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LONDON MARKET PRE-OPEN: UK state to sell up to 15% stake in NatWest

Thu, 22nd Jul 2021 07:53

(Alliance News) - The FTSE 100 is poised to open above the 7,000 mark on Thursday as the week's rebound continues, with markets more optimistic over the global economic outlook despite rising coronavirus cases.

In early UK company news, the UK government has entered a trading plan to sell off up to a 15% stake in lender NatWest. Unilever warned of cost pressure. Morgan Sindall raised its outlook, and Hiscox promoted its chief financial officer to chief executive.

IG says futures indicate the index of London large-caps stocks to open up 18.62 points, or 0.3%, at 7,016.90 on Thursday. The FTSE 100 closed up 117.15 points, or 1.7%, at 6,998.28 on Wednesday.

London's blue-chip index slumped 2.3% at the start of the week as worries mounted over a resurgence in coronavirus cases across the globe, driven by the more infectious Delta variant.

However, the mood brightened as the week progressed and now the FTSE 100 is in touching distance of returning to the level at which it closed on Friday, being 7,008 points.

"Concern that rising Delta infections might slow down the economic rebound appear to have been put to one side for now, after a day of positive trading updates that showed companies might be able to meet full-year expectations on revenues and profits after all," said Michael Hewson, chief market analyst at CMC Markets.

"Today's European open looks as if it could well be a positive one ahead of today's European Central Bank rate meeting, which given recent comments from ECB President Christine Lagarde, could prove much more insight into ECB policy over the next 18 months than had originally been thought two weeks ago."

The European Central Bank interest rate decision is at 1245 BST, followed by a press conference with President Christine Lagarde at 1330 BST.

The meeting, initially regarded as likely to be uneventful by analysts, is now being closely watched following the results of the ECB's strategy review a fortnight ago.

The headline change from the review was the ECB's decision to adopt a new symmetric 2% inflation target, which allows more room for inflation overshoots than the previous target of 'below, but close' to 2% did.

The euro traded at USD1.1799 early Thursday ahead of the ECB announcement, flat against USD1.1800 late Wednesday.

Elsewhere, the dollar was on the back foot. Sterling was quoted at USD1.3729 early Thursday, up from USD1.3684 at the London equities close on Wednesday. Against the yen, the dollar fell to JPY110.11 versus JPY110.25.

Gold was quoted at USD1,801.17 an ounce early Thursday, lower than USD1,805.13 on Wednesday. Brent oil was trading at USD72.14 a barrel, up against USD71.86 late Wednesday.

In the US on Wednesday, Wall Street ended in the green, with the Dow Jones Industrial Average up 0.8%, the S&P 500 up 0.8%, and the Nasdaq Composite up 0.9%.

In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong jumped 1.7%. The S&P/ASX 200 in Sydney rose 1.1%. Financial markets in Japan are shut for the Marine Day holiday.

In early UK company news, the UK government said it plans to sell a part of its stake in NatWest in a trading plan managed by Morgan Stanley.

The UK Treasury currently owns 6.34 billion shares in NatWest, representing a 54.7% stake.

While the trading plan has been entered into on Thursday, the earliest that the sales will commence is August 12. The plan will run no later than August 11, 2022.

"HMT has instructed Morgan Stanley that (a) its intention is that up to, but no more than, 15% of the aggregate total trading volume in the company will be sold over the scheduled duration of the trading plan, and (b) shares may not be sold under the trading plan below a price per share that UKGI and HMT determine represents fair value and delivers value for money for the taxpayer," the government said.

NatWest has a GBP23 billion market cap, so a 15% stake would be worth about GBP3.5 billion. It would lower the government's holding to below 40%.

Consumer goods firm Unilever reported interim sales growth, though noted input cost inflation.

Revenue for the first half of 2021 rose 0.3% to EUR25.79 billion, while pretax profit dipped 3.6% to EUR4.37 billion.

Underlying sales growth for the half-year was 5.4%, driven by volumes, though the company noted price growth stepped up in the second quarter. Unilever's underlying operating margin slipped 100 basis points to 18.8% due to investment into its brands and input cost inflation.

"Competitive growth is our priority, and we are confident that we will deliver underlying sales growth in 2021 well within our multi-year framework of 3-5%, despite more challenging comparators in the second half," said Chief Executive Alan Jope.

"We have seen further cost inflation emerge through the second quarter," Jope said. "Cost volatility and the timing of landing price actions create a higher than normal range of likely year end margin outcomes. We are managing this dynamically and expect to maintain underlying operating margin for 2021 around flat."

The firm added that the operational separation of the tea business is "substantially complete" and due to conclude in October. It is focused on the next phase for the business, which would include an initial public offering, sale or partnership.

Unilever declared a quarterly dividend of EUR0.4268 per share, in line with what was declared for the first quarter.

Morgan Sindall said it expects full-year results significantly ahead of prior expectations following a strong first half performance.

The construction and property regeneration group said all divisions have performance well and its results for the first half of 2021 are expected to show pretax profit around GBP53 million, reflecting growth of more than three-fold on a year ago and up 46% on 2019's pre-pandemic levels.

The Construction & Infrastructure division's margin and profit growth was growth in the half, while Fit Out continued its "high level" of performance.

"As a result, the group now anticipates that its full year results for 2021 will be significantly ahead of its previous expectations," said Morgan Sindall.

Centrica said its first half performance was broadly as expected as it swung to profit.

Revenue for the first half of 2021 rose 9.3% to GBP6.92 billion from GBP6.33 billion a year ago, and the British Gas parent turned to a pretax profit of GBP907 million from a loss of GBP462 million.

"A pre-tax exceptional profit of GBP373m was recognised in continuing operations in H1 2021, largely relating to write backs of exploration and production assets due to the increase in near term liquid commodity prices," the firm noted.

Adjusted operating profit was flat, meanwhile, at GBP262 million versus GBP264 million.

Centrica proposed no interim dividend, in line with a year ago.

"Although there is still a lot to achieve, our turnaround remains on track, our balance sheet has been significantly strengthened and the recent changes in colleague terms and conditions will enable us to better serve the needs of our customers," said Chief Executive Chris O'Shea.

Insurer Hiscox said it will promote Chief Financial Officer Aki Hussain to chief executive from January next year, taking over from current boss Bronek Masojada.

After 21 years as CEO, Masojada will retire at the end of the year. Hussain, who joined Hiscox in 2016, has been selected as his successor.

"The business is on a very strong footing with market conditions the best we have experienced for many years and the time is right to hand over to new leadership," said CEO Masojada.

Alongside the ECB decision, Thursday's economic calendar has US weekly jobless claims figures at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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