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(Alliance News) - London's FTSE 100 is set to trade higher in morning dealings, before focus on Thursday afternoon turns to an expected interest rate hold by the Bank of England.
Threadneedle Street is expected to maintain bank rate at the 16-year high of 5.25% for the seventh-successive meeting on Thursday. It announces the rate decision at midday. Unlike the upcoming meeting in August, Thursday's decision will not be accompanied by a monetary policy report with economic projections, nor a press conference with Governor Andrew Bailey.
For those hoping for a summer rate cut, August, and not Thursday's June meeting, is likely to be the best bet.
For the first time since July 2021, inflation returned to target, numbers on Wednesday showed.
According to the Office for National Statistics, the rate of yearly consumer price growth faded to 2.0% in May, from 2.3% in April. The reading was in-line with the FXStreet cited consensus.
"Importantly, we anticipate the BOE MPC vote split to remain 7-2 in favour of no rate change with Dave Ramsden and Swati Dhingra voting again for a 25 bp rate cut," Brown Brothers Harriman analysts commented.
In early corporate news, it was deal-making galore. Sainsbury's announced a deal to hand over its core banking operations to NatWest, Tate & Lyle as bolstered its offering with an acquisition, while Energean has sold assets in Egypt, Italy and Croatia. AIM-listed Alpha Financial Markets Consulting has agreed to a takeover.
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 0.2% at 8,221.81
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Hang Seng: down 0.7% at 18,303.83
Nikkei 225: up 0.2% at 38,633.02
S&P/ASX 200: down marginally at 7,769.40
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US financial markets were closed for Juneteenth holiday on Wednesday.
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EUR: down at USD1.0734 (USD1.0745)
GBP: down at USD1.2705 (USD1.2723)
USD: higher at JPY158.17 (JPY157.92)
GOLD: higher at USD2,334.48 per ounce (USD2,325.80)
(Brent): down at USD85.14 a barrel (USD85.77)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
15:00 BST eurozone consumer confidence
12:00 BST UK interest rate decision
13:30 BST US initial jobless claims
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The Conservatives are projected to slump to their "lowest seat tally in the party's almost 200-year history" at the UK general election, according to a pollster. YouGov said its latest study projects Labour to secure 425 seats, the Tories 108, the Liberal Democrats 67, SNP 20, Reform UK five, Plaid Cymru four and the Green Party two. It noted such a scenario would hand Labour leader Keir Starmer a 200-seat majority while it added Reform UK leader Nigel Farage is "likely" to win in Clacton. Several high-profile Conservatives, including Chancellor Jeremy Hunt, would lose out if the projection played out at the ballot box on July 4.
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Eamon Ryan's resignation as Green Party leader will not destabilise the Irish coalition government nor change the timing of the next general election, the taoiseach and tanaiste have said. The environment minister's announcement that he will step down as party has prompted speculation of an early general election. However, Simon Harris, the taoiseach, moved to end the speculation, saying Ryan's decision does not "alter" plans to have the government serve its full term. Ryan made the shock announcement on Tuesday, but will remain in place until his party elects his successor.
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The taoiseach has said achieving a united Ireland remains his political aspiration but insisted his current focus is promoting practical cooperation on the island. Harris was asked on Wednesday about weekend comments from his predecessor Leo Varadkar about unity. Speaking at an Ireland's Future event in Belfast, Varadkar expressed hope the next government in Dublin would actively work towards achieving unification and set it as a "political objective". He said government should also consider using its budget surplus to set up a fund to prepare for the economic challenges of Irish unity.
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Sinn Fein president Mary Lou McDonald has said she has "huge optimism" ahead of the UK general election. She indicated the party is hoping to consolidate its strength at Westminster, where at the last general election in 2019 it returned seven MPs, and to build further. The July 4 vote comes after a challenging election for Sinn Fein in the Republic of Ireland where it had hoped to significantly increase its number of councillors, but came back with just 21 extra seats. It increased its number of MEPs from one to two, but lost its sitting MEP Chris MacManus. Speaking at the party's manifesto launch in west Belfast, McDonald said she feels sure they will "perform very strongly".
