(Alliance News) - Stock prices in London are seen opening lower on Friday, after risk sentiment soured overnight in New York and as traders contemplated what interest rate hikes will mean for the previously rampant tech sector.
Meanwhile, Asian equities ended the week on the back foot. The Bank of Japan was the last of a raft of major central banks to announce monetary policy decisions this week.
IG futures indicate the FTSE 100 index is to open 15.6 points, 0.2%, lower at 7,245.01. The blue-chip index closed 89.86 points, 1.3%, higher at 7,260.61 on Thursday. The FTSE has advanced 1.9% so far this week.
In early UK corporate news, speciality chemicals company Johnson Matthey will sell its Health business. Smart Metering Systems has extended a deal with oil major Shell. Building materials firm SIG lifted its outlook. NatWest's exit from the Republic of Ireland has progressed.
The pound was quoted at USD1.3311 early Friday, fading from USD1.3320 late Thursday, but up markedly from a weekly low of USD1.3173.
UK retail sales grew at a faster pace than expected in November, figures on Friday showed, helped by clothing store sales topping pre-virus levels for the first time.
Figures from the Office for National Statistics showed UK retail sales advanced 4.7% yearly in November, beating Trading Economics cited market consensus of a lesser 4.2% rise. Sales had fallen 1.5% by in October.
On a monthly basis, retail sales rose 1.4% in November, following a 1.1% climb in October.
The ONS noted clothing store sales volumes in November topped pre-virus levels by 3.2%.
"British consumers looked to wrap up Christmas early this year, with November's further increase in sales driven in part by fears of product shortages and the risk, as we are now seeing, of a new Covid variant emerging," Lloyds Bank analyst Aled Patchett commented.
"Omicron has fast become the major concern for retailers – particularly those with physical stores in towns and city centres that have seen footfall drop this week as commuting customers have been asked to work from home. With inflation showing little sign of easing and household budgets likely to tighten in the New Year, the sector will need to strike a balance between offering discounts to lure customers and trying to protect already slim margins as the January – or even December – sale season kicks into top gear."
In the US on Thursday, the tech-heavy Nasdaq Composite dropped 2.5%, while the broad-based S&P 500 gave back 0.9%.
The Dow Jones Industrial Average, up for most of the day, showed signs of fatigue, slipping into the red late in play and ending the session down 0.1%.
Asian equities have similarly struggled on Friday. The Nikkei 225 in Tokyo closed down 1.8%. The Shanghai Composite fell 1.2%, and Hang Seng in Hong Kong was down 1.0% in late trade. Faring better, the S&P/ASX 200 in Sydney closed up 0.1%.
The Bank of Japan decided on Friday to scale back its pandemic-related funding measures as the economy is set to recover amid waning supply-side constraints.
The board, governed by Haruhiko Kuroda, decided to end the additional purchases of commercial paper and corporate bonds at the end of March 2022 as scheduled.
From April 2022, the purchases of securities will be of the same amount as prior to the Covid-19 pandemic, so that the amounts outstanding of these assets will decrease gradually to the pre-pandemic levels, namely, about JPY2 trillion, around USD17 billion dollars, for commercial paper and about JPY3 trillion for corporate bonds.
The board decided to maintain the interest rate at -0.1% on current accounts that financial institutions maintain at the central bank.
Elsewhere, Friday's economic calendar has eurozone inflation readings at 1000 GMT.
The euro stood at USD1.1323 early Friday, up from USD1.1310 at the European equities close on Thursday. Against the yen, the dollar was trading at JPY113.61, unchanged from JPY113.60.
On the London Stock Exchange, Johnson Matthey said it has sold a majority stake in its Health unit to Altaris Capital Partners for an enterprise value of GBP325 million. Altaris is a healthcare-focused investment firm.
"Johnson Matthey will retain approximately a 30% equity stake from which it expects to realise significant additional future value," the company explained, adding completion is expected in mid-2022.
Johnson Matthey said the unit operates in "different markets from the rest of the group" and a strategic probe has found it is "not core".
The sale will lead to an accounting loss of GBP200 million, Johnson Matthey added.
NatWest progressed with its planned exit from the Republic of Ireland.
In mid-February, in its annual results, NatWest had outlined plans to exit from the republic, which has already included selling EUR4.2 billion in gross performing commercial lending and associated undrawn exposures of about EUR2.8 billion to AIB Group.
It has now signed a legally-binding agreement with Permanent TSB to offload about EUR7.6 billion of assets. The package of assets is made up of performing non-tracker mortgages, a performing micro-SME loan book, Ulster Bank's Lombard asset finance business and 25 of its branch locations.
A non-binding memorandum of understanding was inked between the parties back in July. Completion is expected to occur between the fourth quarter of next year and early 2023.
As part of the deal, NatWest is to receive a just shy of a 17% non-consolidating equity stake in Permanent TSB.
Ulster Bank now has deals in place for around 58% of its total gross lending portfolio and an estimated 65% of its credit risk-weighted assets, NatWest explained.
Elsewhere, Smart Metering Systems said it has extended an exclusivity agreement with Shell Energy Retail, a unit of the oil major, for the installation of and funding of smart meters until December 2025.
"The extension of the exclusivity agreement is a testament to the strength of our long-term relationship with Shell, underpinned by our well established end-to-end integrated model," SMS Chief Executive Alan Foy said.
SIG said it has continued to trade well, topping expectations so far in the fourth quarter. "This has increased visibility and confidence," the building materials company said.
Annual underlying operating profit is now expected to be "no less" than GBP40 million, ahead of previous expectations.
Brent oil was quoted at USD74.44 a barrel early Friday, down from USD74.90 late Thursday. Gold stood at USD1,808.03 an ounce, up from USD1,796.70.
By Eric Cunha; ericcunha@alliancenews.com
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SIG (SHI)
Smart Metering Systems (SMS)
Johnson Matthey (JMAT)
Natwest (NWG)