(Alliance News) - London's FTSE 100 is called to open higher on Tuesday, as traders see the pendulum swinging in the favour of a 50 basis point rate cut by the Federal Reserve on Wednesday.
According to the CME FedWatch Tool, there is a 69% chance the Fed cuts by 50 basis points on Wednesday. There is a 31% chance it cuts by 25 basis points.
A week ago, the odds of a 50 basis point cut stood at 34%.
"The labour market and inflation data haven't exactly screamed for a massive cut, but that hasn't stopped the market from placing its bets. With a 50bp cut looking like a sure thing, disappointment could be on the horizon if the Fed pulls back with a mere 25bp. The first cut is just the appetizer, though—the main course comes with Jay Powell's press conference and the Fed's dot plot, which will likely set the pace for the rest of the year," SPI Asset Management analyst Stephen Innes commented.
"Last week, the idea of a 50bps cut seemed outlandish, with fears that such a move would signal panic about the economy and spook the markets. But this week, that narrative has flipped. Markets are now cheering for the big cut, and after some well-placed media trial balloons, stock markets are soaring on the expectation."
In early UK corporate news, B&Q owner Kingfisher reported a half-year sales decline but a profit rise. It also upped its free cash flow guidance. Flutter struck a EUR2.30 billion deal to buy Playtech's Snaitech arm, strengthening the Paddy Power's owner foothold in Italy.
Components maker Essentra cut annual guidance, while e-commerce firm THG announced it is considering separating its Ingenuinty technology division.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.7% at 8,339.84
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Hang Seng: up 1.4% at 17,658.62
Nikkei 225: down 1.0% at 36,203.22
S&P/ASX 200: up 0.2% at 8,140.90
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DJIA: closed up 228.30 points, 0.6%, at 41,622.08
S&P 500: closed up 0.1% at 5,633.09
Nasdaq Composite: closed down 0.5% at 17,592.13
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EUR: higher at USD1.1132 (USD1.1119)
GBP: higher at USD1.3211 (USD1.3195)
USD: lower at JPY140.57 (JPY140.75)
GOLD: higher at USD2,585.33 per ounce (USD2,579.31)
(Brent): higher at USD73.11 a barrel (USD72.49)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
China Mid-Autumn Festival. Financial markets in Shanghai closed, Hong Kong open.
10:00 BST eurozone ZEW economic sentiment survey
10:00 BST Germany ZEW economic sentiment survey
13:30 BST US retail sales
14:15 BST US industrial production
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The UK's oil and gas industry has been credited with "significant progress" towards its emissions reduction targets, as figures show its greenhouse gas emissions have fallen by 28% since 2018. According to a report by industry body Offshore Energies UK, the decrease means the sector has achieved its 2027 emissions target, of a 25% reduction in emissions from the production of oil and gas, four years ahead of schedule. The report also showed the sector's methane emissions plunged by 53% over the same period, achieving its 2030 target of halving methane emissions from oil and gas production seven years early. Under the North Sea Transition Deal, the UK's oil and gas industry is committed to reductions in emissions against a 2018 baseline of 10% by 2025, 25% by 2027, and 50% by 2030, with the aim of achieving net zero by 2050. These targets relate specifically to "upstream" emissions from oil and gas production, and not to emissions generated by the burning of fossil fuels once they have entered use. Mark Wilson, HSE & operations director at OEUK, said: "We are pleased by the huge efforts made by the UK oil & gas industry and the supply chain to reduce emissions as we scale up new sources of renewable energy. "Oil and gas will remain essential for decades to come. It is better from all points of view: financial, environmental and social, that energy comes from our own, homegrown North Sea supplies."
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Britain is the "sick man of Europe" when it comes to health, according to a new report which highlights serious concerns about a rise in the number of people off work due to long-term illness. Health challenges facing the nation have reached "historic proportions", according to the Institute for Public Policy Research. Researchers point to a stark rise in people who are missing from the workplace due to long-term illness since 2020. They examined absence trends pre-2020 and compared them to the number off work due to long-term sickness at the start of 2024. They found that 900,000 more workers were off work due to long-term sickness compared to what would have expected to have occurred had pre-2020 trends continued. And this figure may grow significantly higher, they warned. "While it is hard to predict whether increases in economic inactivity due to sickness will plateau or continue to grow in coming years, should the rate of growth continue at the same pace it has since 2020, we would expect economic inactivity due to sickness to reach 4.3 million by the end of the next parliament," the researchers said.