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BROKER RATING CHANGES
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Berenberg cuts SSP Group to 'hold' (buy) - price target 180 (280) pence
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UBS cuts Ryanair to 'neutral' (buy) - price target 20 (24) EUR
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COMPANIES - FTSE 100
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DS Smith reported a decline in annual earnings but labelled its showing as "robust" amid tricky market conditions. The packaging firm said revenue in the year to April 30 declined 17% to GBP6.82 billion from GBP8.22 billion. DS Smith's pretax profit declined 24% to GBP503 million from GBP661 million. "We are pleased to have delivered a robust performance, despite the challenging environment, driven by our focus on customers, quality, service and innovation together with the benefit from our self-help productivity initiatives," Chief Executive Officer Miles Roberts said. DS Smith maintained its final dividend at 12 pence per share, giving a full-year payout of 18p, also unmoved on-year. Looking ahead it added: "The positive trends in packaging volumes from the second half of last year have continued into the current financial year and we remain focused on pricing, operational efficiency and tight cost control." DS Smith in April accepted an all-share takeover from International Paper, valuing the FTSE 100 listing at GBP5.8 billion on a fully diluted basis. Shortly after that agreement was struck, Mondi pulled out of the race to acquire DS Smith.
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Sainsbury's agreed a deal to sell its core banking business to lender NatWest Group. The deal includes the grocer's personal loan, credit card and retail deposit portfolios but not its commission income pact, including insurance, ATMs and travel money. Argos Financial Services is also not included in the deal and Sainsbury's said it will update on plans for that division "at a future date". Sainsbury's said it expects its bank arm to return excess capital of at least GBP250 million to the grocer once its phased withdrawal has been completed. Sainsbury's plans to return this sum to shareholders. NatWest said it expects to acquire GBP2.5 billion of gross customer assets. "As part of the transaction, NatWest Group also expects to add around one million customer accounts," the lender added. It also explained Sainsbury's Bank will pay NatWest GBP125 million consideration as part of the transfer. This deal is expected to have a 20 basis point impact on its common equity tier 1 ratio on completion. It will be earnings per share and return on tangible equity accretive from completion. Sainsbury's in January had announced a phased withdrawal from its core banking business. Peer Tesco in February struck a deal to sell the retail banking business of Tesco Bank to Barclays.
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COMPANIES - FTSE 250
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Tate & Lyle announced a deal to acquire nature-based ingredients company CP Kelco for USD1.8 billion, in a move which will create a "leading global speciality food and beverage solutions business". The deal with JM Huber Corp consists of a USD1.15 billion cash portion funded from new and existing debt facilities and cash resources and USD645 million from the issue of 75 million new Tate & Lyle shares. There is a deferred consideration of up to 10 million extra Tate & Lyle shares subject to performance criteria based on the FTSE 250 firm's share price. Consumer and industrial products firm Huber will "become a long-term shareholder" of Tate & Lyle, with a 16% stake on completion. Huber will be entitled to nominate two non-executive directors of Tate & Lyle for as long as it holds at least a 15% stake. In addition, Tate & Lyle announced it will launch a share buyback of up to GBP215 million, returning proceeds from the sale of a 49.7% remaining interest in Primient as previously earmarked.
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Energean said it will sell its portfolio in Egypt, Italy and Croatia to a Carlyle International Energy Partners-controlled entity in a deal worth up to USD945 million. The exploration and production firm said deal proceeds will be enough to repay a USD450 million corporate bond and allow for USD200 million for a special dividend. "This sale enables Energean to rationalise the portfolio and focus on its gas-weighted, gas-development strategy, underpinned by the Karish Field in Israel and recent farm-in to the Anchois field in Morocco. This strategy aims to maximise asset monetisation (through a develop and operate model), free cash flow generation and returns to shareholders," Energean explained. "The transaction also optimises the portfolio by divesting later life assets, removing over 60% of the group's decommissioning liabilities, and improving free cashflow generation in the short to medium-term."
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OTHER COMPANIES
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Alpha Financial Markets Consulting backed a GBP626.0 million takeover by funds managed by Bridgepoint Advisers. The deal values each Alpha Financial share at 505 pence each and the agreement follows the London listing announced Wednesday it would be "minded" to accept a bid of that size should one be made. Alpha FMC Non-Executive Chair Ken Fry said: "Bridgepoint is a highly successful investor, with a proven track record in supporting specialist consulting businesses and high quality management teams. Alpha FMC will benefit from their expertise and support with the next phase of its development and growth, providing both access to capital and continuity for both Alpha FMC's clients and employees."
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By Eric Cunha, Alliance News news editor
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