(Alliance News) - London's FTSE 100 is called to open lower on Friday, eating into its weekly gain, despite a strong day in New York overnight.
"Investors, on second thought, are now applauding Jerome Powell's savvy move—taking out a 50bps 'insurance cut' against a softening labour market. But let's be clear: the rate cut pipeline is far from dry, and some investors are betting that the speed and size of future cuts will be the deciding factor for equity returns in the months ahead," SPI Asset Management analyst Stephen Innes commented.
On Friday, there were two more rate decision, holds by the People's Bank of China and the Bank of Japan, to round off a central banking-heavy week.
The BoJ left interest rates unchanged at 0.25% on Friday. The PBoC left its one-year loan prime rate unchanged at 3.35%. The over-five-year LPR was kept unmoved at 3.85%.
On Wednesday, the Federal Reserve enacted a 50 basis point rate cut, ensuring the mood in equity markets was largely bullish this week. The Bank of England followed with a hold on Thursday. Elsewhere on the globe, Norges Bank left rates unmoved this week, Brazil's central bank hiked and South Africa's cut.
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 0.6% at 8,275.42
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Hang Seng: up 1.1% at 18,217.39
Nikkei 225: up 1.5% at 37,723.91
S&P/ASX 200: up 0.2% at 8,209.50
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DJIA: closed up 522.09 points, 1.3% at 42,025.19
S&P 500: closed up 1.7% at 5,713.64
Nasdaq Composite: closed up 2.5% at 18,013.98
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EUR: higher at USD1.1175 (USD1.1145)
GBP: higher at USD1.3325 (USD1.3268)
USD: lower at JPY142.31 (JPY142.94)
GOLD: higher at USD2,598.52 per ounce (USD2,585.15)
(Brent): lower at USD74.73 a barrel (USD75.05)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
13:00 BST eurozone consumer confidence
16:00 BST eurozone European Central Bank president Christine Lagarde speaks
09:30 BST UK Bank of England Governor Andrew Bailey speaks
09:30 BST UK Bank of England MPC member Catherine Mann speaks
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UK retail sales were higher than expected in August, numbers on Friday showed, while public sector borrowing picked up. According to the Office for National Statistics, UK retail sales volumes rose 1.0% in August from July, beating the FXStreet cited consensus of 0.4%. They had risen 0.7% in July from June. That reading was upwardly revised from 0.5%. "Some supermarkets and clothing retailers reported a boost because of warmer weather and end-of-season sales," the ONS said. "More broadly, sales volumes rose by 1.2% in the three months to August 2024, when compared with the three months to May 2024." Year-on-year, retail sales climbed 2.5% last month, picking up speed from a 1.5% climb in July and beating consensus of 1.4%.
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Consumer confidence has fallen sharply in "not encouraging news" for the UK government as households "nervously" await next month's autumn budget, according to a long-running survey. GfK's Consumer Confidence Index fell seven points in September to minus 20, with significant drops in predictions for personal finances and the general economy over the coming year. Expectations for the general economy over the next 12 months fell by 12 points to minus 27, while the forecast for personal finances is down nine points to minus three. The major purchase index, an indicator of confidence in buying big ticket items, is down 10 points on last month to minus 23, five points higher than a year ago. GfK said: "These three measures are key forward-looking indicators so despite stable inflation and the prospect of further cuts in the base interest rate, this is not encouraging news for the UK's new government." Neil Bellamy, consumer insights director at GfK, said: "Strong consumer confidence matters because it underpins economic growth and is a significant driver of shoppers' willingness to spend. "Following the withdrawal of the winter fuel payments, and clear warnings of further difficult decisions to come on tax, spending and welfare, consumers are nervously awaiting the budget decisions on October 30."
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UK public sector borrowing spiked last month. Coming in at GBP13.73 billion, it was the third highest August borrowing since monthly records began in 1993, the ONS said. Public sector borrowing jumped from the GBP3.10 billion registered in July and the GBP10.47 billion reported in August 2023. The latest figure was the highest August reading since 2021. "Borrowing in the financial year to August 2024 was GBP64.1 billion, GBP300 million more than in the same five-month period a year earlier and the third highest year-to-August borrowing since monthly records began in January 1993," the ONS added. Public sector net debt excluding public sector banks was provisionally estimated at 100% of the UK's gross domestic product as of the end of August, the ONS said. This is up 4.3 percentage points from a year earlier, sitting at "levels last seen in the early 1960s".
