LONDON MARKET OPEN: Just Eat jumps on JV stake sale; Joules feels heat

(Alliance News) - European equities edged lower in early dealings on Friday, with traders wary of the possibility of another chunky 75 basis point rate hike from the US Federal Reserve next month, after a series of hawkish comments from the central bank's policymakers.

The FTSE 100 was down 16.31 points, or 0.2%, at 7,525.54. The blue-chip index is up 0.3% from where it finished last week, however.

The FTSE 250 index was down 80.61 points, or 0.4%, at 20,056.04. The AIM All-Share index was down 1.45 points, or 0.1%, at 923.11.

The Cboe UK 100 index was down 0.1% at 752.47. The Cboe 250 was down 0.4% at 17,345.86. The Cboe Small Companies was up 0.1% at 14,367.56.

In Paris, the CAC 40 was down 0.2%, while the DAX 40 in Frankfurt was down 0.4%.

The dollar was on the up. Sterling quoted at USD1.1912 early Friday, down sharply from USD1.2000 at the London equities close on Thursday. The euro stood at USD1.0081 early Friday, down from USD1.0132 late Thursday. Against the yen, the dollar was trading at JPY136.54, up sharply from JPY135.10.

The greenback got a boost after some Fed policymakers expressed the importance of getting a handle on inflation.

Among them, Neel Kashkari, for a long-time considered one of the central bank's more dovish members, said the Fed must move quickly to get a handle on inflation, Reuters reported.

The Minneapolis Fed president said the Fed must rein inflation as soon as possible, even it means triggering a recession, according to the news agency.

"We need to get inflation down urgently. We need to get demand down," Kashkari told an event on Thursday.

There were also hawkish comments from Mary Daly, the president of the Federal Reserve Bank of San Francisco and James Bullard, the president of the Federal Reserve Bank of St Louis.

Bullard said he is leaning towards a 75 basis point hike, according to the Wall Street Journal. Daly said a hike of 50bp or 75bp would be "reasonable" next month, CNN reported.

"It is patently clear that the Fed has inflation reduction as its main aim, even though it acknowledges the knock-on risk of derailing the economy. The market is still pricing in a 0.5% interest rate rise in September, although there are increasing concerns that another 0.75% hike could be on the cards, with rates currently projected to peak at 3.5%. Separate comments from several Fed officials suggested that there remains some way to go before victory can be declared on taming inflation," Interactive Investor analyst Richard Hunter commented.

"Meanwhile the bond market – traditionally a more bearish arena – is standing firm on its recessionary prediction. Seen as a precursor for impending recessions, the Treasury yield curve remains inverted suggesting that interest rate rises may be continuing for rather longer than the equity market is expecting and may even stay there until such time as inflation begins a measurable and sustained fall."

In Tokyo on Friday, the Nikkei 225 ended marginally lower, while the S&P/ASX 200 in Sydney clawed fractionally higher. In China, the Shanghai Composite closed down 0.6%, while the Hang Seng Index in Hong Kong was down 0.1% in late trade.

UK retail sales defied expectations and grew on a monthly basis in July, figures on Friday showed, though they slightly missed a year-on-year forecast.

According to the Office for National Statistics, UK retail sales volumes fell 3.4% on a yearly basis in July, a sharper than the FXStreet-cited market consensus of a 3.3% slide. In June, they had slumped 6.1% year-on-year.

Excluding fuel sales, UK retail sales fell 3.0% on a yearly basis in July, easing from a 6.2% decline in June. The latest adjusted figure beat FXStreet consensus of a 3.1% decline.

On a monthly basis, sales increased 0.3% in July from June, outperforming expectations of a 0.2% decline. They had fallen 0.2% on a monthly basis in June.

Excluding fuel, retail sales rose 0.4% monthly in July, ahead of expectations of a 0.2% fall. In June, retail sales ex-fuel rose 0.2% from May.

Ahead of the data, a long-running consumer confidence tracker hit a record low.

GfK's consumer confidence index fell three points in August to minus 44, its lowest figure since records began in 1974. All five measures that make up the index fell last month, including confidence in personal finances and the general economy.

Among London-listed retailers, Joules shares fell by a third in early trade.

Scorching hot weather has hit sales of winter clothing, including "rainwear, knitwear, and wellies". Trading over the five weeks to August 14 has "softened materially," it cautioned.

Margins have taken a hit and Joules now expects a "significant loss" in its first half. It expects an improved second half, as it reaps the rewards of self-help work.

"In light of this, the board currently expects the group to deliver a full year loss before tax, and before adjusting items, significantly below current market expectations," it said.

Earlier this week, Joules named Jonathon Brown as its new chief executive officer, effective from September 30. Brown will initially join the company as CEO designate on September 7 and then take up the role on September 30. Most recently, he was the CEO of Compare the Market, and has also held positions at retailers such as Kingfisher and John Lewis.

The new appointment came after under-pressure Joules said it was in talks with Next about adopting its Total Platform services. The move, if it goes ahead, will see Next inject about GBP15 million into Joules.

Joules said on Friday: "The group continues positive discussions with Next about both adopting its Total Platform services to support its long-term growth plans and a potential equity investment. There can be no certainty that these discussions will lead to any agreement, and further announcements in this regard will be made if and when appropriate."

Next was down 1.6% in early trade.

While Joules was the worst AIM performer, Kinovo was among the best, surging 20%. The property services company, focused on safety and regulatory compliance, land regeneration and energy efficiency, reported a sharp revenue hike.

Revenue in the year to March 31 jumped 35% to GBP53.3 million from GBP39.4 million. It swung to a pretax profit of GBP2.3 million from a GBP252,000 loss.

Elsewhere, Just Eat Takeaway.com jumped 29%. It has relinquished a 33% stake in the iFood joint-venture to Johannesburg- and Amsterdam-listed internet assets investor Prosus for up to EUR1.8 billion.

"Just Eat Takeaway.com remains focused on improving its profitability and on a disciplined allocation of capital. It will retain the transaction proceeds to maintain its balance sheet strength and to service repayments of its upcoming debt maturities," Just Eat said.

iFood has online food and delivery operations in Latin America. Prosus and its subsidiary Movile will fully own iFood after the deal is completed. Prosus was up 1.4% in Amsterdam.

The deal comes as Just Eat Takeaway explores a deal for its Grubhub unit. Just Eat completed its USD7.3 billion acquisition of Chicago, US-headquartered Grubhub in June last year. It first mulled a sale of Grubhub in April, and on Friday said it continues to "actively explore" this.

Kingspan shares surged 4.9%, after the building materials firm said it has "been able to navigate" input cost inflation.

For the six months that ended on June 30, revenue rose 42% to EUR4.15 billion from EUR2.92 billion a year earlier. It has the first time half-year revenue topped EUR4 billion.

Pretax profit surged 30% to EUR387.6 million from EUR297.2 million.

"Despite a challenging trading environment, Kingspan delivered record half year results, with revenues over EUR4 billion for the first time. We have been able to navigate large input cost increases with only modest margin impact," Chief Executive Gene Murtagh commented.

Kingspan upped its payout by 29% to 25.6 cents from 19.9 cents.

Brent oil was quoted at USD95.18 a barrel early Friday, down from USD96.12 late Thursday. Gold was quoted at USD1,753.29 an ounce, down from USD1,761.70.

By Eric Cunha; ericcunha@alliancenews.com

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