(Alliance News) - The FTSE 100 is expected to edge into the red at Tuesday's open, with a strong pound likely to hinder progress for many of its overseas earners.
The pound crossed over the USD25 mark following hawkish comments from the UK's central bank. Data from the Office for National Statistics revealed that UK public sector borrowing continued at record highs in October.
Meanwhile, the dollar was weaker against other major currencies as well, as investors awaited the latest minutes from the US Federal Reserve's meeting earlier this month.
Another key point of focus for the day will be Nvidia's third-quarter results, due after the New York market close. The chipmaker has been the prime beneficiary of the excitement surrounding the AI sector, with its stock more than tripling in value since the beginning of the year.
"Expect volatility in the wake of the earnings announcement of the year's most loved and intriguing company. Options trading implies that we could see a positive or a negative swing of around 8% after the earnings report hits the ground," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 10.2 points, 0.1%, at 7,486.16.
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Hang Seng: marginally higher at 17,782.92
Nikkei 225: closed down 0.1% at 33,354.14
S&P/ASX 200: closed up 0.3% at 7,080.50
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DJIA: closed up 203.76 points, 0.6%, at 35,151.04
S&P 500: closed up 0.7% at 4,547.38
Nasdaq Composite: closed up 1.1% at 14,284.53
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EUR: up at USD1.0959 (USD1.0942)
GBP: up at USD1.2526 (USD1.2497)
USD: down at JPY147.66 (JPY148.32)
GOLD: up at USD1,990.91 per ounce (USD1,974.08)
OIL (Brent): down at USD81.69 a barrel (USD82.78)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
08:30 EST US Chicago Fed national activity index
08:55 EST US Johnson Redbook retail sales index
14:00 EST US Federal Open Market Committee meeting minutes published
16:30 EST US API weekly statistical bulletin
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UK public sector net borrowing, excluding public sector banks, reached GBP14.9 billion. This was 42% higher than the GBP10.5 billion in October 2022. It marks the second-highest level for October since records began in 1993, behind only the October of 2020 during the Covid pandemic. In the UK fiscal year to date, borrowing stands at GBP98.3 billion, which is GBP21.9 billion higher than the same period of the prior year. However, it is GBP16.9 billion less than the Office for Budget Responsibility's March forecast of GBP115.2 billion.
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The governor of the Bank of England has warned it is "much too early" to say that inflation has been beaten, despite figures last week which showed the prime minister's target to halve inflation had been reached. Andrew Bailey, who sits on the body which decides interest rates, said that inflation is still "too high". In a speech, Bailey said that it was both too soon to say that inflation had been beaten and too early to start talking about cutting interest rates. "While the inflation data for October released last week were welcome news, it is much too early to declare victory," he said. "Inflation remains too high and we need to make sure we get it all the way down to the 2% target." Bailey said the Bank's interest rates are currently "restrictive", meaning that they are helping to bring down inflation. "If we maintain this stance for long enough, we will squeeze inflation out of the system. That is what we will do," he said.
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The UK is working with the EU to "fix the specific issue" that means electric cars traded between Britain and the bloc could face 10% tariffs from next year, according to the exports minister. Under the post-Brexit trade deal, electric vehicles need to have 45% EU or UK content from 2023, with a 50%-60% requirement for their battery cells and packs – or face British or EU import tariffs. However, it was warned in September that carmakers in both the UK and EU have not built up their electric vehicle supply chains enough to meet those requirements and concern is rising as the new year looms. Exports minister Malcolm Offord of Garvel said in response to a written question from John Taylor of Warwick that "unforeseen shared external shocks" are to blame.
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BROKER RATING CHANGES
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Berenberg reinitiates Auto Trader Group with 'hold' - price target 715 pence
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Citigroup raises Admiral to 'buy' - price target 2,941 pence
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JPMorgan cuts Softcat to 'underweight' (neutral) - price target 1,150 (1,400) pence
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COMPANIES - FTSE 250
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Telecom Plus reported a half year period of double-digit growth, proclaiming it was "comfortably on track" to double the size of its customer base. In the six months to September 30, the multi-utility supplier, trading as Utility Warehouse, said revenue jumped 57% year-on-year to GBP883.6 million from GBP562.4 million. Pretax profit rose 23% to GBP35.7 million from GBP29.1 million. It raised its interim dividend by 5.9% to 36 pence, and said it expects to spend up to GBP10 million on share buybacks over its second half. "We are now into our 5th consecutive half-year period of delivering comfortable double-digit customer growth, clearly demonstrating the long-term sustainability of our current growth trajectory. We anticipate passing the 1 million customer milestone during the second half of the year, and are confident that we will meet expectations for the full year," the firm said. After 16 years at the company, content that the business is in "better health than ever", its co-Chief Executive Officer Andrew Lindsay said he will step down from his role, leaving Stuart Burnett as sole CEO from next summer.
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UK Commercial Property REIT said its largest shareholder does not approve its possible merger with Picton Property Income, and it has consequently terminated discussions. It had confirmed it was in discussions with Picton earlier this month. Picton on Tuesday noted the announcement, naming Phoenix Life as the shareholder in question, with a holding of around 43% in UK Commercial Property. Picton said it was considering feedback from shareholders it has received since talks of the merger were confirmed, and will make a further announcement in due course.
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OTHER COMPANIES
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Capita said around 900 jobs are at risk of redundancy as it begins to conduct employee consultation programmes. The London-based consulting, transformation and digital services business said it expects the cuts to deliver cost savings of around GBP60 million on an annualised basis from the first quarter of next year, with GBP27 million in exceptional costs to be recognised this year. The job cuts will mostly be "indirect support function and overhead roles", Capita said. "The group continues to trade in line with its expectations, delivering positive operational and financial performance and has won contracts with a total contract value of GBP2.85 billion year to date [from GBP2.59 billion in 2022]," it added.
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AO World raised its annual profit expectations, now expecting pretax profit between GBP28 to GBP33 million for financial 2024, compared to a prior estimate of about GBP28 million. The electrical retailer said revenue in the six months to September fell 12% year-on-year to GBP482 million from GBP546 million, and it swung to a pretax profit of GBP13 million from a GBP12 million loss. It pointed to an improvement in its gross margin thanks to actions such as removing unprofitable sales, introducing delivery fees on all orders, and tightly controlling costs on advertising & marketing.
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By Elizabeth Winter, Alliance News deputy news editor
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