(Alliance News) - London's FTSE 100 is set to fall further on Tuesday, after a sell-off at the start of the week, with hawkish words from a US central banker reinforcing the 'higher-for-longer' interest rates messaging.
"The most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals," Fed Vice Chair for Supervision Michael Barr told a conference in New York in prepared remarks.
"I expect it will take some time," he continued, adding that his decision would be guided by "a range of incoming data."
The 10-year US treasury yield spiked past the 4.70% mark to a 16-year-high overnight and the dollar was on the up.
Swissquote analyst Ipek Ozkardeskaya commented: "Relief that came with the news of a temporary avoidance of a potential government shutdown remained short-lived. Sentiment in stocks markets turned rapidly sour, both in Europe and in the US, while the US treasury yields didn't even react positively to the no shutdown news in the first place."
"Elsewhere, the EUR-USD sank below the 1.05 level on the back of accelerated dollar purchases and softening European Central Bank expectations following last week's lower-than-expected inflation figures. Cable slipped below a critical Fibonacci support yesterday, and is headed toward the 1.20 psychological mark."
In early UK corporate news, AstraZeneca said it has settled suits in the US, while boohoo cut its top-line outlook. Greggs reported improved sales and expects an annual outcome in line with expectations.
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 0.2% at 7,497.72
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Hang Seng: down 2.9% at 17,292.03
Nikkei 225: closed down 1.6% at 31,237.94
S&P/ASX 200: closed down 1.3% at 6,943.40
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DJIA: closed down 74.15 points, 0.2%, at 33,433.35
S&P 500: closed little changed at 4,288.39
Nasdaq Composite: closed up 0.7% at 13,307.77
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EUR: down at USD1.0469 (USD1.0508)
GBP: down at USD1.2073 (USD1.2143)
USD: up at JPY149.81 (JPY149.78)
GOLD: down at USD1,822.98 per ounce (USD1,833.40)
(Brent): down at USD90.00 a barrel (USD90.70)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
Germany - Unity Day: financial markets open
08:00 EDT US Fed Atlanta President Raphael Bostic delivers remarks at Leadership Atlanta alumni roundtable
08:55 EDT US Johnson Redbook retail sales index
10:00 EDT US job openings and labor turnover survey
10:00 EDT US IBD/TIPP economic optimism index
16:30 EDT US API weekly statistical bulletin
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UK Prime Minister Rishi Sunak is facing a backlash from Tories, businesses and northern leaders over a chaotic announcement to save billions of pounds by scrapping the HS2 leg to Manchester. The prime minister is expected to hold an emergency Cabinet meeting to sign off the measures during his party conference in the city most directly hit by the cut. He is then likely to confirm the decision in his speech to the Conservative membership on Wednesday as he possibly softens the blow by spending on other projects for the North. The Times reported that after intense lobbying from within his Cabinet he will say the line will terminate in Euston, in central London, rather than the western suburb of Old Oak Common.
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Shop price inflation in the UK cooled for the fifth consecutive month in September, data showed. According to the latest British Retail Consortium-NielsenIQ tracker, the annual shop price inflation rate cooled to 6.2% in September, from 6.9% in August. September's print was below the three-month average rate of 6.9% and the lowest in a year. Non-food inflation eased to 4.4% in September from 4.7% in August, while food inflation decelerated to 9.9% from 11.5%. "Food prices dropped on the previous month for the first time in over two years because of fierce competition between retailers. This brought year-on-year food inflation down to single digits and contributed to the fifth consecutive monthly fall in the headline rate, helped by easing cost pressures," commented Helen Dickinson, chief executive of the British Retail Consortium.