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BROKER RATING CHANGES
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RBC cuts Compass to 'sector perform' (outperform) - price target 2,400 pence
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JPMorgan raises Auction Technology to 'overweight' (neutral) - price target 530 (543) pence
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COMPANIES - FTSE 100
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DIY products retailer Kingfisher reported a first-half sales decline, though profit rose, and the company believes it is better-positioned after "significant structural cost" cuts. Sales in the six months to July 31 declined 1.8% on-year to GBP6.76 billion from GBP6.88 billion. Sales missed the Vuma consensus of GBP6.81 billion. Pretax profit increased 2.3% to GBP324 million from GBP317 million a year prior. "Trading overall in the first half was in line with our expectations. This was underpinned by customers continuing to repair, maintain and renovate their existing homes, driving resilient volume trends in our core product categories. As expected, demand for 'big-ticket' categories has remained weak, in line with the broader market, while seasonal category sales trends have improved since early July. Against this backdrop we maintained a strong focus on effectively managing our costs and inventory," Chief Executive Officer Thierry Garnier said. "Our UK & Ireland banners continued to gain market share, supported by strong e-commerce sales and our progress in addressing trade customer needs. Screwfix delivered positive LFL sales and TradePoint achieved strong LFL sales growth of 7.1%, now representing 22% of B&Q's sales. Sales in France were broadly in line with the market, reflecting the soft consumer backdrop." Kingfisher maintained its interim dividend at 3.80 pence per share. So far in the third-quarter, like-for-like sales are down 0.3% on-year. Looking ahead, it predicts adjusted pretax profit for the full-year between GBP510 million and GBP550 million, the bottom-end of the range lifted from GBP490 million. It upped its free cash flow guidance to a GBP410 million to GBP460 million range, from GBP350 million to GBP410 million previously.
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COMPANIES - FTSE 250
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Essentra warned that it expects annual profit to fall short of current market expectations, as market conditions in Europe "softened". The provider of components, with a focus on plastic injection moulded, vinyl dip moulded and metal items, had predicted a "modest improvement in volumes in the second half" of 2024. "However, through August and into September, consistent with the weak [purchasing managers' index] metrics widely reported, market conditions in Europe, (including Turkey) have softened. Whilst the Americas region has reported a slower than anticipated rate of recovery, APAC remains broadly in line with expectations," Essentra warned. "The impact of the market back drop on trading since the half year 2024 results, combined with a consequently more cautious view of the likely timing of further modest improvements in market conditions has led to the board revising its expectations for full year 2024." It now expects adjusted operating profit for 2024 between GBP40 million and GBP42 million, which would be below company-compiled market expectations of GBP48.4 million to GBP49.7 million. In July, it said it expected profit "aligned with market expectations". Essentra added: "Management remain confident in the business model and that the company is well positioned, supported by a right-sized cost base and robust operations, to benefit from high levels of operational leverage when normalised growth returns. The group continues to balance its investment in value creating opportunities across the business alongside cost mitigation activities and driving efficiencies, which has supported strong gross and operating margins. The balance sheet remains robust, and full year leverage guidance remains unchanged."
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Gambling software firm Playtech announced a deal to sell its Snaitech unit to Paddy Power owner Flutter Entertainment for EUR2.30 billion. Bookmaker Flutter said the move is in line with its "strategy to invest in leadership positions in international markets". Playtech had announced talks with Flutter for a deal for the Snaitech Italian betting operation in August. "Following the completion of the transaction, the Playtech group will focus on its technology-led offering in high-growth B2B gambling markets with an accelerated growth plan and an extensive portfolio of strategic ventures," Playtech said. It plans to return between EUR1.70 billion and EUR1.80 billion to shareholders through a special dividend once the deal is sealed. Flutter added: "On completion, Flutter will assume the gold medal position in Italy with a 30% online share when combined with its existing Italian business, which will deliver efficiency benefits in a key market for the group."
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OTHER COMPANIES
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THG reported a decline in half-year revenue but a narrowed loss, as the e-commerce firm revealed it has taken a step towards changing its London listing category, sizing up FTSE UK Index Series inclusion. In addition, it announced it is looking into separating its Ingenuity technology platform, which serves the likes of Frasers Group and Holland & Barrett. "Post a demerger, the group would consist of THG Beauty and THG Nutrition, two globally leading consumer businesses, which are highly profitable, cash generative and capable of paying dividends," THG added. THG said revenue in the first half of 2024 declined 3.6% to GBP934.0 million from GBP969.3 million a year prior. Its pretax loss, however, slimmed to GBP118.1 million from GBP133.0 million. It hailed a "standout performance" at its THG Beauty, though the going was tougher at THG Nutrition, as a weaker yen hurt trading for its MyProtein brand. Japan is Myprotein's second largest market. "Following a two-year project, local manufacturing recently commenced which will steadily scale to reduce exposure to Japanese Yen FX movements," THG added, however. Ingenuity revenue fell 4.4% to GBP305.8 million from GBP320.0 million a year earlier. The firm also noted it has appointed a sponsor to facilitate the transfer of its shares to the equity shares (commercial companies) category of London's Official List. The transfer will allow the firm to be considered for inclusion in the FTSE UK Index Series. This would "improve passive investment flows and liquidity", THG added. "The group is targeting to effect the ESCC transfer for index inclusion no later than March 2025," it explained.
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By Eric Cunha, Alliance News news editor
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