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(Alliance News) - Stocks in London are set to open lower on Wednesday as investors remained in a risk-off mood amid the prospect of interest rates staying higher for longer in the US.
"Investors continue to grapple with the implications of an extended period of elevated interest rates and the potential economic repercussions," said Stephen Innes at SPI Asset Management, adding that the looming possibility of a US government shutdown was not helping matters.
Last week, the US Federal Reserve left its benchmark interest rate at a 22-year high on Wednesday but signalled it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.
On Monday, the Moody's ratings agency warned that a US government shutdown this weekend, amid political deadlock in Congress, would have negative implications for the country's top-tier credit rating.
In early UK corporate news, Flutter Entertainment announced the acquisition of an initial 51% stake in Serbian sports betting and gaming operator, MaxBet, and Land Securities said customer demand for its office space in London has remained strong since the end of March.
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 6.92 points, or 0.1%, at 7618.80
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Hang Seng: up 0.8% at 17,602.75
Nikkei 225: closed up 0.2% at 32,371.90
S&P/ASX 200: closed down 0.1% at 7,030.30
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DJIA: closed down 388.00 points, 1.1%, at 33,618.88
S&P 500: closed down 1.5% at 4,273.53
Nasdaq Composite: closed down 1.6% at 13,063.61
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EUR: lower at USD1.0564 (USD1.0576)
GBP: lower at USD1.2146 (USD1.2163)
USD: higher at JPY149.13 (JPY148.91)
Gold: lower at USD1,896.49 per ounce (USD1,903.23)
(Brent): higher at USD93.16 a barrel (USD92.37)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
EU ECB Governing Council non-monetary policy meeting
10:00 CEST EU monetary developments
11:00 IST Ireland retail sales
09:30 BST UK capital issuance statistics
07:00 EDT US MBA weekly mortgage applications survey
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The head of the British Chamber of Commerce in Germany has said that despite Brexit, British and German firms are currently cautiously optimistic about the future of bilateral trade. "Brexit could have been a catastrophe," BCCG President Michael Schmidt said in a statement issued on Wednesday. "We are happy that the long-standing, trusting relationships between our countries and British pragmatism have long made good mutual business possible again," he added. He particularly praised the role of Britain's current prime minister. "What was crucial was that British Prime Minister Rishi Sunak found largely pragmatic solutions with the EU," he asserted.
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The UK government will reportedly delay putting in new environmental laws which would force developers to improve countryside and wildlife habitats. A government source told the BBC the biodiversity net gain, which was meant to become a mandatory aspect of the planning system in England, will not be introduced this year. Wildlife Trusts told the BBC the delay was "another hammer blow for the future" and the UK Green Building Council said any delay would "hurt green business and development". New rules which state developments must result in a 10% BNG were set to come into effect in November.
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BROKER RATING CHANGES
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Berenberg reinitiates Relx with 'buy' - price target 3,270 pence
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Jefferies cuts Derwent London to 'hold' (buy) - price target 1,913 (3,399) pence
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Jefferies cuts Great Portland to 'hold' (buy) - price target 387 (706) pence
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COMPANIES - FTSE 100
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Flutter Entertainment announced the acquisition of an initial 51% stake in MaxBet, a Serbian omni-channel sports betting and gaming operator, for EUR141 million. The Betfair and Paddy Power owner will have the opportunity to acquire the remaining 49% in 2029. "MaxBet will provide Flutter with the platform to access fast-growing markets via a strong podium brand. This also creates an opportunity to accelerate growth and deliver a gold medal position for Flutter through expansion in the Balkans region by leveraging the benefits of the Flutter Edge," the company said.
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Commercial property developer Land Securities said customer demand for its office space in London has remained strong since the end of March. As a result, over the first five months of its financial year, occupancy in its Central London portfolio has increased by 100 basis points to 96.9%. With rents continuing to grow and its entire office estate in Victoria 100% full, the company has now committed to the start of Thirty High. It is expected to be completed in the summer of 2025, with the estimated development cost for the refurbishment at GBP400 million.
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COMPANIES - FTSE 250
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Components and systems manufacturer Senior announced that its Aerospace division has been awarded a 12-year contract extension with jet engine maker Rolls-Royce for the supply of precision machined structures and components. The contract extension begins in January 2026 with manufacturing being undertaken at Senior Aerospace's Ketema facility near San Diego, US.
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Specialist insurer Hiscox announced that it has agreed to sell DirectAsia, its business operations in Singapore and Thailand predominantly providing motor insurance. The business is being sold to Ignite Thailand Holdings Limited, the parent of the Roojai group of companies, a specialist investor in financial services start-ups. The transaction is subject to customary conditions and regulatory approvals and is expected to complete by the end of 2023.
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JPMorgan Global Growth & Income said the financial year ended June 30 was "another challenging one" for investors amid stubbornly high inflation and rising interest rates but nonetheless outpaced its benchmark index during the period. The company returned 19.1% on a net asset value total return basis, outperforming its benchmark, the MSCI All Countries World Index in sterling terms, which returned 11.3%. JPMorgan Global said the drivers of this performance were broad-based across many sectors and stocks. As at June 30, the firm's NAV per share stood at 458.9 pence, compared to 403.1p at the same time a year prior.
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OTHER COMPANIES
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Old Mutual said it "performed well" in the first half of 2023 as profit surged and revenue rose on the back of higher new business value, robust gross inflows, and strong insurance premiums. The Anglo-South African financial services firm said pretax profit surged by 75% to ZAR8.27 billion in the six months that ended June 30 from ZAR4.72 billion a year earlier. Insurance revenue was up 8.5% to ZAR33.27 billion from ZAR30.65 billion, with gross written premiums growing by 16% to ZAR12.59 billion from ZAR10.89 billion. Non-insurance revenue was 9.2% higher at ZAR8.28 billion from ZAR7.58 billion. The company said value of new business rose by 32% to ZAR937 million from ZAR708 million due to strong guaranteed annuity sales and a shift towards higher margin products in Personal Finance and Wealth Management. But net client cash outflows of ZAR7.25 billion were worse than the prior period due to large outflows in Personal Finance and Wealth Management, and Old Mutual Investments.
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Pantheon Infrastructure reported a net asset value per share of 101.0 pence as at June 30, up from 98.9p as at December 31, and representing a total NAV return of 3.1% since the end of 2022. Pantheon also declared an interim dividend of 2p for the half-year ended June 30. Looking forward, the company said the market for infrastructure investments remains "competitive" and added that fundraising in private markets has been "challenging so far". Nonetheless, Pantheon said it remains "optimistic" about future investment opportunities and value creation potential.
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Gresham House Energy Storage Fund, which invests in utility-scale battery energy storage systems, reported a net asset value per share of 146.66 pence as at June 30, down from 155.51p as at December 31 but up from 145.11p at the same time a year prior. The company's total NAV return was negative 3.5% over the first half of 2023. Gresham said its recent weaker trading has been driven by low price volatility due to lower demand amid higher energy bills, and the current low utilisation of batteries by National Grid ESO. Fund Manager Ben Guest said: "With National Grid system issues expected to be addressed in the relatively near term, and new capacity coming into operation, we have no doubt that, as we enter 2024, the long-term return opportunities for GRID remain as strong as ever."
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By Heather Rydings, Alliance News senior economics reporter
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