billion in mortgage-backed securities. The minutes indicated the Fed probably would start by cutting USD10 billion a month in Treasury securities and USD5 billion a month in MBS.
Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December.
"In their discussion of inflation, participants observed that the inflation rate was elevated, and they expected that it would likely remain so in coming months before moderating," the minutes read, though the US central bank continues to believe price pressures are transitory.
The dollar was largely lower early Thursday, though continued to make gains against the safe haven Japanese yen.
Sterling was quoted at USD1.3681 early Thursday, higher than USD1.3565 at the London equities close on Wednesday. The euro traded at USD1.1596 early Thursday, up on USD1.1575 late Wednesday.
Against the yen, the dollar rose to JPY113.51 versus JPY113.35.
Gold was quoted at USD1,793.13 an ounce, firm on USD1,792.11 on Wednesday. Brent oil was trading at USD83.93 a barrel early Thursday, up from USD83.11 late Wednesday.
By Lucy Heming; lucyheming@alliancenews.com
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Dunelm (DNLM)
Qinetiq (QQ.)
Sabre Insur (SBRE)