(Alliance News) - The FTSE 100 is called to open lower on Tuesday, with nerves creeping into equity markets ahead as a key week for earnings and monetary policy progresses.
Tuesday is the eve of interest rate decisions from the Bank of Japan and Federal Reserve. The Bank of England's decision is on Thursday.
A warning of a GBP22 billion black hole in the UK public finances by new Chancellor Rachel Reeves also did little to inspire investor confidence.
Over in New York, Microsoft reports earnings following the closing bell, after a mixed bag for the tech sector so far.
"Its data center growth will be largely in focus, and may meet and even beat expectations as Big Tech companies continue to spend big on AI tools. But strong results may not spark the same enthusiasm than in the previous quarters if companies like Facebook and Google don't confirm AI's positive impact on their revenues," Swissquote analyst Ipek Ozkardeskaya commented.
In early UK corporate news, both BP and Standard Chartered announced new share buybacks. Diageo's earnings declined in a "challenging" year.
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 0.3% at 8,264.65
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Hang Seng: down 1.5% at 16,987.93
Nikkei 225: up 0.2% at 38,525.95
S&P/ASX 200: down 0.5% at 7,953.20
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DJIA: closed down 49.41 points, 0.1%, at 40,539.93
S&P 500: closed up 0.1% at 5,463.54
Nasdaq Composite: closed up 0.1% at 17,370.20
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EUR: higher at USD1.0823 (USD1.0819)
GBP: higher at USD1.2851 (USD1.2847)
USD: higher at JPY155.01 (JPY153.91)
GOLD: higher at USD2,388.37 per ounce (USD2,377.20)
(Brent): lower at USD78.60 a barrel (USD79.90)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
10:00 BST eurozone GDP
10:00 BST eurozone consumer confidence
09:00 BST Germany GDP
13:00 BST Germany CPI
11:00 BST Ireland CPI
11:00 BST Ireland retail sales
15:00 BST US consumer confidence
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Shop price annual inflation in the UK was steady in July, but uncertainty lies ahead, the latest data from the British Retail Consortium showed. The BRC-NielsenIQ shop price annual inflation remained at 0.2% in July, unchanged from June. This is below the three-month average rate of 0.3%. The annual rise in shop prices remained at its lowest rate since October 2021. Non-food prices remained in deflation, with prices falling 0.9% in July, compared to a 1.0% drop in June. Food price inflation slowed to 2.3% in July, down from 2.5% in June. "Holiday makers could pick up bargain summer wear and summer reads as clothing and footwear prices fell for the seventh consecutive month amidst persistent weak demand, and the prices of books fell. The 2023 declines in global food commodity prices continued to feed through, helping bring down food inflation rates over the first seven months of 2024. However this shows signs of reversing, suggesting renewed pressure on food prices in the future. Sports gatherings for Wimbledon and the Euros benefitted from discounted snacking items such as crisps and soft drinks," said BRC Chief Executive Helen Dickinson. "UK households suffered from high levels of inflation in 2022 and 2023 and can celebrate inflation levels returning to normal over the first half of this year. But, with the outlook for commodity prices remaining uncertain due to the impact of climate change on harvests domestically and globally, as well as rising geopolitical tensions, renewed inflationary pressures could be lurking just over the horizon."
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The UK's economic watchdog has announced a review into how the former government prepared its forecasting for the spring budget, as it raised concerns over the "transparency and credibility" of spending plans. A letter published by the Office for Budget Responsibility followed the chancellor saying she had identified GBP22 billion of overspending this financial year. Rachel Reeves told the House of Commons that she had uncovered a black hole in public finances left by the previous Conservative government. This includes unfunded spending on the asylum system and transport which she said the OBR did not know about. Richard Hughes, chair of the OBR, confirmed that it was only made aware of the extent of pressures on departmental budgets after meeting with the Treasury last week. "The Treasury document also sets out its plans for further managing down these pressures over the remainder of the financial year," he said. "If a significant fraction of these pressures is ultimately accommodated through higher DEL (department expenditure limits) spending in 2024-25, this would constitute one of the largest year-ahead overspends against DEL forecasts outside of the pandemic years."
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BROKER RATING CHANGES
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RBC cuts Howden Joinery to 'sector perform' (outperform) - price target 980 (920) pence
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Deutsche Bank cuts Man Group to 'hold' (buy) - price target 280 (325) pence
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COMPANIES - FTSE 100
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Oil major BP reported a decline in second-quarter revenue and a fall in profit and it announced plans for another USD1.75 billion share buyback. It reported an increase in underlying profit, however, shaking off "lower industry refining margins". BP said its second-quarter total revenue USD48.25 billion, a decline of 2.5% from USD49.48 billion. Pretax profit fell 64% to USD1.25 billion from USD3.49 billion. Profit increased by a key gauge increased, however. Underlying replacement cost profit rose 6.5% to USD2.76 billion. BP's underlying RC profit beat a Reuters cited analyst forecast of USD2.54 billion. Underlying RC profit per share rose 12% to 16.61 cents from 14.77 cents. BP upped its dividend 10% to 8.00 cents per share from 7.27 cents. Looking to the third-quarter, the firm expects weaker Upstream output than what it achieved in the third, but still expects "slightly" stronger production for the whole of 2024 compared to 2023. It added: "BP continues to expect divestment and other proceeds of USD2-3 billion in 2024, weighted towards the second half. Having realized USD18.9 billion of divestment and other proceeds since the second quarter of 2020, bp continues to expect to reach USD25 billion of divestment and other proceeds between the second half of 2020 and 2025. BP expects to buyback USD1.75 billion worth of shares before its third-quarter results and is "committed to announcing USD3.5 billion for the second half of 2024".
