(Alliance News) - Stock prices in London are seen opening marginally higher on Tuesday following a higher close in the US on Monday, amid growing optimism that a trade deal between the US and China will be reached.
In early UK company news, Premier Inn hotel chain owner Whitbread reported a fall in interim profit amid political uncertainty in the UK, and health and household goods maker Reckitt Benckiser cut its full-year sales forecast. However, distribution firm Bunzl said its full-year expectations remain unchanged.
IG futures indicate the FTSE 100 index is to open 2.66 points higher at 7,166.30. The index closed up 13.07 points, or 0.2%, at 7,163.64 on Monday.
Whitbread said it delivered a resilient first-half profit performance, despite challenging market conditions in the UK.
For the six months to August 29, revenue was flat at GBP1.08 billion, while pretax profit was down 7% at GBP219.9 million from GBP236.8 million last year. The figures excluded contributions from the Costa coffee chain in the comparison period, as this has since been sold to the Coca-Cola Co.
Whitbread kept its interim dividend flat at 32.7 pence per share.
At Premier Inn in the UK, total accommodation sales declined by 0.6%, driven by weak regional market conditions.
Whitbread Chief Executive Alison Brittain said: "Market conditions in the UK continue to be challenging with business confidence remaining weak and leisure confidence in decline, coinciding with heightened political and economic uncertainty, which has continued into the third quarter of financial 2020. This has impacted hotel domestic demand, particularly in the regional market, where 80% of Premier Inn hotels are located. There has also been a greater decline in short-lead discretionary bookings, which tend to be at higher price points.
"With this uncertainty, it is difficult to predict how business confidence and business investment will evolve in the second half of FY20 and into FY21 and impact demand for short-stay, domestic travel...Trading conditions in the UK hotel market will continue to be monitored closely."
Reckitt Benckiser said third quarter total sales were up 5.3% to GBP3.29 billion, while like-for-like sales during the period rose 1.6%.
Reckitt said its annual net revenue growth target has been reduced to a range between 0% to 2%, down from its previous target of 2% to 3%. Reckit said this was "reflecting the reduction in retailer inventory levels of seasonal products in the third quarter and the inherent uncertainties of the season and associated stocking".
The Nurofen painkiller maker expects a modest decline in annual adjusted operating margins.
CEO Laxman Narasimhan said: "RB's performance in Q3 was disappointing. We delivered another quarter of consistent growth in Hygiene Home. Our Health business, despite good market growth and stable consumer offtake, delivered a weak net revenue performance. This was primarily due to issues in the US and China. In the US, we saw more cautious retailer seasonal purchasing patterns. In China, Infant Formula & Child Nutrition continues to face challenging market conditions.
"This performance is a reflection of an extended period of significant change and disruption in the company. I am prioritising execution and operational performance as a matter of urgency. I have made it clear within the organisation that any activities that detract focus and attention from improving our operational performance, be paused."
Distribution firm Bunzl said expectations for 2019 remain unchanged, with overall trading consistent with the slowing underlying revenue growth it had guided earlier. The company attributed this to mixed macroeconomic and market conditions across the countries and sectors in which it operates.
Bunzl reported third quarter revenue growth of 4% at actual foreign exchange rates and 0.5% at constant currency.
Bunzl said growth through acquisitions remains an important part of its ongoing strategy, with total committed spend on acquisitions so far this year of GBP100 million. The acquisition pipeline remains active and a number of ongoing discussions are taking place, it added.
In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.2%, S&P 500 up 0.7% and Nasdaq Composite up 0.9%.
US President Donald Trump on Monday said he expects to sign a partial trade pact with China next month following progress in developing the text of a preliminary agreement reached earlier this month.
"Stock markets trade on a positive note on growing expectations that the US and China may finally clinch a partial deal at next month's Asia-Pacific Economic Cooperation meeting in Chile. US President Donald Trump said that China is already buying US farm products, and he wants them to buy more. He also knows how to get China to buy more farm products: by removing the tariffs on their exports," said London Capital Group's Ipek Ozkardeskaya.
In China, the Shanghai Composite index was flat, while the Hang Seng index in Hong Kong was up 0.1%. Markets in Japan are closed for a public holiday.
The pound was quoted at USD1.2985 early Tuesday, flat against USD1.2982 at the London equities close Monday.
UK Prime Minister Boris Johnson is urging MPs to back his Brexit deal as he launches a final bid to force through legislation in time for the UK to leave the EU with an agreement on October 31.
Ministers have insisted they are confident they have the numbers to get the Withdrawal Agreement Bill through the Commons, despite their defeat in Saturday's special sitting.
However they face a fierce parliamentary struggle after announcing plans to fast-track it through the lower House in three days, potentially paving the way for the Lords to consider it over the weekend.
They will need MPs to approve a "programme motion" setting out the timetable for its passage through the Commons, setting up a crunch vote on Tuesday evening.
Failure to get the motion through would open up the prospect that Johnson will be forced to accept another lengthy delay to Britain's departure from the bloc.
The economic calendar on Tuesday has UK public sector net borrowing at 0930 BST and US existing home sales at 1500 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Bunzl (BNZL)
Whitbread (WTB)