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BROKER RATING CHANGES
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UBS cuts Burberry to 'sell' (neutral) - price target 1,614 (2,285) pence
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Jefferies cuts Vistry to 'hold' (buy) - price target 999 (1,231) pence
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JPMorgan reinitiates Tullow Oil with 'overweight' - price target 55 pence
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COMPANIES - FTSE 100
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AstraZeneca said it has settled legal matters involving its Nexium acid reflux and Prilosec heartburn products, parting with USD425 million. Astra said it still believes suits in the US District Court for the District of New Jersey, as well as in the Delaware Superior Court and the New Jersey Superior Court, are "without merit". It said it "admits no wrongdoing in the settlement agreement". The company explained: "These settlements avoid continued costly litigation and allow the company to move forward with its purpose of delivering life-changing medicines to millions of patients around the world." Astra said a provision has been taken for the USD425 million. Another case in the US District Court for the Middle District of Louisiana is penned for April.
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COMPANIES - FTSE 250
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Greggs reported third-quarter sales growth and said it is spotting signs that inflation is "beginning to ease". The bakery chain said it got a boost from its evening trading, sales made after 1600, and its digital channels in the 13 weeks to September 30. Total sales rose 21% on-year during the period. Company-managed shop like-for-like sales were up 14%. "As we had expected, the rate of cost inflation has eased as we annualise on the significant commodity-led increases experienced in 2022. At a time when customers are looking to make their money go further Greggs continues to offer exceptional value and grow market share. We have strong product and promotional plans for the fourth quarter and the extension of our delivery service will make Greggs accessible to more customers on more occasions," the company said. Greggs expects a full-year outcome in line with expectations.
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Wizz Air reported a rise in passenger number of more than 20% last month. The budget carrier said it carried 5.5 million passengers in September, up 21% year-on-year from 4.6 million. Its capacity improved 14% to 6.0 million from 5.3 million, and its load factor to 92.4% from 87.1%. On a rolling 12-month basis, passenger numbers are 40% higher at 57.6 million. Fellow budget carrier Ryanair said passenger numbers were around 9.4% higher on-year at 17.4 million in September, from 15.9 million. Its load factor was unmoved at 94% last month. On a rolling 12-month basis, passenger numbers were 17% higher at 178.9 million.
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OTHER COMPANIES
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boohoo cut revenue guidance after a difficult second half, but it reported some green shoots and sees a "clear path to improved profitability and getting back to growth". For the six months ended August 31, revenue fell 17% to GBP729.1 million from GBP882.4 million a year prior. The fast fashion firm's pretax loss stretched to GBP26.4 million from GBP15.2 million. Chief Executive John Lyttle said: "Over the first half, we have made substantial progress across key projects and initiatives, including the launch of our US distribution centre. We have seen significant improvements in sourcing lead times and invested in pricing to reinforce our value credentials. We have identified more than GBP125 million of annualised cost savings that support our investment programme. Our confidence in the medium-term prospects for the group remains unchanged as we execute on our key priorities where we see a clear path to improved profitability and getting back to growth." Looking to the full-year, boohoo now predicts its revenue will decline between 12% and 17% from GBP1.77 billion achieved the year prior. This is due to the "slower volume recovery than previously anticipated" and the company intentionally eyeing "more profitable sales within our labels". It had previously expected revenue to fall by 10% to 15%. Its adjusted earnings before interest, tax, depreciation and amortisation margin is still expected to land between 4% and 4.5%. Its first-half adjusted Ebitda margin improved to 4.3% from 4.0% a year earlier.
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Petrofac said it has been awarded an engineering, procurement and construction pact by ADNOC Gas, which is part of the Abu Dhabi National Oil Co. The deal for ADNOC's Habshan carbon capture, utilisation and storage project is valued at more than USD600 million, Petrofac said. Petrofac, a services provider to the energy industry, said Habshan is "one of the largest carbon capture projects in the Middle East and North Africa region".
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Character Group expects annual results in line with expectations, despite some tricky trading conditions during key periods of its financial year. The toy, games and gifts manufacturer, which ended its financial year on August 31, said trading conditions were "persistently challenging throughout". This included the all-important Christmas period in 2022. Character added: "However, the directors are pleased to report that, in line with the board's predictions, the business has performed more strongly in the second half and the group expects to report full year underlying profitability in line with current market expectations. The strength of the group's product portfolio has played a crucial part in achieving this result in the second half."
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By Eric Cunha, Alliance News news editor
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