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Brewer Diageo said full-year sales and profit fell, as the Guinness maker endured a "challenging year". Sales in the year to June 30 fell 1.3% from USD27.89 billion from USD28.27 billion. Pretax profit fell 3.3% to USD5.46 billion from USD5.64 billion. Diageo upped its payout by 5.0% to 103.48 cents per share from 98.55 cents. "While fiscal 24 was a challenging year for both our industry and Diageo with continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves," CEO Debra Crew said. "Fiscal 24 was impacted by materially weaker performance in [Latin America & Caribbean]. Excluding LAC, organic net sales grew 1.8%, driven by resilient growth in our Africa, Asia Pacific and Europe regions. This offset the decline in North America, which was attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year." In the new financial year, Diageo said the "consumer environment continues to be challenging". "We expect the negative pressure on organic operating margin that we saw in the second half of fiscal 24 to persist into fiscal 25. We will continue to drive productivity and pricing to offset cost inflation and continue to invest in strategic initiatives to drive long-term sustainable organic operating profit growth," it added.
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Standard Chartered upped its outlook, announced a new share buyback and reported earnings growth for the second-quarter. The Asia-focused lender said reported operating income in the second-quarter of the year rose 2.1% to USD4.66 billion from USD4.57 billion a year prior, despite net interest income declining 19%. Non interest income rose 18%. Pretax profit climbed 4.2% to USD1.58 billion from USD1.52 billion a year prior. StanChart upped its interim dividend by 50% to 9 cents per share and it announced a further USD1.5 billion share buyback which starts "imminently". CEO Bill Winters said: "We produced a strong set of results for the first half of the year, demonstrating the value of our franchise as a cross-border corporate and investment bank and a leading wealth manager for affluent clients. We generated double-digit income growth, with positive momentum continuing into the second quarter, and with continued discipline in managing our expenses." The CEO added: "We are announcing our largest ever share buyback of USD1.5 billion. This brings our total shareholder distributions announced since full-year 2023 results to USD2.7 billion." StanChart now expects operating income to rise more than 7% at constant currency in 2024, having previously expected a rise at the top end of a 5%-7% range.
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COMPANIES - FTSE 250
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Baker Greggs raised its dividend and posted stronger revenue for the first-half of the year, though profit edged lower. In the 26 weeks to July 1, revenue expanded 14% to GBP960.6 million from GBP844.0 million. Pretax profit, however, slipped 7.4% to GBP74.1 million from GBP80.0 million. Distribution and selling costs were 14% higher on-year at GBP465.4 million, the sausage roll maker said. Greggs raised its interim dividend 19% to 19.0 pence per share from 16.0p. "Greggs has made good progress in the first half of the year, further broadening our range of on-the-go food and drink whilst making it more accessible to more customers. Our success is founded on the exceptional value that Greggs offers to customers looking for food and drink on-the-go and the fast and friendly service delivered by our colleagues," CEO Roisin Currie said. "Our cost outlook for 2024 remains unchanged and we continue to trade in line with our plan. The board remains confident in the long-term growth strategy, and we are investing to support that growth."
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Aerospace components maker Senior said it has won a five-year deal with Rolls-Royce Holdings. It will supply the FTSE 100 listing with aerofoils for the Pearl engine family. "Senior is proud to be recognised as a High-Performance Supplier to Rolls-Royce, and, with the award of this contract, delighted to have the opportunity to continue to provide our leading levels of quality, manufacturing expertise, and on-time delivery performance," Senior's Aerospace CEO Launie Fleming said.
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OTHER COMPANIES
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Estate agent Foxtons said it "continued to outperform the market" in the first-half of its financial year. Revenue in the six months to June 30 grew 11% to GBP78.5 million from GBP70.9 million a year earlier. Pretax profit shot up 24% to GBP7.5 million from GBP6.1 million. Foxtons raised its interim dividend by 10% to 0.22p per share from 0.20p. CEO Guy Gittins said: "The strong momentum we started the year with has continued, with double-digit revenue and earnings growth and our position as London's largest Lettings and Sales agency reinforced. Despite macro headwinds and the election interruption, we continued to outperform the market, delivering strong Sales revenue growth of 28% and market share growth of 30%. Growth was also delivered in Lettings, with a double-digit increase in new business volumes, further bolstered by the acquisitions we made in 2023."
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By Eric Cunha, Alliance News news editor
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