LONDON MARKET PRE-OPEN: UK unemployment rate unexpectedly worsens

(Alliance News) - Stocks in London are set to rebound on Tuesday after a brutal start to the week, though further volatility is likely as central bank meetings in the US and UK loom this week.

"Wherever you look there appears to be a gradual realisation that having underestimated inflation risks for so long, central banks are now looking to play catch-up with a series of aggressive normalisation measures, as the Federal Reserve gets set to start its two-day meeting later today," said Michael Hewson, chief market analyst at CMC Markets.

In the UK, data on Tuesday showed the unemployment rate rising unexpectedly.

The jobless rate rose to 3.8% in the three months to April, up from 3.7% in the same period March. At the same time, average earnings excluding bonuses rose 4.2% from a year before, in line with the reading for March and ahead of FXStreet-cited consensus of 4%. Including bonuses, wages grew 6.8% annually, below consensus of 7.6%.

Sterling was quoted at USD1.2176 early Tuesday, rising against USD1.2150 at the London equities close on Monday.

IG says futures indicate the FTSE 100 index of large-caps to open up 51.09 points, or 0.7%, at 7,248.70 on Tuesday. The FTSE 100 closed down 111.71 points, or 1.5%, at 7,205.81 on Monday.

The expected rebound in Europe on Tuesday comes despite a tumble in New York, as worries mount over a possible 75 basis point hike by the US Federal Reserve this week.

The Fed unveils its latest interest rate decision on Wednesday. Expectations for the meeting are being raised rapidly, with the likelihood of a 75 basis point hike now priced in by 95% of market participants, according to the CME's FedWatch tool, up from just 23% a day ago.

It was a rough session on Wall Street on Monday, with the benchmark of the tech-heavy Nasdaq diving nearly 5%. The Dow Jones Industrial Average ended down 2.8%, the S&P 500 down 3.9% and the Nasdaq Composite down 4.7%.

In early UK company news, equipment rental firm Ashtead posted a jump in annual profit and was upbeat on its outlook despite inflation and supply chain issues.

Revenue for the financial year to April 30 rose 19% to USD7.96 billion from USD6.64 billion the year before. Pretax profit jumped 35% to USD1.67 billion from USD1.24 billion.

Adjusted pretax profit of USD1.82 billion, up 38% on the year before, was in-line with analyst consensus of USD1.81 billion.

Ashtead proposed a final dividend of 67.5 cents, taking the total payout for the year to 80.0 cents, up 38% from 58.0 cents the year prior.

"The new financial year has started well, and the business has clear momentum. We are well positioned to navigate the challenges and capitalise on the opportunities arising from the market circumstances we face, including supply chain constraints, inflation, labour scarcity and economic uncertainty, all factors which we believe to be drivers of ongoing structural change," said Ashtead.

There also was some M&A action unveiled early Tuesday.

Entain has agreed to buy BetEnt, trading as BetCity, for up to EUR850 million. Amsterdam-headquartered BetCity is one of the Netherlands's leading online sports betting and gaming operators.

"The newly regulated Netherlands online market is highly attractive and fast-growing across both sports betting and gaming," UK-based Entain said.

ITV unveiled plans to take a majority stake just shy of 80% in Plimsoll Productions, a producer of natural history television programmes, for GBP103.5 million.

"Plimsoll Productions' has a strong network with all of the global streamers, and this acquisition will strengthen and deepen ITV Studios' relationships with the streamers," the broadcaster said, noting Plimsoll has made shows for platforms such as Apple+, Netflix and Disney, as well as for ITV itself.

Housebuilders Crest Nicholson and Bellway painted a strong picture of the sector.

Crest Nicholson upgraded its full-year adjusted pretax profit guidance to a range of GBP135 million to GBP140 million - versus just GBP107.2 million the year before - after a strong interim performance. Half-year revenue increased 12% to GBP364.3 million from GBP324.5 million, reflecting the "underlying strength" of the UK housing market, and adjusted pretax profit jumped to GBP52.5 million from GBP36.1 million.

On a reported basis, Crest swung to a pretax loss of GBP52.5 million from a profit of GBP36.3 million a year before, due to a GBP10.5 million exceptional charge which includes its obligations under the UK government's Building Safety Pledge, which addresses the issue of dangerously flammable cladding.

Meanwhile, sector peer Bellway said it has seen strong housing sales demand in the period stretching February 1 to June 5. It reported an average of 253 reservations per week, up 5.9% year-on-year, and added that positive pricing momentum continues to offset inflationary pressures.

"Demand is strong, reservations are ahead of last year, and our order book remains substantial," said Chief Executive Jason Honeyman.

Games Workshop said it expects full-year core revenue to be not less than GBP385 million, which would be up 9.1% on the GBP353 million generated the year before, and pretax profit is set to rise at least 2.6% to GBP155 million from GBP151 million.

discoverIE posted annual profit growth and said it expects inflationary pressures to be "manageable" in the year ahead.

Revenue for the financial year ended March 31 rose 25% to GBP379.2 million from GBP302.8 million the year before, and pretax profit improved 27% to GBP17.1 million from GBP13.5 million.

The FTSE 250-listed maker of customised electronics, for sectors such as renewables and transport, declared a full-year dividend of 10.8p, up 6% on the year prior.

"The new financial year has started well, with continued strong growth in organic sales, and the order book at record high levels. While supply chain headwinds and inflationary pressures remain, they are expected to be manageable," the company said.

In Asia on Tuesday, the Japanese Nikkei 225 index closed down 1.3%. In China, the Shanghai Composite was up 0.4%, while the Hang Seng index in Hong Kong was up 0.3%. The S&P/ASX 200 in Syndey closed down 3.6% after reopening from a public holiday in Australia on Monday.

The euro traded at USD1.0438 early Tuesday, firm versus USD1.0425 late Monday. Against the yen, the dollar rose to JPY134.52 from JPY133.90.

Gold was quoted at USD1,828.50 an ounce early Tuesday, rising from USD1,826.77 on Monday. Brent oil was trading at USD123.27 a barrel, up from USD119.33 late Monday.

The economic events calendar on Tuesday has US producer prices at 1330 BST. In addition, the Fed's two-day monetary policy meeting gets underway.

By Lucy Heming; lucyheming@alliancenews.com

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