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BROKER RATING CHANGES
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Jefferies cuts Burberry to 'underperform' (hold) - price target 490 (800) pence
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Peel Hunt cuts IntegraFin to 'add' (buy) - price target 400 (385) pence
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COMPANIES - FTSE 100
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Rolls-Royce on Thursday welcomed news that the Czech Republic and the Czech state utility, CEZ Group, has named Rolls-Royce SMR as their preferred supplier for the development and construction of small modular reactors. In a statement on Wednesday, the Czech government said that the project would "help modernise the Czech energy industry and open up new opportunities for the domestic industry". It said it expected local companies to play a significant role as Rolls-Royce was "just forming its supply chain". Rolls-Royce SMR Chief Executive, Chris Cholerton, said he welcomed the news. "This decision, to select Rolls-Royce SMR from a list of seven potential SMR technology providers, follows a rigorous evaluation process by CEZ Group. Discussions are ongoing to finalise contract terms and the final agreements are subject to customary regulatory clearances. Details of the agreement will be published at signing."
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COMPANIES - FTSE 250
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Investec said "momentum" picked up as the first half of its financial year has progressed. Updating on the five months to August 31, the financial services company said it saw "low levels of activity" at the start of the period ahead of elections in both the UK and South Africa. "The latter part of this period has seen a more positive economic outlook reflecting increasing certainty on global interest rate cuts," it added. Investec's first-half runs to September 30. It warned of a mixed earnings outcome for the half-year, following the Burstone Group and Rathbones Group deals. It expects earnings per share to slump up to 50% to a range of 35.2 pence and 38.2p, from 69.6p a year before. It blamed Burstone's deconsolidation, and the amortisation of intangible assets associated with the Rathbones combination. In July last year, Burstone acquired asset management businesses from Investec. In another transaction, Rathbones completed an all-share combination with Investec Wealth & Investment, which had been a UK division of Investec, in September last year. Investec owns a 41% stake in Rathbones. But headline EPS is guided to be between 35.3p and 38.2p, compared to 36.9p. That range spans a 1.4% fall to a 3.5% rise. Group adjusted pretax operating profit is seen between GBP450 million and GBP482 million, up from GBP441.4 million.
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Air quality solutions firm Volution Group said it struck a deal to acquire commercial and residential ventilation services provider Fantech for up to GBP144 million. Australasia business Fantech is being acquired from UK-based Elta Group. "Fantech, which includes the Fantech, Ideal Air, NCS Acoustics, Air Design, Major Air, Systemaire and Burra Steel brands, is a leading provider of both commercial and residential ventilation in Australia and commercial ventilation solutions in New Zealand," Volution said. "The acquisition will enhance Volution's market position in the Australasian region through Fantech's highly recognised and market leading brands extending the group's reach into new end market applications with particular emphasis on the commercial sector." Volution will pay GBP112.9 million upfront and GBP30.8 million will be payable 12 months after the completion.
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OTHER COMPANIES
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Pressure Technologies cut its profit outlook due to order placement and project delays. The engineering firm said that while its Precision Machined Components division has "continued to deliver a strong performance through the second half of the year", it still expects group results to be "slightly below previous guidance". Pressure Technologies in June had predicted adjusted earnings before interest, tax, depreciation, and amortisation of no less than GBP1.0 million for the year to September 30. The weaker outlook given on Friday is down to "later than anticipated defence order placement and project delays in Chesterfield Special Cylinders". The firm noted that the sale process for the PMC unit is now at "an advanced stage", with due diligence now complete. It expects the deal to be sealed in the "very near future". Pressure Technologies in June said it had found a preferred buyer for PMC, though at the time, it said it was targeting transaction completion in August. The proceeds from the sale will go towards repaying a term loan facility and funding "strategic investment opportunities at Chesterfield Special Cylinders", it said in June.
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The operator of Plymouth's Sutton Harbour reported a chunkier annual loss though revenue doubled. For the year to March 31, Sutton Harbour Group posted revenue of GBP16.4 million, jumping from GBP8.2 million. Its pretax loss, however, ballooned to GBP4.4 million from GBP2.0 million. Finance costs soared to GBP2.0 million from GBP1.2 million. It also booked GBP855,000 in exceptional costs, the majority coming from arbitration hearing expenses as part of a "dispute" with the UK's Environment Agency. The matter has been "ongoing for a number of years" and is related to worries about the "responsibility for the ongoing maintenance of Sutton Harbour Lock". "The group is confident of its position and will look to recover its costs should the Hearing find in the group's favour. Nonetheless, the costs accumulated to date in relation to the dispute of GBP537,000 have been expensed to the Income statement as an exceptional cost," Sutton Harbour Group said.
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By Eric Cunha, Alliance News news editor
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