(Alliance News) - Stock prices in London are seen opening higher on Tuesday boosted by a surprisingly strong manufacturing purchasing managers' index reading from China.
In company news, engineer Smiths Group opted not to pay an interim dividend and delayed the separation of its Smiths Medical unit in light of uncertainty caused by Covid-19. Water company Severn Trent said it is on track to deliver a full-year trading performance in-line with previous guidance.
IG futures indicate the FTSE 100 index is to open up 22.16 points at 5,585.90. The blue-chip index closed up 53.41 points, or 1.0%, at 5,563.74 Monday.
In a trading update, Smiths Group said it has withdrawn financial guidance due to the coronavirus outbreak as it is too early to quantify the effects it will have on the business. However, the company said it was not "practicable to complete" the separation of Smiths Medical in current circumstances and has delayed the separation.
"Smiths and Smiths Medical need to focus on navigating the external challenges - including the delivery of ventilators and other critical care devices. Therefore, the board has decided to delay separation until conditions improve. The intent to separate remains unchanged," Smiths said.
The company previously had said the separation of the Smiths Medical arm was on track to be delivered by the end of the first half of 2020.
For the half year to January 31, Smiths said continuing operations delivered underlying revenue growth of 3%. Reported revenue increased 8%, including the acquisition of fluid management business United Flexible.
The company said trading to the end of March was affected to "some extent" by early Covid-19 disruption, which is now accelerating. In the first half, only the Chinese operations of John Crane and Interconnect were disrupted. Orders that were due to ship in January slipped into the second half. All its sites in China have now reopened and are operating at close to normal levels, the company noted.
In light of the uncertainty created by the pandemic, the company said it was prudent not to propose paying an interim dividend.
Looking beyond the Covid-19 outbreak, Smiths said it is well placed to deliver consistent outperformance and is well-positioned in long term, attractive growth markets.
Water works Severn Trent said there has been no material change to current year business performance since the trading update in January. Its financial year ends on March 31.
The utility said it has a robust financial liquidity position extending out to early 2022 to manage through current uncertainty and remains on track to deliver at least GBP25 million of net customer outcome delivery incentive outperformance payments for financial 2020, as previously guided.
"There has been no material change to current year business performance since the trading update announced on January 28, and we continue to expect the group will deliver full-year trading performance in-line with previous guidance," Severn Trent said.
The Japanese Nikkei 225 index closed down 0.2%. In China, the Shanghai Composite is up 0.2%, while the Hang Seng index in Hong Kong is up 0.9%.
China's manufacturing PMI, a key gauge of factory activity, jumped to 52.0 from a record low 35.7 the month before and beating market expectations of 44.8, according to a Bloomberg survey. Anything above 50 is considered growth.
The National Bureau of Statistics said the number "reflects that over half of surveyed companies had improvements in their resumption of work and production from the month before". But it stressed "it does not represent that our country's economic operations have returned to normal levels".
China's non-manufacturing PMI came in at 52.3, also in positive territory and also well above analyst predictions.
In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 3.2%, S&P 500 up 3.4%, and Nasdaq Composite up 2.6%.
The pound was quoted at USD1.2351 early Tuesday, down from USD1.2404 at the London equities close on Monday.
In economic news, the UK's annual economic growth was confirmed at 1.1% in the fourth quarter of 2019, unchanged from the previous reading. The figure was in line with market expectations.
Consumer confidence in the UK weakened at the start of March, even prior to the full impact of the Covid-19 health crisis, research firm GfK said Tuesday.
The firm's overall consumer confidence barometer declined by two points to negative 9 from negative 7 in February. This still was better than the score of negative 13 recorded in March 2019, which was just ahead of the first expected Brexit date.
However, the survey on which the recent index is based was carried out in the first two weeks of March, before UK Prime Minister Boris Johnson imposed restrictions on movement in the country to slow the spread of the new coronavirus.
Against the yen, the dollar was trading at JPY108.28 Tuesday morning, up from JPY107.93 late Monday. The euro was quoted at USD1.1012, lower from USD1.1042.
Brent oil was quoted at USD23.04 a barrel, up from USD22.09. The North Sea benchmark fell to USD21.65 overnight - its lowest level in 18 years.
Gold was quoted at USD1,614.75 an ounce, soft from USD1,619.47.
The economic events calendar on Tuesday has Germany unemployment figures at 0855 BST and eurozone inflation readings at 1000 BST. Kantar's UK grocery market share figures are due at 0800 BST on Tuesday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Smiths Group (SMIN)
Severn Trent (SVT)