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(Alliance News) - Stocks in London are set to open higher on Wednesday, continuing their recovery from a start-of-week sell-off that had been set off by surging coronavirus cases across the globe.
In early UK company news, retailer Next boosted profit guidance on strong recent trading as it resumed dividends with a special payout, while publisher Future also lifted its outlook.
IG says futures indicate the FTSE 100 index of large-caps to open up 11.07 points, or 0.2%, at 6,893.40 on Wednesday. The FTSE 100 closed up 36.74 points, or 0.5%, at 6,881.13 on Tuesday.
"After the shock and surprise of Monday's rout, which was prompted by concerns that rising Delta virus cases would prompt a slowdown in the global recovery story, European markets managed a modest rebound," said Michael Hewson, chief market analyst at CMC Markets.
Indonesia, Iran and France were suffering alarming surges in coronavirus cases on Tuesday, as governments raced to vaccinate populations in a bid to outpace the highly contagious Delta variant, first detected in India.
The new cases come as the head of the Olympics admitted Tuesday he suffered "sleepless" nights leading up to the Tokyo Games, due to open Friday and already marred by outbreaks of the virus.
Nonetheless, markets are poised to continue their recovery on Wednesday.
Hewson said: "Because of yesterday's solid US finish, we can expect to see European markets open a little bit higher this morning, although we still have some way to go wipe out the losses from last Friday's close."
Wall Street rallied on Tuesday, with the Dow Jones Industrial Average ending up 1.6%, S&P 500 up 1.5%, and Nasdaq Composite up 1.6%.
Netflix shares in New York ended down 0.2%, and gained just 0.6% after-hours trade. The video streaming service reported growth in revenue in the second quarter of 2021 as the number of paid membership subscriptions rose.
Netflix said it finished the quarter with over 209 million paid memberships, slightly ahead of its forecast, and up from 193 million paid memberships the year prior. The company noted that Covid has created some "lumpiness" in its membership growth. It expects slower membership growth in 2021 compared to 2020.
In early UK company news on Wednesday, clothing and homewares retailer Next said recent sales have been "materially ahead" of internal expectations, resulting in a bump to full-year profit guidance.
It also restarted dividend payments, declaring a special payout of 110 pence. It plans to announce another special dividend alongside its Christmas trading statement in January next year, and return to ordinary dividends in the financial year to January 2023. It did not pay out a dividend for its last financial year, ended this past January.
The retailer said full price sales in the eleven weeks to July 17 were up 19% on two years ago, ahead of its guidance of 3% growth. It has increased its full-price sales guidance for the rest of the year to 6% from 3%.
In addition, Next bumped up its central guidance for full-year pretax profit by GBP30 million to GBP750 million, which is towards the top of its previous guidance. In financial 2021, pretax profit dropped 54% to GBP342.4 million from GBP748.5 million in financial 2020.
"Since our stores have reopened they have performed better than we expected, and we intend to repay any business rates relief we have received, or will receive, while our stores are open this year. This decision was taken after consulting major shareholders who, between them, account for around 30% of our shares in issue. Assuming that our stores remain open for the remainder of the financial year, we estimate the cost of this repayment will be GBP29 million," Next said.
Postal operator Royal Mail said it remains confident on its full-year prospects as it noted that online shopping is holding up even as UK lockdown restrictions ease.
For the three months to the end of June, revenue was up 13% on a year ago and 20% higher than two years ago.
"The domestic parcel market remains strong. The early signs are that domestic parcel volumes appear to be re-basing at a higher level than pre-Covid as consumers continue to shop online. While domestic parcel volumes decreased 7% year on year, they increased by more than a third, up 35%, compared to pre-COVID levels in 2019-20," the company noted.
Royal Mail held its full-year expectations.
Chair Keith Williams said: "We continue to expect fluctuations in volumes as we emerge from Covid restrictions, which we will need to manage accordingly. Nonetheless we are encouraged by the revenue performance across Royal Mail and GLS in the first quarter."
Future, a magazine publisher and new owner of Gocompare, said it expects full-year profit to beat current market forecasts after a strong second half to date.
The Media division's performance has been led by "robust" digital advertising revenue and e-commerce product affiliate revenue growth, including Prime Day in June. The Magazines division performance is in line with expectations, it added.
As a result of "continued positive momentum", Future expects full-year profit to be materially ahead of current market forecasts.
"We are delighted that the group's strong performance has continued throughout the period, which is testament to the strength of our diversified revenue streams and global reach," said Chief Executive Zillah Byng-Thorne.
Computacenter said it 2021 will likely be another year of "substantial progress" following a robust first half performance.
The computer services provider expects to post 50% year-on-year growth in adjusted pretax profit for the first half of 2021. Profit would have been even further ahead had there not been supply shortages in the industry, it said.
"As we enter the second half of the year our Services backlog and more particularly our Product backlog, across all geographies, are at a record high which gives us a high degree of comfort," said Computacenter, adding that it concerns remain about supply shortages and a further strengthening of the pound, but does not believe either of these headwinds will get any worse.
The firm added: "After a record breaking performance in 2020, as we entered into 2021, there was some understandable scepticism as to whether Computacenter could continue with its 16 years of uninterrupted earnings per share growth. Given the performance in the first half, the current backlogs and the forecast to the end of the year, while nothing in life is ever certain and we face a stronger comparative in the second half, it is highly likely that 2021 will be another year of substantial progress for the group."
Estate agent Foxtons confirmed it is reviewing strategic options for mortgage broking business Alexander Hall Associates, which could include the possible sale of the unit.
This follows trade publication Mortgage Solutions on Tuesday reporting that mortgage advice firms have been approached by third parties acting for Foxtons as it searches for a buyer for the Alexander Hall business.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 0.6%. In China, the Shanghai Composite was up 0.7%, while the Hang Seng index in Hong Kong was down 0.6%. The S&P/ASX 200 in Sydney ended up 0.8%.
In foreign exchange, the pound continued to fall from highs of around USD1.3900 last week.
Sterling was quoted at USD1.3597 early Wednesday, down on USD1.3602 at the London equities close on Tuesday.
"Reopening concerns and spiralling virus cases has kept GBP/USD well offered this week, and it remains vulnerable to a deeper correction, potentially reaching USD1.3200," said Jeffrey Halley at Oanda.
The euro traded at USD1.1762 early Wednesday, flat on USD1.1764 late Tuesday. Against the yen, the dollar was flat at JPY109.91.
Gold was quoted at USD1,813. 17 an ounce early Wednesday, up on USD1,808.34 on Tuesday. Brent oil was trading at USD69.17 a barrel, flat on USD69.14 late Tuesday.
By Lucy Heming; lucyheming@alliancenews.com
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