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LONDON MARKET PRE-OPEN: Focus On Bank Of England; Next Raises Guidance

LONDON (Alliance News) - London stocks are set to open lower on Thursday ahead of the release ...

Alliance News 14 September, 2017 | 7:34AM
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LONDON (Alliance News) - London stocks are set to open lower on Thursday ahead of the release at noon of minutes from the Bank of England's Monetary Policy Committee meeting.

In early UK corporate news fashion retailer Next suffered a sales decline in its first half but upped its full-year guidance, while grocer Morrisons reported higher interim revenue and profit.

Next said revenue decreased 2.6% to GBP1.89 billion in the six months to the end of July from GBP1.94 billion a year earlier. Pretax profit declined by 10% year-on-year to GBP309.4 million from GBP342.1 million.

"The first half has seen a marked divergence of performance between our Retail and Directory businesses, with sales and profits down in Retail but moving forward in Directory," Next said.

The clothing and homeware retailer said total Retail sales declined by 8.3% to GBP993.2 million, while Directory sales increased 5.7% to GBP868.4 million. Next Brand full price sales in the period decreased by 1.2%.

"The first half of the year has been difficult and sales and profits are in line with our cautious expectations. However, our performance in the last three months has been encouraging on a number of fronts and whilst the retail environment remains tough, our prospects going forward appear somewhat less challenging than they did six months ago," Next said.

Next upped its full-year full price sales range to between negative 2.0% and positive 1.5%, from previous guidance of negative 3.0% to positive 0.5%, subsequently raising its full-year profit guidance to a range of GBP687 million to GBP747 million, from a prior range of GBP680 million to GBP740 million.

The retailer declared an interim dividend of 53 pence per share, in line with a year previously.

Meanwhile, Wm Morrison Supermarkets said revenue increased 4.9% in the six months to July 30 to GBP8.42 billion from GBP8.03 billion, while pretax profit rose 40% to GBP200 million from GBP143 million.

The grocer lifted its interim dividend by 5.1% to 1.66 pence from 1.58p a year earlier.

Morrisons said it expects total annualised wholesale sales to its partners to exceed GBP700 million, including tobacco, by the end of 2018. The company also said it expects wholesale supply sales to reach in excess of GBP1 billion "in due course", and its McColl's deal to make an initial profit contribution from 2018/19.

"This is another good performance from Morrisons. Our seventh consecutive quarter of positive like for like means that we are able to report profit growth on growth for the first time in the turnaround," said Chairman Andrew Higginson.

IG says futures indicate the FTSE 100 index of large-caps to open 3.5 points lower at 7,376.2. The blue-chip index closed down 0.3%, or 20.99 points, at 7,379.70 on Wednesday.

Focus is on the BoE's September meeting, the minutes of which are due to be released later in the day.

"While no change is expected to monetary policy overall there could be little nuances that might point to a slight shift in tone with respect to the timing of a potential paring back of the current level of monetary easing," says Michael Hewson, chief market analyst at CMC Markets.

The Monetary Policy Committee will return to nine members following the appointment of Deputy Governor David Ramsden, who joined the rate-setting body on September 4. It is widely anticipated that there will be a 7-2 vote for unchanged rates, at the historic low of 0.25%, compared to a 6-2 vote in August.

Some economists believe a vote to hike could come from Andrew Haldane, joining hawks Ian McCafferty and Michael Saunders who voted for a hike in the previous meeting. This would see the split narrow to 6-3.

Haldane in June hinted at potentially supporting some degree of policy tightening before the end of the year, saying he was ready to vote for an increase in interest rates "relatively soon".

Analysts at Deutsche Bank said a Haldane vote to raise rates is "more likely" at the Thursday meeting than it was last month, when he voted in line with the majority to maintain interest rates.

"If the MPC wanted to send a message to the markets then a Haldane shift to the hawk camp would certainly do that, and help keep a tactical floor under the pound at a time when other central banks are already starting to look at hitting the monetary brakes," says CMC's Hewson.

Sterling was quoted at USD1.3214, higher than USD1.3208 at the London close on Wednesday.

Meanwhile, the latest survey from the Royal Institution of Chartered Surveyors on Thursday showed the house price balance in the UK rose unexpectedly in August.

The house price balance rose to positive 6.0 in August from positive 1.0 in July. Meanwhile, it was expected to remain flat during the month.

Although signalling a return to growth, this measure is consistent with only a marginal rise in national prices, RICS said. The London price gauge remained stuck firmly in negative territory, posting the weakest reading since 2008.

In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.3% In China, the Shanghai Composite is down 0.6%, while the Hang Seng index in Hong Kong is also down 0.6%.

Already released, China's industrial production and retail sales growth weakened in August and fixed asset investment logged its slowest growth since 1999, as measures to curb excessive lending and reduce overcapacity weighed on activity.

Industrial production climbed 6% year-on-year in August, slower than the 6.4% increase seen in July and the weakest pace of expansion logged so far this year. Output growth was forecast to accelerate to 6.6%.

Similarly, retail sales growth eased to 10.1% in August from 10.4% in July. This was the slowest growth since January to February this year and below the expected rate of 10.5%.

During January to August, fixed asset investment increased 7.8% from previous year, after rising 8.3% in the first seven months of the year. The latest annual expansion was the slowest since 1999.

The main culprit for weak activity and spending was a slowdown in infrastructure investment, which also weighed on industrial output, Julian Evans-Pritchard, an economist at Capital Economics, said.

Wall Street ended higher on Thursday, with the Dow Jones Industrial Average ending up 0.2%, S&P 500 and the Nasdaq Composite all closing up 0.1%.

Later in the day, August consumer price inflation figures for Italy are released at 0900 BST and for the US at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2017 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Next PLC 4,304.00 GBX -0.37 -
Morrison (Wm) Supermarkets PLC 209.40 GBX -0.66
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